Big Box competitors for Los Alamos National Laboratory service and supply contracts are troubling small businesses in New Mexico, according to Jeff Lunsford of the Consortium of Major LANL Subcontractors.
The topic was under discussion in the New Mexico Legislature last year and has been an item of discussion with New Mexico congressional delegation. Contractual uncertainties have multiplied lately with the impending plan to transfer environmental cleanup work at the laboratory from the National Nuclear Security Administration to the Department of Energy’s Office of Environmental Management, which will require new and still unspecified procurement arrangements as well.
In a presentation to representatives of the Regional Coalition of LANL Communities Friday, Lunsford said that his organization is not against enterprise-wide contracts under the Supply Chain Management Center at the Kansas City Plant. But, he said, “There are issues with how SCMC is operating that could impact Northern New Mexico, and we are working with SCMC to address those specific challenges.”
He said a major concern with SCMC’s approach as a super-supplier, driving savings and efficiencies among the suppliers, was a lack of transparency in the bidding process. “Requests for data have been at best vaguely answered and the bid processes are completely closed, so they choose who they’re going to send an RFP to. It’s not announced in advance,” Lunsford said.
He said another concern is that the SCMC tends to pick only the largest kind of small business, typically defined as businesses up to either 500 or 1,000 employees. SCMC wants a “small business,” to meet its local obligations, but it has to be a business large enough to handle a nation-wide contract. So a very small,micro-regional business with 10 or 20 employees is typically not even invited to bid.
The NNSA set up the SCMC in 2006, under former Administrator Tom D’Agostino, as a money-saving, pooled purchasing system throughout the enterprise. NNSA claims it has saved hundreds of millions of dollars, although a GAO report in 2012 chided the organization for not fully knowing what its support costs were from 2007 through 2011, “because DOE changed its data collection approach beginning in 2010 to improve its data and, as a result, does not have complete and comparable cost data for all years.”
From financial figures Lunsford said were provided by Sen. Martin Heinrich’s office, the total “spend” for Los Alamos in New Mexico in 2013 was $337M, and $276M in 2014, a drop of $61M or 18 percent. Northern New Mexico communities received $251M in 2013 and $212M last year, a decline of $39M or 15.54 percent.
“The declines are not directly attributable to SCMA today, but what we wanted to point out to you is how much LANS spends in Northern New Mexico and in New Mexico,” and the future impacts with present trends continued, Lunsford said. “If the local contracts continue to get impacted by EM or SCMC, we’re talking hundreds of millions of dollars of impact potential to the local communities.”
Doug McCrary, manager of procurement and property at LANL, followed with a presentation bringing the LANL procurement numbers up to date, with numbers that appeared to show very little decline, in the last two years for which he showed data. “Generally, from what I see between (FY)14 and 15, he said, “the spend is fairly consistent,” and there appeared to be very little decline in the last two years.”
He explained his process of analyzing procurements to determine the best fit for the lab. “If I see the SCMC is a better fit, typically what I do is go to the local business and say I have a better opportunity. Let’s talk about it, see if we can put you in a better space in competition with the SCMC.” An additional advantage, he pointed out is that bona fide Northern New Mexico companies qualify for a 5 percent pricing preference and if a Northern New Mexico company can come within that 5 percent, he is required by the federal government to go to the local company.
Among the steps proposed by Lunsford and the Major Subcontractors Consortium is a pilot project underway with the Regional Development Corporation to help build stronger and more capable businesses. During discussion, Española Mayor Alice Lucero said, “I don’t think there are any small businesses in Española or north of Española that have 500 employees and they’re in great need, but I think it’s almost impossible for some of these small businesses to succeed.” Even with extra help, they couldn’t handle a nationwide bid, she said.
At the end of the meeting, the regional coalition board members voted to approve a letter backing the SCMC issue.