With $3 billion in savings expected, not clear how much saved at Y-12, Pantex so far

 

More than $3 billion in savings are expected during a decade, but it’s not clear yet how much money has been saved after three years under a consolidated contract at two nuclear weapons plants in Tennessee and Texas.

The savings of $3.27 billion are expected under a contract that could last 10 years at the Y-12 National Security Complex in Oak Ridge, Tennessee, and Pantex Plant in Amarillo, Texas.

On Monday, officials said Consolidated Nuclear Security LLC, the contractor at the two sites, has generated significant savings in three fiscal years, although it’s not clear exactly how much they’ve saved. CNS has managed and operated Y-12 and Pantex Plant since July 1, 2014.

Federal officials announced the expected savings of $3.27 billion during a decade when the five-year contract was announced in January 2013. Officials said the consolidated contract, the result of years of work, could save money in part by eliminating redundancies in such areas as human resources, purchasing, finance, and information technology.

It was the first consolidated contract for the National Nuclear Security Administration. CNS operates Y-12 and Pantex for the NNSA, a semi-autonomous agency within the U.S. Department of Energy.

Oak Ridge Today has previously reported that CNS would have to be on track at the end of the third year to achieve 80 percent of the promised savings in order to have the contract extended after five years. In January 2013, NNSA officials expected a savings of $523 million by the end of the third year.

After the contract was awarded to CNS in January 2013, there were three bid protests and a four-month transition before the company started managing and operating Y-12 and Pantex in July 2014.

Since CNS’s third year ended June 30, Oak Ridge Today asked in October, after two congressmen expressed support for the consolidated contract, if CNS had saved $523 million by the end of the third year and if the contractor was on track to produce the $3.27 billion in savings in a decade.

CNS and the National Nuclear Security Administration responded on Monday. They said they have not completed the required analysis of savings achieved through the first three years.

“Therefore, it would be premature to discuss savings achieved through the end of the third year of performance,” according to a response to questions provided by Y-12 spokesperson Ellen Boatner.

The response said CNS generated “significant verified savings” to the NNSA for fiscal years 2014 to 2016, but verification of the savings for fiscal year 2017 has not been completed.

“The intent of the contract is to free up savings for site reinvestment and site improvement, and that is being realized,” the response said.

The response from CNS and the NNSA said site reinvestment projects in the B61 Life Extension Program are under way. The B61 is a nuclear gravity bomb deployed from U.S. Air Force and North Atlantic Treaty Organization (NATO) bases. (Learn more about the B61 Life Extension Program here.)

In addition, several reinvestment projects have been approved and are proceeding, the response said. Those include new vacuum chamber equipment, new leak tank systems, upgraded vacuum manifolds, security gate equipment replacement, restroom area upgrades, and additive machining, among other projects.

The response said CNS generates cost savings through methods that include efficiencies in labor, non-labor, procurement, and benefits.

“At contract award, the federal government realized an immediate savings in contract fee, which was reduced from 7.0 percent to 3.0 percent, saving over $500 million in fee over the life of the contract,” the response said. “In addition, the government receives 65 percent of the savings generated by efficiencies as a result of the contract merger. Savings are achieved by improving work processes and changes to compensation plans.”

The workforce at Y-12 and Pantex has increased because of added mission work being performed at the two sites. Employment at Y-12 and Pantex was reported to be about 7,800 in July 2014, and it’s roughly 8,000 now.

The CNS contract with the NNSA is valued at up to about $22 billion if all contract options are exercised. The contract includes options that could allow it to be extended for up to five more years, based upon performance.

Included in the contract is project management of the Uranium Processing Facility at Y-12, where a 90 percent design was recently completed. The UPF is the largest federal investment in Tennessee since World War II, and it is expected to be completed by 2025 at a cost of no more than $6.5 billion.

The contract was to be administered by the NNSA Production Office, or NPO, which which was created in June 2012 and oversees nuclear production missions at Y-12 and Pantex.

In January 2013, the NNSA said the consolidated contract included a total available fee of about $446 million to manage three sites for DOE and NNSA, depending on CNS’ quality of performance and whether an option to perform Savannah River Tritium Operations (SRTO) near Aiken, South Carolina, was exercised at the end of the first year. So far, that option for tritium operations at Savannah River has not been exercised.

CNS may also earn up to an additional $263 million as their share of savings, though CNS cannot share any savings related to employee benefits, the NNSA said in January 2013.

The response to questions that CNS and the NNSA provided on Monday said that CNS earned a $42 million fee in fiscal year 2015 and a rating of good, and $31 million in fee and a rating of good in fiscal year 2016. (You can find the full 2015 and 2016 performance evaluation reports for CNS, including award fees, at https://nnsa.energy.gov/aboutus/ouroperations/apm/perfevals/npoperfevals.)

Y-12, Pantex, and the Savannah River Site are key plants in the nation’s nuclear production work. The NNSA previously said each site provides unique capabilities in areas such as high explosives, precision machining, and tritium production.

Before CNS, Y-12 had been operated by B&W Y-12, a partnership of the Babcock and Wilcox Company and Bechtel Corporation, for 12 years. Pantex was managed and operated by Babcock & Wilcox Technical Services Pantex LLC. Bechtel, which has operational headquarters in Reston, Va., was a partner on that project as well.

CNS member companies include Bechtel National Inc., Lockheed Martin Services Inc., ATK Launch Systems Inc., and SOC LLC, with Booz Allen Hamilton Inc., as a teaming subcontractor.

Pantex is responsible for nuclear weapons life extension programs; weapons dismantlement; development, testing, and fabrication of high explosives components; and storage and surveillance of plutonium pits.

Y‐12 is responsible for safe and secure uranium storage, processing, and manufacturing operations; supplying fuel for the U.S. Navy; and global non-proliferation.

More information will be added as it becomes available.

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