U.S. Cited for Laxity at UC Nuclear Labs : Contracts: Two reports find that the Energy Department is not keeping a close rein on spending at three facilities managed by the university.

The Energy Department is failing to staunch wasteful spending at nuclear weapons laboratories operated by the University of California and is in danger of losing control of lab activities, government audits said Wednesday.

A report by the General Accounting Office also said that the Energy Department is giving the university $14 million to cover costs that the government would not pay under normal circumstances, including potential criminal penalties for health and safety violations.

Rep. John D. Dingell (D-Mich.), who requested the audit, charged that the money amounts to a “slush fund” for penalties and fines. The university is free to keep whatever it does not spend.

In a separate report, the GAO said the department is losing control of pension fund costs at the labs, making unnecessary payments for employee pensions and offering employee buyouts with far more generous provisions than federal employees receive.

The charges come as the Energy Department is weighing whether to open competition for the prized contract to manage the labs, a job that the university has performed without rivalry for four decades.

The University of California is one of the largest Energy Department contractors, receiving about $2.5 billion annually to operate the Lawrence Livermore, Los Alamos and Lawrence Berkeley national labs.

UC officials took strong exception to many of the GAO charges, asserting that the stewardship of the labs by the school is one of the principal reasons they are regarded as world-class scientific organizations.

“The labs have greatly improved their management,” said Robert Kuckuck, the university’s special assistant for laboratory administration. “There has been an awful lot turned around.”

Kuckuck said that in the last two years, the university has tapped just $6,000 of the $14 million pool established for costs that the government ordinarily does not pay. Under its contract, the university is reimbursed for all of its legitimate costs. Rather than a slush fund, Kuckuck characterized the money as “a risk management fee.”

Energy Department spokesman Philip Keith said the agency had not seen the GAO reports and could not comment on specific charges. But he added that the university contract was negotiated during the George Bush Administration before reform efforts by the Clinton Administration.

“There are some things that could be improved,” he said.

UC stewardship of the labs has come under increasing criticism in recent years amid charges that the university lost millions of dollars of government property and substantially overcharged the government for its fleet of vehicles.

Energy Secretary Hazel O’Leary has attempted to clamp down on the department’s business practices, acknowledging that improving efficiency and contract administration is one of the top issues confronting the troubled agency.

In a letter to O’Leary, Dingell praised her reforms but also charged that the GAO reports show that the efforts have not yet cleaned up problems with the labs’ administration.

The Energy Department signed a five-year contract in 1992 with the university to manage the labs. Since then the department has decided to open to competition its multibillion-dollar management contracts at other nuclear weapons sites and is considering whether the UC contract should also be subject to competition.

A decision may be reached as early as next year. In his letter, Dingell said the decision should be based in large part on the university’s willingness to correct the problems cited by the GAO.

The GAO issued two reports, one charging that university’s fees are substantially higher than they should be. The other charges that unnecessary pension payments were made for 18,300 employees.

The GAO audit said that many exceptions to the Energy Department’s standard practices have been made that have weakened the department’s “ability to effectively oversee the contracts and protect the taxpayer’s investment in these laboratories.”

Among the exceptions is an agreement that prior notice be given for any so-called surprise inspections at the laboratories.

Livermore, located east of San Francisco, and Los Alamos in New Mexico are the nation’s design centers for nuclear work. Lawrence Berkeley lab in Berkeley does research unrelated to nuclear weapons.