oversight

Major Management Challenges and Program Risks: Department of Energy

Published by the Government Accountability Office on 1999-01-01.

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

               United States General Accounting Office

GAO            Performance and Accountability
               Series




January 1999
               Major Management
               Challenges and Program
               Risks
               Department of Energy




GAO/OCG-99-6
GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States



      January 1999
      The President of the Senate
      The Speaker of the House of Representatives

      This report addresses the major performance and
      management challenges that have limited the
      effectiveness of the Department of Energy (DOE) in
      carrying out its mission. For many years, we have
      reported significant management challenges at DOE.
      These challenges include difficulties in completing large
      projects, making the transition to external regulation,
      modifying the Department’s organizational structure to
      correct challenges, reforming its contracting practices,
      and maintaining sufficient technical and managerial
      skills. These challenges cut across DOE’s programs.

      To address its performance and management challenges,
      DOE developed a strategic plan for departmentwide
      improvement, as well as a specific plan for contract
      reform in 1994. In addition, during the 1990s, DOE
      conducted or commissioned several studies of the
      missions and organization of its national laboratories.
      However, DOE has not always implemented reform
      recommendations and has been slow in acting on others.
      Therefore, we will continue monitoring DOE’s contract
      management as a high-risk area. Furthermore, some
      challenges facing DOE are long-standing, and the solutions
      to some may lie beyond the scope of DOE’s current reform
      efforts.
This report is part of a special series entitled the
Performance and Accountability Series: Major
Management Challenges and Program Risks. The series
contains separate reports on 20 agencies—one on each of
the cabinet departments and on most major independent
agencies as well as the U.S. Postal Service. The series
also includes a governmentwide report that draws from
the agency-specific reports to identify the performance
and management challenges requiring attention across
the federal government. As a companion volume to this
series, GAO is issuing an update to those government
operations and programs that its work has identified as
“high risk” because of their greater vulnerabilities to
waste, fraud, abuse, and mismanagement. High-risk
government operations are also identified and discussed
in detail in the appropriate performance and
accountability series agency reports.

The performance and accountability series was done at
the request of the Majority Leader of the House of
Representatives, Dick Armey; the Chairman of the House
Government Reform Committee, Dan Burton; the
Chairman of the House Budget Committee, John Kasich;
the Chairman of the Senate Committee on Governmental
Affairs, Fred Thompson; the Chairman of the Senate
Budget Committee, Pete Domenici; and Senator Larry
Craig. The series was subsequently cosponsored by the
Ranking Minority Member of the House Government
Reform Committee, Henry A. Waxman; the Ranking
Minority Member, Subcommittee on Government
Management, Information and Technology, House



            Page 2       GAO/OCG-99-6 Dept. of Energy Challenges
Government Reform Committee, Dennis J. Kucinich;
Senator Joseph I. Lieberman; and Senator Carl Levin.

Copies of this report series are being sent to the
President, the congressional leadership, all other
Members of the Congress, the Director of the Office of
Management and Budget, the Secretary of Energy, and
the heads of other major departments and agencies.




David M. Walker
Comptroller General of
the United States




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Contents



Overview                                                        6

Major                                                          11
Performance and
Management
Challenges
Related GAO                                                    30
Products
Performance and                                                34
Accountability
Series




                  Page 4   GAO/OCG-99-6 Dept. of Energy Challenges
Page 5   GAO/OCG-99-6 Dept. of Energy Challenges
Overview



                   Today’s Department of Energy (DOE) is a
                   multibillion-dollar enterprise with multiple
                   missions in energy and science. It is also an
                   agency with multiple performance and
                   management challenges. We, DOE’s Inspector
                   General, the National Performance Review,
                   and the Department itself have documented
                   these challenges and recommended reforms.
                   DOE has taken corrective actions, but major
                   performance and management challenges
                   remain.


The Challenges

DOE Has Had        DOE has had difficulty completing large
Difficulty         projects on time and within budget. From
Completing Large   1980 through 1996, DOE terminated 31 of 80
Projects           major system acquisitions (mission-critical
                   projects costing over $100 million) after
                   expenditures of over $10 billion, and
                   completed only 15, most of which were
                   behind schedule and over budget. For
                   example, DOE spent $6.5 billion over 15 years
                   for a permanent disposal site for highly
                   radioactive waste at Yucca Mountain,
                   Nevada. This project is currently 12 years
                   behind schedule, and DOE has not yet
                   determined whether the site is suitable for a
                   repository.

