DATE: 16 November 2011 TO: Dr. John W. Fischer, Laboratory Joint Analysis Team (Chair, OSD) FROM: Don J. DeYoung, Laboratory Joint Analysis Team (U.S. Navy Team Member) SUBJ: NEW MISSIONS FOR THE NUCLEAR WEAPONS LABS DOD DOWNSIZED ITS LAB SYSTEM AFTER THE COLD WAR 1988 – 2005: DoD conducted five Base Realignment and Closure (BRAC) rounds to remove excess capacity from its lab system. A combined 21 lab sites were closed and the workforce was cut by about one-third.1 DOE WAS ADVISED BY EXPERT PANELS TO DOWNSIZE ITS LAB SYSTEM 1995: The Secretary of Energy’s advisory board (chaired by Robert Galvin, former Motorola CEO) proposed closing and consolidating components of the nuclear weapons complex. The lab system was deemed “oversized,” due to “excess capacity in areas associated with nuclear weapons design and development, and political considerations which have inhibited downsizing.” The Board found it unrealistic “for these institutions to attempt to retain their current size by laying claim to ‘new missions.’”2 1995: The President’s National Science and Technology Council found that the DoE lab system is “bigger and more expensive than it needs to be” and there is “excessive duplication of capabilities among the labs.”3 2005: A second advisory board to the Secretary of Energy echoed the first and raised the prospect that one of the design labs might close.4 2008: The Center for a New American Security (co-founded by Michele Flournoy, now Under Secretary of Defense for Policy) proposed that the DoE lab system be streamlined by “a process similar to the Base Realignment and Closure Commission … a National Labs Realignment and Closure process.”5 DOE LABS ARE INSTEAD PURSUING NEW MISSIONS Mar 2009: The Stimson Center examined how the nuclear weapons labs (Lawrence Livermore, Los Alamos, and Sandia) might be transformed into a “national security enterprise.” The Center’s report advised more funding would be needed “to make national security beyond nuclear weapons a core mission requirement.” It proposed a governance structure whereby the DNI, DHS, and DoD support the DoE labs with capital investments and annual funding commitments.6 [Note: The Stimson Center lists DoE as a financial donor] Oct 2009: DDR&E (now ASD(R&E)) chartered the Laboratory Joint Analysis Team to focus on the technical health of the DoD labs. In a handwritten note, Mr. Zachary Lemnios penned that he wanted to see “what we really need from the Laboratories (DoD & DoE)” (see Attachment A). Dec 2009: Directors of the three DoE labs (one of whom has a salary of $1.7 million)7 visited the White House where they described the dangerous impact of budgetary pressures.8 The administration later announced plans to increase investments in the nuclear weapons complex to $8.6 billion per year over the next decade. In constant dollars, this is almost 40% more than the previous 20-year average of $6.2 billion per year and nearly 70% more than the Cold War average (1948-89) of $5.1 billion per year.9 Mar 2010: ASD(R&E) issued a strategic plan for the “Defense Laboratory Enterprise” (DLE). It states that, “Most of the planning effort will be development of a catalog of DoD and DoE laboratory technical capabilities and facilities.”10 The plan includes the nuclear weapons labs as part of the DLE, along with other Federally Funded Research and Development Centers (FFRDCs).

