SPECIAL INQUIRY

Alleged Attempts by Sandia National 

Laboratories to Influence Congress and 

Federal Officials on a Contract Extension

DOE/IG-0927 November 2014

U.S. Department of Energy

Office of Inspector General

Office of Audits and Inspections
Department of Energy

Washington, DC 20585

November 7, 2014

MEMORANDUM FOR THE SECRETARY

FROM: Gregory H. Friedman

Inspector General

SUBJECT: INFORMATION: Special Inquiry on "Alleged Attempts by Sandia 

National Laboratories to Influence Congress and Federal Officials on a 

Contract Extension" 

BACKGROUND

The Department of Energy's Sandia National Laboratories (SNL) is a Government-owned, 

contractor-operated laboratory that is part of the National Nuclear Security Administration's 

(NNSA) nuclear weapons complex. In 1993, the Management and Operating (M&O) contract 

was competitively awarded to Sandia Corporation, a wholly owned subsidiary of Martin 

Marietta. In 1995, Martin Marietta and Lockheed Corporation merged to form the Lockheed 

Martin Corporation (LMC). In 1998, the Department noncompetitively extended the SNL 

contract. The contract was set to expire on September 30, 2012, but it was extended for 

12 months with two 3-month option periods, which extended the contract for an additional 

6 months beyond the September 30, 2013 expiration date. On March 17, 2014, the Department 

announced that it was moving forward with a noncompetitive extension for a period of 2 years 

with an option for a third year while NNSA prepared for a full and open competition.

Prompted by an Office of Inspector General inspection report on Concerns with Consulting 

Contract Administration at Various Department Sites (DOE/IG-0889, June 2013), the NNSA's 

Sandia Field Office conducted a preliminary review of documentation from 2009 through 2011 

regarding consultant activities between Heather Wilson, LLC (the principal of which is a former 

member of the U.S. House of Representatives) and SNL. On March 27, 2013, the Sandia Field 

Office alleged that SNL impermissibly attempted to influence an extension to the Sandia 

Corporation contract and engaged Ms. Wilson in these activities.

Given the seriousness of this allegation, the Office of Inspector General initiated a Special 

Inquiry into the facts and circumstances surrounding the allegation.

RESULTS OF SPECIAL INQUIRY

Our inspection substantiated the allegation. We found that SNL used Federal contract funds to 

engage in activities that were intended to influence the extension of Sandia Corporation's 

contract with the Department—a contract then valued at about $2.4 billion per year. In 

particular, SNL developed and executed a plan that involved meeting with and attempting to 

influence Federal and Congressional officials to provide assistance in obtaining a noncompetitive 

extension of its contract with the Department. We determined that these activities appeared to 
have violated United States Code (U.S.C.) and Federal Acquisition Regulation (FAR) provisions 

prohibiting the use of Federal funds to influence members of Congress or Federal officials with 

regard to an extension of a contract. We also concluded that such activities were impermissible 

under a provision of the Sandia Corporation M&O contract, which prohibits the contractor from 

making interface with any Federal, state, municipal or local legislators, or legislative personnel 

for the purpose of obtaining or retaining business for Sandia Corporation. 

Prohibitions Related to Influencing and Attempts to Influence

Title 31 U.S.C. § 1352, Limitation on use of appropriated funds to influence certain Federal 

contracting and financial transactions, stated in pertinent part, (a)(1) that none of the funds 

appropriated may be expended to the recipient of a Federal contract to pay any person for 

influencing or attempting to influence an officer or employee of any agency or a member of 

Congress in connection with...the extension of any Federal contract. In addition, 

FAR 31.205-22, Lobbying and political activity costs, states that "costs associated with the 

following activities are unallowable: Section (6)—costs incurred in attempting to improperly 

influence, either directly or indirectly, an employee or officer of the Executive Branch of the 

Federal government to give consideration to or act regarding a regulatory or contract matter." 

Further, Sandia Corporation SF 6432-CO, Standard Terms and Conditions for Consultants and 

Other Professional Provider Services, contains a clause on Prohibited Activities that states, in 

part, that the contractor shall not have any interface with any present or potential Federal, state, 

municipal, or local government customers or commercial customers, or Federal, state, municipal 

or local legislators or legislative personnel for the purpose of obtaining or retaining business for 

Sandia Corporation.

