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In an interview two weeks ago, Los Alamos Chamber of Commerce Member Services Coordinator Katy Korkos told the Los Alamos Monitor that the impact of a government shutdown at Los Alamos National Laboratory could hit subcontractors twice as hard as other entities.
“Lab subcontractors will never be able to recover the income that they’re losing currently,” Korkos said.
Subcontractors can only bill for work performed and their contracts are subject to firm end dates, so they are not able to receive an extension to complete the required work and recoup their losses.
Conversations with a couple of those contractors revealed just how extensive the losses from the government shutdown could be.
Energy Solutions is already feeling the impact. The company is one of approximately 20 subcontracted to process and ship transuranic (TRU) waste to the Waste Isolation Pilot Plant in Carlsbad. LANL shut down those operations Oct. 8, affecting an estimated 200 workers.
For Energy Solutions, that is only one of the dominos to fall.
“It’s affecting projects not only here but in Oakridge, Idaho and Hanford,” Vice President Miles Smith said.
“Everywhere we’re working is shut down. We only have two projects that are not affected by this.”
The company has had to lay off 154 workers, something it generally avoids.
“Ordinarily, we pay full salary and benefits even to our hourly workers when work is interrupted. During the Las Conchas fire and other delays we’ve continued to pay people and take the hit ourselves,” Smith said. “Because of the widespread nature of this shutdown, with so many people affected, we can’t do that.”
The financial impact is significant.
“We’re losing money now, because we’re getting no revenue and we’re maintaining a minimum workforce and trying to hold onto some key talent,” Smith said.
“This is an unanticipated hiccup that’s costing us $73,000 in lost revenue every day and an additional expense of $24,000 to $25,000 a day for maintaining staff and operations.”
The company is advancing vacation pay to workers who request it, and Smith estimates they will be able to offer employees an additional 40 hours in advance pay.
“So this is a real financial hit for those folks. We’ve got a lot of single parents working for us and young workers who don’t have a lot of vacation built up,” Smith said. “If this goes past the middle of the week it will hurt a lot of people.”
According to Smith, the “3,706 Transuranic Waste Campaign” itself is currently on track, since efforts to remove 3,706 cubic meters of TRU waste from Technical Area 54 and Material Disposal Area G by June 30, 2014 were ahead of schedule before the shutdown.
The deadline is part of a framework agreement reached between DOE, NNSA and LANL and the New Mexico Environment Department.
“At this time I’m not too terribly worried, but the longer this goes on the harder it will be to recover and complete the project,” Smith said.
“We’ll probably have a slow start up to be sure we’re safe, and then we’ll probably be working overtime to recover our schedule.”
Another subcontractor, Merrick & Company, has not yet been affected but will be if the shutdown continues through this week.
“We’ve been informed unofficially by LANL that upon Oct. 18 they’re going to put a stop work to all the contracts that we’re working on,” said Vice President Scott Gustafson.
Merrick is an employee-owned firm with 11 offices and approximately 500 employees worldwide. The company’s second office was opened in Los Alamos in 1986. Most of their New Mexico work comes from LANL.
“About 75 percent of our business is funded by the government, either local or federal, but the vast majority of the government funding we get is federal,” Gustafson said.
“So this has impacts to us not just here in the local community, but also across the country.”
Approximately 25 employees will be affected in Los Alamos alone.
“The response that we have to take is to try to reassign our people here locally if we can or to furlough them. Those are our two basic choices,” Gustafson said.
“And we don’t have enough work from other parts of our business to be able to reassign them.
“So, unfortunately, we’re facing furloughs for the people here; and not just the people here, but across several of our other offices.”
A project in Denver is one of those scheduled to be shut down. Merrick also received notice that work on the uranium processing facility in Oakridge, Tenn., would be shut down. But the unofficial word last week was that work will continue uninterrupted, which could mean a reprieve for 50 of Merrick’s employees.
Merrick has not yet estimated what its financial losses will be.
“It’s a mixture of lost revenue, which is critical for a company our size–cash flow is very important–and the potential loss of people is very big as well,” Gustafson said. “Because people cannot go without a paycheck for too long, and they will–rightfully so–try to find new work.”
Gustafson said that the fact that the company is employee owned does not alter the decision to furlough people, although the company will “do whatever we can to ease the pain,”
“The decisions are not really different than they would be for another company. It’s just that being employee owned, we’re more conscious of how we spend our funds and how we treat our people,” Gustafson said. “But in the end, we’re still a business, because all of our employees expect us to run a business like a business. As owners, they expect a return for their investment, just like anybody else.
“We don’t have the financial wherewithal to just let people come to work without something to do, and to not have billable work. You can’t sustain that.
“I think the nice thing is that when you are an employee-owner, you do tend to understand the business side a little bit better, and you can recognize the financial situation you’re in and why the company’s taking those types of actions.”
LANL subcontractors across the board are experiencing similar scenarios, according to Liddie Martinez, secretary/treasurer of the executive committee of Los Alamos National Laboratory Subcontractors Consortium.
Martinez does not expect to have clear numbers about how many have been affected by the shutdown until the end of the year, but all of Northern New Mexico is likely to feel the impact.
“Everyone who is working for the laboratory obviously is going to be impacted by the shutdown, with the exception of the security company,” Martinez said. “It’s definitely devastating for Northern New Mexico. Ten thousand jobs plus is a very, very significant impact.”
Those 10,000 jobs are from the impending LANL shutdown alone, and do not include those affected by the Sandia closure.
“It’s huge,” Martinez said.
“And, of course, it has the domino effect, because everybody will be trying to hang onto whatever dollars they have to pay for essentials, and so it starts to have an impact in the retail arena.”
The situation is compounded by the fact that 1,000 subcontractor jobs have already been lost due to earlier budget shortfalls at the lab.
“It’s very scary,” Martinez said. “A lot of families do not have a savings account that they can rely on, so of course that makes the whole situation of being furloughed even scarier. So it is really a devastating impact on Northern New Mexico.”