oversight

Management and Funding Aspects of Three Nonnuclear Energy Research, Development, and Demonstration Subprograms

Published by the Government Accountability Office on 1977-02-25.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                         DOCOENT RESUME

00175 - [A0891476]

[Management and Funding Aspects of Three Nonnuclear Energy
Research, Development, and Demonstration Subprograms]. B-186105;
EMD-77-24. February 25, 1977. Released March 7, 1977, 3 pp. +
enclosure (22 pp.).

Report to Sen. Frank Church, Chairman, Senate Committee on
Energy and Natural Resources: Energy Research and Development
Subcommittee; by Robert F. Keller, Acting Ccptrcller General.
Contact: Energy and Minerals Div.
Budget Function: Natural Resources, Environment, and Energy:
    Energy (305).
organization Concerned: Energy Research and Development
    Administration.
congressional Relevance - Senate Committee on Energy and Natural
    Resources: Energy Research and Development Subcommittee.
Authority: Energy Reorganization kct of 1974 (P.L. 93-438).

          anageent and funding aspects of three nonnuclear
energy research, development, and demonctraticn subprograms
under the Energy Research and Development Adinistration were
examined. The three subprograms were- photovoltaic energy of the
solar energy program; direct combustion of the ccal program; and
hydrothermal technology application of the geothermal energy
developsent program. Findings/Conclusions: The extent to which
r search, development, and demonstration funds were used for
,anagelent suppo: t services among the three subprograms varied.
The amounts used for planning and anaging were: $1.8 mBilion
(5.3%) for solar photovoltaic energy; $5.4 million (9%) for coal
direct combustion; and $0.2 million (1.1%) for hydrothermal
technology applications. The anagement support services
included: planning subprogram activities, reviewing and
evaluating research proposals, and contract and administrative
support. Amounts of research, development, and demonstration
funds used for planning and anagement services were not
disclosed in the agency's budget justification documents or
accounting records. Reccamendations: RDA should separately
identify in the budget and accounting records each subprogran's
research, development, and demonstration funds used for
management support services and ake the acount of such funds
visible in the agency's annual budget ubalssicn to the
Congress. (RRS)
                      COMFtOLLER GENERAL OF THE UNITED STATES
                                  WASHINGTON. D.C. 20S4

                 'RESTRIC't -        ot to be relased outsiH        Onr
                                                                    fneat
                  Account.tg Otfice except on the bedIs of spocfio approval
Ld~              by the office of Congreonal RebrUtio         .---'

      B-186105                                            February 25, 1977        t.



°     The onorable Frank Church                                        a       |
      Chairman, Subcommittee on Energy
        Research and Water Resources
      Committee on Energy and Natural
        Resources
      United States Senate

      Dear Mr. Chairman:

           In res¥.nse to your October 27, 1976, letter and
      subseQuent discussions with your office, we reviewed certain
      management and funding aspects of three nonnuclear energy
      research, development, and demonstration subprograms under
      the Energy Research and Development Administration. These
      subprograms were: photovoltaic energy of the solar energy
      development program; direct combustion of the coal Drogram;
      and hydrothermal technology applications of the geothermal
      energy development program.

           As agreed with your office, we reviewed the

           -- funds available and obligated for fiscal years
              1975-76, and the transition quarter;

           -- types of organizations receiving subprogram
              funds;

           -- percent of funds awarded by competitive
              solicitation versus sole source;

           -- funding used for planning and/or manaaing
              purposes, paper studies, research and
              development, and test and demonstration; and

           -- funds managed by personnel outside agency
              headquarters.

           We are recommending that the Administrator, Energy
      Research and Development Administration, separately identify
      in the budgeting and accounting records each subprogram's
      research, development, and demonstration funds used for
      management support services and make the amount of such
      funds visible in the agency's annual buEget submission to
      the Congress. In this regard, we obse-red that the extent
      to which these funds were being used fo: such services varied
                                                                              EMD-77-24
B-186105



among the three subprograms, amounting to:  $1.8 million,
or 5.3 percent obliug:ed fr solar photovoltaic energy;
$5.4 million, or 9 ercent, obligated for _.al direct com-
bustion; and $0.2 million, or 1.1 percent, obligated for
hydrothermal technology applications. These management
support services included: planning subprogram activities;
reviewing and evaluating research proposals; and, contract
and administrative support.

      The amounts of research, development, and demonstration
funds used for planning and management services were nt dis-
closed in the agency's budget justification documents and
accourntng records which we reviewed. In our opinion, the
disclosure of this information would be helpful to     e
Congress in carrying   out its funding and oversight responsi-
bilit:Lies for each of the resParch, development, and demon-
stration subprograms.

     As you know, section 236 of the Legislative Reorganization
Act of 1970 recuires the head of a Federal agency to submit a
written statement on actions taken on our recommendations to
the ouse and Senate Committees on Government Oerations not
later than 60 days after the date of the resort and to the
House and Senate Committees on Appropriations with the agency's
first request for appropriations made more than 60 days after
the date of the report.

     Copies of this report will be snt to the Energy
Research ard Development Administration so that the recuire-
ments of section 236 can be set in motion.

     Our review was conducted at the Energy Research and
Development Administration headquarters in Washington, D.C.
and was limited to interviewing officials involved in the
specific funding and management aspects of the three sub-
programs, analyzing financial information provided by agency
officials, and reviewing eight selected contracts. The
results of our review are enclosed.

