Anonymously contributed:
Subject: DIRECTOR'S MESSAGE TO LAB EMPLOYEES
E-LINE: A Message to Laboratory Employees From The Director
Several local newspapers carried a story this morning with the
headline: Laboratory Hides the Cost of the Colossal NIF Laser. The
claim in the story is that the overhead charges for the NIF project
and the National Ignition Campaign have been inappropriately low.
This is incorrect. I'd like to tell you the facts.
As is the common practice for many Department of Energy construction
projects, NIF uses a construction overhead charge that ensures that
the project pays for the Laboratory-wide services that it uses and
requires. There are two reasons for this:
-- It is important to ensure that the overall finances of the host
institution are not distorted as the project initially grows and then
declines. This ensures that the true cost of the project is properly
reported. This is why the NIF and the NIC pay directly for services
that are otherwise paid for indirectly on other Laboratory programs.
-- The use of "construction rates" was explicitly approved by the
Department of Energy, with concurrence in writing by the Chief
Financial Officer of the Department. The existing and approved rate
structure forms the basis for the DOE budget for the completion of
the National Ignition Campaign.
Each year, the Laboratory discloses to the Department of Energy its
overhead structure and charges. This "disclosure statement" includes
the nature and the basis for the construction rates, and is annually
approved by the Department. LLNL accounting practices for NIF have
been consistently reviewed and approved by DOE and applied by the
Laboratory since the inception of the project. Additionally, we have
had numerous external groups review our practices, and they have
concurred that our approach is fully compliant with DOE rules and
regulations, with our disclosed and approved practices, and with
accepted interpretations of the Cost Accounting Standards. A recent
DOE-sponsored audit came to a conclusion consistent with this
approach -- that NIF must be treated as a "construction
work-in-progress"activity through completion of the National Ignition
Campaign in late 2012.
As you may have read, an accounting review by the NNSA Service Center
in Albuquerque, NM, reached a different conclusion -- a conclusion
that is not consistent with more than 10 years of prior DOE approvals
and practices.
The Laboratory stands by the DOE-approved accounting practices that
have been used throughout the construction and commissioning of the
NIF and the NIC program.
Progress in using NIF has been spectacular. We are looking forward to
achieving fusion in the laboratory. It will truly be a game changer.
George Miller
Laboratory Director
20 comments:
A DOE-approved practice does not mean sound practice. Why don't you and your management team speak up against that instead of condoning it, eh George?
GM has said so many things that were not true, broken so many promises - there is no way you can believe him about this either.
LLNS and DOE had to get NIF up and running with what funding was provided by congress and could not do it if they had to pay all the burden charges. So they got creative and made some back room agreements with their DOE counter parts. Happens all the time and is no big deal unless you get caught. If any laws were broken some will have to be fired, but if it is just creative management someone will be promoted.
George, after all the lies you and Ed have told I don't think anyone is going to take you seriously. With this in mind, your explanation will more likely than not lead people to conclude you and your management team really are guilty of accounting "irregularities". Thou doth protest too much.
Geroge never disputes the reported existence of the NNSA audit nor does he suggest that the conclusions of that audit were misreported.
Somebody, then, must be lying. Either George is lying, or the NNSA auditors are lying. After all, Geroge said "This is incorrect", i.e., "a lie". They can't both be right. You choose.
This is not news, pretty much everyone at the lab knows this has been going on for years. If fact the more cynical among us believe that the main reason NNSA tolerates WFO at LLNL is to subsidize NIF
" a conclusion
that is not consistent with more than 10 years of prior DOE approvals
and practices."
Hmm... Kinnda sounds like Bernie Madoff saying the FTC conclusions that landed him in jail for 140 years were inconsistent with 20 years of prior FTC approval and practices.
So, in essence George is telling us that DOE/NNSA approves of shifting the financial burden onto other programs at the lab thus making their projects more expensive to their sponsors. I bet all those WFO sponsors are glad to subsidize NIF.
We had a grand opening of NIF with invited dignitaries this year. I had assumed that indicated the construction of NIF was complete, and yet we are being told that NIF will be continuing construction until 2012 and thus the other programs will continue to be pillaged for another two years. Sounds like the Winchester Mystery House construction plan is being used.
"The claim in the story is that the overhead charges for the NIF project
and the National Ignition Campaign have been inappropriately low."
