DOE: Labs paid too much
by Diana Heil, August 25, 2004

Three national nuclear-weapons laboratories, including the one at Los Alamos, didn't pay close enough attention to millions of dollars' worth of spending on subcontractors in recent years, a new U.S. Department of Energy report says. Defenders of Los Alamos National Laboratory, however, say the report overlooks the big picture and might be out of date. The department's Office of Inspector General reviewed how the national labs at Los Alamos and Sandia in New Mexico and the Lawrence Livermore lab in California managed 287 subcontracts during the fiscal years that began in October 2001 and 2002. The University of California operates Los Alamos and Livermore, while Lockheed Martin runs Sandia lab in Albuquerque. The report, made public Tuesday, questioned $12.9 million in costs paid to subcontractors at Los Alamos and $600,000 at Sandia.

The root problem, the report says: lack of adequate controls on spending for subcontractors, who get a substantial amount of the money the government pays to operate the labs. In one fiscal year alone, 44 percent of DOE money for the three labs -- about $1.8 billion -- went to subcontractors. Michael Kane of the National Nuclear Security Administration, DOE's weapons branch, wrote in a June letter to the Office of Inspector General that the report focuses on old data. "The data that was utilized by the auditors certainly validates the problems that were evident at LANL at that time," he said. "However, there are new managers, reporting relationships and work processes that have been put into place since the time of the data sample." Los Alamos has come a long way from two years ago, when, as one spokeswoman put it, the "entire world was telling us we couldn't manage a kid's lemonade stand." Back then, employees were able to sidestep rules intended to control purchases on charge cards. The employees could split transactions into smaller sales, which wouldn't bust limits on the cards. Since then, spokesmen say, the lab reviewed its business practices, including contract oversight, and received much-improved reports from independent accounting firms. "We believe the lab has improved in these areas and made strides in improving its operations since the purchase-card scandal," NNSA spokesman Bryan Wilkes said in a telephone interview Tuesday.

The Inspector General's report raised other concerns. While Sandia performed audits on all subcontractors, Los Alamos conducted only two audits out of 93 active subcontracts checked by the Inspector General. The 93 contracts were valued at $1.3 billion. "Los Alamos and Livermore ... did not always arrange for or otherwise ensure that audits were performed of their subcontractors' records, operations and transactions with respect to costs claimed," the report says. But the report noted progress, saying Los Alamos increased the number of contract auditors on its staff, developed new procedures and is revamping its purchasing system. Of the $12.9 million in spending questioned by the Inspector General, LANL managers said, the lab internally has resolved all but $387,000 of the amount. However, the lab never provided proof, according to the Inspector General's report.

Originally published in The New Mexican.

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