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Los Alamos bets on 'creativity' to handle $200m of extra costs

Efficiencies and imagination tested

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Los Alamos National Laboratory has been hit with a vague and challenging directive to avoid layoffs despite a 10 per cent knock to the lab's budget.

The Register has obtained a memo sent out last week by lab director Michael Anastasio that provides the best details to date on the budget impact the lab faces following its recent change in management. In the memo, Anastasio reveals $200m of "incremental costs" that Los Alamos will likely have to deal with without an increase to its close to $2bn budget. While many workers fear that the budget shortfall will result in layoffs, Anastasio maintains that "efficiencies" and "creativity" should keep employment levels constant.

Subject: FY07 Indirect Budget Call

Each year, the Laboratory goes through a budget development exercise with CFO guidance setting forth indirect budget targets and establishing a review process. Today I issued this year's guidance to LANL senior managers which will culminate in an FY07 budget.

This is the next step on our institutional commitment to finding efficiencies in how we manage this Laboratory. It is clear that this will raise short-term challenges in order to ensure the long- term health and viability of a great national security science laboratory.

As I have discussed at several all hands meetings, FY07 presents a challenging financial picture. An expected flat funding profile combined with increases in costs for items such as compensation, employee benefits, gross receipts taxes, and management fee means the incremental costs facing the Laboratory in FY07 total roughly $200M. To address the increased incremental costs for FY07, indirect budget targets will be reduced by 10%.

The budget call identifies certain expectations. One is that we intend to manage the current level of LANS staffing through constrained hiring and by monitoring attrition. The second major expectation is that we minimize the impact to our customers by keeping our current overhead rates stable.

While line management is ultimately responsible for examining their operations and identifying funding efficiencies to meet FY07 targets, everyone owns the success of this Laboratory. All of us need to examine how we do work and apply LANL's trademark creativity to finding smarter ways to further science and accomplish our mission in a safe and secure manner.

The private Los Alamos National Security (LANS) consortium has been trickling out cost estimates since it took over sole management of Los Alamos from the University of California on June 1. The consortium - composed of Bechtel, UC and government contractors Washington Group International and BWX - must deal with extra taxes, benefits costs and incremental costs well beyond those that existed under the non-profit UC. In addition, LANS can now earn up to $80m in performance fees where UC could only earn $8m.

The memo from Anastasio confirms that LANS expects all of these charges to add up to $200m or close to 10 per cent of the lab's annual budget.

Efficiencies and creativity may well help the lab meet the budget constraints without firing workers. The vague terms, however, don't seem like the concrete plan of action the government was promised when handing over Los Alamos to LANS.

Numerous scientists left the lab before the management change, complaining that the Los Alamos work environment has made it impossible to do top quality work. LANS officials have countered such charges by saying that thousands of top researchers remain at the lab and by saying that they're working to remove the bureaucratic procedures that have haunted Los Alamos for years. ®

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