     We have discussed the matters presented wi.h agency
officials and have considered their comments in the pre-
paration of the report. We did not, howvever, obtain formal




                              2
B-186105



agency comments because of the tight reporting deadline
established by the Subcommittee.
                             Sincerely yours,




                       ACTING Comtroll    General
                              of the United States

Enclosure




                              3
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             COMMENTS ON CERTAIN MANAGEMENT AND

             FUNDING ASPECTS OF SELECTED NONNUCLEAR

               ENEGl RESEARCH,   DEVELOPMENT,   AND

                   DEMONSTRATION SUBPROGRAMS

BACKGROUND

     The Energy Research and Development Administration (EFDA)
was created by the Energy Reorganization Act of 1974 (Public
Law 93-438, October 11, 19.'4) and was established in January
1975. The act: authorized 17RDA to bring together and direct
Federal activities relating to the research and development
of various sources of energy and to carry out several other
functions. ERDA's responsibilities include
     -- exercising central responsibility for policy,
        coordination, support, and management of all
        energy research and development programs;

     -- encouraging and conducting research and
        development, including demonstrating commer-
        cial feasibility and practical applications
        related to the development and use of various
        energy sources; and

     -- participatirg in and supporting cooperative
        research and development projects which may
        involve contributions of financial or other
        resources to the work done by public or private
        persons or agencies.

     ERDA was established by integrating several energy
research and development programs which were scattered among
several Federal agencies. In the fossil energy areas, the
Department of the Interior's Office of Coal Research, and
part of the Bureau of Mines were integrated into ERDA's fossil
energy programs. Solar and geothermal energy conversion pro-
crams were transferred to ERDA from the National Science
Foundation.

     There are roughly three phases which a technology must
oass before it becomes commercial. The first phase is
exploratory research. In the 1960s and 1970s, the National
Science Foundation and the Office of Coal Research began
funding laboratory research in solar, geothermal, and coal
technologies. ERDA is presently continuing these efforts and,
in certain activities, is moving on to the next phase--the
ENCLOSURE                                           ENCLOSURE


pilot lant hase. In this phase, technical feasibility is
demonstrated on a small scale with the use of pilot plants.
These plants are built to demonstrate that the enerqy systems
can operate continuously for hours, days, or even years.
Since ERDA's formation many tests and/or small scale demon-
strations have been initiated in the solar, geothermal, and
coal energy areas.
     If these pilot plants prove successful, demonstration
plants will be built to prove technical feasibility on a large
scale and/or economic viability. Commercialization, which is
sometimes considered the final phase because Government sup-
port may still be necessary, is the ed product of extensive
and costly research and development efforts.
     To accelerate the movement of technologies through their
various phases, the Conqress has greatly increased the funding
available to ERDA for energy research and development. For
example, solar energy research and development aDppropriations
rose from about $50 million in fiscal year 1975 under the
National Science Foundation to about $114 million in fiscal
year 1976 under ERDA. ERDA's fiscal year 1977 budget includes
about $290 million for solar energy research and development.
Large increases have also occurred in other nonnuclear energy
research and development programs. Such increases require a
more extensive nanagement effort. To meet its expanded man-
agement responsibilities, EPDA has assigned some managerial
responsibilities to other Federal agencies, ERDA laboratories,
ERDA operations offices, and private industry.
     On October 27, 1976, the Chairman, Subcommittee on Energy
Research and Water Resources, Senate Committee on Energy and
Natural Resources, asked the General Accounting Office to
develop information on three ERDA subprograms. These sub-
programs were coal direct combustion within the Division of
Coal Conversion and Utilization, hotovoltaic energy within
the Division of Solar Energy, and hydrothermal technology
applications within the Division of Geothermal Energy.
     We focused our review on the research, development, and
demonstration funds appropriated for each subprogram. In-
direct costs for salaries paid to ERDA headquarters and field
operations offices personnel were not included as part of our
review. These costs are separately funded through appropri-
ations for the program suipport line item in ERDA's budget and
are not identified by subprogram in ERDA's accounting and
budgeting records.
     For each subprogram we obtained information showing
(1) program funding, (2) fund recipients, (3) method of

                              2
                                                       ENCLOSURE
ENCLOSURE


                                     program management.
awards, (4) use of funds, and (5)we  did not verify in detail
Except for selected contracts,
the information provided by ERDA officials.
                                             fund recipients, the
      With respect to the information on and large businesses
                                    small
Chairman requested a breakout of            ERDA provided.
which we obtained by using information is made by each con-
According to ERDA, this determination        which EPDA provides
 tractor based on the following guidance
 to its prospective contractors:
                                            purpose of
       "A small business concern for the        including
      Government procurement is a concern,        owned
       its affiliates, which is independentlyfield of
                                           the
       and operated, is not dominant in on Government
       operations in which it is quoting under the
       contracts, and can further qualify           average
       criteria concerning number of employees,as prescribed
       annual receipts, or other criteria,
       by the Small Business Administration."
                                              out funding for
       In determining fund uses, we broke
                                       research and development,
 management support, paper studies,              management support
  and test and demonstration. We identifiedand  demonstration
  costs as those research, development,developing management
  funds used for such functions as:       contractors and other
  clans; coordinating activities among
                                     success of programs;
 Federal agencies; monitoring the proposals; and contract and
 reviewing and evaluating research We considered paper studies
 administrative support services.
                      evaluations,  state-of-the-art studies,
 to include technical
                  work, and  feasibility and design studies
 systems analysis
 associated with facilities.
 SOLAR PHOTOVOLTAIC ENERGY
                                            seven technologies
       Solar photovoltaic energy is one of solar energy program.
                                   ERDA's
 currently being developed within the Division of Solar Energy
 This program is administered by
                                                      Geothermal,
                 Assistant Administrator for Solar,
 under the ERDAEnergy
 and Advanced         Systems.
                                                converts sunlight
       Photovoltaic energy is a process which cells) directly
 falling on a photo-sensitive  material (solar
 into electrical energy.   The overall goal of the solar photo-
                                           low-cost, reliable
 voltaic energy subprogram is to developthe creation of a viable
 photovoltaic systems and to encourage to produce and distribute
  industrial and commercial capability      and commercial use.
  these systems in widespread residential