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                      Overview




DOE’s Transition to   With few exceptions, DOE’s facilities are not
External Regulation   licensed or inspected by independent
Is Slow               regulators to help ensure safe operations.
                      The Department’s own advisory committee
                      concluded that “Widespread environmental
                      contamination at DOE facilities and the
                      immense costs associated with their cleanup
                      provide clear evidence that self-regulation
                      has failed.”1 While DOE agreed to external
                      regulation in these areas, its commitment
                      appears to be lagging.


DOE’s                 DOE’s ineffective organizational structure
Organizational        blurs accountability, allowing problems to go
Structure Allows      undetected and remain uncorrected. At
Challenges to Go      Brookhaven National Laboratory on Long
Uncorrected
                      Island, radioactive tritium leaked into
                      groundwater for years because DOE’s weak
                      organizational structure discouraged
                      effective oversight of the contractor’s
                      operations. DOE eventually terminated its
                      relationship with the organization managing
                      this facility because the laboratory lost
                      public trust.




                      1
                       Total environmental liabilities reported in DOE’s 1997 financial
                      report were $181 billion.

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                     Overview




Contract             DOE  relies on contractors to perform about
Management           90 percent of its work. Recently, it has
Remains Vulnerable   increased its use of competition in selecting
to Risk              contractors to manage and operate its major
                     facilities, but it should do more. However, it
                     is still not competitively awarding contracts
                     for environmental restoration work at its
                     national laboratories, even though it does so
                     at other facilities. In addition, although DOE
                     originally planned to shift risk from the
                     federal government to private contractors as
                     a means of enhancing their performance, it
                     now considers risk-sharing more
                     appropriate. At its Hanford site in
                     Washington State, for example, DOE assumed
                     much of the risk that it initially planned to
                     shift to the contractor.


DOE’s Staff Lack     DOE’s staff lack technical and management
Technical and        skills needed to oversee complex operations.
Management Skills    At an Idaho facility, DOE turned to a private
                     contractor, in part, because it lacked the
                     in-house expertise needed to evaluate
                     technical cleanup proposals. At the Hanford
                     site, where DOE entered into a
                     multibillion-dollar fixed-price contract for
                     the next 20 years, DOE has no experts in
                     fixed-price contracting. Finding enough staff
                     with the necessary skills presents a serious



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               Overview




               challenge to DOE, particularly in light of
               recent downsizing initiatives.


Progress and   To correct performance and management
Next Steps     challenges such as these, DOE developed a
               strategic plan for departmentwide
               improvement, as well as a specific plan for
               contract reform in 1994. In addition, during
               the early 1990s, DOE conducted or
               commissioned several studies of the
               missions and organization of its national
               laboratories. Most recently, DOE completed
               strategic and annual performance plans
               under the Government Performance and
               Results Act. These plans responded to
               reported criticisms of the Department’s
               operations and established goals and
               measures for improved performance.

               DOE’s strategic plan articulates what the
               Department regards as its primary missions.
               This plan gives the Congress and the
               administration an opportunity to affirm or
               change DOE’s missions and reach agreement
               on long-term priorities for the Department.
               Together with the contract reform initiative,
               the strategic plan establishes a framework
               for improving DOE’s performance and
               management. However, DOE’s challenges are
               deeply entrenched, and the solutions to


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              Overview




              some may lie beyond the Department’s
              control. If the Congress is not satisfied with
              the pace and scope of DOE’s reform efforts, it
              may need to provide further direction to the
              Department through legislation.


Key Contact   Victor S. Rezendes, Director
              Energy, Resources, and Science Issues
              Resources, Community, and Economic
                Development Division
              (202) 512-3841
              rezendesv.rced@gao.gov




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Major Performance and Management
Challenges


            DOE is a large agency with critical missions
            and serious challenges in carrying out these
            missions. In fiscal year 1998, DOE obligated
            almost $18 billion to maintain the nation’s
            nuclear weapons stockpile, manage the
            largest environmental cleanup in history,
            support research and development at 23
            national laboratories, and accomplish other
            missions in energy and science. Despite
            recent downsizing, DOE employs over 11,000
            federal employees and is the largest civilian
            contracting agency in the federal
            government, retaining about 108,000
            contract employees at over 50 major
            installations in 35 states.

