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Sandia National Laboratories has a budget of US$3.6 billion. On its website they write:

Sandia National Laboratories is operated and managed by National Technology and Engineering Solutions of Sandia, LLC., a wholly owned subsidiary of Honeywell International, Inc. National Technology and Engineering Solutions of Sandia operates Sandia National Laboratories as a contractor for the U.S. Department of Energy’s National Nuclear Security Administration (NNSA) and supports numerous federal, state, and local government agencies, companies, and organizations.

Why doesn't the NNSA manage a lab that they own themselves? What are the legal implications of this structure?

3 Answers 3

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The federal government in the United States routinely turns over government tasks to private government contractors (similarly, for example, almost all road and building construction and almost all major defense procurement is done that way).

One reason that this is done is that private government contractors generally aren't subject to the civil service employment system of the federal government which greatly constrains how employees are hired, fired, and paid. More flexibility in hiring, an easier ability to fire employees, and an ability to pay key employees more than the top civil service employment rates all make this desirable. It also keeps the employees of the lab out of the federal civil service systems defined benefit retirement system.

Another reason is that when a private government contractor buys a good or service, it isn't subject to strict government contracting rules regarding bidding out government contracts. This can be more efficient and reduce litigation over the procurement process.

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  • 4
    @DavidHammen The issue is not the upstream contracts from the U.S. government that you mention. The issue is the downstream contracts for rental space, furniture, computers, office supplies, landscaping, cleaning services, laboratory equipment, internet service, etc. Being a private contractor sweeps away a huge amount of red tape involved in the downstream contracts, which is O.K. since federal taxpayers aren't directly on the hook for those. Taxpayers pay only for the contract payment from the government to the private contractor for handling the task for the government.
    – ohwilleke
    Commented Mar 1, 2023 at 21:52
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    One of the key advantages of not being a government-owned, government-operated organization is that such organizations are not subject to government restrictions on federal employee pay rates. If applied, those restrictions would drastically reduce the quality of people that could be hired by those DOE national labs (and also JPL and other non DOE FFRDCs). Commented Mar 1, 2023 at 22:09
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    @DavidHammen I don't disagree and say so in my answer. It means the managers and tech people can be paid more. It also means that out sourced janitors and landscapers can be paid less.
    – ohwilleke
    Commented Mar 1, 2023 at 22:11
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    All the reasons given here seem to be about cheesing their way around regulations, which I think is quite misleading. Using civilian contractors is done rather a lot for tasks that aren't really in the US military's core competencies. Doing actual science at labs is one of those things. The US military doesn't build its own planes or ships either. There aren't Army-run factories staffed by active-duty soldiers casting bullets or sewing uniforms. There's no "farming brigade" to grow the food for their rations.
    – T.E.D.
    Commented Mar 2, 2023 at 17:54
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    @T.E.D. The government does hire its own scientists in its own labs. NIH is huge but also DoD labs (Naval/Air Force/Army Research Labs), and NASA centers, all directly managed. They have to have some special arrangements, like the "Scientific Technical" payscale which is above standard civil service rates. The DOE is heavily in the FFRDC system as a result of the Manhattan project: they needed to spin up a huge science enterprise quick, and that required contractor help.
    – user71659
    Commented Mar 2, 2023 at 18:23
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It's not just Sandia. That's how all but one of the US National Laboratories operate. They are government-owned but contractor-operated National Laboratories. The same applies to Federally Funded Research and Development Centers (FFRDCs) such as the Jet Propulsion Laboratory, and also to the banks in the Federal Reserve System. Sixteen of the Department of Energy's seventeen National Laboratories operate as FFRDCs. From The Department of Energy’s National Laboratory Complex,

  • GOCO (Government Owned/Contractor Operated) operated laboratories are owned by the Federal Government, but managed by contractors.
  • Contractors may be individual universities, university consortia, private companies, or nonprofits. GOCO dates back to the original laboratories of the Manhattan Project.
  • Most Federal laboratories are GOGOs (Government Owned/Government Operated); all but one of DOE’s laboratories (NETL) are GOCOs.
  • GOCO researchers are not Federal employees and have more freedom than GOGO scientists. GOCO employees can assert copyrights, consult with industry, and participate in start-ups based on technology developed at the laboratory.