                                     3
ENCLOSURE                                                  ENCLOSURE



     Photovoltaic energy   rinciples are widely understood,
primarily through experience gained with its use in the space
program. In addition, photovoltaic technology has provided
eneray for transistor :adios, buoy lights, and highway
emergency call systems. Mcst solar cells, however, are cur-
rently made from silicon, and are very expensive. ERDA is
seeking to develop less expensive solar cells which would
make photovoltaic energy an economically competitive source
of renewable energy.
Program fund ing
     From January 1975 through the transition uarter, a
total of $190.5 million in appropriated funds was made
available to ERDA for the seven technologies being developed
under the solar energy program. Of this amount, $33.9 million
was made available for the photovoltaic energy subprogram,
as shown in the table below.
                   Photovoltaic energy-funding
                                   -   Fiscal-year -
                                                 1976
                                  1975         (note a)            Total
                                  -------- (000 omitted)-

Appropriations allotted       b/$5,051         $28,859         $33,910
Obligations                      5,051         .28,414          33,465

    Unobligated balance          $ --- 0       $-... 445       $      445


a/Includes transition quarter.
b/Appropriations transferred from the National Science
  Foundation in January 1975.
The $0.4 million unobligated balance was carried over from
the transition quarter to fiscal year 1977.
Fund recipients
     In determining the types of organizations receiving sub-
program funds, we obtained data from agency program and finan-
cial records and through discussions with agency officials.
This data indicated that ERDA obligated a significant portion
of the $33.5 million for work being carried out by other


                                  4
ENCLOSURE                                          ENCLOSURE



Federal aencies and EPDA laboratories, as shown in the
following table.
                       Type-of organization
                          receivinq funds

                                Amount obligated   Percent of
Type of-oLqanization                (note a)         total

                                  (000 omitted)

Small business                       $       18           .1
Large business                            4,621         13.8
Universities                              2,245          6.7
Federal agencies                         23,108         69.0
ERDA laboratories                         3,473         10.4

     Total                           $33,465           100.0


a/Obliqations from January 19, 1975, through the transition
  quarter.

     We selected for review the three projects for which ERDA
obligated the largest amounts of funds. These projects account
for $25.4 million, or about 76 percent of the subprograms'
total obligations.

     -- A total of $18.8 million was for a project
        being carried out by the National Aeronautic
        and Space Administration's (NASA's) Jet Pro-
        pulsion Laboratory, Pasadena, California, to
        develop low-cost silicon solar arrays.

     -- About $3.3 million was for a project with the
        NASA Lewis Research enter, Cleveland, Ohio,
        to test the operating characteristics of varLous
        photovoltaic systems to determine their usefulness.

     -- About $3.3 million was for work being car:ied out
        by Sandia Laboratories (Sandia), one of ERDA's
        Government-owned, contractor-operated, multi-
        program laboratories. Sandia is responsible for
        conducting detailed systems analysis and developing
        subsystems which incorporate sunlight tracking
       and/or concentration techniques to improve overall
       systems performance.
     ERDA officials said they make extensive use of these
laboratories because of

                                 5
ENCLOSURE                                             ENCLOSURE



     -- their unique capabilities and experience in
        specific photovoltaic research efforts. NASA,
        for example, has the experience gained from
        photovoltaic cell research within the space
        program;

     -- their responsiveness to ERDA headquarters'
        direction and control;

     -- the urgency of these efforts which did not
        permit sufficient time to involve new
        entities in a significant wayT and

     -- their willingness to conduct their projects
        primarily through the use of utside con-
        tractors.

     Although the preceding table indicated that only a
relatively small percentage of obligations was incurred for
private industry work, our review of the projects being
carried out by the Sandia and NASB laboratories showed that
a significant portion of such projects was being subcontracted
to private industry. Based on information provided to us by
officials at these laboratories, about $13.4 million, or 52.8
percent of the $25.4 million obligated for work by these lab-
oratories, was subcontracted with private firms and univer-
sities.  This information indicated that about 74 percent
of the $13.4 million was subcontracted with large businesses,
20 percent with small businesses, and 6 percent with
universities.

Method of.award

     In our analysis of the $33.4 million obligated for the
photovoltaic energy subprogram, ERDA provided us with infor-
mation on the methods used for awarding funds to recipients.
This information indicated that such awards were made pri-
marily on a noncompetitive basis, as shown in the following
table.