            Over the years, we, DOE’s Inspector General,
            and the National Performance Review have
            documented challenges with DOE’s
            performance and management and
            recommended reforms. This report
            summarizes findings from our issued reports
            on the effectiveness of DOE’s efforts at
            managing large mission-critical projects;
            protecting the environment, safety, and
            health at its own facilities; clarifying its
            organizational structure; reforming its
            contracting practices; and obtaining needed
            technical and management skills to oversee
            complex operations. This report also
            indicates, where applicable, how DOE has


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                   responded to recommendations of the
                   National Performance Review and addressed
                   weaknesses through the strategic plan that it
                   developed in response to the Results Act.


DOE Has Had        To support its missions, DOE often requires
Difficulty         large projects costing hundreds of millions
Completing Large   of dollars, many of which it designates as
Projects           major system acquisitions. DOE’s projects are
                   often first-of-a-kind and involve substantial
                   risk, as well as substantial funding for
                   construction. For example, DOE’s programs
                   in high-energy physics and nuclear physics
                   require accelerators (large machines that
                   propel atomic particles near the speed of
                   light) that can range in cost from hundreds
                   of millions of dollars to billions of dollars.

                   DOE has had difficulty completing large
                   projects on time and within budget. From
                   1980 through 1996, the Department
                   conducted 80 major system acquisitions
                   whose actual or planned costs totaled
                   $65 billion. Thirty-one of these projects were
                   terminated before completion, after
                   expenditures of over $10 billion, and only 15
                   were completed, the majority of which were
                   usually behind schedule and over budget.
                   For the 34 ongoing projects, we found that
                   27 had cost overruns averaging over 70


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    percent and 16 were behind schedule.2 One
    large project, a repository at Yucca
    Mountain, Nevada, for permanently
    disposing of highly radioactive waste,
    including the by-products of nuclear power
    generation, has already cost $6.5 billion, and
    DOE has not yet determined whether the site
    is suitable for a repository. In addition, the
    project is at least 12 years behind schedule.
    Because of this delay, many nuclear power
    plants have had to construct their own
    temporary waste storage facilities.

    Some of the challenges in managing large
    projects were attributable to factors beyond
    DOE’s control, including world events
    (especially the end of the Cold War),
    incomplete technologies, and changes in the
    administration’s policy. Nevertheless,
    weaknesses in DOE’s management and
    oversight also contributed to the challenges.
    Overall, we identified four factors underlying
    the cost increases, delays, and terminations.

•   Changing missions for DOE have made it
    difficult to sustain departmental and
    congressional support for long-term,
    high-cost projects. For example, today’s
    emphasis on conducting environmental


    2
     Completion dates and costs were not available for 14 of these 34
    projects.

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    cleanups at DOE sites is very different from
    DOE’s focus in the 1970s on developing
    alternative sources of energy. With changing
    missions, projects such as the Gas
    Centrifuge Enrichment Plant and the Clinch
    River Breeder Reactor were terminated after
    expenditures of $2.8 billion and $1.6 billion,
    respectively.
•   Incremental funding for projects has delayed
    their construction and increased their costs.
    Because budget authority for the total cost
    of a project is not provided at the time the
    project is approved, annual funding for the
    project is often less than requested. For
    example, the Fermilab Main Injector Project
    in Illinois (for use in high-energy physics
    experiments) received only 40 percent of its
    planned funding for the first 3 years. As a
    result, according to DOE officials, the project
    fell behind schedule and incurred additional
    costs.
•   A flawed system of incentives does not
    always reward employees and contractors
    appropriately. For years, DOE’s culture
    encouraged employees to complete projects
    but not to question the need for them or to
    raise management issues. Thus, participants
    in the Superconducting Super Collider
    project tried to keep it going even when
    expected foreign contributions did not
    materialize and the total projected costs rose


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    from $5.9 billion to over $11 billion.
    Additionally, DOE managers have often failed
    to penalize contractors for poor
    performance and have sometimes even
    rewarded inadequate performance. For
    example, during the 1980s and early 1990s,
    DOE paid millions of dollars in bonuses to the
    contractor at its Rocky Flats Plant in
    Colorado, despite well-documented safety
    and health deficiencies at the facility.
•   Finally, inadequate technical and managerial
    skills have resulted in higher costs and
    delays. For example, according to DOE, the
    Defense Waste Processing Facility in South
    Carolina cost about $900 million more than
    planned and opened about 6 years late, in
    large part because the project’s managers
    lacked experience with large-scale
    technology projects and did not focus
    sufficient attention on technical,
    institutional, or management issues.

