Vying for Energy

Despite new competition to run labs, small business gets short shrift.

An Energy Department contracting model that Congress complained was too exclusive three years ago is under fire again, this time for suppressing small business.

Congressional auditors are criticizing the department's reliance on a handful of large companies and universities to manage its laboratories and other high-cost projects at the same time the Bush administration is trying to increase funding for science research and the revival of nuclear power.

The department buys more than $20 billion worth of goods and services each year, but an increasing share of those procurement dollars-80 percent in 2004 and 87 percent in 2005-goes to facility managers. Only a little more than 4 percent of prime contract money goes to small companies. The share spent on projects suited for them is shrinking. In an April report (GAO-06-501), the Government Accountability Office said Energy failed to meet its small business prime contracting goal in four of the past five years.

The shortfall persists in spite of a 2003 congressional mandate to put lucrative, long-standing lab contracts up for bid for the first time in order to tighten oversight and pry open the market. New contracts already are in force at the Los Alamos, Lawrence Berkeley, Idaho and Thomas Jefferson labs. Argonne National Laboratory could be under new management by Oct. 1. Energy is taking offers to run the Ames and Fermi labs beginning Jan. 1, 2007. Contracts for the Lawrence Livermore and Pacific Northwest labs do not expire until Sept. 30, 2007, but already are in play.

Lawmakers targeted research facilities that have not had a management turnover in at least 50 years. In most cases so far, the original contractors or companies set up by them have won the competitions. For example, Livermore is one of three labs managed single-handedly by the University of California since their inception in the late 1940s and early 1950s. In late May, UC ended its run as the sole manager of Los Alamos when a partnership led by UC and Bechtel National assumed control of the lab. UC kept its job at Berkeley.

As tight as the market seems, it is not impenetrable. For example, a new Northrop Grumman-led joint venture broke through in April with a contract to run the Nevada Test Site. The company, National Security Technologies LLC, outbid the previous contractor, Bechtel Nevada Corp.

The department will benefit from at least two new Bush administration initiatives in the coming year. Appropriations bills making their way through Congress in July included about $4 billion for Energy's Office of Science under the American Competitiveness Initiative, which proposes to double funding for basic research by the Energy Department, the National Science Foundation, and the National Institute of Standards and Technology.

Congress also increased funding for a variety of clean energy technologies under the Advanced Energy Initiative, which seeks to develop alternatives to foreign oil supplies. Lawmakers were divided in their support for a key element of the initiative-one that would spark a comeback for nuclear power in the United States. The Global Nuclear Energy Partnership has a two-pronged purpose: to satiate the world's hunger for electricity while keeping nuclear material out of the hands of those who want to use it in bombs. Senate appropriators set aside $286 million for fiscal 2007 to begin development of a demonstration power plant that can burn recycled plutonium. Their counterparts in the House of Representatives offered significantly less than half that amount.

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