Nuclear agency withholds more than $5 million from Los Alamos operator

More than $5 million has been withheld from the University of California as a penalty for the mismanagement of Los Alamos National Laboratory in fiscal 2004.

Citing sloppy handling of sensitive material, security concerns and accounting lapses, the National Nuclear Security Administration imposed the fee reduction Friday.

The University of California was assessed an initial $2.1 million fee reduction but NNSA Administrator Linton Brooks decided that was insufficient. After reviewing the penalty, he withheld another $3 million in management fees. The laboratory was given an "unsatisfactory" operations rating in fiscal 2004-the lowest of four possible performance levels.

"We got walloped and unfortunately we deserved it," said UC spokesman Chris Harrington. "But it's important to note that what we have done is corrected the problem and put the right policies and procedures in place so this doesn't happen again."

Employees at the laboratory allegedly misused official credit cards and lost classified material-including two computer disks. The $5.1 million represents the largest amount of money ever withheld from a national laboratory for performance failures, according to the agency. The Los Alamos facility is responsible for developing some of the nation's most advanced technology and nuclear weaponry. The University of California has operated Los Alamos for more than 61 years without competition, but the contract was recently opened to bidders for the first time.

"Although multiple investigations have confirmed that the 'missing' disks never existed, the major weaknesses in controlling classified material revealed by this incident are absolutely unacceptable, and the University of California must be held accountable for them," Brooks said Friday. "Of even greater concern are significant safety weaknesses which came to light at approximately the same time."

"I consider this an appropriate indication of the severity and systemic nature of the problems uncovered at Los Alamos, problems which have already resulted in substantial loss to the government," he said

The Project on Government Oversight, which watches Los Alamos closely, applauded the penalty. POGO officials recently called for more stringent financial penalties in the next contract that is awarded for Los Alamos.

"It is a step in the right direction, although we don't believe they should have gotten any fee," said Pete Stockton, a Los Alamos observer from POGO. "I think that Brooks was right on with the things he was saying about the University of California."