    There are no quick, easy solutions to DOE’s
    challenges in keeping large projects on
    schedule and within budget; however,
    changes made by the Congress, the
    executive branch, and DOE could help. First,
    two acts—the Federal Acquisition
    Streamlining Act of 1994 and the Federal
    Acquisition Reform Act of 1996—encourage
    federal agencies to establish goals and


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incentives for managing acquisition projects
and to improve education and training for
their acquisition workforce. Second, starting
in 1996, the Office of Management and
Budget has required all federal agencies to
request full funding for fixed assets, which
would include DOE’s large projects. Finally,
departmental initiatives in the areas of
contract reform, asset management,
strategic planning, information systems
management, and financial planning should
strengthen DOE’s ability to manage large
projects. For example, DOE’s strategic plan
incorporates performance measures, as the
National Performance Review
recommended, requiring the Department to
annually meet baselines established for the
scope, schedule, and cost of its projects.

While these changes may strengthen DOE’s
management, the fate of DOE’s acquisitions
also depends on direction from the Congress
and the administration. Now that DOE has
developed its first strategic and annual
performance plans under the Results Act, we
believe the time is right for reviewing its
missions and agreeing on long-term
priorities for the Department.




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DOE’s Transition   With few exceptions, DOE’s research and
to External        nuclear facilities are not inspected or
Regulation Is      licensed by independent regulators to help
Slow               ensure safe operations. For national security
                   reasons, DOE relied historically on its own
                   staff to ensure safety at these facilities. We
                   and others have criticized DOE for
                   weaknesses in its self-regulation. In 1995, for
                   example, a DOE advisory committee
                   concluded that the widespread
                   environmental contamination at DOE’s
                   facilities and the immense costs associated
                   with their cleanup is evidence that
                   self-regulation has failed. In 1998, the
                   Defense Nuclear Facilities Safety Board, an
                   independent group that oversees but has no
                   regulatory authority over DOE’s defense
                   facilities, criticized the Department for
                   failing to correct worker health and safety
                   hazards.

                   With several exceptions, DOE is subject to
                   environmental protection statutes enforced
                   by the Environmental Protection Agency
                   (EPA) and the states. But DOE is still the only
                   federal agency whose facilities are generally
                   exempt from regulation by the Nuclear
                   Regulatory Commission (NRC) for nuclear
                   safety and by the Occupational Safety and
                   Health Administration for worker safety. In
                   1993, the Secretary of Energy announced


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that the Department would seek external
regulation for worker safety. Two years
later, DOE created advisory groups to help
formulate its policies and implement plans to
eliminate self-regulation for both nuclear
and worker safety at its facilities. Although
these advisory groups endorsed external
regulation, DOE has backed off from its initial
plans and is now conducting pilot programs
to simulate external regulation at selected
facilities and determine whether it is
warranted.

Although DOE’s pilot programs may provide
useful insights, they will not yield much of
the information that managers need to make
well-informed judgments about the value
and practicality of external regulation at
DOE’s vast nuclear complex. For example,
NRC estimates on the basis of one pilot
project that it would need about one-fifth of
one staff person’s time per year to regulate
nuclear safety at the Lawrence Berkeley
National Laboratory in California. However,
this estimate does not fairly represent the
cost of external regulation for the majority
of DOE’s nuclear facilities because the
Lawrence Berkeley National Laboratory
does not have the nuclear reactors, weapons
plants, or heavily contaminated facilities
found at the defense and environmental


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                   cleanup sites that make up 80 percent of
                   DOE’s complex.


                   DOE’s current plan to conduct pilot programs
                   to simulate external regulation is
                   inconsistent with its former plan to move
                   forward immediately with external
                   regulation. Although DOE maintains that its
                   current plan reflects appropriate caution, we
                   believe that the Department is wavering in
                   its commitment to external regulation. We
                   recommended in May 1998 that DOE set forth
                   its position on the external regulation of
                   nuclear and worker safety at its facilities and
                   develop an implementation strategy
                   consistent with its position.


