Parts of Y-12, Pantex contract protests upheld; GAO says procurement should be re-opened

A federal agency has upheld parts of two protests challenging a five-year contract to manage two nuclear weapons plants in Tennessee and Texas.

The U.S. Government Accountability Office also recommended re-opening the contract procurement, raising questions about the status of the $22.8 billion contract awarded to Consolidated Nuclear Security LLC, or CNS, in January. CNS was one of three bidding teams who competed for the contract to manage and operate the Y-12 National Security Complex in Oak Ridge and Pantex Plant near Amarillo, Texas.

At the heart of the GAO decision, announced Monday, were questions about proposed savings. In particular, the agency seemed to question whether the National Nuclear Security Administration, which awarded the consolidated contract to CNS on Jan. 8, had properly evaluated the expected savings.

“NNSA failed to follow the publicly stated solicitation criteria, which provided that the agency would evaluate the feasibility and size of each offeror’s proposed cost savings resulting from the consolidation of the management and operation of these sites,” Ralph O. White, GAO managing associate general counsel for procurement law, said in a statement released Monday afternoon.

“Specifically, GAO concluded that NNSA failed to meaningfully assess the majority of each offeror’s proposed cost savings, and based its source selection decision on the unsupported assumption that all cost savings proposed by every offeror would be achieved,” White said. “The protesters raised various other protest allegations, which were denied.”

Earlier this year, federal officials said CNS had promised to help the federal government save $3.27 billion during the next decade, but many of the details would have to be announced later. The expected savings of the other two bidding teams have not been publicly disclosed.

On Monday evening, Jason Bohne, a spokesman for Bechtel National Inc., which is part of the CNS team, said the $3.27 billion in savings was a credible number. But the company will provide more details as a result of the GAO decision, he said.

“Based on the information we have, we’re encouraged,” Bohne said. “We feel that the opportunity to provide additional information will confirm that the NNSA made the right decision when it picked Consolidated Nuclear Security.”

The CNS team also includes Lockheed Martin Services Inc., among others.

The two losing teams—Nuclear Production Partners LLC, of Lynchburg, Va., and Integrated Nuclear Production Solutions LLC of Oak Ridge—had filed the bid protests. The first was filed Jan. 17, and the GAO had 100 days to issue a decision.

On Monday, the GAO said the NNSA should re-open the procurement, request more information from the bidders about their proposed cost savings, and evaluate the relative size of each team’s proposed cost savings. If the procurement were re-opened, it would only be open to the three teams that have already bid.

The U.S. Department of Energy and NNSA have 60 days to respond. They’re not bound by the decision, but agencies usually follow the GAO’s recommendations.

If they don’t, the GAO could notify the House and Senate appropriations committees and other appropriate committees. Under federal law, the Comptroller General reports annually to Congress on federal agencies that do not fully implement a recommendation made by GAO in connection with a bid protest decided the prior fiscal year.

In a short statement, the NNSA said it was reviewing Monday’s decision.

“We appreciate the GAO’s advice,” NNSA spokesman Josh McConaha said. “We’re going to take some time before settling on our path forward, but we are committed to reducing costs for the American taxpayers and strengthening our nuclear security capabilities at Pantex and Y-12.”

Meanwhile, CNS could challenge the decision in the U.S. Court of Federal Claims in Washington, D.C., which hears a small percentage of the 2,500 protests filed with the GAO each year. But it’s not clear that they would.

“The ball is in the NNSA’s court now,” Bohne said. “We’ll be prepared to follow any directive that the NNSA gives.”

The consolidated contract is the first for the NNSA, and it’s been in the works for several years. NNSA officials have said the consolidation could save money in part by eliminating redundancies in such areas as human resources, purchasing, finance, and information technology.

The bid protests had already put on hold the transition to CNS, which had initially been scheduled to take over operations at Y-12 and Pantex on May 1.

Babcock and Wilcox Co., the current lead managing and operating contractor at Y-12 and Pantex, said it was pleased with the GAO decision. B&W is part of the the Nuclear Production Partners team, which also includes URS, Northrop Grumman, and Honeywell. B&W said the team’s proposal was a “very strong choice for moving closer to the National Nuclear Security Administration’s vision of a consolidated nuclear security enterprise and for continuing the tradition of excellence B&W has maintained at both Y-12 and Pantex over the past 12 years.”

Besides consolidating management and operations at Y-12 and Pantex, the contract awarded in January also included construction of the Uranium Processing Facility at Y-12, and it could have added the management and operation of NNSA’s Savannah River Tritium Operations, located near Aiken, S.C.

White said the protest decision itself contains proprietary and sensitive information, so its release is currently limited to NNSA personnel and certain outside counsel. However, the parties have been directed to submit proposed redactions so a public version of the decision can be prepared, White said. It could be available in a few weeks at www.gao.gov.

In the meantime, the B&W contracts for Y-12 and Pantex have been extended to May 31, said Steven Wyatt, public affairs manager for the NNSA Production Office in Oak Ridge.

The Integrated Nuclear Production Solutions team includes Jacobs Engineering Group Inc. and Fluor Federal Services Inc. A Jacobs spokeswoman did not return a phone call seeking comment.

Note: This story was last updated at 12:10 a.m. April 30.