Every national lab except for the National Energy Technology Laboratory (NETL), along with every other FFRDC, and every reserve bank is an organization created by, owned by, and authorized by the US federal government -- but not operated by the US federal government. The employees of those organizations are not civil servants. US government agencies cannot create startups or own copyright. National labs can.

This puts these organizations a bit beyond the reach of Congress, which is intentional. While the Congress does authorize funding, it does not have as deep a reach into these organizations as it does into normal federal government agencies.

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  • This answer could use some more information to back up the claims that this is how they all operate. It also doesn't answer the question of why it is like that, sure it follows the pattern but what is the reason behind that pattern.
    – Joe W
    Commented Mar 1, 2023 at 19:28
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    I donwvoted it both for the absurd suggestion that it is unconstitutional for the government to contract research and development activities, and for the poorly informed suggestion that Congress has no control over the research because it is done under contract.
    – Nobody
    Commented Mar 1, 2023 at 19:30
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    Which proves nothing more than anybody can walk into court with a theory, however outlandish.
    – Nobody
    Commented Mar 1, 2023 at 19:39
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    @JoeW Here is the master list (as of February 2023) of all FFRDCs. Note that the national labs constitute a small part of this list. Having had worked for an FFRDC for over a decade, I know a tiny bit about this subject. Commented Mar 1, 2023 at 20:15
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    @uhoh The labs are operated by some entity, often a university, like Caltech, or a non-profit partnership like Battelle-UT. "Operated" in this context means they handle stuff like HR, equipment, renting building space, etc. The actual work is supervised by a program manager that is a civil servant with DOE or whatever agency runs the FFRDC. The program managers decide what projects will and will not work on, and they answer to higher-ups in the agency, who in turn answer to Congress and the President.
    – Nobody
    Commented Mar 2, 2023 at 14:53
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Well, it was always like that, i.e. not managed by the government directly, so one of the reasons is some kind of tradition, I suppose. From Wikipedia.

Sandia Laboratory was operated by the University of California until 1949, when President Harry S. Truman asked Western Electric, a subsidiary of American Telephone and Telegraph (AT&T), to assume the operation as an "opportunity to render an exceptional service in the national interest." Sandia Corporation, a wholly owned subsidiary of Western Electric, was formed on October 5, 1949, and, on November 1, 1949, took over management of the Laboratory. The United States Congress designated Sandia Laboratories as a National laboratory in 1979. In October 1993, Sandia National Laboratories (SNL) was managed and operated by Sandia Corporation, a wholly owned subsidiary of Lockheed Martin. In December 2016, it was announced that National Technology and Engineering Solutions of Sandia, under the direction of Honeywell International, would take over the management of Sandia National Laboratories beginning May 1, 2017.

As for the implications, I'll let someone else comment/answer, for now... but I'll say that Sandia doesn't seem the only one. From an article lambasting this policy:

Several years ago, the U.S. Department of Energy put management of our nuclear weapons research and development labs out for bid. Against the advice of many, DOE awarded the contract for both labs (Lawrence Livermore in the Bay Area and Los Alamos in New Mexico) to a single private partnership comprising the University of California Regents, Bechtel Corp., and other private companies. This created the Holy Grail of unaccountable profiteering: Not just a for-profit monopoly, but a taxpayer-funded for-profit monopoly.

For a more nuanced/opposing view, a 2004 paper notes:

the development of the market-based management system of the U.S. Department of Energy (DOE) multiprogram (national) laboratories-the government-owned, contractor-operated (GOCO) system-is well over 50 years old, dating from the Manhattan Project. During the Manhattan Project, the World War II effort culminating in the development of the atomic bomb, the federal government asked the University of California to operate what is now Los Alamos National Laboratory. This was the model for GOCO management of laboratories, with the government owning the laboratory site and its equipment and buildings but with the contractor-the university-providing the employees and managing them.

