Doubts Raised on Bids for LANL

By: Adam Rankin
Albuquerque Journal Staff Writer
Thursday, February 24, 2005

Will the Department of Energy, now holding a competition for the contract to run Los Alamos National Laboratory, receive any bids from worthwhile potential managers capable of operating the nation's largest and oldest nuclear weapons research facility?

Sen. Pete Domenici, R-N.M., acknowledged on Wednesday that since DOE announced in April 2003 that it would put the LANL contract out for bids, he has developed some doubts.

"With the passage of time, I began to wonder and I wonder if the DOE has been wondering, too," he said.

Even before the draft criteria that DOE will use to evaluate potential managers was announced, two of the front runners in the putative field of competitors dropped out of the running— the University of Texas and Lockheed Martin, which operates Sandia National Laboratories in Albuquerque.

Other potential bidders have discussed the scarcity of competitors and how slow partnerships to seek the contract have been to form. Thus far, not a single company, university or consortium has announced firm plans to bid on the laboratory's $2 billion-a-year contract.

Once close to announcing a partnership with a business to manage LANL, University of California officials now say only that negotiations with potential partners are ongoing.

UC has held the contract since the lab was created to develop the atomic bomb during World War II, but DOE decided to put the management contract out for bids after a series of security and management problems at LANL in recent years.

Domenici talked about the LANL contract competition following a talk at Los Alamos on nuclear non-proliferation issues hosted by LANL and the Los Alamos Committee on Arms Control and International Security.

Federal officials announced on Tuesday major changes in the criteria for managing LANL, many of which were designed to make the contract more attractive to bidders.

A draft request for proposals was published in December and the changes this week announced amend that document. Federal officials said they received numerous comments from potential bidders and hundreds of comments and questions from current LANL employees about the terms of the document.

They are now seeking additional input through March 4 on the changes.

Aside from doubling the proposed fee for the next manager of the Los Alamos lab— to a level about seven times what the University of California now earns for running LANL— federal officials have also decided to extend the university's current contract by about six months. The contract previously was set to expire in September.

Federal officials originally proposed a 1.5 percent management fee for the next manager based on LANL's $2 billion budget, but the changes boost that offer to 3 percent, or about $60 million. That dwarfs the $8 million that the University of California is now eligible to earn and doubles the $30 million fee originally proposed in the bidding criteria.

"I think the raising of the fee is a good thing," Domenici said, adding that it now "seems to be sufficient."

The contract extension for the University of California, if approved by the secretary of energy, will allow federal officials reviewing the contract competition for LANL to evaluate pension benefit packages offered by companies seeking to operate LANL.

The extra time also will allow companies to develop "substantially equivalent" benefits to those provided now by the University of California and for LANL employees to review the proposed benefits to decide whether they want to stick with the new operator or retire under the UC pension plan, according to the amended criteria released Tuesday.

Domenici said he and his staff are still reviewing the criteria changes but that he has some concerns over a proposed requirement to create a free-standing pension plan and a limited liability corporation to manage LANL.

"Seems to me they (federal officials) are looking for something," he said. "What is it they have in mind?"

Despite all the uncertainty and "commotion" about the contract competition, which Domenici said is natural in the midst of unknown territory, he predicted that LANL employees and the laboratory will come out well in terms of the contract.

"It is too important an institution to risk any changes that will elicit a major change in the caliber and quality of the workforce," he said.