Strategy to Obtain a Contract Extension

In 2009, SNL formed an in-house Contract Strategy Team and utilized consultants in the 

development of a plan to secure a noncompetitive extension of the Sandia Corporation contract 

with the Department. Available documentation confirmed that an essential element of this plan 

was to influence members of Congress and Federal officials to prevent the need for a competitive 

process as a means to achieve the desired contract extension. In our view, these actions were in 

conflict with applicable statutory and regulatory requirements. As best we could determine, 

these efforts were funded through the contract instrument, thus the costs were borne by the U.S. 

taxpayers. 

As early as March 2009, SNL began formulating a contract extension strategy. In an M&O 

Contract Strategy presentation dated March 16, 2009, the effort was to "approach the new 

administration with a defined capture strategy to extend the LMC ownership of Sandia 

Corporation at the conclusion of the current contract term for an additional 7 years with award 

term potential of an additional 12 years." The strategy also noted, "Failing success...then 

support LMC to win a competition including attempting to influence the evaluation criteria in the 

RFP [Request for Proposal]." The stated challenge of the strategy was "over the next 12 months 

campaign aggressively (Administration and Congress) to convince [the then Secretary of 

Energy] Secretary Chu to extend the M&O contract and retain the LM [Lockheed Martin 

Corporation]/Sandia team." 

SNL utilized three consultants to provide advice and guidance in the development of the contract 

strategy. One consultant's advice suggested that LMC should aggressively lobby Congress and 

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influence chairs and members of key committees (but keep a low profile); meet with the New 

Mexico Congressional delegation who "should let Chu know (by direct contact) that [the 

delegation] expects a contract extension and will follow the matter with personal interest"; have 

Sandia vice presidents influence Chu's key advisors; and contact a former U.S. Senator, a former 

NNSA Administrator and a former Governor of New Mexico. 

Finally, SNL developed a "Contact Plan" that listed individuals who had "influence on [the] 

decision," such as political officials and staffers, and those individuals who were "required to 

make extend/compete decision," such as Department and NNSA officials. According to an SNL 

official, the next step was to "map contacts" and develop a contact sequence and schedule, 

including SNL and LMC actions.

In our view, the plan developed by the SNL Contract Strategy Team represented an apparent 

violation of 31 U.S.C. § 1352, Limitation on use of appropriated funds to influence certain 

Federal contracting and financial transactions. In this case, appropriated funds were used to 

pay the recipients of a Federal contract, both SNL employees and consultants, salaries and fees 

for developing a plan intended to result in influencing or attempting to influence an officer or 

employee of the Department or a member of Congress in connection with the extension of the 

SNL contract.

Execution of Strategy to Obtain a Contract Extension

Our review established that SNL actually took action to implement portions of the Contract 

Strategy Team's plan. Specifically, SNL documentation revealed that after the development of 

the Contact Plan, the Laboratory held numerous meetings/strategy sessions, prepared 

documentation, and participated in e-mail discussions that indicated a desire to influence Federal 

officials as well as members of Congress in the decision about whether to competitively award 

the new Sandia Corporation contract. These discussions indicated that SNL employees, funded 

directly or indirectly with Federal resources, were actively engaged in implementing the plan of 

the Contract Strategy Team and closely coordinated with LMC officials during this effort.

For example, SNL employees who were funded under the Sandia Corporation M&O contract 

were actively engaged in the implementation of the plan to influence members of Congress and 

Federal officials. In an e-mail dated July 6, 2009, a senior member of the SNL Contract Strategy 

Team expressed concern that SNL's Contract Strategy was stalled and that the Laboratory needed 

the support of the then NNSA Administrator to advise the then Secretary of Energy on the 

benefit of extending the contract noncompetitively. An SNL consultant suggested that SNL start 

working the "edges," like key members of Congress, that SNL's message "to these people" 

should be that competition was not in the best interest of the Government, and that SNL should 

ask them to call then Secretary Chu and tell him that a re-compete at SNL was not needed.