[...] the GOCO system is quite distinctive and, from an organizational standpoint, a design innovation. During the past 50 years, the GOCO model spread throughout DOE and its predecessor agencies (e.g., the Atomic Energy Commission) and has been used in other government agencies as well, including the Department of Defense. Currently, GOCO arrangements are used to manage 19 U.S. laboratories, nearly a dozen manufacturing and production plants (for weapons materials, components, and assembled devices), and repositories such as the Strategic Petroleum Reserve. [...]

A formal statement of the structures and criteria for a GOCO laboratory is set forth by the Office of Federal Procurement Policy (1984). The GOCO contractor may be a university, a for-profit corporation, a not-for-profit corporation, or a consortium combining such institutions. The selection of the management and operations (M&O) contractor takes place in either an open competition with all bidders welcome or in a restricted competition with prequalified bidders. [...]

The advantage of the GOCO system-at least as seen by officials of the largest GOCO lab, Sandia National Laboratories-is a streamlined bureaucracy, although the GOCO labs have nonetheless been highly criticized as too bureaucratic (U.S. DOE, 1997):

The GOCO allows proven private-sector processes to operate without bureaucratic restrictions and procedures that sometimes exist within government institutions. One particular characteristic of the GOCO concept has served the nation well: scientific independence. Scientists performing for a GOCO contractor are to a great extent insulated from political pressures. As a result, they can speak out as honest brokers, acting truly in the national interest. (Sandia National Laboratories, 2004)

In actuality, the GOCO system is not so clear-cut. It is an evolving management innovation, or set of innovations. The nature of the GOCO system has changed radically since its inception and, even today, is implemented in very different ways at the various laboratory sites. As W. Kenneth Davis notes in his brief history of the GOCO system at the Department of Energy, "It is important to note that they evolved in a way dictated by circumstance" (National Academy of Engineering, 1994, p. 224) [...]

The original GOCO arrangement for managing a federal laboratory was at the behest of President Truman. Truman's letter to AT&T president Leroy Wilson requesting that AT&T manage what later became Sandia National Laboratories made an appeal to the national interest. AT&T accepted and began managing Sandia on November 1, 1949. Other GOCO arrangements were set up at about the same time including, among others, the University of California's management of Los Alamos (the first GOCO contract), General Electric's management of Oak Ridge National Laboratory, the University of Chicago's management of Argonne National Laboratory, and Columbia University's management of the new Brookhaven National Laboratory. The original contracts were little more than a handshake agreement; early contracts were based on a dollar-per-year fee and were motivated chiefly as a public service.

From this beginning, the GOCO system spread to other national laboratories created in the 1950s (although on a management fee basis rather than as dollar-per-year public service). The presumption in the early years of the GOCO system was that the private sector could more effectively manage research support (as demonstrated in the Manhattan Project) and leave the science to the scientists. The early contracts assumed cost recovery and mutual scientific exchange and benefit but were not viewed as profit centers for the contractor-managers. In later years, especially within the past decade, the GOCO system has been subject to contract reform and privatization initiatives that are closer to traditional market philosophy. The GOCO contracts are now subject to a required rebid on a periodic basis (as opposed to a previous system of change only for poor performance or at contractor discretion). The amount of the fees collected by contractors has skyrocketed in the past decade as their liability has increased in connection with laboratories' hazardous waste disposal problems, among other cost issues.

That 20-y.o. paper possibly doesn't cover later changes, but it gives a broader picture of how the system came about in its early years.

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  • I think you almost got the key point. The key point is most DOE labs came about due to the Manhattan project, where they needed to bring up a huge science enterprise in months to develop the atom bomb. The scale of this project required multiple contractors to manage. The rest followed from that initial start.
    – user71659
    Commented Mar 2, 2023 at 18:24

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