Saturday, January 20, 2018
Why did LANS fail?
Both LLNL and LANL are for profit. Profit is money that one gets in return beyond what is invested. In the case of LANL and LLNL, certain members members of the LLC make a profit, other members of the LLC reinvest the money back in the lab and do not make a profit. People paying the extra money that got used for profit expect something in return. I cannot go into all the details on this blog but one of the expectations was that by paying this extra money that certain industrial partners promised that they would improve business practices, introduce industrial effectiveness and so on which would actually save lots money in the long run. At least that was the claim, however this not only did not happen but things become much more expensive and less efficient. Of course one could argue what certain industrial partners wanted to really "maximize" their profit by doing absolutely nothing and not investing anything at all. Let us go through a simple exercise, suppose you come across a lemonade stand that claims it sells lemonade. You say " that sounds good I would like to have some lemonade!". The person at the stand says that will be 1 dollar for lemonade. You give them 1 dollar and the person does not give you any lemonade and you say hey I want my lemonade. The person at the stand says it would cost them 40 cents to make the lemonade so they would get a profit of only 60 cents if they did that but if they did nothing they would get a profit of 1 dollar. Did you know that 1 dollar is more than 60 cents? Now you may think this is short sighted and such a lemonade stand would go out of business in a day which is true in most cases, however for something like an LLC at LANL and LLNL this is not true and for 10 years you can make a metaphorical 40% more "profit" by not investing a single cent to fulfill the promises you said would happen when you got the contract in the first place. Now I will not fill in all the gaps as that is for you to figure out but this is why the contract is changing, why DOE is rather shall we say unhappy with certain members of the LLC. Not only will this explain LLNS/LANS for you but it may also help you understand how banks, supermarkets, the stock-market, and other business work and in some cases fail.
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28 comments:
You don't get contractor performance excellence when the unhappy lemonade customer repeatedly says "I didn't get the lemonade I paid for, and I may decide to do something about it in a few years, but in the meantime, here is the money for next years lemonade". What a sweetheart business arrangement for LANS and LLNS corporate partners, and what a pay more get less disaster for the taxpayer, and DOE/NNSA missions.
The big lie that has lead to most of the pain at LLNL is that the "profit" for the LLC comes directly from the Lab as a tax on its operating budget. The profit/award fee was not an add on to the Lab's budget. In other words it is not factored into the Lab's annual budget. It's the equivalent of hiring a general contractor to build you a house, then gving them a fixed budget to only buy materials and pay labor/workers - then telling the contractor (after the budget money is handed to them) if they want a 15% profit to take it out of this fixed budget, but don't skimp on quality materials.
A better model would have been if NNSA (government) wanted to reward the :ab operator, they the money should come from the federal government directly. I bet if this were the case, NNSA/LFO would really be assessing the performance of the LLCs and demanding to know exactly why they should give the LLC a $30m-$46m reward (which half of the partners just take and put in their corporate bank accounts).
You're missing critical details.
1) It isn't just the industrial partners that promised improvement, it's the entire LANS/LLNS team that promised improvement. Since UC leads both LANS and LLNS, UC is ultimately responsible for delivering on these promises. At LANL, the vast majority of upper managers (10 out of 11) are UC. These are the people responsible for delivering on promises. These are the people who failed. UC people.
2) The M&O contractors do NOT earn profit. They earn a fee completing the work in an acceptable fashion. It's not like the lemonade stand at all. It's more like paying a neighborhood teenager for mowing your lawn.
By the way, UC does not return 100% of the earned fee (which is NOT profit) to the labs.
"1) It isn't just the industrial partners that promised improvement, it's the entire LANS/LLNS team that promised improvement. Since UC leads both LANS and LLNS, UC is ultimately responsible for delivering on these promises. At LANL, the vast majority of upper managers (10 out of 11) are UC. These are the people responsible for delivering on promises. These are the people who failed. UC people."
Ok here you go again with your anti-UC stuff. Look we have gone over this many times. The perception of people who work at the lab is that Bechtel is in charge. Everyone believes this, you have failed time and time again to show anyone at LANL thinks otherwise. Sure everyone at LANL could be wrong but that is the perception.
One of the arguments for the contract change was that business practices at LANL where bad which was due to UC. A major pitch was that that Bechtel and the industrial partners would come an an fix this. Not only did this not happen and money was not saved but we had a RIF at LLNL, and two VSPs at LANL, along with a complete cluster * in terms of business practices. The only logical conclusion was that this was due to the so called business practices brought in by the industrial partners not UC. Everyone agrees on this point but it is DOE that really agrees with this which is why they are changing the terms of the contract.
