LANS to pay $10 million

-A A +A

Lab: Joint agreement addresses security system cost overrun

By John Severance

The first step was taken Tuesday to resolve the cost overrun issue with the Nuclear Material Safeguards and Security Upgrade Project at TA-55.

The National Nuclear Security Administration and Los Alamos National Security, LLC, the managing and operating contractor of the Los Alamos National Laboratory, have reached an agreement on how to move forward with the project.

According to the joint statement issued late in the day Tuesday, the settlement agreement, reached in partnership between NNSA and the LANS Board of Governors, resolves LANS’ accountability for potentially unallowable costs incurred on the project to date and sets a path forward for completion of the project.

Under the agreement, LANS, LLC will pay the government $10 million in non-reimbursable, non-taxpayer funds to settle project costs deemed potentially unallowable by the NNSA, and work with its subcontractors to develop plans to restart work at NMSSUP as efficiently and economically as possible.

A revised estimate of the total project cost, which includes savings from this agreement, is due to NNSA by Dec. 10. NNSA has agreed to resume funding the NMSSUP project no later than Dec.14.

The joint statement read, “LANS and NNSA both recognize the missed opportunities in project execution and oversight that took place with the NMSSUP project. LANS conveyed an understanding of the seriousness of the situation and the value of its partnership with the government.

“Implementing stable improvements to our infrastructure operations is vital to maintaining a 21st century nuclear security enterprise. With this agreement, both parties are now positioned to complete this critical project as efficiently and effectively as possible.”

NMSSUP was intended as an upgrade to the existing fences, cameras, sensors, and other detection and denial systems around facilities at TA-55. The project was suspended on Oct. 23.

Originally, the system was supposed to cost $213 million, but cost overruns increased the project to $254 million, according to a memo written by Lab Director Charlie McMillan to employees.

According to officials, the lab discovered and reported to the NNSA a construction defect from the 2010 timeframe, and a pair of separate technical issues, resulting in a completion delay for the TA-55 Plutonium Facility security perimeter upgrade project.

Nuclear Weapons and Materials Monitor obtained a preliminary analysis of the project’s problems a couple of weeks ago. The analysis stated that “the project spun out of control as it faced issues with technology and was hindered by contractor interface issues stemming from the project being broken up into five pieces — and didn’t have the proper project management tools to fix or understand problems as they arose.”

The most egregious problems were represented by the improper installation of fiber optic cables. The cables were supposed to be physically separated, but when they were installed in 2010, they were instead routed together. The problem wasn’t discovered until September, according to the lab’s estimate at completion submitted to the NNSA, Nov. 3. Other issues included problems with the perimeter lighting system and a perimeter denial system.

As early as May 2010, the NNSA advised LANS it was concerned that the project would not be completed on schedule or within the cost baseline.

On Sept. 28 of this year, after numerous unsuccessful attempts to obtain an updated estimate to complete the project, the NNSA directed LANS to provide a Nuclear Materials Safeguards and Security Upgrades Project recovery plan to address corrective actions to design and construction, and to identify how LANS will complete the project within approved project and cost baselines.

LANS did not provide the requested information, however, on Oct. 17, LANS notified NNSA that NMSSUP could not be completed within available funds and requested emergency reprogramming of an undetermined amount.

Daily status meetings were held to maintain awareness of project impacts. LANS brought in an external team to assess the situation and to determine a path forward. That team immediately determined that LANS was in danger of exceeding available funding. As a result, LANS suspended performance on all five subcontracts and repositioned its own project management personnel to other site work. Those moves were done without consulting NNSA.

Concurrently, NNSA also tried to identify potential sources of funding for reprogramming including fee decrements. Some of the options considered involved slashing the management fee paid to LANS. Last year, that fee was $76 million. Another option to pay for the cost overruns was that the NNSA tried to get an emergency reprogramming of funds that would be needed to protect the project. Last month, the NNSA submitted a $120 million request to reprogram funds as a result of the deferral of the Chemistry Metallurgy Research Replacement facility.

On Wednesday, LANS, LLC and the NNSA arrived at this $10 million agreement. And last week, LANS also hired outside counsel to help it deal with the botched construction on the project.