DOE’s              DOE’s  organization includes a dozen
Organizational     headquarters program offices, 10 major field
Structure Allows   offices with many smaller offices located
Challenges to Go   near DOE’s facilities, and over 50 major
Uncorrected        facilities owned by the government and
                   operated by DOE’s contractors. As we
                   reported in 1981, DOE does not have clear
                   lines of authority linking the Department’s
                   units, and as we reported in 1993 and again
                   in 1998, the roles and responsibilities of
                   DOE’s headquarters and field offices are not
                   clearly defined. Contractors, such as those
                   operating the large national laboratories,


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receive policy guidance from many different
program offices but are managed and
evaluated by field offices that are not
accountable to the program offices. Several
program (and staff) offices can direct a
single contractor, bypassing the field office
and other program offices. This
uncoordinated direction limits DOE’s ability
to hold contractors accountable for their
activities and ultimately affects their
performance.

In 1997, we ultimately attributed leaks of
tritium (a radioactive element) into
groundwater from a research reactor at the
Brookhaven National Laboratory on Long
Island, New York, to weaknesses in DOE’s
organizational structure. These leaks went
undetected for many years and then
remained uncorrected for several more years
because the contractor assigned low priority
to them, despite public concern and local
environmental regulations requiring
corrective action. DOE did not hold the
laboratory accountable for meeting its
regulatory commitments but eventually
terminated the contract because the
laboratory lost public trust. We found that
DOE’s organizational structure prevented
effective accountability over the
Department’s on-site field office—the office


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with the most immediate responsibility for
ensuring the laboratory’s compliance with
environmental, safety, and health
requirements. Because the on-site office was
part of a chain of command with no explicit
responsibility for environmental, safety, and
health issues, it did not report directly to
either of two other offices with such
responsibility—one of these offices was in
another chain of command, and the other
was an independent office. In 1998, the
Defense Nuclear Facilities Safety Board
recommended that DOE establish clear lines
of authority and responsibility to ensure the
resolution of safety issues.

DOE’s own oversight offices have reported
similar weaknesses in the Department’s
organizational structure. For example, in
1997, DOE’s Laboratory Operations Board
reported inefficiencies in both headquarters
and the field resulting from the Department’s
complicated management structure. The
Board recommended that DOE undertake a
major effort to rationalize and simplify its
headquarters and field management
structure to create a more effective line
management. DOE’s strategic plan includes a
performance measure designed to create a
line of accountability by requiring (1) links in
annual performance budgets between


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                resource requirements and plans,
                (2) independent validations of projects’
                costs, and (3) crosscutting evaluations of
                performance.


Contract        DOE  is the largest civilian contracting agency
Management      in the federal government. In fiscal year
Remains         1997, it obligated about $16.2 billion, or
Vulnerable to   about 91 percent of its obligations, to
Risk            contracts. We have reported on weaknesses
                in DOE’s contracting practices, including
                noncompetitive awards and lax oversight of
                costs and activities. In 1990, we designated
                DOE’s contracting as a high-risk area. Three
                years later, the Secretary of Energy
                established a Contract Reform Team, which
                reviewed DOE’s contracting practices and, in
                February 1994, published a report with 48
                recommendations to make contracting work
                better and cost less.3 Among these were
                recommendations to award contracts
                competitively, incorporate
                performance-based incentives, and increase
                the use of fixed-price contracts. While DOE
                was reviewing its contracting practices, it
                was also developing its strategic plans.
                Together, the contract reform and strategic
                planning initiatives helped to shape the

                3
                 Some of these recommendations also were made by the National
                Performance Review and were included in DOE’s strategic plan as
                performance measures.

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framework for contract reform that DOE has
since put in place. While these reforms are
generally steps in the right direction, DOE has
had some problems in implementing them,
and in some instances, their effectiveness
will not be known for several years.
Therefore, we will continue monitoring DOE’s
contract management as a high-risk issue.

Since 1996, DOE has increased its use of
competition in awarding contracts for
managing and operating its facilities, but it
could do more, particularly at its national
laboratories. In 1996, we reported that from
July 1994 through August 1996, DOE had
awarded 8 of 24 management and operating
contracts (33 percent) competitively. For
fiscal year 1996 through fiscal year 1998, DOE
reported that it had awarded 14 of 26 such
contracts (54 percent) competitively and
extended the other 12 noncompetitively.
(The total value of these 12 contracts was
$102 billion.) According to DOE, 8 of these 12
contracts were eligible for noncompetitive
renewal under the Competition in
Contracting Act, which exempts contracts
for federally funded research and
development centers from the requirements
for competition. However, as we reported in
1996, only about half of the funds spent by
management and operating contractors at


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the national laboratories went for research
and development; the remainder went for
other work, such as environmental
restoration. At other facilities, DOE awards
contracts for environmental restoration
work competitively. In our view, DOE could
improve its contracts with the national
laboratories by separating and competitively
awarding the portion of the work that is not
related to research.

