Bechtel and Los Alamos National Laboratory: The Privatization of the Nuclear Industry

[EDITOR’S NOTE]: Nuclear Watch New Mexico recently filed a second lawsuit under the Freedom of Information Act in the federal district court of New Mexico to obtain the National Nuclear Security Administration’s Performance Evaluation Reports for Los Alamos National Laboratory and all eight nuclear weapons sites in the country. The group first filed a FOIA request in January of 2012 and failed to get a response from the government. This new lawsuit seeks to find out why the government continues to award tens of millions of dollars of contracts to the Bechtel/University of California corporate consortium that has increasingly demonstrated mismanagement and waste. Below is a history of Bechtel’s long and sordid history of corporate profiteering and mismanagement around the world. (nuclearwatchnm@nukewatch.org)

By KAY MATTHEWS

Los Alamos National Security (LANS) is the for-profit limited liability corporation that runs the world’s premier nuclear weapon’s site, the Los Alamos National Laboratory (LANL) in northern New Mexico. Its two dominant partners are the University of California (UC) and Bechtel, one of the world’s largest privately held corporations. Through a parallel consortium UC and Bechtel also run LANL’s sister nuclear weapons lab, the Lawrence Livermore National Laboratory in California. When the Bechtel/UC consortium took over management of Los Alamos National Laboratory in 2006 it wasted no time revealing what privatization would bring to the Lab: the layoff of 450 to 600 contract workers, and a subsequent reduction in the work force—through attrition—of another 300, is testimony to its “cost-efficient” path towards profit. Now, in 2012, after threatening to layoff between 400 to 800 employees, the Lab achieved the “voluntary” layoff of about 557 workers. Those employees have been given 39 weeks of severance pay and an extension of their health insurance benefits.

Of course, Bechtel itself is guaranteed a contractual amount of profit, no matter what it has to do to meet a Department of Energy (DOE) budget. And Bechtel excels in making a profit: in 2004 the company had revenues of $17.4 billion and in 2005, $18.1 billion. As Steve Bechtel Sr., son of Bechtel founder Warren Bechtel and father of current owner (along with his son Riley) Steve Bechtel Jr., put it, “We are not in the construction and engineering business. We are in the business of making money.” (Layton McCartney, Friends in High Places, 1988.)

How It All Began

To better understand what Bechtel management of the Lab may mean it’s useful to take a look at the company’s history. Founded by Californian Warren Bechtel in the early 1900s, Bechtel took advantage of the rebuilding opportunities after the San Francisco Earthquake and initially specialized in railroad and irrigation canal construction. The company also branched out into mining, insurance, real estate development, highway construction, and oil pipeline construction, and by the end of the 1920s Bechtel was one of the largest construction companies in the U.S. The crowning achievement of Warren Bechtel’s career was building Boulder Dam in Nevada (later named Hoover Dam), which provided water for the development of Los Angeles, Phoenix, Palm Springs, and the Imperial Valley. As one of the partners in Six Companies, Bechtel would go on to be involved in the construction of many New Deal projects: the Moffat Tunnel in Colorado, the Grand Coulee, Parker, and Bonneville dams, and the Oakland-San Francisco Bay Bridge.

By the time Warren’s son Steve came on board to head the business, the company was turning its sights away from government projects and towards the private sector, particularly oil. And an old schoolmate and early business partner of Steve’s from Berkeley, John A. McCone, helped propel the company into the international arena of pipeline development, nuclear power, and nuclear weapons. McCone, “one of the pivotal figures in American policy,” (McCartney, Friends in High Places) was chairman of President Dwight Eisenhower’s Atomic Energy Commission (AEC) and director of the CIA during the John Kennedy and Lyndon Johnson administrations.

Like many corporations that make money through war-profiteering, the Bechtel and McCone business partnership made much of its fortune by building ships during World War II. Also during the war years Bechtel undertook the building of the Alaska pipeline, which set the pattern for subsequent controversies in which Bechtel would become embroiled: the government favor of no contract bidding (the pipeline construction was actually conducted in secret by the War Department) and construction mismanagement, including delays and cost overruns. At the direction of the War Department, Bechtel-McCone was also building pipelines and refineries in Mexico, Venezuela, Bahrain, and off the coast of Saudi Arabia. Steve Bechtel and John McCone made over $100 million dollars on less than a $400,000 investment during the war.

