**[PART III - SECTION J]{.underline}**

**[APPENDIX M]{.underline}**

**[REGIONAL PURCHASING PROGRAM]{.underline}**

\(a\) [General]{.underline}.

> \(1\) The Laboratory is the major economic presence in northern New
> Mexico. With particular regard to the Laboratory, it is recognized
> that the Laboratory and its personnel and procurement practices have a
> major impact on the economy of northern New Mexico. Through its
> procurement policies, the Laboratory has the opportunity to strengthen
> regional business enterprise, stimulate greater regional employment
> and infrastructure, increase the business tax base in northern New
> Mexico, and reduce regional dependence on federal investment.
>
> \(2\) As a condition of this Contract, the Contractor must continue to
> contribute to the economic development of northern New Mexico while
> continuing to meet NNSA program expectations. To assist the Contractor
> in meeting this condition, the Contractor is encouraged to conduct a
> Regional Purchasing Program (\"Program\") that stimulates regional
> economic development initiatives in northern New Mexico and has a
> positive impact on the economic development of the region.

\(b\) [Local Factors Affecting The Development Of The
Program]{.underline}. The Contractor's Program must take into account
unique regional conditions such as the complex interplay between local
labor relations conditions, socioeconomic conditions, local availability
of commercial sources for goods and services, local tax structures, and
other factors. The following factors have been identified by NNSA as
being unique to the Laboratory and are to be taken into account in the
Contractor's development of its Program:

> \(1\) The Laboratory is the largest employer in northern New Mexico
> and has the largest single impact on the regional economy.
>
> \(2\) Despite various efforts to diversify the local economy, the city
> of Los Alamos remains largely a "one-company town," and the
> surrounding communities of Espanola, Santa Fe, the Pueblos, and other
> nearby communities are highly dependent on the Laboratory for
> employment and business opportunities.
>
> \(3\) Because the Laboratory is located on federal land, neither the
> Contractor nor NNSA pays property taxes. This situation, coupled with
> New Mexico's particular taxation arrangements for the funding of
> public schools and local governments, has resulted in extensive
> special arrangements to accommodate the needs of the county government
> and school district of Los Alamos. The Laboratory's subcontractors who
> provide services to the Laboratory are generally subject to ordinary
> New Mexico business taxes. Consequently the nature and extent of the
> tax impact of any substantial shift in effort from the Laboratory to
> its subcontractors must be taken into account.
>
> \(4\) Los Alamos remains geographically remote from the national labor
> markets and industry. This impacts the ability of the Laboratory to
> recruit professional scientific staff and other supplemental labor
> staff with special skills that may not be available in the local labor
> market. Also, because the Laboratory constitutes the only market for
> such employees in northern New Mexico, a loss of employment is
> particularly hard on such employees, typically requiring long-distance
> job hunting and relocations to distant cities. As a result, stability
> of employment has long been a personnel management objective that has
> been important to both Laboratory management and to the Laboratory
> workforce.
>
> \(5\) The Government selected the Los Alamos site in 1943 partly on
> the basis of its geographic isolation. Los Alamos is still remote and
> has no local access to rail or local access to major shipping routes.
> The Laboratory is also surrounded by Native American and
> federally-owned lands which are not readily available for commercial
> development. The lack of business infrastructure increases the cost
> and difficulty of obtaining certain goods and services at the
> Laboratory, and has had a long-standing effect on the Laboratory's
> make-or-buy decisions.
>
> \(6\) Current NNSA policy emphasizes contractor outsourcing. In past
> decades national security concerns led DOE/NNSA, and its predecessor
> entities, to place importance on security and operational
> independence. As a result, the Laboratory, like some other NNSA
> facilities, was designed to have a complete suite of internal, on-site
> support capabilities, including such capabilities as printing,
> warehousing, cafeteria services, medical facilities, light
> construction, facility repair and maintenance, fabrication and
> machining, vehicle maintenance, utility services, and many others.
> Almost all of the equipment and facilities dedicated to these support
> capabilities are located on the Laboratory premises. Much of it cannot
> be easily moved off-site except at great expense, and it may not be
> cost effective to abandon the use of such facilities and equipment for
> the purpose of outsourcing the work. Special consideration must be
> given to the various advantages and disadvantages associated with
> utilizing numerous support subcontractors on-site in Government-owned
> facilities using Government-furnished equipment. The essential
> facilities support services and protective force services at the
> Laboratory are already outsourced.
>
> \(7\) Northern New Mexico ranks among the poorest regions in the
> United States by several economic measures.

