DOE plans to extend Battelle contract at PNNL

RICHLAND -- The Department of Energy plans to extend Battelle's contract to operate and manage Pacific Northwest National Laboratory in Richland for five more years.

That will continue Battelle's run as contractor from 1965 through September 2017.

However, the extension is contingent on working out the details of the continuing contract.

"This is great news," said Mike Kluse, PNNL director, in a Friday message to employees. "Battelle has demonstra-ted the ability to nurture core capabilities and reinvent PNNL as national needs emerge."

DOE decided to extend the contract rather than put it out to bid mostly based on Battelle's performance, said Julie Erickson, acting manager of DOE's Pacific Northwest Site Office.

"Battelle excels in science and technology, and particularly applied science and technology," she said. It also showed operational excellence in areas such as safety, security and business systems, she said.

DOE said last year it planned to announce in late 2010 whether it would extend Battelle's contract or put it out to bid. That would allow for a draft bid request to be released in spring 2011.

Although DOE is continuing negotiations with Battelle, it decided to make the announcement of the bid extension since little more than a year is left before the end of Battelle's contract, Erickson said. DOE and Battelle are optimistic the negotiations will conclude before Sept. 30, 2012, when the current contract expires.

The two parties are negotiating the profit Battelle would be eligible to earn over the five-year contract extension, a routine part of federal contract negotiations.

But they also are discussing how Battelle will make the land, buildings and equipment it owns that are used by Pacific Northwest National Laboratory available to DOE. Battelle has owned some of the land and buildings used by PNNL since the '60s, although DOE owns most facilities at its other national labs.

A formal agreement for use of Battelle facilities is being negotiated to replace a gentleman's agreement to ensure there is no question about use in the future, Erickson said.

The decision to extend the contract rather than put it out for bids was based in part on a change in federal policy.

Between 2005 and 2010, DOE conducted 11 contract competitions for national laboratory management, but for the labs under the DOE Office of Science, only one proposal was submitted for each bid solicitation.

In competitions for other labs, such as those under the DOE National Nuclear Security Administration, more bids were received. But in all but one case the contract still was awarded to a team that included the current contractor.

In early 2010, Energy Secretary Steven Chu said that the practice common under the previous presidential administration of routinely opening the lab contracts to competition often did not have the expected benefits of saving money and improving efficiency.

Under Chu's leadership, the decision on whether to open management contracts for competition would be decided case by case, he said in a policy statement.

"Everything we've been doing in recent years is focused on PNNL delivery excellence in science and technology, management and operations and community stewardship so DOE has confidence to extend the contract," Kluse said.

His message to staff has been that if performance continues to improve, there would not be a compelling interest to open the contract to competition, he said.

It also has been helped by the support of Battelle's corporate office, the DOE Pacific Northwest Site office and the community support, including from the Tri-City Development Council, he said.

"Since 1965 we've seen 24 different prime contractors at Hanford," with each new contractor needing several years to learn the job, said Gary Petersen, vice president of Hanford programs for TRIDEC. "The constant has been Battelle operating the lab."

Battelle has been a good corporate citizen, spinning off private companies based on technology developed there, he said. Businesses that race their roots to Battelle and PNNL technology or personnel now employ more than 1,100 people in the Mid-Columbia.

In addition, Battelle has donated $24 million to Tri-City area education, arts and human services organizations, including more than $3 million to help create the Hanford Reach Interpretive Center and Delta High School. It has invested more than $125 million of its money in facilities and equipment at the lab and is co-leading the effort to create and develop a research district in the land around the PNNL campus.

If DOE had decided to put the contract for PNNL out to bid, Battelle would have needed to spend several million dollars on a lengthy and detailed proposal to continue managing and operating the lab.

There also would have been an impact to productivity, both because a team would need to be assigned to put the proposal together and also the uncertainty among the staff, Kluse said.

The contract extension negotiations do not include a replacement to Battelle's "use agreement," which allowed Battelle to do nongovernment work at PNNL. The use agreement expires Sept. 30, 2012.

DOE is establishing a new mechanism to make it easier for independent work to be conducted at all national laboratories, helping move technology from the labs to the marketplace. Battelle is confident it will be in place before the use permit expires, Kluse said.

PNNL employs 4,907 people, all but 439 of them in Richland, and has an estimated operating budget for the current year of $1.1 billion.