In 1994, DOE began incorporating
performance-based incentives in its
management and operating contracts to
better link contractors’ fees to the
satisfactory accomplishment of specific
tasks. In 1997 and 1998, DOE’s Inspector
General found problems in the Department’s
implementation of these incentives, and in
1997, a departmentwide assessment
identified other concerns, such as limited
guidance on developing and administering
the incentives. Our July 1998 report
indicated that DOE had taken steps to correct
these problems, including issuing guidance,
conducting training, and incorporating
lessons learned into the fiscal year 1998
incentives. However, it was too early to
assess the effectiveness of these incentives
because DOE’s technical, financial, and
contracting personnel had not yet completed


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    their reviews, which they perform at the end
    of the fiscal year. Moreover, as we reported
    in April 1998, DOE incorporated
    performance-based incentives for fiscal year
    1998 in 16 of the 20 contracts we reviewed
    after the contractors had started their work.
    Thus, the incentives were less effective than
    they might have been in guiding and
    enhancing the contractors’ performance.

    To control costs and shift risks from the
    government to contractors, DOE has begun to
    use fixed-price contracts for environmental
    cleanups in place of the cost-reimbursement
    contracts that the Department routinely used
    in the past. Under this “privatization”
    initiative, DOE planned to pay its contractors
    a fixed amount for acceptable goods and
    services, regardless of the costs they
    incurred, and shift most financial risks to the
    contractors. While DOE has used fixed-price
    contracts for some well-defined projects,
    such as cleaning up some contaminated soils
    and decontaminating workers’ uniforms, it
    has not met its initial goals for more
    complex environmental cleanups, as the
    following examples show:

•   Pit 9, a project to clean up radioactive waste
    at the Idaho National Engineering and
    Environmental Laboratory, incurred nearly


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    $200 million in cost overruns. The project,
    which we characterized as a failure, was at
    least 26 months behind schedule when we
    reported on it in July 1997. Issues
    surrounding this project, such as the type
    and amount of waste to be cleaned up and
    who will pay for the increased costs, are
    currently in litigation.
•   At the Hanford site in Richland, Washington,
    DOE planned to make the contractor fully
    responsible for the financial risk associated
    with constructing a facility to treat highly
    radioactive waste, currently stored in leaking
    underground tanks. However, because
    lenders told DOE that the contractor would
    not be able to obtain affordable financing
    without government backing, DOE agreed to
    pay much of the project debt if the
    contractor defaulted on its loans. The extent
    of the liability retained by the contractor
    remains uncertain. While this financing
    approach appears reasonable for this
    project, DOE faces a financial risk not initially
    contemplated that could be in the billions of
    dollars.

    Before DOE decides whether to award
    fixed-price or cost-reimbursement contracts,
    it needs to consider several factors,
    including the cleanup and financial risks
    involved, the adequacy of the competition


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                   among qualified firms, the types of financing
                   available, and the skills of the DOE staff
                   responsible for designing and overseeing the
                   contracts.


DOE’s Staff Lack   A lack of staff with the requisite skills is an
Technical and      underlying cause of problems in several
Management         areas. As previously noted, insufficient staff
Skills             with the appropriate management skills was
                   one of the four key factors underlying the
                   cost overruns, delays, and terminations
                   associated with DOE’s major system
                   acquisitions. Inadequate technical and
                   management skills have also hampered DOE’s
                   self-regulation and contract management.
                   DOE and its Inspector General have identified
                   the need for stronger technical and
                   management skills, and the National
                   Performance Review recommended
                   strengthening this area. DOE included
                   performance measures in its strategic plan to
                   address the problem.