"2) The M&O contractors do NOT earn profit. They earn a fee completing the work in an acceptable fashion. It's not like the lemonade stand at all. It's more like paying a neighborhood teenager for mowing your lawn."
What!? It is profit it was just explained to how it is profit, even the people who are with the industrial partners call it profit. Off the record I even know that the current LLNL director called it profit and even pointed out that by for Bechtel it is pure money with no investment. The industrial partners consider this profit and do everything they can to leverage it. It is exactly like the lemonade stand, in fact that analogy came from someone who works in one of the industrial partners ;) Again there is a set amount of money to deliver something, i.e "good business practices", in the real world the industrial partner has to invest something in order carry out the delivery, in term they get a "fee" for that delivery so profit is
Profit = fee - investment,
you maximize profit by making investment = 0.0. In the real world you get thrown out in year or less, but not so in LANL and LLNL which takes about 10 years. By the way this is what DOE also thinks which is exactly why they changed the terms of the fee in the new contract and was even stated publicly that the old fee/profit gave the wrong incentives. Now considering that UC always reinvested its fee that leaves only the industrial partners has the issue. Ok got it now, not to hard to understand.
"By the way, UC does not return 100% of the earned fee (which is NOT profit) to the labs. "
You have may a different definition of "return" but the money is used for students and research collaborations with the different labs, sounds like a great benefit to the labs, considering the high quality of top talent at the UC systems and recruitment for the labs.
Look you have NEVER been rational about your hatred for UC, it is obviously something personal with you that you think UC/LANL has wronged you, this has made you completely insane over the many years that you have been on your anti-UC crusade as seen by your posts on this blog and letters to the Santa Fe newspapers, get over it and move on with your life.
It’s true, the anti-UC guy hasn’t been rational.
It is most certainly NOT profit. Profit requires investment. The M&O partners have not invested a single cent. Not one. You just said so too. DOE/NNSA pays ALL costs; facility costs, utility costs, even labor. In exchange, the M&O earns a fee if they execute the agreed work and meet the contractual conditions set out by DOE/NNSA. While there are for-profit companies in LANS and LLNS none of them operate on a profit basis for the lab contracts.
This is like hiring a teenage neighbor to mow your lawn with your own lawnmower. You provide the mower, you provide the gas for the mower, you provide the maintenance on the mower, and the teenager provides nothing but his time and effort. In exchange for mowing your lawn, you pay the teenager a fee. Did the teenager make a profit? NO!!! He earned money without investing any money so NO PROFIT. If the teenager had his own business and paid for the lawnmower, maintenance, and gas, then the teenager would make a profit if revenue exceeded costs.
When you work and earn a salary do you call your salary profit? Do you pay taxes on your salary or on capital gains? Hint, a salary is also not profit.
By the way, I've NEVER ONCE written a letter to the New Mexican. NOT ONCE. NOT EVER. I don't even read it, it's a rag. You're batting zero, you are mistaken every single time you fabricate something that you would have no way to know.
This is where I'll point out to Scooby that you called me insane. YOU broke the rules so I'm asking Scooby to censure you. Scooby, please delete the offending post above. While you're at it, you can delete this whole thread, top-level post and all. It's total garbage written by someone who doesn't even know the difference between profit and fee.
There’s a few good points here, and some nonsense and a lot of extraneous verbiage.
The LLNS/LANS LLC model is what it is. The analogies offered are not apt.
The LLC model clearly has not achieved its purportedly intended purpose of improving operations while saving taxpayer dollars. Let’s not re-write history about whose bright idea the model was ... namely DOE’s with support from a few key members of Congress. They shoved it down everyone’s throat, ignoring the well-founded advice at the time that it would not work. Even the DOE/NNSA senior managers who drove this at the time will now state in candor that it didn’t work out the way they intended. (In greater candor, that it has been a complete disaster.)
So, there are two models for which we have data ... (A) non-profit, in the public interest management through 2007, and (B) for-fee LLC partnership since then. Neither is perfect but one worked vis-a-vis managing the nations’s nuclear design enterprise, and the other did not. The path forward is clear. Go back to (A) and focus on the design enterprise, leveraging that enterprise in adjacent missions only so far as it makes sense.
The analogy of a lemonade stand that doesn't deliver lemonade after getting paid is ludicrous. The labs DO NOT operate this way. M&O contractors don't make their fee up front.
