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Advocating for Los Alamos at the Roundhouse

Article by Pete Sheehey published in Los Alamos Monitor, March 9, 2018

As a member of the County Council’s Regional and State Subcommittee, I helped develop our state legislative agenda, which was approved by the whole Council last December. One priority was to address the concern that if a non-profit organization won the new LANL contract, state and local government could lose a total of $50 million per year in gross receipts tax (GRT).

Working with our State Senators Cisneros and Martinez and Representative Garcia Richard, we developed a bill, SB17, to close the loophole that lets non-profit organizations avoid GRT payment as prime contractors for national laboratories (SB17 preserves the GRT exemption for all other non-profit businesses and contracts). The bill passed both Houses: 31-4 in the Senate and 48-19 in the House. It still needs the signature of Governor Martinez to become law.

Why SB17?

Non-profit organizations in New Mexico are exempt from GRT, except for services they buy from a subcontractor. The non-profit University of California (UC), in the last full year of its Lab contract, paid $41 million in GRT (55% to state, 45% to county). DOE additionally paid millions of dollars in direct “assistance payments” to the county, but these were phased out.

When the for-profit LLC Los Alamos National Security took over, GRT payments increased substantially, to $82 million in 2016. In the absence of federal assistance payments, this increase has been needed to provide the infrastructure and services that support the ~10,000 employee Lab operation.

I worked at the Lab for 26 years, under both the non-profit University of California (UC) and the for-profit LANS LLC. I agree with many that the work atmosphere was better under UC than under LANS. Both contractors made costly mistakes that no one wants to see repeated. For the security of our nation, and the safety of our environment, I want the best contractor, for-profit or non-profit, to run the Lab.

Would SB17 weaken the new contract bid of a non-profit contractor by raising the cost to NNSA? The RFP for the new Lab contract, RFP DE-SOL-0011206, clearly states: "In determining the best value to the Government, the Technical and Management Criteria, when combined, are significantly more important than the Cost Criterion. The Government is more concerned with obtaining a superior Technical and Management proposal than making an award at the lowest evaluated cost/price."

Under present law, if a non-profit contractor took over the Lab, NNSA would be able to avoid payment of ~$50 million per year in GRT. $50 million is only 2% of the total yearly ~$2.45 billion Lab cost. It is wishful thinking that NNSA would turn over to Los Alamos any money saved because a non-profit didn’t have to pay GRT. With today’s intense federal budget pressure, any savings would stay in Washington.

The best technical/management contractor to run LANL should clearly offer more than 2% greater value to the nation than the lowest bidder. SB17 puts all contractors on a more leveled playing field, so that the selection is strongly focused on who can do the best job. That should be our prime objective.

How SB17 Passed

My late friend and mentor Dave Thomsen, of the Los Alamos Committee on Arms Control and International Security, taught me how to be an effective advocate: be informed, be persistent, and make concise, well-reasoned arguments. That is how I set out to get SB17 passed.

With the help of our county’s lobbyist, Scott Scanland, the Council advocated for this bill. Council Chair David Izraelevitz, the President-Elect of the New Mexico Municipal League, obtained their support. I am on the Board of Directors of the New Mexico Association of Counties, and got their support. Councilor Chandler, who serves as Board Secretary of the Regional Coalition of LANL Communities (RCLC), got support from the Coalition and its members. Councilor Maggiore, our Board member for the North Central Regional Transit District, got a resolution of support from NCRTD.

When Senator Cisneros took the bill to the Senate, and Representative Garcia Richard to the House, I served as one of the expert witnesses, providing detailed answers to technical questions. There was thorough debate on this bill, and Senator Cisneros and Representative Garcia Richard, with our help, answered all questions well.

Conclusion

SB17 passed both Houses with strong bipartisan support. If the governor signs the bill, GRT revenues from national laboratory contractors will no longer be in doubt every time a new contract is awarded. If not, state and local government will face a ~$50 million per year funding uncertainty every time Lab contracts go out for bid.

Note:

Governor Martinez vetoed SB17 on March 9. I responded to the Monitor: "The concerns cited in the governor's letter vetoing SB17 were thoroughly debated in the NM House and Senate. Large bi-partisan majorities in both Houses found that those concerns were not valid reasons to oppose the bill; they voted 31-4 in the Senate and 48-19 in the House in favor of SB17. The veto potentially creates a major revenue problem for the state and northern New Mexico."