\(d\) [Program conditions]{.underline}. Within 6 months of the effective
date of the Contract, the Contractor will develop a Regional Purchasing
Program, for Contracting Officer approval, that gives regional vendors
in northern New Mexico (which includes Taos, Santa Fe, Rio Arriba,
Sandoval, Mora, San Miguel, and Los Alamos Counties, and the eight
regional Pueblos of Nambe, Picuris, Pojoaque, San Ildefonso, San Juan,
Santa Clara, Taos, and Tesuque) a preference for subcontract award. The
following principles and practices are designed to enhance economic
development in the local region and shall apply to the Laboratory's
Program and shall be applied by the Contractor.

> \(1\) Regional purchasing pricing preference. This preference policy
> element must, at a minimum, (i) be flowed down to major subcontractors
> (subcontracts with a value equal to or greater than \$5 Million), and
> (ii) reflect a 5% increase adjustment factor to be applied to the
> total proposed cost of those subcontractors whose businesses are not
> licensed and physically located in northern New Mexico, and who's
> labor force proposed to perform the majority of such work (51% of more
> in terms of direct productive labor hours) do not reside in northern
> New Mexico.
>
> \(2\) New services. Newly required services will be acquired from
> subcontractors, unless such services are required to be performed by
> Laboratory employees as provided for in the Contractor's Make or Buy
> Plan or in accordance with Section 41 of the Atomic Energy Act of
> 1954, as amended, (42 U.S.C. § 2061).
>
> \(3\) Business alliances. The Contractor will conduct long-term
> business alliances with regional vendors for goods and services. These
> alliances may include training and mentoring programs to enable
> regional vendors to compete effectively for Laboratory subcontracts
> and purchase orders or assistance with the development of business
> systems (accounting, budget, payroll, etc.) to enable regional vendors
> to meet the audit and reporting requirements of the Laboratory and
> NNSA. These alliances may also serve to encourage the formation of
> regional trade associations which will better enable regional
> businesses to satisfy the Laboratory's needs.
>
> \(4\) Assistance. The Contractor will make prospective regional
> vendors aware of any assistance that may be available from the
> Northern New Mexico Regional Development Corporation (RDC), the Los
> Alamos Commerce and Development Corporation or other entities with
> regard to particular purchasing actions. The Contractor will cooperate
> with the RDC and other entities in the development of contracting
> assistance programs to maximize their effectiveness.
>
> \(5\) Regional procurement advisory council. The Contractor will
> consult with the Northern New Mexico Procurement Advisory Council in
> connection with major decisions regarding the implementation of this
> Program and with regard to changes to this Program.
>
> \(6\) Long-term subcontracts. When appropriate, the Contractor will
> award subcontracts for multiple-year terms to (i) create more stable
> business relationships with regional suppliers and (ii) make capital
> more available to commercial sources.
>
> \(7\) Subcontractor transitions. In any change of on-site
> subcontractors the Contractor will require the transitioning
> subcontractors to maximize stability of the workforce and assure
> continuity in operations.
>
> \(8\) Financial incentives. The Contractor will encourage its major
> support subcontractors, through performance goals tied to financial
> incentives, to further subcontract in a manner that to the maximum
> extent practicable promotes regional economic diversification.
>
> \(9\) Importing new businesses. The Contractor will adopt procurement
> practices intended to attract new businesses to northern New Mexico
> where regional capabilities do not exist. Subcontractors from outside
> the region may be required to establish a regional base and employ
> locally as part of the subcontract. Further, consistent with other
> purchasing principles and practices described in this Contract, the
> Contractor may require its subcontractors to subcontract functions to
> create new capabilities for regional businesses. The Contractor must
> avoid creating situations where importing businesses will unfairly
> compete with existing regional vendors for commercial sales.
>
> \(10\) Subcontracting for research at New Mexico colleges and
> universities. The Contractor will develop a process for acquiring
> research efforts in support of Laboratory programs from New Mexico
> colleges and universities.

\(e\) [Measuring Program success]{.underline}. NNSA will include
performance criteria (objectives, measures and associated targets) in
its annual Performance Evaluation Plan to assess Contractor performance
against this Appendix. Program success will ultimately be measured by
regional economic indicators.