Jul 2010: On the fast track from “think tank” proposal to governmental reality in 16 months, the DNI, DHS, and DoD signed an interagency charter to “foster coordination of individual investments” at the nuclear weapons labs (see Attachment B). Ten days later, at a Senate hearing, the three DoE lab directors affirmed their support for the administration’s proposed strategic arms treaty with Russia.11 Aug 2010: ASD(R&E) tasked the Defense Technical Information Center (DTIC) to create, within one year, a research and engineering (R&E) database to improve financial and program reporting.12 [Note: OSD gave this task to a top accounting firm, KPMG, in the 1990s. The project failed despite several years of effort and considerable public funding (no doubt in the millions of dollars).13 Unfortunately there is little reason to believe that DTIC and ASD(R&E) have carefully examined such past efforts to derive a viable approach. At present, the listed recipients of the data call include nine Navy labs that were shuttered by BRAC 16 years ago. One intended recipient is now the site of a county morgue.14] Dec 2010: Dr. Ashton Carter USD(AT&L) urged that the DoD “use all means available to preserve and strengthen them [FFRDCs]”, in part because they “operate in the public interest free from organizational conflicts of interest.”15 [Note: The Project on Government Oversight has pointed out that FFRDCs “are not governed by the ethical standards that apply to federal employees.”16] Dr. Carter later observed that the Pentagon has paid too little attention to these institutions in recent years.17 [Note: The National Science Foundation reports that total Federal funding to FFRDCs (industry, university & non-profit) increased by more than 30% from 2000 to 2008.18 Funding for nonprofits over that period jumped by more than 100%, and by 350% since the end of the Cold War.] May 2011: The ASD(R&E)’s office circulated a DoD-DoE Governance Plan (see Attachment C) and announced by email that, “Mr. Lemnios is pushing to implement an FFRDC-like governance framework to develop a strategic planning mechanism between the DoD and DoE. This construct is modeled after the MIT/LL annual plan process.” [Note: Mr. Lemnios was Chief Technology Officer at MIT Lincoln Laboratory]. The Governance Plan establishes an annual cycle that begins with “an internal DoD data call issued by USD(AT&L) to solicit and compile activities to be considered for DoE execution.” Jun-Sep 2011: An OSD data call requested program and financial data from the DoD labs, sorted by seven “core technical capabilities” chosen by ASD(R&E). The ASD(R&E) followed with a DoD-wide review of R&E investments at the program element and project level.19 A separate memo from Dr. Carter to the DoE’s deputy secretary stated, “An internal DoD-wide data call will allow us, for the first time, to provide DoE labs clear insight to DoD technology and development needs” (see Attachment D). It is unclear how much of the government data will be shared with the DoE labs’ new corporate management, which a long time observer of the Los Alamos lab believes is focused “more on personal bonuses than on scientific achievement.”20 IMPLICATIONS OF NEW MISSIONS

Raising Financial Costs to DoD. DoE contractor labs are “more expensive per FTE than elsewhere,”21 costing “an average of two to three times more” than other industrial firms.22 Fees paid by DoE to administer two of the labs “have swelled” by 850 and 600 percent after their conversion from non-profit to for-profit operation.23 Therefore DoD’s commitment to support new missions for DoE’s contract workforce must be weighed carefully, especially when estimates show the DoD budget could fall by as much as 31 percent in 10 years.24 In fact, DoD policy demands such deliberation. [Note: According to DTM 09-007, when making program commitments, officials must be aware of “the full costs of manpower and have a thorough understanding of the implications of those costs.”25 This includes “performing an economic analysis in support of workforce decisions.”] Inviting Inadequate Oversight. The DoD-DoE Governance Plan says USD(AT&L) will perform “oversight functions and responsibilities”, and Dr. Carter’s memo of December 2010 refers to an “annual review of each FFRDC conducted by my office.” Yet it is reasonable to ask if OSD is able to meet these requirements in light of the Defense Science Board’s statement in 2005 that:

“A serious concern we have about the USD(AT&L) and DDR&E being able to fulfill their responsibilities stems, not from a lack of authority, but from the thinness of their technical staff. The staff is capable and hardworking, but does not come close to matching the breadth and depth of technical talent and experience inside OSD during much of the Cold War.”26