How does it actually work at the labs? DOE/NNSA establishes the work to be done and the criteria to earn the fee. Through the fiscal year, LANS/LLNS attempts to manage the labs to achieve those established goals. DOE/NNSA pays all costs as they are incurred EXCEPT the M&O's fee. At the end of the FY, DOE/NNSA evaluates the M&O contractors' performance and the contractors earn fee according to how well they met their goals. A contractor MIGHT earn a portion of the fee if they do poorly but to get the full fee they must meet all goals.
You wouldn't pay your neighborhood teenager if he didn't show up to mow the lawn, and DOE/NNSA doesn't pay the M&O fee if the M&O doesn't deliver acceptable work.
UC does not return all of their fee to lab related activities. They keep part of the fee to pay for their own operations and a part to fund non-reimbursable lawsuits filed against UC generally arising from UC's poor management performance.
6:23 PM claims that UC worked when it led the labs as a non-profit. That's laughable.
Nanos led LANL when UC ran LANL as a non-profit. The Nanos years were the worst two years at LANL bar none. The very worst. The absolute worst. Worse than the LANS years.
UC hired Nanos. UC defended Nanos until well after the lab started to implode. UC was forced to fire Nanos under pressure that came from outside UC.
Nothing more needs to be said.
"It is most certainly NOT profit. Profit requires investment. The M&O partners have not invested a single cent. Not one. You just said so too. DOE/NNSA pays ALL costs; facility costs, utility costs, even labor. In exchange, the M&O earns a fee if they execute the agreed work and meet the contractual conditions set out by DOE/NNSA. While there are for-profit companies in LANS and LLNS none of them operate on a profit basis for the lab contracts.
This is like hiring a teenage neighbor to mow your lawn with your own lawnmower. You provide the mower, you provide the gas for the mower, you provide the maintenance on the mower, and the teenager provides nothing but his time and effort. In exchange for mowing your lawn, you pay the teenager a fee."
Ok in some odd way you are getting a bit closer, congrats for trying. Lets just go with the teenage neighbor thing, even in that case it is still profit but not in money but in time invested by the teenager. You give him 10 bucks, he maximizes his "time" instead of profit by not doing anything for you. On the other hand with that extra time he did not do mow your lawn he could maw some other lawn and get 10 additional dollars so with his investment in "time" to mow a lawn he gets 20, instead of 10$.
Now lets get slightly more complex but stick with the neighbor paying the teenager to do the yard. You go to the kid and say hey I will give 100 dollars to fix the yard, your call how you do it. The kid would say I could do that, I will rent a lawn mower for 30$, I could get the gas for 10$, and buy a rake for 10$, so by investing 50$ I will make ...wait for it....wait for it...... 50$ in PROFIT!.
Ok now are you ready for the next the subtle point? Our industrial contractors are in fact suppose to "invest" something and that is exactly what they said they where going to do, this was to bring in people, programs, computer codes whatever. How is this an investment, well suppose you have a top notch business guy in Bolivia calculating how much money to charge for water to the locals, he is the best at what he does but you cannot move him because you will lose your Bolivian water profit without this guy. You have another guy building low cost showers in Iraq for the US army, he is really good at that but your company just got thrown out of Iraq and it will not be for another 3 years before he can build showers in Syria. Ok send him to LANL, we get to keep him, our profits in Bolivia, our profits in LANL, and our future profits in Syria. Sure LANL will not get the great business practices from the right person but industrial partner is getting the money anyway. See how this maximized "Profit", ok don't call it profit, they maximized their money but not investing something and this something is people, time, property or money or any quantity that can be exchanged for "money". Now can you see why Bechtel and friends love the LLC of LANS and LLNLs it is essentially free money without any cost if you play it this way which they did.
Lets see if this gets you a bit closer.
"This is where I'll point out to Scooby that you called me insane. YOU broke the rules so I'm asking Scooby to censure you. Scooby, please delete the offending post above. While you're at it, you can delete this whole thread, top-level post and all. It's total garbage written by someone who doesn't even know the difference between profit and fee."
To be fair I will take it back that I said you are insane. I only t to make the point that you seem have an agenda that impedes your rationally and judgement. Case in point, you hate UC so much that you now want Scooby to remove the original post and that is not rational. Why, because either the post has made some good points and that is exactly why you want it removed. (2) If the post is "total garbage" as you claim than there is no reason to remove it since it will be obvious it is garbage or one could provide a clear argument against. You have not provided a clear counter argument and now you want the whole thing to disappear because just because it goes against your narrative of UC is bad, now does that sound rational?
LLNL does just fine...