After the war Steve Bechtel bought out McCone and turned Bechtel Corporation into a service company that avoided debt by dealing with customers who financed their own projects with advance payments: projects that Bechtel not only built but conceived and designed. The biggest of those clients was Standard Oil Company of California, and the place it made its money was Saudi Arabia. From there, Bechtel went to work all over the Middle East, and through its lobbyists essentially became the voice of the Arab world in Washington D.C.

 

Nuclear Activity

Even before John McCone became chairman of the AEC, Bechtel had recognized the potential for profit making in the atomic power industry. In the 1940s Bechtel built several “heavy water” storage plants in Hanford, Washington as part of the Manhattan Project, based in Los Alamos. It was also one of the contractors that built the “Doomsday Town” in the Nevada desert where the AEC detonated a nuclear device to see what would happen to a typical city. It was leveled, of course. Through Steve, Sr.’s connections in Washington D.C and with California utilities that were committed to nuclear energy, it got in on the ground floor of the government’s “Atoms for Peace”, which proposed transforming the greatest destructive force ever developed into “abundant electrical energy.” When John McCone was appointed AEC chairman in 1954, and started moving AEC funding to the private nuclear industry (against the wishes of Harry Truman, who said that nuclear energy was “too important a development to be made the subject of profit-seeking”) (McCartney, Friends in High Places), and spreading U.S. nuclear technology overseas, Bechtel was off and running. Greatly expanded during the Nixon administration, the nuclear industry was scheduled to build 31 power plants by 1973, half of which were to be contracted to Bechtel.

The first of many boondoggles for which Bechtel was responsible was the nuclear plant in Tarapur, India, where the seed for today’s South Asian arms race was planted. The plant experienced major leaks, causing high levels of radioactivity in the Arabian Sea. The Tarapur plant was not the only Bechtel built plant that experienced leaks. According to McCartney, “ . . . the entire generation of BWR [boiling-water reactors] plants Bechtel and GE had begun building during the late 1950s were not . . . in compliance with minimum AEC safety requirements.” Several Bechtel employees also complained that the company was using “substandard building techniques and faulty welding techniques in the construction of nuclear power plants.” Bechtel was accused of trying to silence these complaints and retaliating against the whistle blowers.

After a failed attempt to get into the nuclear-fuel enrichment business in the mid-1970s, Bechtel switched its attention to the nuclear clean-up industry. The man who would help lead the company in this next business phase was none other than George Shultz, who epitomizes the government/corporate revolving door routine: first in Washington, as Secretary of Labor and Treasury Secretary under Richard Nixon, then as Bechtel’s executive president, and finally, Secretary of State under Ronald Reagan.

One of Bechtel’s largest and most lucrative assignments is at the Hanford Nuclear Repository, located on the Columbia River in Washington, the largest nuclear waste repository in the country. Hanford stores high-level waste generated from the processing of spent nuclear fuel and has leaked more than one million gallons of nuclear liquid waste into the surrounding environment. Bechtel was awarded the contract to build the waste treatment plant—the Hanford High-Level Nuclear Vitrification Plant—that takes the liquid waste from the leaking underground tanks and turns it into solid glass-waste logs, which will in turn be disposed of in an underground geological repository.

At the start of 2005 the plant was estimated to cost approximately $5.8 billion and was supposed to be in operation by a 2011 deadline. Construction on the plant was halted in the summer of 2005 due to flaws in the plans, apparently caused by a fast-tract schedule that began before the design had been finalized. According to a press release from the Government Accountability Project, this “was the result of Bechtel’s rush to receive a $15 million bonus for meeting a deadline, coupled with an effective lack of oversight by the DOE.” It is now estimated that the plant will cost $11.55 billion (one source says $13.2 billion) and will not begin operation until 2019. Overall, Hanford’s cleanup costs are expected to total up to $60 billion and the work to continue until 2035.

Mismanagement in Iraq

Bechtel was gone from Iraq by the end of 2006. Its $50 million contract to build the Basra Children’s Hospital was cancelled because the Special Inspector General for Iraq Reconstruction (SIGIR) found that the project was almost $90 million over budget and more than a year and a half behind schedule. Bechtel’s other contracts expired that year. While Bechtel blamed security concerns for its failure to complete the hospital, many pointed to the fact that Bechtel subcontracted the work to Jordanian and Iraqi companies that resulted in additional overhead, too little managerial oversight, and short-term employment and low pay for the Iraqis.