Furthermore, technical talent by itself is not enough. Objectivity and public accountability are also fundamental to effective oversight. When millions of R&D dollars are at stake, the public must be confident that the government’s funds are awarded on merit, not steered by influence. Here lies another concern. OSD’s objectivity and accountability is open to question in light of its decision to withhold BRAC-05 data showing the force structure’s increasing need for in-house R&D support through 2025. The data revealed all lab proposals to be at odds with Sec. 2903(d)(2) of BRAC law — making them vulnerable to rejection by the Commission.27 Neither the data, nor the fact that the proposals conflicted with a statutory requirement, were reported to the Commission or Congress. OSD instead removed the data from its public report due to asserted concerns about the aggregation of information, disclosure of which would “provide clear advantage to the enemy.” Four years later, when DoD’s Inspector General investigated, OSD reversed itself by acknowledging that the data “did not contain any damaging information” and were publicly releasable.28 Bypassing the Services’ Competitive Funding with an Institutional Entitlement. The DoD-DoE Governance Plan will force the Services to modify existing investment processes that allocate R&D funds competitively, based on cost and technical merit. In fact, substantial DoD funding is already awarded to the DoE labs on a competitive basis through their Work for Others program, about $900 million to the three labs in FY08.29 Re-creating Excess Capacity at DoD Labs. DoD conducted five BRAC rounds to reduce excess capacity within its laboratory system. The DoE chose instead to maintain its “oversized” Cold War infrastructure. Transferring defense missions from the DoD labs to the DoE labs will likely re-create excess capacity within DoD. This could further reduce savings from BRAC-05, which GAO estimates to already be 70% less than the Commission’s original projections.30 And it could lead to another BRAC round. Eroding DoD Lab Excellence. Measuring the quality of scientific and engineering (S&E) workforces is not easy. Comparing those workforces across labs with different missions is harder yet. However some metrics are reliable and comparable across institutions. One such metric is the number of National Academy members, whose professional stature is such that they are considered to be “advisers to the nation” on S&E matters. The Naval Research Laboratory has 10 members with a workforce of 2,500. This compares to 15 members across the three nuclear weapons labs with a combined workforce of 27,000.31 In short, the DoD has much to lose if DoE labs gain new missions and cause an erosion of DoD lab excellence. Breaking the “Yardstick”. Excessive outsourcing impairs the DoD’s ability to preserve its internal technical capability.32 Dr. William Perry, a former DDR&E and Secretary of Defense, observed that this capability exists to “assure that the public interest is served.” Free from commercial pressures, the in-house laboratory system is the Pentagon’s “yardstick.” It must be capable of providing objective and authoritative S&E advice to the acquisition workforce so that it can, in turn, choose intelligently among competing technologies offered by contractors and then, at a later point, judge the quality of the contracted work. Diminishing Public Accountability. Without a strong yardstick, our government cannot govern well — not even if it retains the best and brightest on contract. The government’s own assets must capably bear the responsibility for decisions that affect national interests, and they must maintain public confidence by the manner in which those decisions are made. AN UNFULFILLED MISSION Energy security is a vital mission, one that demands DoE’s full commitment to develop safe, economical and accessible new sources. Moreover, an earthquake’s destructive impact on Japan’s Fukushima nuclear plant underscored the need for progress on reactor safety, radioactive waste disposal, and seismology. In short, the DoE mission is unfulfilled and much work remains to be done.

NOTES

1 DoD, “Report to the President and Congress: Plan for 21st Century Laboratories and Test and Evaluation Centers”, 1997 (Appendix G), and the 2005 Defense Base Closure and Realignment Commission Report, vol. 1. 2 Secretary of Energy Advisory Board: Alternative Futures for the Department of Energy National Laboratories (1995), 5, 10. 3 Executive Office of the President, Interagency Federal Laboratory Review: Final Report, (15 May 1995), p. 12. 4 Secretary of Energy Advisory Board: Recommendations for the Nuclear Weapons Complex of the Future, (2005), 4. 5 Center for a New American Security, “Remodeling the U.S. Government for Energy Security” (December 2008), 18. 6 Stimson Center, Leveraging Science For Security, (March 2009), 3-4 and 42-43. 7 The directors’ salaries were reported as a condition of accepting federal stimulus money from DoE’s total of $36.7 billion. 8 “The Path to Nuclear Security”, remarks of Vice President Biden at the National Defense University, (18 February 2010). 9 Nuclear Watch New Mexico, (24 November 2010); data from the Section 1251 Report. 10 Office of the DDR&E, “Strategy for the Defense Laboratory Enterprise”, (March 2010), 33-34. 11 Center for Strategic & International Studies, “Final Public START Hearing Focuses on Stockpile Stewardship” (16 July 2010). 12 Alan R. Shaffer memo to DTIC, “Integration and Modernization of R&E Reporting Databases”, (10 August 2010). 13 In its 1996 report, Defense Acquisition Infrastructure: Changes in RDT&E Laboratories and Centers, the GAO reported,

“Because each Service has its own financial system to support unique organizational structures, management approaches, and cultures, DoD has multiple financial systems reporting on a wide variety of elements. Thus, disparate financial data … makes it difficult to compare the services’ RDT&E organizations across DoD.” (p. 25). The GAO noted, “DoD officials said that they are in the process of hiring an outside consultant to assist them in determining the true cost of operating DoD’s RDT&E infrastructure.” The consultant was KPMG.

