In 1942, the University of California stepped quietly into history and infamy when Berkeley physicist Robert Oppenheimer was chosen to direct the Manhattan Project.

By 1943, the United States government’s first nuclear laboratory was under construction and managed by the University of California. Work at the Los Alamos National Laboratory would, by 1945, lead to the construction and detonation of the first atomic bomb at Alamogordo, New Mexico. The UC’s relationship with Los Alamos National Laboratory spans 60 years, involves thousands of workers and has left an indelible mark on the history of the United States.

And, as of 2006, it may be over.

The Department of Energy – once the Atomic Energy Commission – which owns Los Alamos, announced Wednesday that the UC’s contract to manage Los Alamos will be open for bidding in 2005. The announcement follows the progressive discovery of major management problems at the laboratory, which included the alleged misallocation of some $15 million in government funds and periodic breaches in nuclear security policy.

“It is my intention to make it clear that, in dealing with nuclear weapons and materials, only the highest standards of performance are acceptable,” Secretary of Energy Spencer Abraham said in an open letter to his advisers.

In accordance with recommendations by Deputy Secretary of Energy Kyle McSlarrow and National Nuclear Security Administrator Linton Brooks, the UC will continue to manage Los Alamos through until its contract ends in 2006.

According to DOE statements, the UC’s scientific contribution to Los Alamos is of the highest caliber and the drastic management reforms the UC has instituted since its management practices were called into practice last December have been sufficient to ensure acceptable functioning of the lab through this period.

The DOE also encouraged the UC to participate in bidding for the contract in 2005.

“Our instinct is to compete and to compete hard,” UC President Richard Atkinson said. However, the final decision on whether or not to bid on the contract will lie with the University’s Board of Regents.

Other potential bidders include the University of Texas and Lockheed Martin, which currently manages the DOE’s Sandia National Laboratories.

The UC’s management problems at Los Alamos began with the Wen Ho Lee scandal in 1997. Lee, a lab scientist, spent 275 days in jail on 59 felony counts in 1999 after being accused of transferring nuclear secrets to an unsecured computer at Los Alamos. The severity of the charges proved to be unfounded, and Lee was released after pleading guilty to one minor charge and being sentenced to time already served.

Last year, the lab’s troubles escalated after Los Alamos officials fired Glen Walp and Steve Doran, two laboratory investigators who submitted a report of fiscal misconduct by laboratory employees. The investigators’ termination was considered by some to be a cover-up by the laboratory aimed at protecting the UC’s contract with the DOE.

According to the report, officials there ignored a host of unauthorized purchases by laboratory employees totaling several million dollars, including golf balls, underwear, all-terrain vehicles, a Ford Mustang and a two-ton magnet. Lab employees also allegedly lost or purchased the following items on company credit cards: a water tower, a home air conditioning unit, several vehicles, flat-screen televisions, spy equipment, dishwashers, digital cameras, over 200 computers and a forklift.

“The fact that there was not greater fraud and theft at Los Alamos is a tribute to the character of the vast majority of men and women working there and not to the efficacy of the management systems in place,” McSlarrow wrote in a recent report.

Complaints by Walp and Doran sparked a string of laboratory audits and investigations into laboratory management. Subsequent reports revealed lax security and financial management at Los Alamos. Since last December, the UC has drastically restructured management at the lab in an attempt to protect its contract.

“We will continue to show the world that we are the premier nuclear weapons laboratory, and that our business process, program management and other administrative efforts will be the equal of our scientific excellence,” interim lab director George Nanos said in a statement Wednesday.

Walp and Doran have been rehired by the UC and have received retroactive pay for their period of unemployment. Walp responded positively to the DOE’s decision to put the Los Alamos contract up for bidding.

“I knew we were taking on a giant – and we won,” he said.

The Associated Press contributed to this report.