But the company didn’t leave empty handed, by any means. During its tenure in Iraq it was awarded non-competitive contracts totaling $2.85 billion for reconstruction projects to provide electricity, and water and sewage systems that dragged on for years and failed to meet contractual obligations. It took over three and a half years for these systems to exceed prewar levels, but they remain below U.S. government expectations. Three billion dollars had been paid, while only half of the projects planned in these systems had been completed. And of those in operation, according to Bechtel, “not one is being operated properly.” The company blames a poor Iraqi work force, but the fact that the U.S. administrator in Iraq fired the upper echelon management work force and hired Bechtel to build systems the Iraqis were unfamiliar with, is more likely where the blame lies.

In a subsequent report to Congress SIGIR found Bechtel met its original objectives on fewer than half of the reconstruction projects. Most of the rest were canceled, reduced in scope, or never completed as designed.

Privatization of Water

No discussion about Bechtel should fail to mention its attempt to privatize the water system in Cochabamba, Bolivia. This topic has been covered extensively and I will only give a brief overview here. When a Bechtel consortium took over the city’s water supply from the government, it ignited una guerra del agua during

which “peasants from the nearby countryside manned barricades sealing off all roads to the city” to protest what they perceived as the abrogation of their basic human right to clean water. The citizens of Villa San Miguel, a nearby barrio, who had dug their own well and installed a water system to serve its poor community, also joined in the protest when the water consortium took over its water system. The company installed meters to charge fees, which complied with a contract that guaranteed the company a minimum of fifteen percent profit adjusted annually to the consumer price index in the United States.

The people of Cochabamba took to the streets over and over again in mass protest and eventually forced the water company officials to flee. The Bolivian government revoked the company’s contract but was forced to pay the corporation between $12 and $40 million in compensation. Bechtel then became involved in other water privatization schemes, including San Francisco, where the company won a $45 million contract to repair and manage the city’s water system.

What This Means for LANL

“Nuclear laboratories are no longer to be intellectual institutions devoted to science but part of a corporate-business model where research, design, and ultimately the weapons themselves will become products to be marketed. The new dress code will be suits and ties, not lab coats and safety glasses.”—Frida Berrigan

Bechtel is now one of four contractors partnering in the limited liability corporation LANS that has taken over management of Los Alamos National Laboratory. This is part of a DOE trend to consolidate nuclear weapons businesses in the hands of a small group of corporations, universities, and nonprofits. Damon Hill and Greg Mello of the Los Alamos Study Group took a closer look at what this may mean in their article, “Competition – or Collusion? Privatization and Crony Capitalism in the Nuclear Weapons Complex: Some Questions from New Mexico, May 30, 2006” (http://www.lasg.org/NNSAPrivatization.pdf):

“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 will bring greater whistleblower ‘discipline,’ tighter control over information and communication, and according to an internal presentation by the incoming LANL director, encouragement of employee reporting of anything or anyone impeding the mission.”

All of this has indeed come to pass, as has Concerned Citizens for Nuclear Safety’s Joni Arends’ prediction that Bechtel will “cut corners and risk safety while building the $950 million Chemical and Metallurgy Research Building Replacement at LANL just as it has at Hanford. The facility itself is enough of a safety risk, and if we couple these problems with a design-as-you-build approach, the impact to our environment and our health will be devastating.” (www.nuclearactive.org) The cost of the proposed CMMR complex ballooned to $6 billion dollars when LANL had to reconfigure how to take into account the potential seismic activity that had been underestimated in the initial design. Fortunately, as I reported in “Los Alamos National Laboratory: A Plague on Your House” (March 17), funding for the CMRR nuclear facility contract has been deferred for at least five years. In a typical PR move the Lab announced that even if the new CMRR nuclear facility doesn’t get built LANL can continue to do the “necessary” work to produce pits for nuclear weapons at “other” facilities: in other words, corporate profiteering from weapons work will continue, whatever the funding and despite the public demand for non-proliferation and a change of mission.