Source: Los Angeles Times | W.J. Hennigan and Ralph Vartabedian

The contractor managing the nuclear weapons laboratory at Los Alamos, N.M., was slapped with a $57-million reduction in its fees for 2014, largely due to a costly nuclear waste accident last year. The contractor, Los Alamos National Security, saw its fee reduced 90% because of the accident, in which a 55-gallon drum packaged with plutonium waste from bomb production erupted after being placed in a 2,150-foot underground dump in the eastern New Mexico desert.

The Department of Energy determined that the contractor had a “first-degree performance failure” and cut its fee to $6.25 million — a pittance compared with the $63.4 million that the contractor could have earned if it had met all of its 2014 contract incentives.

“The size of the cut was astounding,” said Jay Coghlan, director of Nuclear Watch New Mexico, a group that scrutinizes operations at Los Alamos National Laboratory. “It is a step in the right direction.”

Coghlan said the Energy Department also reduced the duration of the management contract by one year for the consortium, which was selected in 2007 to help restore order to the lab’s operations after more than a decade of security lapses, management errors and accounting scandals.

The consortium includes San Francisco-based Bechtel Corp., the University of California, Charlotte, N.C.-based Babcox & Wilcox Co. and San Francisco-based URS Corp.

Charles F. McMillan, director of the Los Alamos lab, sent a memo to his 6,000 employees last week that stressed the positive, despite having received one of the worst fee reductions in the department’s history.

“Although this was a very tough year for the laboratory, I am optimistic that next year will be better,” he wrote. “I am determined to do all that I can to make it so.”

Outside analysts and watchdog groups said the reduction in profits was surprisingly tough, especially given the history of the Energy Department allowing its contractors to escape accountability for errors and failures.