* Aging activists broke into weapons grade uranium Y-12 facility
* Babcock & Wilcox company to take over full security of Y-12
By Timothy Gardner
WASHINGTON, Sept 29 (Reuters) - The U.S. government's "Fort Knox" of weapons-grade uranium storage has ended a contract with a unit of an international security firm two months after an 82-year-old nun and other nuclear activists broke into the site.
The managing contractor at the Oak Ridge, Tennessee, site, B&W Y-12, a unit of Babcock & Wilcox Co, said late on Friday it will terminate the contract with WSI Oak Ridge on Oct. 1. WSI is owned by security firm G4S, which was at the center of a dispute over security at this year's London Olympic Games.
The move came after the National Nuclear Security Administration (NNSA), an Energy Department agency, sent a letter on Friday to B&W Y-12 President Charles Spencer saying it had "grave concerns" about his company and WSI providing security at Y-12, the nation's only site for storing and processing weapons-grade uranium.
The letter recommended that B&W terminate the subcontract with WSI and work with it to take over security operations after the July 28 break-in.
The nun, Megan Rice, and two others cut perimeter fences to reach the outer wall of a building where enriched uranium was stored. The site was shut temporarily after the breach.
An investigation by the Energy Department's inspector general last month found a security camera had been broken for about six months and was part of a backlog of repairs needed for security at the facility.
The NNSA repeated on Saturday that Energy Secretary Steven Chu has said the incident was an important "wake-up call" for the entire nuclear complex.
"The security of our nation's nuclear material is the Department's most important responsibility, and we have no tolerance for federal or contractor personnel who cannot or will not do their jobs," said NNSA spokesman Joshua McConaha.
After the incident the NNSA's top security official and two other federal officials were reassigned. In addition, top officials at WSI were removed and officers associated with the break-in were fired, demoted, or suspended without pay.
WSI's parent company, G4S, found itself the focus of a political and media storm this summer in Britain over outsourcing of security after it failed to provide enough guards for the Olympics.
WSI did not immediately answer a request for comment about the ending of the contract.
It seems few other jobs will be lost over the incident that brought new questions about the government's outsourcing of sensitive security operations.
B&W said in a statement it will offer employment to all Y-12 security police officers and active union workers with WSI Oak Ridge.
The NNSA and Department of Energy are engaged in reviews of security operations from the contractor, to the federal management, to the security model, McConaha said.
The final review will begin after Chu asks outside observers to analyze current protection of nuclear materials and explore more options for protecting the sites.
Chu received a classified review of the Y-12 incident earlier in the week by the department's health, safety, and security office.