                              6
ENCLOSURE                                          ENCLOSURE



                              Amount obligated
Method of award                   (note a)           Percent

                                  (000 oitted)

Competitive                        $ 4,605                13.8
Noncompetitive (note b)             28,860                86.2

     Total                         $33,465               100.0


a/Obliqations from January 19, 1975, through the transition
  quarter.

b/Includes $723 thousand for projects initiated by the
  National Science Foundation and transferred to ERDA.

     Our review showe that of the $28.9 million awarded non-
competitively a total of about $26.6 million, or 92 percent,
was awarded to other Federal agencies and ERDA laboratories.
ERDA's justification for such noncompetitive awards was simi-
lar to its rationale for funding ERDA and NASA laboratories
as discussed in the preceding section, that is, the unique
capabilities of the performing organizations and the urgency
of the tasks to be performed.

     Although ERDA awarded funds to other Federal agencies
and ERDA laboratories noncompetitively, the Sandia and NASA
laboratories subsequently made predominantly competitive
awards to their subcontractors.  Information provided by ERDA
and NASA officials indicated that these organizations awarded
$10.4 million, or about 78 percent of the $13.4 million sub-
contracted, competitively from January 1975 through the
transition uarter. Thus, the Sandia and NASA laboratories'
efforts to subcontract through competitive awards indicate
that a significant portion of the funding under the photo-
voltaic subprogram was awarded competitively.

Use-of program funds

     As part of our review, we tried to determine how much
of the subprogram funds were being used for management sup-
port, paper studies, research and development, and test and
demonstration. We noted, however, that EPDA's program and
financial records did not provide a sufficient breakout of
this information. Accordingly, through our detailed analysis
of these records and through discussions with ERDA and labo-
ratory officials, we were able to develop estin;ates showing
the purposes for which the $33.4 million was obligated. Our
categorization of such information indicated that ERDA's


                              7
ENCLOSURE                                            ENCLOSURE



principal efforts are in line with the subprogram objective
to research and develop low-cost solar cells and alternative
systems, as shown below.
                     Use of-photovoltaic funds
                        by-type of function
                                 Amount obligated    Percent of
     Function                        (note a)          total
                                     (000 omitted)
Management support                    $ 1,759            5.3
Paper studies                           3,31A            9.9
Research and development               23,992           71.7
Test and demonstration                 -4,400           13.1
     Total                            $33,465          100.0

a/Obligations from January 19, 1975, throuqh the transition
  quarter.
      The nearly $1.8 million obligated for management ,;ipport
 was primarily associated with anaging the ongoing projects
 at the NASA nd Sandia laboratories. These organizations also
 accounted for about one-third of the $3.3 million obligated
 for paper studies, with the remainder attributable to private
 businesses. These tueies, for the most part, were for
 analysis work on systems using alternative photo-sensitive
 materials. The test and demonstration obligations were pri-
 marily for the photovoltaic systems test facility at the NASA
.Lewis Research Center.
Prcgram management
     The degree to which ERDA retains day-to-day management
of the photovoltaic energy subprogram varies depending on
the activities involved. These activities include: systems
analysis and engineering, .lI-costsilicon solar array, devel-
opment, concentrator system development, test and applications,
and research and development on advanced systems. For example,
ERDA has designated two organizations as project managers
respor.ilie for planning and managing specific subprogram
activities: NASA's Jet Propulsion Laboratory, which has
responsibility for the low-cost silicon solar array develop-
ment; and, Sandia Laboratories which has responsibilities for
both the svstems analysis and engineering and the concentrator
development activities. In addition, the NASA Lewis Research


                                 8
ENCLOSURE                                           ENCLOSURE


Center has been given managerial responsibilities for the
major portion of the test and applications subprogram
activity.    ERDA headquarters has retained day-to-day manage-
nrment over the aavanced research and development activity.

     In sharing managerial responsibility with Sandia and
NASA laboratories, ERDA headquarters has retained overall
programmatic responsibility for the conduct and direction of
the various subprogram activities. This responsibility
includes developing a national photovoltaic program, coordi-
ndtinq activities among contractor and other Federal agencies,
and monitoring the success of the programs. Managerial respon-
sibilities assigned to NASA and Sandia laboratories include

     -- planning and defining the scope and objectives
        of their respective subprogram activities and
        projects;

     -- soliciting, evaluating, and selecting specific
        projects to be conducted under their respective
        activities;

     -- providing technical and administrative gidance
        for technical work conducted under their
        respective activities and/or projects.

In short, ERDA headquarters maintains overall espons.bility
over the subprogram but has delegated day-to-day management
to Sandia and NASA laboratories for much of the solar
photovoltaic subprogram.

     NASA and ERDA officials estimated that the costs
associated with such day-to-day manageme't amounted to $1.5
million. These costs were charged directly to subprogram
research, development, and demonstration funds during the
period covered by our review.

     ERDA officials said they delegated certain project
management responsibilities prim&ily because they did not
have sufficient staff available at ERDA headquarters.
Although they expect the headquarters staff for this subpro-
gram to double during fiscal year 1977 from the present three
professionals, they pointed out that such an increase would
not be sufficient to allow headquarters to perform the ay-
to-day management of all subprogram activities.  Thus, pro-
ject management through the above research organizations is
expected to continue.




                              9
ENCLOSURE                                            ENCLOSURE



COAL-DIRECT COMBUSTION

     ERDA's Assistant Administrator for Fossil Energy
administers three major fossil proQrams--coal, petroleum and
natural gas, and in-situ technology. Direct combustion from
coal is one of eight subprograms within the coal p ogram.