                   A lack of staff with the requisite technical
                   skills limited the effectiveness of DOE’s
                   self-regulation and contributed to the
                   environmental problems at many of DOE’s
                   facilities. The Defense Nuclear Facilities
                   Safety Board, in its annual reports to the
                   Congress, has repeatedly stated that the lack


                   Page 27         GAO/OCG-99-6 Dept. of Energy Challenges
Major Performance and Management
Challenges




of appropriate technical expertise in DOE is a
significant problem. As we have reported
since 1991, managers throughout DOE have
told us that the lack of skilled staff in
program, project, and contracting oversight
positions is one of the most fundamental
challenges in the Department. In March 1997,
we reported that DOE did not assign enough
staff with the proper technical capability to
oversee the early stages of a project at the
Fernald site in Ohio, resulting in major
cleanup problems that could have been
avoided.

In 1994, DOE’s Contract Reform Team
acknowledged that DOE’s staff were not
prepared to effectively oversee contractors.
According to the team, DOE lacked “sufficient
and adequately trained personnel in such
areas as contract administration, cost
estimation, and financial management.” As
we reported in July 1997, DOE’s Idaho facility
turned to privatization, in part, because it did
not have the in-house expertise to evaluate
technical cleanup proposals. However,
delays and cost overruns at both the Idaho
and the Hanford facilities suggest that DOE
may likewise lack expertise in administering
fixed-price contracts. Both the Director of
Contract Reform and Privatization and the
contracting officer at Hanford acknowledged


Page 28         GAO/OCG-99-6 Dept. of Energy Challenges
Major Performance and Management
Challenges




that the DOE staff at Hanford are not experts
in fixed-price contracting. As DOE stated in a
1997 study, the use of fixed-price contracts
for privatizing cleanups will require its
employees to become more involved in the
early stages of procurement development
and to acquire more skills in corporate
budgeting, capital market analysis, and the
financing of employee benefits.

Finding enough staff with the necessary
skills presents a serious challenge to DOE,
particularly in light of recent downsizing. At
Hanford, for example, DOE plans to ensure
adequate oversight of the tank waste cleanup
by putting about 80 technical and managerial
staff in place. However, as of August 28,
1998, DOE had not yet filled 30 positions,
including 5 of the 9 DOE staff responsible for
contract management. DOE officials told us
that they plan to hire these and other needed
staff during fiscal year 1999.




Page 29         GAO/OCG-99-6 Dept. of Energy Challenges
Related GAO Products



Completing Large   Nuclear Waste: Department of Energy’s
Projects           Hanford Tank Waste Project—Schedule,
                   Cost, and Management Issues (GAO/RCED-99-13,
                   Oct. 8, 1998).

                   Information Technology: Department of
                   Energy Does Not Effectively Manage Its
                   Supercomputers (GAO/RCED-98-208, July 17,
                   1998).

                   Nuclear Waste: Department of Energy’s
                   Project to Clean Up Pit 9 at Idaho Falls Is
                   Experiencing Problems (GAO/RCED-97-180,
                   July 28, 1997).

                   Nuclear Waste: Impediments to Completing
                   the Yucca Mountain Repository Project
                   (GAO/RCED-97-30, Jan. 17, 1997).

                   Department of Energy: Opportunity to
                   Improve Management of Major System
                   Acquisitions (GAO/RCED-97-17, Nov. 26, 1996).

                   Nuclear Waste: Uncertainties About Opening
                   the Waste Isolation Plant (GAO/RCED-96-146,
                   July 16, 1996).


Shifting to        Department of Energy: Clear Strategy on
External           External Regulation Needed for Worker and
Regulation

                   Page 30       GAO/OCG-99-6 Dept. of Energy Challenges
                 Related GAO Products




                 Nuclear Facility Safety (GAO/RCED-98-163,
                 May 21, 1998).

                 Department of Energy: Information on the
                 Tritium Leak and Contractor Dismissal at the
                 Brookhaven National Laboratory
                 (GAO/RCED-98-26, Nov. 4, 1997).


Streamlining     Department of Energy: Uncertain Progress in
DOE’s            Implementing National Laboratory Reforms
Organizational   (GAO/RCED-98-197, Sept. 10, 1998).
Structure
                 Results Act: DOE Can Improve Linkages
                 Among Plans and Between Resources and
                 Performance (GAO/RCED-98-94, Apr. 14, 1998).

                 Department of Energy: Information on the
                 Tritium Leak and Contractor Dismissal at the
                 Brookhaven National Laboratory
                 (GAO/RCED-98-26, Nov. 4, 1997).

                 Department of Energy: A Framework for
                 Restructuring DOE and Its Missions
                 (GAO/RCED-95-197, Aug. 21, 1995).

