National Nuclear Security Administration’s Management and Operating Contractors Generally Classified Subcontracts in Accordance with the Federal Acquisition Regulation
March 4, 2026
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March 4, 2026
National Nuclear Security Administration’s Management and Operating Contractors Generally Classified Subcontracts in Accordance with the Federal Acquisition Regulation
The Department of Energy uses management and operating (M&O) contracts to carry out 90 percent of the agency’s mission. The National Nuclear Security Administration’s (NNSA) M&O contractors for the Kansas City National Security Campus and Los Alamos National Laboratory are Honeywell Federal Manufacturing & Technologies, LLC (Honeywell) and Triad National Security, LLC (Triad), respectively. Both Honeywell and Triad utilize subcontracts to achieve their mission. The combined value of firm-fixed-price (FFP) subcontracts issued by Honeywell and Triad from December 2023 through January 2025 was over $1.6 billion.
We initiated this audit to determine if NNSA’s M&O contractors were classifying subcontracts in accordance with the Federal Acquisition Regulation.
We found that NNSA’s M&O contractors, Honeywell and Triad, generally classified subcontracts in accordance with the Federal Acquisition Regulation and had procurement policies for FFP subcontracts consistent with the Federal Acquisition Regulation. During our audit, we requested the universe of subcontracts from Honeywell. While compiling the universe of 14,006 subcontracts, Honeywell initially identified and disclosed 35 subcontracts that were classified as FFP but should have been classified as cost-plus-fixed-fee, and an additional misclassified subcontract was later identified. According to Honeywell officials, the subcontracts were misclassified due to human error, and it took corrective actions to prevent subcontract misclassification in the future. We reviewed a judgmental sample of 65 FFP subcontracts and did not identify any additional subcontracts that were improperly classified. At Triad, we reviewed a judgmental sample of 30 FFP subcontracts and found 1 subcontract that was improperly classified. In addition, a Triad internal audit identified an inconsistent subcontract classification within its procurement system.
A fundamental component of the procurement process is the selection of the appropriate subcontract type. Subcontracts that are incorrectly or inconsistently classified could lead to inaccurate reporting and insufficient oversight.
Because the sites took corrective actions, we are not making any recommendations. Going forward, M&O contractors should ensure subcontracts follow policies related to subcontract classification.