     The primary objectives of the coal direct combustion
subprogram re to develop methods for burning coal cleanly
and to increase the economy of converting coal to electricity.
Specific areas of research and development include:

     -- Fluidized-bed combustion, atmospheric and
        pressurized, with particular attention to
        achieving high -ombustion efficiency,
        acceptable component durability, minimum
        emission of particulates and sulfur and
        nitrogen oxides, and reliable operation of
        combined cycle systems.

     -- Combustion and heat transfer characteristics
        of chars, coal oil slurries, solvent refined
        coal and coal-derived liauid fuels when burned
        in conventional furnaces, and the application
        of such data to improved combustor design.

     -- Causes of adherent slag and ash deposits, and
        development of methods for minimizing these
        efficiency degrading problems.

     -- Identification and ontrol of toxic elements
        released during the direct combustion of coal.

Proara- funding

     From January 19, 1975, through the transition quarter
over $630 million in appropriated funds was made available to
ERDA for carrying out activities under the coal program. Of
this amount, $91.1 million was made available for the direct
combustion subprogram, as shown in the following table.




                              10
ENCLOSURE                                                ENCLOSURE



                  Direct-combustion-funding

                                  --- Fiscal year   -

                                                1976
                                  1975        (ncte a)       Total

                                 ---- …----(000 omitted)-------

Appropriations allotted     b/$31,476         $59,596       $91,072
Obligations                   -- 4,270        -56,322        60,592

    Unobligated balance          $27,206   c/$ 3,274      c/$30,480


a/Includes transition quarter.

b/Amounts transferred from Department of the Interior.

c/Includes $8 million of unobligated funds which were
  transferred to the coal magnetohydrodynamics subprogram.

     In addition to the-amounts shown above, ERDA conducts
some coal direct combustion research work in other subpro-
grams.  For example, in the coal advanced research and
supporting technology subprogram, ERDA obligated about
$3.7 million in fiscal year 1976, including the transition
quarter, for exploratory direct combustion research.

     An ERDA official said that most of the unobligated
balance at the end of the trar.nition quarter was reserved for
contracts under negotiation by ERDA's Procurement Division.
This official added that these contracts are expected to be
executed during the first half of fiscal year 1977.

Fund recipients

     Our aalysis of data obtained from agency program and
financial records and through discussions with agency
officials indicated that ERDA obligated a significant portion
of the $60.6 million for work being carried out by private
industry, as shown in the following table.




                             11
ENCLOSURE                                             ENCLOSURE



                       Type of organization
                          receivinq-unds
                                Amount obligated     Percent of
Type of organization                (note a)           total
                                     (000 omitted)
Small business                        $ 7,641           12.6
Large business                         45,130           74.5
Non-profit institutions                   398            0.7
Universities                            2,984            4.9
Federal agencies                          750            1.2
Foreign governments                       302            0.5
ERDA laboratories and
  energy research centers                3,387           5.6
     Total                            $60,592         100.0

a/Obligations from January 19, 1975, through the transition
  quarter.
     In the coal direct combustion subprogram, industrial
sites are being used for pilot demonstration plants to
facilitate and encourage industrial participation in the
design, fabrication, erection, and operation of fluidized
bed combustion systems. This work is aimed at fostering
industry involvement to assist in solving institutional and
technological problems.
     An ERDA official responsible for this subprogram said
that most contracts were awa:ded to large business firms
because small business entities have difficulty in meeting
the cost sharing targets set by ERDA. ERDA's target for
cooperative joint funding is one-third private and two-thirds
Federal for pilot plants and is 50-50 sharing for demon-
stration plants. About half of the funds obligated for this
subprogram from January 1975 through the transition quarter
was for cost-sharing contracts.
     We selected for review the three contracts with the
largest amounts obligated from January 19, 1975, through the
transition quarter. These contracts were:
     -- A $22 million contract with Pope, Evans, and
        Robbins, Inc., a large business, to design,
        construct, nd test a multicell fluidized bf:d
        boiler. The Department of the Interior awarded
        this contract in October 1972 and it was

                                12
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       transferred to ERDA in January 1975.  Fror.
       January 1975 through the transition uarter,
       ERDA obligated about $7.6 million for this
       contract.

     -- A $27.5 million cost-sharing contract awarded
        on March 1, 376, to Curtis-Wright Corporation,
        a large business, to engineer, design, construct,
        test, and evaluate a pressurized, fluidized-bed
        pilot plant. As of September 30, 1976, ERDA had
        obligated $7.6 million for this contract,.

     -- A $6.3 million contract awarded on September 30,
        1976, to City Public Service Board, a small
        business, to design, engineer, construct, operate,
        maintain, test, and evaluate a coal-oil slurry
        system. ERDA obligated the entire $6.3 million
        of this contract as of September 30, 1976.

     Under the two selected contracts with large businesses,
for which ERDA obligated about $15.2 million, these con-
tractors subcontracted about $8.2 million to other private
firms from January 19.5 through the transition quarter.
Information was not readily available to determine whether
each of these subcontractors were small or large businesses,
but we noted that some small businesses were used. Under the
third contract, for which ERDA had obligated $6.3 million,
the contractor had not awarded any subcontracts as of
September 30, 1976.

Method of award

     In our analysis of the $60.6 million obligated for the
direct combustion subprogram, ERDA provided us with information
on the methods used for awarding funds to recipients. This
information is provided below.

