Some LANL employees have expressed the opinion that SB17, the bill recently passed by the state legislature requiring every prime contractor for a National Laboratory in New Mexico to pay full gross receipts tax (GRT), will weaken the new contract bid of any non-profit contractor by raising the cost to NNSA for a non-profit organization to run the Lab.
This reflects confusion about the Lab RFP and GRT, which I would like to clarify.
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 for science was better under UC than under LANS. Under both contractors, costly mistakes were made which 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.
The RFP for the new Lab contract, RFP DE-SOL-0011206, clearly states (p.207): “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.”
State-required GRT payments are a reimbursable expense under the RFP, so NNSA is legally required to pay this cost. Conversely, any non-required payments are not reimbursable to the contractor by NNSA. It is wishful thinking to believe 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 to NNSA would stay in Washington.
New Mexico’s potential lost GRT, should a non-profit win the Lab contract, is about $50 million per year ($30M to state, $20M to local government). $50 million is only 2 percent of the total yearly ~$2.5 billion Lab cost.
The best technical/management contractor to run LANL should clearly offer more than 2 percent greater value to the nation than the lowest bidder. SB17 simply puts all contractors on a more level playing field, so that the selection is strongly focused on who can do the best job. That should be our prime objective.