The evidence indicated that SNL and LMC officials had conversations with members of 

Congress and Federal officials to convince the Department, NNSA and Congress of the merits of 

contract extension without competition. Documentation from one meeting indicated that a senior 

SNL official met with a member of the New Mexico Congressional delegation and engaged in 

discussions on the merits of a contract extension without competition; conducting an aggressive 

campaign to avoid an RFP process; and informing the Secretary of Energy that the nation would 

be better served by preserving the SNL/LMC team. Senior SNL and LMC officials also met 

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with the NNSA Administrator. The first meeting took place on September 3, 2009. According 

to SNL documentation, this meeting was "to initiate discussions on the future of the Lockheed 

Martin/Sandia relationship and their desire to retain the same team for the future M&O contract 

that has performed so successfully over the past 16 years." According to notes from the SNL 

Contract Strategy Team, the NNSA Administrator had "easy access to Secretary Chu and Dan 

Poneman [Deputy Secretary of Energy] in the DOE front office and . . . has no problem 

interfacing with Congress and committees on the matter of a Sandia contract extension." The 

evidence also indicated that the successor to laboratory leaders initially involved with the 

Contract Strategy Team continued to participate in the implementation of the Contract Strategy.

Finally, SNL employees who were funded under the Sandia Corporation M&O contract were 

actively engaged with LMC in the implementation of the plan to influence members of Congress 

and Federal officials. Documentation gathered during our review indicated that SNL officials 

met with the Lockheed Martin Electronic Systems management and the Lockheed Martin 

Washington Operations team to engage their support for SNL's strategy. Documentation also 

indicated that SNL officials communicated with LMC on influencing the Department's decision 

on a contract extension, stating "we believe it is best for LM, Sandia and the nation to work 

together towards influencing DOE to retain this team." In addition, documentation showed that a 

senior member of the Contract Strategy Team was informed that an LMC leader had sent a 

memorandum to then Secretary Chu stating that LMC wanted to have the contract extended with 

the same terms and conditions. A member of the Contract Strategy Team responded by stating 

that, "if the answer [from the Secretary] was not in the affirmative, then Lockheed Martin/Sandia 

should seriously consider initiating some heavy Congressional support."

We found that actions taken by Sandia officials and their consultants constituted implementation 

of the plan developed by the SNL Contract Strategy Team. These actions represented the 

culmination of the plan to influence members of Congress and Federal officials, an apparent

violation of 31 U.S.C. § 1352, Limitation on use of appropriated funds to influence certain 

Federal contracting and financial transactions, and FAR 31.205-22, Lobbying and political 

activity costs. In this case, appropriated funds were used to pay the recipients of a Federal 

contract (SNL employees) salaries for influencing or attempting to influence an officer or 

employee of the Department or a member of Congress in connection with the extension of the 

SNL contract. 

Possible Influence of Congress Using Written Matter

We also noted that, in addition to the appearance of attempts to influence members of Congress 

and Federal officials with regard to a contract extension, SNL provided the New Mexico 

Congressional Delegation with information that raised a concern about lobbying. Specifically, 

each year the New Mexico Congressional Delegation requested that SNL provide them with 

information on ongoing and future national security and science research. Included in this 

package was a "Next Steps" or "What Could Congress Do" section, which sometimes included 

funding requests or expressed an opinion on a Congressional matter. In 2009, a Department 

Federal official expressed concern that such action might be construed as lobbying. The official 

believed that this information might unduly influence Congress in its decisionmaking, and 

therefore violated prohibitions against lobbying with appropriated moneys. However, SNL 

disregarded these concerns and continued to include suggestions to Congress. 

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Contributing Factors and Path Forward

Clearly, SNL officials were committed to the notion that the SNL/LMC relationship should 

continue into the future and that this should be accomplished without the benefit of competition. 

This appeared to be the underlying rationale for the actions identified in this report. SNL, 

however, rejected this conclusion. SNL took the position that FAR 35.017, Federally Funded 

Research and Development Centers, allowed SNL to undertake these activities in order to be 

prepared to demonstrate to Department/NNSA that SNL was fulfilling the Department's needs. 