14 DTIC, “2011 Unified Research & Engineering Database (URED) Interface Instruction Document (IID), V2.0. 15 USD(AT&L) memo, “Federally Funded Research and Development Center (FFRDC) Contracting,” 9 December 2010. 16 http://www.pogo.org/pogo-files/alerts/government-oversight/go-co-20070105.html 17 Marcus Weisgerber, “OSD: Use Nonprofit Labs for R&D”, Defense News, 9 May 2011. 18 National Science Foundation, Table 5: “U.S. Research and Development Expenditures, by Source of Funds and Performing

Sector: 1953-2008“, National Patterns of R&D Resources: 2008 Data Update, (NSF 10-314), March 2010. 19 USD(AT&L) memo, subj: “ASD(R&E) FY 2013-FY2017 Program Objective Memorandum (POM) Review”, 7 August 2011. 20 Hugh Gusterson, “The Assault on Los Alamos National Laboratory”, Bulletin of the Atomic Scientists (Nov/Dec 2011). 21 JASON Summer Study: S&T for National Security, (2009), 52. 22 Stimson Center, 37. 23 Michael Lucibella and Alaina Levine, “It’s a Bumpy Ride to Private Management for Los Alamos, Livermore”, APS News,

(June 2010). In 2009, the corporation running the Los Alamos lab received $72 million. When the University of California (UC) was the sole administrator, the most it received was $7.65 million in 1998. The corporation operating the Livermore lab received $47 million in 2009. The most UC received for running it was $6.75 million in 2005.

24 Charles S. Clark, “Defense Budget Could Fall by 31 Percent in 10 Years”, Government Executive.com, (8 September 2011). 25 Directive-Type Memorandum (DTM) 09-007, “Estimating and Comparing the Full Costs of Civilian and Military Manpower

and Contract Support,” 10 January 2010. 26 DSB, “The Roles and Authorities of the Director of Defense Research and Engineering”, October 2005. 27 Don J. DeYoung memo to DoD IG, subj. “IG Report No. H08L106854060 of 22 September ’09”, (30 December 2010). 28 DoD IG Report No. H08L106854060 of 22 September ‘09 29 Department of Energy Office of Inspector General, Audit Report: Work for Others, (October 2009), 1. 30 GAO, Military Base Realignments and Closures (GAO-10-98R), 13 November 2009, 4. 31 Websites of the National Academy of Sciences and National Academy of Engineering (memberships as of December 2010). 32 Don J. DeYoung, “Breaking the Yardstick: The Dangers of Market-based Governance”, Joint Force Quarterly (JFQ), (October

2009). JFQ named it the year’s “Best Feature Article.” [http://www.ndu.edu/press/lib/images/jfq-55/21.pdf] 33 David Ferry, “Alameda Maneuvers for Coveted Lab”, Wall Street Journal, (21 July 2011). 34 Office of DDR&E input to SECDEF Correspondence Routing Slip (OSD 05249-­‐10), Subj: “Interagency Strategic Governance

Charter Concerning the DOE National Laboratories.” 35 Stimson Center, p. 4. 36 DoD Instruction 3201.01 of 3 January 2006. 37 William C. McCorkle et al., letter to William S. Rees, Jr. (Chair, Laboratory Quality Enhancement Program (LQEP)),

“Authorities Necessary to Effectively Manage the Defense In-House Laboratories,” 21 August 2006. 38 Los Alamos News Release, 16 June 2009. 39 U.S. Congress, Senate Armed Services Committee, “Advance Policy Questions for Zachary J. Lemnios: Nominee for the

Position of DDR&E,” 11 June 2009, 17-18. 40 The plan terminates the LQEP (a problem-solving mechanism (see FN #37) established in 1994 after being proposed by a

number of advisory panels) and transfers its personnel subpanel from ASD(R&E)’s purview to that of DoD’s personnel policy community [Office of ASD(R&E), “Disestablishment of the LQEP”, 14 September 2011]. If enacted, the transfer will likely mute what has been an effective advocate for the R&D community’s interests on personnel issues requiring a mission vice policy perspective. Several lab directors sent a letter to Mr. Lemnios on 21 September 2011 explaining the value of the subgroup and asked that he reconsider the plan.

41 Secretary of Defense memo to Deputy Secretary of Defense, “Initial Guidance and Priorities” (17 October 2011).