Actually, I'm not at all convinced that the data prefers one management model over the other. What if the failure is due to the specific contractor choice? After all, UC was there before and after the contract change. Many key LANS managers are LANL old-timers from the UC era, they just changed their uniforms. The recent decay of LANL core competencies could be in fact the fruit of Nanos's disastrous shutdown, which made the place untenable and unattractive for top-tier staff. (It takes years to see the true impact of such actions, as people secure new jobs, wait for their kids finish school before moving, etc.)
Now, bringing Bechtel into the mix certainly didn't help. These folks didn't introduce any kind of best business practices, or efficiencies, or project management innovations. Opportunity wasted. Worse, they seem to have used LANL as a place to park some of their temporarily unneeded people, in between assignments. There was never a feeling of ownership, or long-term commitment to, Los Alamos. They acted like interlopers, here one day to collect the fee, gone the next day as the stuff hits the fan.
I think it's far more important to find a competent, motivated management team, than to call it "for-fee", or "non-profit". It's also important what incentives are given to this team and how its performance is evaluated. For example, "science" performance at LANL continued to be rated excellent year after year, even after half of all Ph.D. had left and the publication count had fallen through the floor. NNSA was unconcerned, so neither was the LANS management.
January 20, 2018 at 8:47 PM
A clear summary of how UC spends its portion of the LLC fees is found in these Board of Regent minutes from last year. UC uses it for either supporting Lab operations or oversight, what does Bechtel use their share for... making money for the Bechtel family.
http://regents.universityofcalifornia.edu/minutes/2017/labs7.pdf
YOU provided the kid with the lawn mower, he didn't rent it. That's the only way the analogy makes any sense because DOE/NNSA provides LANS with EVERYTHING.
No investment, no profit.
As for the rest of your post - too long, didn't read. I might have read the rest if you hadn't started out with the same mindless nonsense.
"YOU provided the kid with the lawn mower, he didn't rent it. That's the only way the analogy makes any sense because DOE/NNSA provides LANS with EVERYTHING.
No investment, no profit."
It is just no that complicated. Even the kid has to "invest" time, and in business time is money. Of course the industrial partners had to invest "people" these people could be making money elsewhere in the other non-LANL portfolios of the partners, so the company has to reduce its money intake someplace to move people to LANL. That is the "investment". In fact an investment is anything fungible with money. To the industrial partners it was always about PROFIT. Heck even a former LANL Director Kuckuck pointed this out:
Robert Kuckuck, who was the last director of LANL under the previous not-for-profit contract run by UC, says the interests of the private sector and the university were not aligned in LANS. “What I saw at Los Alamos was that industry did not send its A team in to the lab. Secondly, and perhaps even more importantly, was the culture difference. None of the industry people I watched come in had any career visions in their mind with respect to the laboratory.
http://physicstoday.scitation.org/doi/10.1063/PT.3.3103
"Nanos led LANL when UC ran LANL as a non-profit. The Nanos years were the worst two years at LANL bar none. The very worst. The absolute worst. Worse than the LANS years. "
Not sure about that, many would say that the LANS years have been worse than Nanos years. The worse part of the Nanos thing was for about 6 months, but you if average over the two years the whole Nanos tenure it was better than LANS. Not to mention that I cannot find single person who thinks Nanos was UC guy or UC wanted him. Everybody seems to think he was forced on LANL by DOE. Everybody expect you. I guess the entire world is wrong and you are right.
"As for the rest of your post - too long, didn't read"
Is reading that hard for you? This is a blog not twitter. Saying "I did not read you post therefore I am right", is not a valid argument.
Wow, you just don't get it do you? The M&O didn't invest ANYTHING in the labs. Not even labor costs. EVERYTHING was paid for up-front by DOE/NNSA, INCLUDING LABOR. The M&O's didn't even invest their A-teams, YOU JUST SAID THAT. They just sent a lot of prepaid flunkies.
Labor that is already prepaid is NOT an investment at all. No investment, no profit.
IF LANS/LLNS doesn't do the work, LANS/LLNS doesn't get the fee. Simple as that.
I have no doubt that LANS, led by UC, failed. I also have no doubt that UC had already failed BEFORE LANS took over. After all, that's why UC was fired.
Your analogy that purports to explain why private companies participating in the management of the labs have a motivation to not deliver work is pure garbage.
"The M&O's didn't even invest their A-teams, YOU JUST SAID THAT. They just sent a lot of prepaid flunkies."
That is the whole point, if they "invested" the A-team that would cost them money elsewhere so by not "investing" the A team they maximize there overall money intake or profit. At the end of each year Bechtel counts profit as Profit = Money taken in - Money spent. Part of maximizing is either increaseing "Money taken in" or reducing "Money spent" one avenue they do this is by "not investing" anything like people, money ect into LANL. Dude this is not the freken hard to get.
