LANL touts work with NM small businesses

Mar. 7—Even as many small businesses in New Mexico struggled as the economic grip of the pandemic tightened, Los Alamos National Laboratory upped its spending with small businesses in the state by 30%, according to an economic impact report released by the lab last month.

LANL increased spending with New Mexico small businesses by nearly $125 million to $413 million during fiscal year 2020, which ended Sept. 30, 2020, and covered roughly the first six months of the COVID-19 outbreak.

In all, the lab reported having 7,315 projects with small businesses in the state, 202 more than the year before.

The report was released about a month after lab managers received low marks for small-business relations on its annual evaluation by the National Nuclear Security Administration, the semi-autonomous agency within the Department of Energy that's in charge of national security and oversees the production of the U.S. nuclear stockpile.

But LANL Director Thom Mason said in a statement to the Journal that working with small businesses soon became a priority when management of the lab switched from Los Alamos National Security to Triad National Security, a consortium made up of the Battelle Memorial Institute, the University of California System and the Texas A&M University System.

"When Triad began managing LANL at the beginning of FY19, we set clear priorities," Mason said. "One of those was to strengthen the Laboratory's impact on the region's economic growth. Last year's increase in small-business subcontracting was largely the result of our increased efforts to collaborate with small-business partners and to bring in new business partnerships. We hit the ground running on that goal in FY2019 and really saw the pace ramp up in FY2020."

In all, LANL increased its overall small-business spending by 17% to $652 million, according to lab data.

Mason said an increase in the lab's budget, from $2.75 billion to $3 billion, translated to more money flowing from the lab to small businesses in 2020.

"This increase launched an industrious period of recapitalizing aging facilities, launching new construction and expanding our general operations," Mason said. "This expansion also gave us more flexibility to work with New Mexico partners to hire full-time employees and supplemental labor support. We expect this trend to continue in FY2021, especially as we continue streamlining the process of subcontracting with LANL."

Mason mentioned three small-business subcontractors — Longenecker, TechSource and Merrick-SMSI JV — as being instrumental in helping LANL carry out its mission by providing personnel, equipment and expertise.

Partnering with small business

The largest amount of small-business spending in New Mexico went to "disadvantaged" businesses — those at least 51% owned by socially and economically disadvantaged individuals — and "women-owned" businesses. Each received more than $140 million in spending from LANL, according to their data. However, some businesses can qualify in more than one subcategory — those owned by disadvantaged women, for instance.

Eighty-eight percent of all the lab's spending with women-owned businesses stayed in New Mexico, according to the report.

Ninety-five percent of the money the lab spent with Native American businesses is spent here, although the overall total is less than $3 million.

A LANL news release said the lab plans to put even more emphasis on small businesses as it "works toward aggressive goals in collaborating with more small businesses."

The announcement highlights Freshies of New Mexico, a fruit grower in Velarde. Through the lab's small-business program, the company was able to install equipment that monitors temperature, wind speed and direction, soil moisture and chemistry.

The lab works with dozens of businesspeople in a wide variety of fields to develop and expand their businesses. Other examples of the lab assisting small business are Georgia O'Keeffe Museum Innovations, a for-profit subsidiary of the Georgia O'Keeffe Museum in Santa Fe, which sought help to develop a crate with a suspension system to limit damage to shipped artworks; UbiQD, a Los Alamos firm that wanted to enhance the color purity of its quantum dot technology; and Taos-based ThermaSun, which benefited from the lab's assistance to develop parts for a heat conversion device.

Room for improvement

The economic data was released a month after Triad National Security, LLC was dinged on its performance evaluation for falling short of small-business goals.

The NNSA's annual review of LANL management said that Triad and, by extension, LANL, failed to meet four of six small-businesses goals and "struggled with small-business relationships."

Asked about that in January, Mason emphasized the increase in money spent on small businesses.

"The most important (goal) is the overall fraction of our procurement that goes to small businesses, and we met that one," he said, pointing to the $413 million that went to New Mexico small businesses.

But Mason acknowledged that the evaluation showed that there was room for improvement.

"What it points to is that we need to work harder to identify more capable small businesses in some of those subcategories," he said.

While LANL spending with small businesses increased significantly, the percentage of total procurement dollars spent with them actually decreased from 69.7% to 65.3% during fiscal year 2020. That's because LANL's total budget increased by a bigger margin, eclipsing the $3 billion mark as the lab ramps up its production of parts for nuclear weapons.

LANL employs 12,367 people, according to the report, which was 326 more than in FY 2019. About 43% of employees (5,269 total) live in Los Alamos County, 23% (2,896) in Santa Fe County and 16% (1,986) in Rio Arriba County.

Bernalillo County is home to 618 LANL employees, accounting for 5% of LANL's workforce.

The total annual salary distribution for LANL employees is $1.24 billion, up from $1.16 billion the previous year.

Information withheld

LANL did not release the full report, just a summary.

That makes Jay Coghlan, executive director of Nuclear Watch New Mexico, skeptical.

"LANL's economic propaganda should be viewed with suspicion given the Lab's past exaggerations of positive impact and suppression of negative data," Coghlan told the Journal.

He was referring to a 2019 economic impact study by UNM's Bureau of Business and Economic Research (BBER) commissioned by the lab.

The lab highlighted employment figures and what was measured as a $3.1 billion economic output, but it withheld some information in the final report that wasn't so glowing for the seven surrounding counties.

According to the BBER report, the lab costs those counties more to provide basic services, such as roads, parks and policing, to LANL employees, based on their percentage of the populations, than the counties take in from taxes paid by those workers and on procurements. It said that while Los Alamos County had a net gain of $13 million from tax revenues created by the lab, surrounding counties lost an average of $1.25 million. Rio Arriba County's deficit was $2.6 million, while Santa Fe County had a net loss of $2.2 million.

"This shows that the economic benefits stick to the already privileged nuclear one-percenters," Coghlan said.

The loss can be at least partly attributed to New Mexico's tax structure, which directs personal income tax revenue to state government. Cities and counties generate most of its revenue through gross receipts and property taxes.

The BBER report also noted that higher income households tend to spend a smaller percentage of their income locally.

That part of the report came to light only because a reporter with the Rio Grande Sun saw a draft version of the report. A lab spokesman told the Sun that LANL didn't want to include the county data in the final report because the focus of the study "was to access impact on the State as a whole and not County-specific impacts, as County-wide data may not present a complete picture of the Lab's impact on a particular community."