Bad Watchdog Season 2 launches June 20.

Public Comment

POGO's comments to the Draft Request for Proposals for the contract to manage Los Alamos National Laboratory

To: Tyler Przybylek

Department of Energy

From: Danielle Brian

Executive Director, Project On Government Oversight

Project On Government Oversight ( POGO ) provides the following suggested additions to the draft Request for Proposal (RFP) for the Los Alamos National Laboratory (LANL) Management and Operations Contract:

There should be different Management and Operations contractors for LANL and Lawrence Livermore National Laboratory.

For the sake of competition and intellectual independence, the RFP should dictate that if a contractor is successful in the Los Alamos competition, that contractor is prohibited from bidding on the Livermore contract.

This intentional split of the contractors for LANL and Livermore would restore the independence of the two-lab system which has been lost. It would also enable the competition of ideas coming from the two labs without the risk of suppression because a single contractor manages both.

Non-profit Management and Operations (M & O) contractors should be required to pay fines for safety violations.

In 2004 alone, LANL committed 45 major safety violations. University of California (UC) was “fined” about $800,000, yet payment of the fine was waived because UC is a non-profit. As a result, there is no deterrent to sloppy operations such as those that caused the 5-month shut-down of hazardous and nuclear sites at LANL at a cost of well over half a billion dollars to the government. This waiver should be eliminated.

M & O contactors should pay civil fines for security violations.

Currently there are no penalties for security violations. There should be a new provision for such fines, and they should be levied and paid even if the contractor is a non-profit.

Consider the award fee as a true award for performance and not an assumed payment.

If the award fee were treated as just that – as an award, and not as a given – it could be a valuable tool in encouraging superior performance. Currently, UC receives the award fee every year, despite repeated instances of poor performance. In the future, if the contractor performs poorly, either in its science programs or management, the award fee should be substantially reduced, if awarded at all. If these standards were upheld, it might even be appropriate to increase the size of the potential award, more in line with Department of Defense laboratories.

There should be independent evaluation of science before granting the award fee.

When the award fee is determined, a major percentage of the fee is based on the quality of the science programs run at the Lab. Currently, the science is evaluated by peers at Los Alamos . This is hardly an independent review. We believe that the Lab’s science should be reviewed by truly independent peers, including scientists from academia, industry, defense labs, or possibly other DOE labs run by different M & O contractors. The award fee must be a true award for meeting or exceeding expectations, not an assumption that is rubber stamped by self-interested parties.

DOE must evaluate contractor management performance more effectively before granting the award fee.

DOE has to do a better job of evaluating the management performance of the contractor. Currently the contractor evaluates its own management through the “self-assessment” process, with DOE adding several sentences to a 50 page document.

Yet again, this process has proven to be flawed. POGO has evidence that in FY 2003 millions of dollars of fraudulent charges were charged to the government. Los Alamos auditors Tommy Hook and Chuck Montano discovered these unallowable costs in audits during the Los Alamos self-assessment. These audits were never forwarded to the DOE, however, nor were they referenced in the final self-assessment. Los Alamos ultimately began harassing both Hook and Montano and stripped them of their job duties because they began to raise concerns that their findings were never reported.

DOE must take a much more active role in these evaluations, particularly if the award fee is increased substantially.

The government should decide what activities the contractor should perform, not the reverse.

The RFP should clearly dictate that the management contractor is always subordinate to the government. The Defense Nuclear Facilities Safety Board states in a letter to the National Nuclear Security Administration that “All language in the [RFP] suggesting that the contractor determines in the first instance how nuclear activities are to be carried out should be deleted.” The Board’s rationale is clear: “The government should never place itself in a position subsidiary to its own contractors.”

End the government’s practice of reimbursing contractors’ legal fees in whistleblower cases.

Currently, the government reimburses all legal fees spent by contractors. As a result, there is no check on the number of times a contractor will appeal a whistleblower case it has lost in an attempt to financially and emotionally wear down the whistleblower. For example, in one case at Los Alamos , a whistleblower was willing to settle for $50,000. However, LANL filed appeal after appeal, costing the government $1.4 million before the end of the case.

The Department of Energy should not reimburse any legal fees incurred by the contractor in whistleblower legal disputes subsequent to an adverse administrative determination by DOE or Department of Labor, or an adverse final judgment by any State or Federal court, unless the determination or judgment is reversed upon further administrative or judicial review.

Create an alternative dispute resolution mechanism for whistleblower cases.

Because of the sheer number and poor treatment of whistleblowers at Los Alamos, the RFP should include a provision to set up something similar to the Hanford Joint Council.

A system was created at the Hanford Nuclear Site in Washington State, based on alternative dispute resolution (ADR) principles, for contractor employees that addressed the entire spectrum of issues in and around whistleblower disputes. The Hanford Joint Council for Resolving Employee Concerns, which operated from 1994 until 2003 and will recommence in 2005 at the DOE contractor’s request, brought together employees, corporate management, interest groups, and others using the most advanced dispute resolution principles. Over the original Council’s eight years of operation, it had a 100 percent record of resolutions, including over 40 formal resolutions and numerous informal resolutions, saving the government millions of dollars in litigation costs and thousands of hours of management, employee, and oversight time.

There is no substitute for genuine government oversight—do not rely on “best industry practices” alone.

The draft RFP’s promotion of “best industry practices” should be tempered with the recognition that those standards are in reality rarely achieved by industry if left to their own devices. Without external oversight, the incentives for contractors to pursue best industry practices are significantly reduced. In fact, in the absence of regular and aggressive government oversight, many contractors have committed illegal activities that cost the American taxpayer. POGO recommends that the RFP emphasize increased federal oversight of the Lab rather than relying solely on “best industry practices.”

POGO staff have investigated and dissected a number of major government contractors—including most of the major companies that attended the recent preliminary conference for bidders on the Los Alamos contract. These companies have been found guilty of or have settled in cases where they were charged with violating the Foreign Corrupt Practices Act; covering up faulty testing on weapons systems; and perpetrating financial fraud against the government, including overcharging the government on contracts, among other numerous illegal practices.

Examples of contractor misconduct and alleged misconduct can be found in POGO’s Federal Contractor Misconduct Database, located at