Actually this is probably true. Since the overhead burden (for NIF) is picked up by the rest of the Lab it doesn't really matter what the charges are. I think George missed the point.
Although there is historic precedent (and DOE guidance) for G&A rate adjustments for large capital construction projects, this has never extended to OPC differentials in the history of LLNL. Also, some NIF-specific "enhancements" were charged off against "institutional" accounts (go ask PAO as one such donor). Off course, if you work at the lab, you probably already knew this.
NIF has been much more than a construction project for several years. Ask any manager in Engineering how equitable NIF's tax breaks have been and how much credibility GM's response has--not.
NNSA/DOE needs to hold LLNS accountable for unallowable costs to the other programs. Hopefully this will bankrupt LLNS and dissolve what has been the biggest disaster in this Lab's history.
When NIF is complete, they are going to have to figure out a new way to burn through sponsor funds. If they don't, charges will fall so fast that sponsors will realize that they have been taken to the cleaners all these years.
George said "This is incorrect", i.e., "a lie".
Saying something is incorrect is not the same as accusing it of being a lie, and by implication the originator being a liar.
That's just simple logic regardless of how 7:02 AM feels about ULM, overhead rates, the Contra Costa Times, etc.
Some history. Most of what George has stated is true.
1. Prior to 1987, major construction projects, called Plant and Capital Equiment (PACE) were funded separately from operations and billed with a reduced overhead thoughout DoE. The reduced overhead ended when the project completion milestone was achieved or when PACE funds were expended (not always the same time). Operations were conducted will full cost recovery. The rationale was that capital equipment had long term benefits to the DoE and institution and that a capital project did not need the same ratio of support services.
2. Nova, Shiva,AVLIS, Mars, SIS FXR, ATA, MFTF, MTX, ETA and TMX were all built this way.
3. At that time LBL, SLAC and the stillborn SSC were PACE funded.
4. Around 1987, Congress was began throwing around the word "accountability". Like many other cliches that Congress substitutes for thought, this word took on many evil faces at the National Labs. One was the requirement for full-cost recovery for all tasks, regardless of fund source or use.
5. Full burden application remained this way at LLNL until Mike Campbell uttered those infamous words in front of Secretary Richardson when the target chamber was emplaced, "NIF is on schedule and on budget". Richardson was humiliated and angry when the impact of delays and cost growth was revealed. (Read the Rand study, "Why big projects Fail", for a dispassionate explanation of how uncertain scope poorly impacts cost and schedules). Richardson later told Tarter publicly, the taxpayer will not pay for this,
"You will take it out of hide".
6. The only hide Bruce had is overhead. So DoE changed the rules again to allow NIF to be built with reduced overheads. It is not a secret and both DoE auditors should know this. Am not sure if this rule applies at other DoE facilities.
7. What is unprecedented, as a previous poster noted, is that reduced overheads have never before applied to ongoing operations. While legal it is new, at least to me.
8. The frustrating thing for other Programs is that the a full cost recovery basis on NIF would reduce the cost of other programs by about 10%.
9. But Mordida is paid in many ways. LDRD costs all programs over 8% off the top. The fee to LLNS is nearly as large, so not all skimming is happening for NIF... Sandboxes for scientists and the payoffs to LLNS for surpressing "UC urges" are part of mix.
10. The interesting thing is that a customer is out there paying 2.5 times for your services what you earn in wages and benefits.
Perhaps you can figure out how to tap into that market directly.
I chuckle when I think of what LLNS charges for me.
Magnetic Facility Test Fusion (MFTF) never "flipped the switch". What absolute waste of the taxpayers money.
10. The interesting thing is that a customer is out there paying 2.5 times for your services what you earn in wages and benefits.
Its more like 3.4 times are wages, probably higher if you can ever figure out all the extra fees tacked on evry service you use.
The accounting practices for NIF are consistent with ENRON's standards.
GM, except for those who have drunk the NIF KoolAid, the rest of your management staff is fed up with funding NIF at the expense of their programs.
I truly hope that NIF succeeds for it has dealt a death blow to most of the rest of us.
Err George....Congress sets the laws. If you've been violating them then it's illegal regardless of whether it is consistent with prior practices.
Better get a good lawyer. Oh wait there aren't any that'll work for what you pay.
December 12, 2009 11:46 AM
Try this on for size. One of two stories is false. History teaches us which story is most likely false. Does that make you feel better?
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