"I have no doubt that LANS, led by UC, failed. I also have no doubt that UC had already failed BEFORE LANS took over. After all, that's why UC was fired."
I have no doubt you have an issue with UC that is entirely personal and not rational.
"Your analogy that purports to explain why private companies participating in the management of the labs have a motivation to not deliver work is pure garbage."
It is actually far worse than that, not only can certain private companies make more money by not delivering work but they can leverage all sorts of other monetary perks, it is called rent seeking. For example not only could a company not send the A team but the C teams the could also send excess people that have no purpose at all with other than parking them there for some time
before they move off to new positions in which they can do something. Again this maximize money in the overall portfolio in the company. Using the fat that the institution pays for certain things they can have crazy travel schedules where they do buisnness all over the world but
if the stop for 10 minutes in New Mexico could charge the whole thing to LANL. They could make sure that when bidding that goes out for contracts that their subsidiary companies get the bids. There is a whole set of ways that not only you can get the fee but you can leverage "profit" as well. You better believe that these guys have this down to a science, where they calculate " Hey we can screw this place for 10" years before we are thrown out. Sure we could have kept it for 15 if did honest work but the amount of overall money we will make in 10 years by doing a horrible job far exceeds that we could make if he did a good job". By the way this is exactly why the contract is changing DOE even stated they want to move from a profit model to a service model because the profit model does not mean you will get a good job.
This by chance is exactly how Bechtel works. I strong encourage you to read:
The Profiteers: Bechtel and the Men Who Built the World by Sally Denton
https://www.amazon.com/Profiteers-Bechtel-Men-Built-World/dp/B01BVTHITY
Some reviews:
An in depth exposition of how business and government have colluded to exploit other countries. Denton does a particularly good job connecting the dots between Bechtel and the deep state.
The new LANS contract suggests a new model of conditional long-term, effectively uncompeted, no-bid contracts in which profit incentives and executive compensation will help shape nuclear weapons policy implementation. . . . Private corporate management and less government oversight
Why does LANS itself use the words "profit incentives".
Too long, didn't read.
"Too long, didn't read."
Than why did you bother to post that you did not read it? Rather odd.
51 lines of pure blather do not a coherent argument make.
51 lines of pure blather do not a coherent argument make.
January 25, 2018 at 8:15 PM
Than it should straight forward to counter this points or show exactly how they are blather. LANS itself talks about a for profit motive to run the lab. What could that possibly mean other than "for profit".
“Then”. The word is, “THEN”. Sheesh.
January 28, 2018 at 7:51 AM,
Don't waste your time trying to correct this person, who has been mistaking "than" for "then" and "where" for "were" in rambling diatribes ever since forever. I think these jarring grammatical errors must be either a result of typing with one's thumbs, or relying on computer transcription of dictation, then being too lazy to correct the comment.
“Then”. The word is, “THEN”. Sheesh.
January 28, 2018 at 7:51 AM
You have pointed out a grammatical error but you did respond to the actual points raised by the poster, specially why would LANS refer to its motive as a "for profit motive" What could that possibly mean other than "for profit". The point is LANS is for profit or money making if thats how you want to put it even though LANS itself calls it profit. They are not in it to serve the nation or do what is right, they are in for the money by any means they can get it.
The conjecture is that UC was essentially forced out. If you had worked at LANL than you would know the stories well, basically the first year that LANS came in there was a clash between UC and Bechtel and what happed was Bechtel basically paid off the high level managers by increasing their salaries 2-3 fold offering bonuses which increased up to 3 to 4 times form what they had before and brought in bunch new managers. Sure some of these managers had been UC appointees but they now worked for Bechtel since thats who got them all extra money. Ask yourself this, why is it everyone above a certain level of management wanted to keep LANS while everybody else wanted to get rid of it? How do you get such a huge disconnect between two groups of people? How is it that screw up after screw up the high level managers are still saying how great LANS is, while everyone else including NNSA sees what a disaster it is? They are saying this because they are paid big money to say this despite the fact even they know this is bad for the United States. Now which part of LANS is after money, profit and the ability to leverage money using LANL as an asset...hint it is not UC. When LANS came in UC was effectively out and we now see the end result.
How precisely are these bonuses paid? Cash? These type of conspiracy theories overlook the most obvious answer. Why would a manager say that everything is great after something bad happens on his or her watch? Because saying things are bad is admitting that they are not good at their job. Come on. It is ok to say both UC appointed and Bechtel appointed managers are bad. Why do we keep defending UC? What have they really contributed? Los Alamos would exist without UC. You take away credit from the people who truly made this institution great.
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