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NNSA releases draft RFP for LANL contract

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Performance fee drops to 1 percent, may cost county millions

By Tris DeRoma

A draft request for proposals released by the National Nuclear Security Thursday shows the government has lowered the performance fee for prospective bidders to 1 percent of approximately $2 billion contract to operate Los Alamos National Laboratory.

The lower fee could be a turn-off for some for-profit companies and could mean less money for Los Alamos County, in terms of gross-receipts taxes.

Regional Coalition of LANL Communities Executive Director Andrea Romeo remarked that the 1 percent performance fee is a marked change from the current management and operations contract, held by Los Alamos National Security, of 3 percent of the contract.

“With a smaller fee the GRT (gross receipts tax) could be greatly affected based on any tax they pay on any fee,” Romero said.

Romero noted that would be a 2 percent decrease in GRT on what is generally an annual $2 billion contract.

Since the fee threshold is smaller, Romero said this could also impact how many for-profit companies apply for the contract.

If a non-profit is awarded the contract, it could spell even more trouble for Los Alamos County and other counties in the region, since non-profits are exempt from paying gross receipts tax in New Mexico.

In the last state legislative session the coalition lobbied for a bill that would correct that, but the bill fell through.  
“...This could turn off a lot of for-profits in the sense that the fee threshold is smaller and the risk involved in taking on a role operating LANL could be too high of a risk,” Romero said. “Without a higher fee is it worth the risk. That’s a big question, especially with no law on the books to continue to collect GRT from a not-for-profit entity. Even with the shrinking fee, there’s going to be less money in New Mexico.”

Of the $200 million in gross receipts tax the state annually receives from Sandia National Laboratories and LANL, Los Alamos County receives about $30 to $40 million.

Romeo also noted that there also appears to be no community commitment mandates written into the RFP.

“It essentially said they (the winning bidders) can provide community support, but there’s no mandate to do so,” Romero said. “In this language it just said the contractors shall perform a periodic needs assessment to determine what support to the community is necessary to facilitate lab operations. That is a huge change for us from the previous language that we’ve seen, and obviously a red flag to us as to how this will be implemented.”

Another key detail Romero noted in the RFP was how much a company’s past performance will count in the bidding process.

Romero said this will most likely keep Bechtel, the University of California, currently members of the consortium that makes up LANS, or any of the other partners in LANS from reapplying for the contract.

The University of New Mexico, just hours after the draft RFP was released, announced that it was considering bidding for the contract.

“The University of New Mexico is very interested in the LANL Management and Operations contract competition. We are evaluating the situation and look forward to more information as it becomes available,” UNM Senior Advisor to the President for National Laboratory Relations Joseph L. Cecchi said.

Others that have seen the draft RFP are worried about what it might mean economically for Los Alamos County and the northern New Mexico region.

The main criteria included in the NNSA draft RFP include past performance, the resumes of key personnel and small business participation. Bidding is open to non-profit and for profit entities.

“The Contractor shall, with the highest degree of vision, quality, integrity, efficiency, and technical excellence, maintain a strong, multi-disciplinary scientific and engineering capability and technical depth that is responsive to scientific issues of national importance in addition to national security responsibilities, including broadly based programs in such areas as the environment, national infrastructure, health, energy, economic and industrial competitiveness, and science education to achieve the mission,” a statement in the RFP said.

In recent years, during the LANS management and operations contract, LANL has come under fire for several safety lapses in its nuclear material manufacturing and waste management programs. The Department of Energy decided in 2015 not to extend the management and operations contract after LANS failed to meet performance and safety goals set by the DOE and NNSA.

“It’s what a lot of folks are calling a ‘killer clause’ for LANS,” Romero said. “It’s basically saying that past performance by any affiliated team or any affiliated offers that have done any work and have had negative performance in the past are going to be weighted significantly in this round.”
LANS’ $2.2 billion management and operations contract is ending in 2018. LANS LLC is made up of a consortium of private and public companies, including Bechtel National, INC., BWXT Government Group, Inc., the University of California and URS.

Bidders, and others who want to comment on the wording in the draft RFP have until July 26 to respond.

One organization that will be responding is UPTE, (University Professional Technical Employees) a union that has in its membership a number of LANL technicians and scientists.  

“The draft LANL RFP was just released today. We are still reviewing and digesting it. Our task force will be meeting Monday evening to decide on the comments UPTE will submit to NNSA by the 26 July deadline,” UPTE Executive Vice President Jeff Colvin said.