                              Amount obligated
Method of award                   (note a)             Percent

                                  (000 omitted)

Competitive                        $23,967                  39.6
Noncompetitive                     -36,625                  60.4

     Total                         $60,592              100.0


a/Obliqations from January 19, 1975, through the transition
  quarter.


                             13
ENCLOSURE                                              ENCLOSURE



     An ERDA official said that most of the noncompetitive
awards were for projects originally under contract with the
Department of the Interior prior to their beinq transferred
to ERDA. According to this official, the Department of tne
Interior awarded sole-source contracts for these projects,
but ERDA has awarded most of its contracts competitively for
projects it initiated in this subprogram.
     Two of the three contracts we reviewed in detail were
competitively awarded by ERDA. The third contract was
originally awarded on a noncompetitive basis in 1972 by the
Department of the Interior. ERDA justified its continuation
of this project on a noncompetitive basis for the following
reasons:
     -- The need to provide continuity of operation.
     -- The selection of another contractor would
        result in a duplication of effort at
        additional Government expense.
     -- The time span to commercialization for this
        technology is short and the present con-
        tractor's experience and familiarity with
        the project would expedite its completion.
     Of the $8.2 million subcontracted under the Pope, Evans,
and Pobbins, Inc., and Curtis-Wright Corporation contracts,
about 98 p rcent wes subcontracted competitively. This
indicates that if subcontracts were considered in he above
table, the proportion of funds awarded competitively may
increase.
Use of program funds
     From our analysis of ERDA program and financial records
and through discussions with ERDA officials, we determined
that a significant portion of the $60.6 million obligated for
the direct combustion subprogram was for research, develop-
ment, test, and demonstration activities as shown in the
following table.




                              14
ENCLOSURE                                          ENCLOSURE



                Use. of direct combustion funds
                       by type-of function

                               Amount obligated    Percent of
     Function                      (note a)          total

                                   (000 omitted)

Management support                   $ 5,429           9.0
Paper studies                          2,374           3.9
Research and development              24,262          40.0
Test and demonstration                28,527          17.1

                                     $60,592         100.0


a/Obligations from January 19, 1975, through the transition
  quarter.

     The $5.4 million for management support services was
primarily associated with seven contracts totaling about $4.6
million. These contracts were awarded to private industry
for the performance of various technical and management sup-
port tasks. The balance, about $0.8 million, was largely for
contract and administrative support services from ERDA labo-
ratories and energy research centers and for computer services
from universities.

     The nearly $2.4 million in obligations for paper studies,
for the most art, were for design studies relating to direct
combustion facilities, evaluation of coal gasification research
and development, and state-of-the-art studies on coal chemistry
and technology. These studies were performed under eight con-
tracts with industrial firms, one nonprofit institution, one
university, and a foreign government.

Proaram management

     ERDA has retained overall control and management respon-
sibilities for the direct combustion subprcqram. In this
regard, ERDA headquarters exercises approval authority over
each contract awarded unuer this subprogram. Of the $5.4
million in obligations for management support services shown
in the preceding table, $4.6 million was for planning, tech-
nical. and other staff functions provided by contractors to
headquarters.

     In response to our inquiry concerning ERDA's need for
such contracted services, an official within the Division
of Coal Conversion and Utilization explained that his

                              15
ENCLOSURE                                          ENCLOSURE



division's workload was heavy and that it, therefore, needed
assistance to adequately carry out its duties.  He added that
this situation developed as a result of the rapid expansion
of the direct combustion subprogram. This required that the
division develop planning and budgeting information within
short time frames and furnish data for EPDA's national-energy
plan, with essentially the same staff that was transferred
from the Department of the Interior.

HYDROTHERMAL TECHNOLOGY APPLICATIONS

     Rydrotheumal technology applications is one of six sub-
programs within ERDA's geothermal energy development program.
This program is administered by the Division of Geothermal
Enerqv under the EDA Assistant Administrator for Solar,
Geothermal, and Advanced Energy Systems.

     Geothermal energy uses the heat stored in the earth's
core and is a large potential domestic energy source. How-
ever, ERDA estimates only a fraction of this resource to be
extractable over the next 25 years, primarily fromr hydr~-
thermal technology applications.

     These applications include using fluids from the vapor-
dominated reservoirs at the geysers in California end various
liquid-dominated reservoirs. The vapor-dominated hydrothermal
resource has been economically exploited in the United States,
but is rare and represents only a small fraction of the total
potential of geothermal resources. The liauid-dominated
hydrothermal resource is more extensively found, but has not
been exploited to any degree for ower production in the
United States. This resource represents the principal qeo-
thermal energy resource available for near-term exploitation.

     The objective of the hydrothermal technology applications
subprogram is to establish the technical feasibility of using
liquid-dominated geothermal resources for both electric power
genera-ion and nonelectric uses. Development efforts are tc
progress systematically from the testing of components through
subsystems and processes in field test facilities, tc the
scaled testing of integrated energy conversion or utilization
systems in pilot plants.

Program fundinq

     Of the $71 million of appropriations available to the
geothermal energy program from January 1975 through the
transition quarter, about $17 million, or 24 percent, was




                             16
ENCLOSURE                                                     ENCLOSURE


made available to the hydrothermal technology applications
subprogram, as shown belor.