SNL indicated that these were typical activities for any contractor intent on continuing a 

relationship with its sponsor, especially a long-term relationship, and that SNL was preparing to 

demonstrate that it deserved a full 5-year extension as permitted by the FAR. Also, SNL 

indicated that, in accordance with prime contract clause I-8, FAR 52.203-12, Limitations on 

Payments to Influence Certain Federal Transactions, Subsection C, and prior to a formal 

solicitation for competition, SNL prepared information and met with NNSA personnel because 

SNL felt it necessary for the Department and NNSA to make an informed decision on a contract 

extension. SNL argued that its actions to obtain a contract extension were based on ''the merits 

of the matter," and that SNL costs associated with such activities were allowable.

In contrast, we find that the position and actions taken by SNL to develop and execute the 

contract extension plan to be highly problematic. Given the specific prohibitions against such 

activity, we believe that the use of Federal funds for the development of a plan to influence 

members of Congress and Federal officials to, in essence, prevent competition was inexplicable 

and unjustified. SNL was cognizant of problems with using Federal funds for similar purposes. 

In fact, the documentation confirms that Sandia's own Legal Counsel recognized in 2004 that as 

a Federally Funded Research and Development Center SNL was required to operate with 

objectivity and full disclosure to the sponsoring agency. When considering the question of 

whether a cost would be allowable when SNL assisted LMC in matters of competition, the Legal 

Counsel warned that, "Neither Sandia nor NNSA could tolerate even the suspicion that Sandia 

was assisting in the competition at prime contract expense." SNL may have felt empowered to 

use Federal funds for such purposes because it had participated in such activities in the past. 

Notably, we located an e-mail dated May 20, 2010, in which an SNL official wrote, "In terms of 

precedent, we used operating costs in the same way in securing the extensions in [1998] and 

2003." This official also stated that, "In 2003 there was a Sandia team formed to secure the 

extension and we worked closely with LMC."

We recognize that LMC, as a for-profit entity, has a corporate interest in the future of the SNL 

contract. However, the use of Federal funds to advance that interest through actions designed to 

encourage a noncompetitive contract extension was, in our view, prohibited by Sandia 

Corporation's contract and Federal law and regulations. 

We made several recommendations designed to assist management in preventing any future use 

of Federal funds to influence members of Congress and Federal officials with regard to Federal 

contracting actions. Specifically:

1. Develop policy guidance on the type of information a Laboratory can provide under FAR 

52.203-12, Limitation on Payments to Influence Certain Federal Transactions, and FAR 

31.205-22, Lobbying and political activity costs; 

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2. Determine whether a violation of Sandia Corporation SF 6432-CO, Standard Terms and 

Conditions for Consultants and Other Professional Provider Services, occurred, and take 

appropriate steps to ensure SNL contractors do not interface with any present or potential 

Federal, state, municipal, or local government customers or commercial customers, or 

Federal, state, municipal, or local legislators or legislative personnel for the purpose of 

obtaining or retaining business for Sandia Corporation;

3. Determine the allowability of salaries paid to SNL employees who participated in the 

activities of the SNL Contract Strategy Team, and recover any costs determined to be 

unallowable;

4. Determine the allowability of fees paid to consultants who participated in the activities of 

the SNL Contract Strategy Team, and recover any costs determined to be unallowable; 

and

5. Determine whether adjustments to previously awarded performance fees are appropriate 

to address the administration and management issues we observed relative to the 

activities of the SNL Contract Strategy Team.

MANAGEMENT REACTION

Management concurred with the report's findings and identified planned actions to address our 

recommendations. We consider management's comments responsive to the report's 

recommendations.

Management's comments are included in the attachment.

Attachment

cc: Deputy Secretary

Under Secretary for Nuclear Security

Chief of Staff

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This memorandum summarizes the results of our Special Inquiry into this matter. Our full 

report, provided to management under separate cover, is considered to be "Offical Use 

Only" and is not publically available.
Attachment

MANAGEMENT COMMENTS

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Attachment

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Attachment

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