Privatization Dogma Confronts Reality at Lawrence Livermore Lab

04/07/2015 05:32 pm ET | Updated Jun 07, 2015

Market fundamentalists have been spreading the gospel of government privatization since the 1980s.

Their evidence-starved theory is that market discipline will lead to better provision of services than the government can deliver.

Although there are surely counterexamples, the overwhelming weight of experience runs counter to corporate doctrine.

In instance after instance, privatization reduces quality and fails to save money. The cost "savings" achieved through privatization -- if any -- simply involve laying off workers (and doing less) or reducing workers' wages and benefits. The Government Accounting Office has found that contractors routinely fail to pay required wages. These aren't the kinds of efficiency gains promised through privatization. And these "savings" in wages are commonly offset by the profits extracted by corporate privateers.

One apparent case in point is the privatization of the management of Lawrence Livermore National Laboratory in the Bay Area. Long managed by the University of California as part of the nation's nuclear research infrastructure, Livermore had serious management problems, including significant security-related issues. But privatization of the university management arrangement turned out to make things worse, according to numerous published reports.

A consortium headed by Bechtel took over operation of Lawrence Livermore in 2007. Although the Bechtel group had said it would add jobs at Livermore, in fact it slashed them, from 9,400 in 2005 to 6,800 several years after the privatization. Part of the job loss was due to cuts in federal spending on the lab, though funding losses would eventually be restored. The lost jobs were not.

In 2011, The New York Times reported that "Lynda Seaver, a lab spokesperson, said spending on staff and operations had fallen because of a substantial increase in management fees."

Read that again: Spending on staff and operations was reduced to cover management expenses. And that's according to the privatized management!

Indeed, reports are that management costs have drained a couple hundred million dollars -- $40 million a year -- from the operations of Lawrence Livermore and of Los Alamos National Laboratory (operated now by the same Bechtel consortium) since privatization.

This exercise in waste and profiteering is not just a rip-off of taxpayers. There's accompanying human tragedy, allegedly made far worse by the way in which the Bechtel consortium laid off workers.

A consolidated lawsuit on behalf of 130 employees alleges that Bechtel violated seniority rules at Livermore and engaged in illegal age discrimination in laying off older, more expensive workers. The Bechtel consortium denies the allegations.

The employees' lawyers complain that the Bechtel attorneys have been trying to stretch out the litigation needlessly, hoping to wear out the employees through attrition. If that has been the Bechtel team's gambit, however, it has failed -- though it has succeeded in making the laid-off employees' lives far more difficult.

After repeated efforts at mediation failed, after repeated continuances granted at the request of the Bechtel consortium, and after repeated efforts to shift courts, a first trial on five test plaintiffs proceeded in 2013. The plaintiffs prevailed on claims of breach of contract, winning awards totaling $2.8 million, intended to compensate them for lost earnings. The Bechtel consortium is appealing. In a second test case involving their age discrimination claims, the defendants prevailed. The employees are appealing this ruling; their position is that the Bechtel group admitted that it discriminated against older employees but that the judge gave improper instructions to the jury on how it should evaluate this evidence.

As the legal wrangling continues, the two sides are now entering yet another mediation. One can only hope that the Bechtel group's lawyers agree to a fair resolution and stop compounding the pain inflicted on the laid-off workers.

You might wonder, by the way, who will have to pay the laid-off workers and the Bechtel consortium's attorneys' fees. In the past, the government has ended up footing the bill for its contractors' misdeeds. Yes, that too is part of the privatization game. Time will tell if that will happen again.