                    Hydrothermal technology
                      applications funding

                                   -    Fiscal yar     _

                                                  1976
                                   1975         (note a)             Total

                                   ---------   (000 omitted)--------
Appropriations allotted      b/$5,886            $11,150          $17,036
Obligations                        5,886             11,011          16,897
    Unobligated balance           $ -- 0       c/S     -139    c/$      139


a/Incluides transition quarter.
b/Amounts transferred from the National Science Foundation.
c/Includes $98,000 of unobligated funds which were
  transferred to other subprograms in the geothermal program.
     In addition to the amounts 3 hown in the above table,
projects supporting the hydrothermal technology applications
subprogram are funded under other geothermal subprograms, such
as the engineering research and development and resource explo-
ration and assessment subprograms.
Fund- recipients
     Based on our review of agency program and financial
records and through discussions with agency officials, we
obtained data indicating the types of organizations receiving
hydrothermal technology applications subprogram funds. This
data indicated that ERDA obligated a significant portion of
the $16.9 million for work being carried out by ERDA labo-
ratories, as shown in the following table.




                              17
ENCLOSURE                                             ENCLOSURE



                       Tvpe of organization
                          receiving funds
                                Amount obligated      Percent of
Type of organization                (note a)            total
                                     (000 omitted)
Small business                          $     341         2.0
Large business                              4,176        24.7
Universities                                2,313        13.7
Federal agencies                            1,040         6.2
ERDA laboratories                           8,937        52.9
State agencies                               .   90        0.5

                                        $16,897         100.0

a/Obligations from January 19, 1975, through the transition
  quarter.

     We selected fo: detailed review two projects for which
the largest amounts were obligated. These two projects
account for about 52 percent of this subprogram's total
obligations.
     -- About $5.5 million was obligated for a project
        with ERDA's Idaho National Engineerinq Labo-
        ratory, a Government-owned, contractor-ooerated
        laboratory, to improve energy extraction and
        conversion technologies to provide for the
        economic production of electricity from a
        moderate temperature hydrothernal resource.
        About 68.1 percent of the research was conducted
        by the operating contractor. The remaining
        research was subcontracted to large corporations
        (30.3 percent), universities (1.5 percent), and
        small businesses (.1 percent).
     -- A total of $3.3 million was obligated for a
        project with the San Diego Gas and Electric
        Company to determine the technical and economic
        feasibility of using high-temperature, high-
        salinity geothermal reservoirs and to gain infor-
        mation on the extent and characteristics of such
        reservoirs. The San Diego Gas and Electric Company
        began this project in 1971 and, in Auqust 1975,
        ERDA contracted to provide funds for a large



                                18
ENCLOSURE                                            ENCLOSURE



       portion of the roject's capital cost and
       50 percent of the operating cost. Total esti-
       mated cost of the project is about $7.6 million
       through June 1978. Information provided by ERDA
       officials indicated that about 40 percent of the
       amounts obligated were for subcontracts to private
       industry.

Method- of award

     In our analysis of the $16.9 million obligated for the
hydrothermal technology applications subprogram, ERDA provided
us with information on te methods used for awarding funds to
recipients. This information indicated t .I'k such awards were
made primarily on a noncompetitive basis     - shown below.
                              Amount obligated
Method of award                   (note a)              Percent.
                                  (000 omitted)
Competitive                        $ 1,025                6.1
Noncompetitive (note b)            -15,872               93.9
     Total                         $16,897              100.0

a/Obligations from January 19, 1975, through the transition
  quarter.
b/Includes $2.4 million obligated for projects transferred
  from te National Science Foundation.
     No competitive awards were made within this subprogram
until the transition quarter. ERDA officials justified the
noncompetitive awards primarily because of the limited geo-
graplical locations available for hydrothermal research, the
special expertise required, and the urgency to initiate
certain projects. BEDA officials pointed out that competitive
awards did occur in the transition quarter and will increase
in future years as research efforts are expanded and private
industry gains more interes,>
      ERDA officials provided us information n subcontracts
awarded by the Idaho National Enqineering Laboratory. The
vast ,majority, 99 percent of projects subcont.acted, were
awarded noncompetitively for reasons similar to those noted
above.



                             19
ENCLOSURE                                         ENCLOSURE



Use of-program-funds
     From our analysis of ERDA program and financial records
and through discussions with agency officials, we determined
the hydrothermal technology applications subprogram functions
for which the $16.9 million was obligated. The largest amount
of funds was obligated for research and development efforts
under this subprogram, as shown in the following table.
                  Use-of hydrothermal funds
                     by typaeof function
                              Amount obligated    Percent of
     Function                     (note a)          total
                                  (000 omitted)

Management support                  $     194          1.1
Paper studies                           2,507         14.9
Research and development                9,856         58.3
Test                                    4,340         25.7

     Total                        $16,897            100.0


a/Obligations from January 19, 1975, through the transition
  quarter.
     The $194,000 obligated for management support was-for
technical services provided by ERDA's Lawrence Berkeley
Laboratory for the design and construction of a test facility
in the Imperial Valley of California. In addition, ERDA
headquarters has delegated day-to-day project management
responsibilities to two of its operations offices; however,
the related management costs are not charged to subprogram
funds. These costs are applied against a separate program
support line item in the ERDA budget.
     The $2.5 million obligated for paper studies was
primarily for design and feasibility studies relating to
geothermal systems. Such studies were conducted by private
industry, an ERDA laboratory, universities and a State agency.
     During the period covered by our review, no demonstrations
of hydrothermal technology applications were funded under this
subprogram or under the demonstration subprogram of the geo-
thermal program.




