National Nuclear Security Administration Contracting:

Review of the NNSA Report on the Sandia Contract Competition

GAO-18-490R: Published: Aug 14, 2018. Publicly Released: Aug 14, 2018.

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Allison B. Bawden
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bawdena@gao.gov

 

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The National Nuclear Security Administration is responsible for the management and security of U.S. nuclear weapons programs. It relies heavily on contractors to carry out its mission, including one to manage and operate Sandia National Laboratories. National Technology and Engineering Solutions of Sandia took over operations in 2017 under a 5-year, $12.7 billion contract.

We reviewed NNSA's cost-benefit analysis of this contract: it mostly addressed what was legally required. However, we found NNSA's $16 million estimate of the contract's potential cost savings to be an underestimate. We estimated potential savings to be considerably more.

 

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This is a photo of an American flag.

Additional Materials:

Contact:

Allison B. Bawden
(202) 512-3841
bawdena@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The new management and operating (M&O) contract for Sandia National Laboratories (Sandia) generally included the changes sought by the National Nuclear Security Administration (NNSA) in several areas, such as cost improvements, provisions that bring the Sandia contract more into line with other national laboratory contracts, and incorporation of recommendations made by several panels and commissions.

NNSA issued a congressionally required report on the new M&O contract for Sandia that, based on GAO's review, addressed three and partially addressed two of the five required reporting elements pertaining to contract costs, benefits, and potential disruptions or delays. The three reporting elements NNSA's report fully addressed are (1) expected cost savings; (2) other benefits; and (3) any disruptions or delays to mission activities. NNSA's report estimated likely cost savings with the new contract of approximately $16 million over the life of the contract. However, based on data NNSA provided, the estimated total savings over the life of the contract could be considerably larger resulting from the pay pool reduction because the cost savings would recur annually once the variable pay pool is reduced. The NNSA report partially addressed reporting elements regarding the immediate and longer term costs of the competition and key limitations or uncertainties about cost savings.

NNSA's report addressed two of three required elements pertaining to its decisions to (1) extend or compete the contract consistent with provisions of the Federal Acquisition Regulation (FAR); (2) to continue to sponsor Sandia as a Federally Funded Research and Development Center (FFRDC)--a type of government-funded entity that has a long-term relationship with one or more federal agencies to perform research and development--consistent with provisions of the FAR; and (3) which activities should be covered under the M&O contract. NNSA's report addressed the two reporting requirements related to deciding whether to extend or compete the M&O contract and continuing to sponsor Sandia as an FFRDC. Specifically, the NNSA report outlined several factors considered and processes used to determine whether to extend or compete the contract and found that all the criteria for the use of an M&O contract applied and were met with respect to the operation of Sandia, supporting the need for an M&O type of contract. In addition, the report stated that NNSA complied with the FAR concerning the continued sponsorship of Sandia as an FFRDC, and supporting agency documentation indicated that NNSA conducted a review of the applicable FAR criteria to make this determination. The NNSA report did not, however, discuss which, if any, activities at Sandia covered under the M&O contract should be covered under a different contract. While this assessment was a required reporting element, there are no requirements to conduct such an assessment for M&O contracts under the FAR or Department of Energy Acquisition Regulation.

Why GAO Did This Study

NNSA is responsible for the management and security of the nation's nuclear weapons programs, among other missions. To carry out this mission, NNSA relies on M&O contracts for its national laboratories and nuclear production facilities. M&O contracts are agreements under which the government contracts for the operation, maintenance, or support, on its behalf, of a government-owned or -controlled research, development, special production, or testing establishment. NNSA decided to compete the Sandia contract in 2015. Under the National Defense Authorization Act (NDAA) for Fiscal Year 2013, as amended, NNSA is required to submit a report on a range of issues to the congressional defense committees after the award of a new M&O contract or resolution of a protest with respect to such a contract. NNSA awarded a new M&O contract for Sandia with a start date of May 1, 2017. The NDAA for fiscal year 2016 includes a provision for GAO to review each NNSA report and brief congressional defense committees. This report summarizes GAO's briefing and addresses (1) changes, if any, NNSA sought under the new Sandia contract, and how those changes are incorporated in the new contract; (2) the extent to which NNSA's report addresses the reporting requirements with respect to costs and benefits and potential disruptions or delays; and (3) the extent to which NNSA's report addresses the reporting requirements pertaining to its decision to extend or compete the contract, sponsorship of Sandia to continue operating as an FFRDC, and the scope of activities to be covered under the M&O contract.

GAO reviewed key NNSA documents, including NNSA's report, and documents pertaining to the contracting process and award, the approval to continue sponsorship of Sandia as an FFRDC, and the authorization to continue operation of Sandia under an M&O contract. GAO compared the reporting requirements with the information NNSA provided in its cost-benefit report on the Sandia contract. GAO also interviewed NNSA officials involved in the Sandia contract award process and in the preparation of the report.

What GAO Recommends

GAO is not making any recommendations.

For more information, contact Allison Bawden at (202) 512-3841 or bawdena@gao.gov

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