Energy Dept.'s Unbundling Plan Under Attack The Energy Department’s large facility management contractors attacked the department’s plan to break up some of their huge contracts so that small businesses could compete for the work. Sen. Pete Domenici (R-NM), chairman of the Energy and Natural Resources Committee, agreed with some of the prime contractors’ concerns at a May 18 hearing. Two of Energy’s big national laboratories, Los Alamos and Sandia, are in his home state. The General Accounting Office also questioned the unbundling plan. “The concept of contracting highly technical, complicated large projects to small businesses that may not have the workforce or expertise unless they partner with large contractors is not sensible or efficient,” said Robin Nazzaro, GAO’s director of natural resources and environment. The department announced in 2002 that it would review the facility management contracts at its national labs and other installations to see if some portions could be broken out for small firms. (SAA 11/15/02) Congress has directed the department to re-compete the contracts; some of them have not been competed for more than 50 years. (SAA, 2/6) Sen. Domenici said, “I have difficulty believing that it is wise to rely on the department to coordinate and integrate all these small activities.” Joan Woodard, deputy director of Sandia National Laboratory, testified, “You can’t fairly hold the prime contractor accountable for the overall management and operation of the facility – including security, safety, health and environmental compliance – when it does not have the hire-and-fire authority over the subcontractors at the site. If we can’t choose our vendors, we can’t be confident that we can control them.” Facility management contractors currently subcontract more than half of their work to small firms, but the department is not allowed to count those subcontracts toward its small business procurement goals. Energy awarded just 4.1% of its prime contract dollars to small businesses in fiscal 2003, according to the Federal Procurement Data Center, the worst performance of any cabinet-level department. Counting subcontracts, Deputy Energy Secretary Kyle McSlarrow told the committee, the department awarded 23% of its dollars to small firms. He said Energy cannot reach the government’s 23% goal for small business prime contracts without unbundling some of the management contracts, because those multibillion-dollar contracts account for 85% of its procurement budget. But he acknowledged worries about the “administrative burden” of managing many small contracts. Woodard said the organization of large primes, the National Laboratories Improvement Council, is urging Congress to allow Energy to count its subcontracts toward the small business goal, as was done before the Office of Management and Budget stopped the practice in 1999. Ann Sullivan, legislative consultant for Women Impacting Public Policy, told Sen. Domenici, “If I had 85% of the business, I wouldn’t want any changes, either.” “We would argue that the department will gain a better price and more efficient service by contracting directly with small businesses,” she testified. “If federal agencies are permitted to count subcontracts as prime contracts, as far as WIPP is concerned, any incentive to reach the goal of 23% for small business is removed. If DOE is permitted to count subcontracts as prime contracts, every other agency will be knocking at your door to get the same exemption and in the end, small businesses will lose.” Local governments around Energy’s large facilities also oppose unbundling the management contracts. City Councilman Robert Thompson of Richland, WA, said local businesses that are now subcontractors would be hurt because the set-aside prime contracts would be advertised nationwide, bringing in new competitors. About 50 major Energy Department sites are managed by contractors. Among the contractors are a subsidiary of Lockheed Martin, which operates Sandia; Iowa State University and the universities of California and Chicago.