NNSA Does Not Utilize Unique Contractor-Exclusion Authority, GAO Finds

It comes as little surprise that when it comes to nuclear security, the FAR’s full and open competition requirements take a backseat. To this end, Congress temporarily granted the Department of Energy authority to exclude contractors from nuclear weapons and security system procurements to preserve the integrity of the supply chain. A recent GAO report, however, reveals the Department of Energy is not utilizing this unique procurement authority.

When it comes to nuclear defense and weapon technology, security is a paramount. The globalization of component manufacturers, however, has raised some questions about security. As GAO succinctly summarizes, “[t]he continued globalization of the nation’s supply chains—including the trend toward using a non-domestic supply chain for some nonnuclear components of nuclear weapons and related systems—has led to heightened risks of potential supply chain exploitation.” Such risks include the introduction of counterfeit materials, or malicious code in software.

Recognizing that supply chain vulnerabilities could jeopardize nuclear procurements, Congress set out to provide the Department of Energy with tools to restrict contractors in the event the Department of Energy detected supply chain risks. Originally included in the 2014 National Defense Authorization Act, this so called “Enhanced Procurement Authority” allows the Department of Energy to exclude contractors and withhold consent for subcontractors that pose supply chain risks to covered systems. 50 U.S.C. § 2786(f)(4). Covered Systems include nuclear weapons and components, nuclear surveillance technologies, and nonproliferation developmental items, among other things. 50 U.S.C. § 2786(f)(5). Interestingly, the Department of Energy’s authority to exclude particular vendors is not reviewable in any federal court. 50 U.S.C. § 2786(d).

The sweeping procurement exclusion authority is curtailed by a number of requirements. To utilize this authority, the Secretary of Energy must first develop a risk assessment that “demonstrates that there is a significant supply chain risk to a covered system.” 50 U.S.C. § 2786(b)(1). If a risk exists, the Secretary of Energy must make a written determination that exercising Enhanced Procurement Authority is necessary to protect national security and less restrictive measures will not eliminate the supply chain risk. The Secretary of Energy has seven days after making a written a determination to provide a report of the action to Congressional committees. Notably, both the written determination and subsequent Congressional report can be classified.

The Secretary of Energy has since delegated authority to evaluate instances where Enhanced Procurement Authority would be appropriate to the Administrator of the National Nuclear Security Administration (“NNSA”). NNSA is a separately organized agency within DOE. GAO describes its mission as “among other things, enhancing national security through the military application of nuclear energy, maintaining and modernizing infrastructure for the U.S. nuclear weapons stockpile, and supporting the nation’s nuclear nonproliferation efforts.”

To provide some degree of oversight, the Enhanced Authority program was to be reviewed annually be GAO. 50 U.S.C. § 2786(e). In its most recent report, GAO found NNSA has not used its Enhanced Procurement Authority once since being enacted. NNSA explained that there were a number of reasons for its authority remaining unexercised.

First, NNSA raised issues with the amount of time the Enhanced Procurement Authority process takes to complete. As GAO noted, “NNSA officials stated that it could take a significant amount of time to be able to eliminate a supplier from the competitive pool—possibly 6 months or longer, according to one NNSA senior procurement official—by using the enhanced procurement authority.” This lengthy time period is due to the need to obtain approval from the Secretary of Energy to use the Enhanced Procurement Authority exclusion procedures. The various layers of approval within the Department of Energy before reaching the Secretary of Energy was identified as an additional issue.

Second, NNSA further identified the case-by-case nature of the Enhanced Procurement Authority as a hindrance to its utility. “NNSA officials stated that while the agency could eliminate the supplier from the competitive pool for one particular procurement, such action would not allow NNSA to remove the supplier from existing contracts and subcontracts or prevent the supplier from being considered in the future.” As such, the process of eliminating a supplier from the chain in one procurement would not impact that supplier’s eligibility on other procurements, even if there was an acknowledged security risk.

Third, NNSA further explained that other tools at its disposal under the FAR could offer similar protection from supply chain compromises without necessitating a similarly lengthy review period. These include unusual and compelling urgency as well as national security exceptions to full and open competition requirements. Additionally, other federal agencies, like the Department of Homeland Security, have authority to issue directives to all federal executive branch agencies to discontinue obtaining services from certain suppliers that are likely compromised. This has eliminated the need to exercise Enhanced Procurement Authority on at least one occasion.

NNSA is currently developing a report identifying the difficulties with implementing Enhanced Procurement Authority and making recommendations for improvement. This report is nearly a year overdue. Regardless, it is clear that while the policy behind the Enhanced Procurement Authority is important, in practice, it may not be an ideal solution for NNSA’s needs.