                             20
ENCLOSURE                                          ENCLOSURE



Proqram management

     ERDA headcuarters has retained overall program manage-
ment of all projects within the hydrothermal suborogram.
However, for certain projects, ERDA has delegated day-to-day
managerial responsibilities to its Idaho Falls and San Fran-
cisco operations offices. The responsibilities of these
operations offices include monitoring performance of the
contractors, recommending program and project changes, and
assisting in program planning. Geothermal Division officials
plan to extend this management assistance policy to more
operations offices. Presently they are preparing a Technical
Management Assistance Agreement which will delineate the
respective roles of ERDA headquarters and ERDA operations
offices in managing the geothermal program.

     Officials within ERDA's Division of Geothermal Energy
told us that they delegated some managerial responsibilities
primarily because they believe onsite project management would
be more effective through providing closer contact with the
actual research. In addition, they pointed out that personnel
ceilings and travel fund restrictions have threatened to
reduce the effectiveness of project management from head-
quarters.

CONCLUSIONS

     From January 19, 1975, through the transition uarter,
ERDA obligated a total of $111 million for the three sub-
prcgrams reviewed.  EPDA awarded a large portion of the
funds on a nonc-mpetitive basis to private industry and
other Federal agencies. We noted that significant amounts
of the solar hotovolcaic and coal direct combustion sub-
programs operating funds were used for management support
functions.  ERDA headquarters also obtained management
support from its field operations offices, but the costs of
such support were included in ERDA's program support budget.

     ERDA has sought to minimize the extent of public finan-
cial commitment by pressing for the highest possible levels
of industry cooperation and involvement. In awarding funds,
ERDA considered each organization's expertise and experience.
As a result, private industry's involvement varied among the
subprograms depending largely on its capabilities and experi-
ence. ERDA justified awarding funds noncompetitively princi-
pally because f time constraints and the unique capabilities
and experience of selected organizations.




                             21
ENCLOSURE                                          ENCLOSURE



     The functions for which research and development funds
are used depend iaraely on the phase of development of a
subprogram. Hence, in the soler photovoltaic and hydro-
thermal subprograins, where program activities are primarily
in the exploratory research and process development phases,
fi"~ were predominantly used for research and development
a     nly small amounts for testing and demonstration. On
ti   other hand, a major portion of the coal direct combustion
subprogram fu1nds was used for the construction and testing
of piloc demonstration facilities.

     In each subprogram reviewed, ERDA primarily used
different types of organizaticns in btaining some management
support.

     -- Solar photovoltaic energy project management
        responsibilities were given to NASA and ERDA
        laboratories. Management support services
        accounted for 5.3 percent of the subprogram
        funds obligated.

     -- Coal direct combustion management support and
        planninq tasks were contracted to private
        industry. Management support services accounted
        for 9.0 percent of the subprogram funds obligated.

     -- Hydrothermal technology applications project
        management responsibilities were si'7en to ERDA
        field operations offices. Costs of services
        provided by such offices are funded from ERDA's
        program support budget. Management support
        services provided by other organizations accounted
        for 1.1 percent of the subprogram funds obligated.

These amounts of subprogram research, development, and demon-
stration funds used for management support services were
neither disclosed in the agency's budget justification Cocu-
ments nor accounting records.

     In a September 21, 1976, report to the Chairman, Sub-
committee on Energy Research, Development, and Demonstration
(Fossil Fuels), House Committee on Science and Technology
(EMD-76-11), we similarly noted that management support
costs incurred under certain Fossil Energy contracts with
private industry were not being specifically identified in
the ERDA budget request as support services. We recommended
that ERDA disclose such costs in a separate line item in
Fossil Energy's budget to the Congress.    Pursuant to the
Leporting requirements   nder  section 236 of the Legislative
Reorganization Act of  1970,  ERDA subsequently advised the


                              22
ENCLOSURE                                           ENCLOSURE



House and Senate Committees on Government Operations that it
disagreed with our recommendation. ERDA said, in part:
     "To show a separate line item in te Fossil
     Energy budget for management and technical
     support would run counter to the basic logic
     of our budget structure and presentation and
     would distract from the decision-level focus
     upon proarammatic accomplishment. However,
     our budget back-up material will contain
     data pertaining to such contracts."
     We continue to believe, however, that research, develop-
ment, and demonstration program funds used for management
support services should be disclosed to the Congress. Such
disclosure should help the Conaress in carrying out its over-
sight responsibilities for each of the research, development,
and demonstration subprograms and in providing it with greater
insight for assessing the reasonableness of each subprogram's
objectives and funding requirements. By disclosing amounts
for management support services separately from amounts for
research, development, and demonstration, the Congress would
have a better opportunity to assess the degree to which ERDA
is relying on outside management support services in con-
ducting its subprograms.
     We believe ERDA should reduce its reliance on outside
management and technical support contracts because such
reliance tends to dilute the agency's ability to retain
essential control over the conduct of its programs and to
assure the Congress that its programs are being carried -t
in an efficient and economical manner.
PECOMWMEDATION TO THE- ADMINISTRATOR
     We recommend that the Administrator, ERDA, separately
idei:tify in the budgeting and accounting records each sub-
program's research, development, ard demonstration funds
used for management support services and make the amount of
such funds visible in the agency's budget submission to the
Congress.




                              23