                 Department of Energy: Management
                 Problems Require a Long-Term Commitment
                 to Change (GAO/RCED-93-72, Aug. 31, 1993).




                 Page 31         GAO/OCG-99-6 Dept. of Energy Challenges
             Related GAO Products




Improving    Nuclear Waste: Department of Energy’s
Contract     Hanford Tank Waste Project—Schedule,
Management   Cost, and Management Issues (GAO/RCED-99-13,
             Oct. 8, 1998).

             Department of Energy: Lessons Learned
             Incorporated Into Performance-Based
             Incentive Contracts (GAO/RCED-98-223, July 29,
             1998).

             Department of Energy: Alternative Financing
             and Contracting Strategies for Cleanup
             Projects (GAO/RCED-98-169, May 29, 1998).

             Results Act: DOE Can Improve Linkages
             Among Plans and Between Resources and
             Performance (GAO/RCED-98-94, Apr. 14, 1998).

             Nuclear Waste: Department of Energy’s
             Project to Clean Up Pit 9 at Idaho Falls Is
             Experiencing Problems (GAO/RCED-97-180,
             July 28, 1997).

             High-Risk Series: Department of Energy
             Contract Management (GAO/HR-97-13,
             Feb. 1997).

             Department of Energy: Contract Reform Is
             Progressing, but Full Implementation Will
             Take Years (GAO/RCED-97-18, Dec. 10. 1996).



             Page 32         GAO/OCG-99-6 Dept. of Energy Challenges
                      Related GAO Products




                      Federal Research: Information on Fees for
                      Selected Federally Funded Research and
                      Development Centers (GAO/RCED-96-31FS,
                      Dec. 8, 1995).


Obtaining Enough Nuclear Waste: Schedule, Cost, and
Staff With Needed Management Issues at DOE’s Hanford Tank
Skills            Waste Project (GAO/T-RCED-99-21, Oct. 8, 1998).

                      Nuclear Waste: Department of Energy’s
                      Project to Clean Up Pit 9 at Idaho Falls Is
                      Experiencing Problems (GAO/RCED-97-180,
                      July 28, 1997).

                      Department of Energy: Management and
                      Oversight of Cleanup Activities at Fernald
                      (GAO/RCED-97-63, Mar. 14, 1997).

                      Department of Energy: Opportunity to
                      Improve Management of Major System
                      Acquisitions (GAO/RCED-97-17, Nov. 26, 1996).




                      Page 33         GAO/OCG-99-6 Dept. of Energy Challenges
Performance and Accountability Series



             Major Management Challenges and Program
             Risks: A Governmentwide Perspective
             (GAO/OCG-99-1)

             Major Management Challenges and Program
             Risks: Department of Agriculture
             (GAO/OCG-99-2)

             Major Management Challenges and Program
             Risks: Department of Commerce
             (GAO/OCG-99-3)

             Major Management Challenges and Program
             Risks: Department of Defense (GAO/OCG-99-4)

             Major Management Challenges and Program
             Risks: Department of Education
             (GAO/OCG-99-5)

             Major Management Challenges and Program
             Risks: Department of Energy (GAO/OCG-99-6)

             Major Management Challenges and Program
             Risks: Department of Health and Human
             Services (GAO/OCG-99-7)

             Major Management Challenges and Program
             Risks: Department of Housing and Urban
             Development (GAO/OCG-99-8)




             Page 34      GAO/OCG-99-6 Dept. of Energy Challenges
Performance and Accountability Series




Major Management Challenges and Program
Risks: Department of the Interior
(GAO/OCG-99-9)

Major Management Challenges and Program
Risks: Department of Justice (GAO/OCG-99-10)

Major Management Challenges and Program
Risks: Department of Labor (GAO/OCG-99-11)

Major Management Challenges and Program
Risks: Department of State (GAO/OCG-99-12)

Major Management Challenges and Program
Risks: Department of Transportation
(GAO/OCG-99-13)

Major Management Challenges and Program
Risks: Department of the Treasury
(GAO/OCG-99-14)

Major Management Challenges and Program
Risks: Department of Veterans Affairs
(GAO/OCG-99-15)

Major Management Challenges and Program
Risks: Agency for International Development
(GAO/OCG-99-16)




Page 35          GAO/OCG-99-6 Dept. of Energy Challenges
Performance and Accountability Series




Major Management Challenges and Program
Risks: Environmental Protection Agency
(GAO/OCG-99-17)

Major Management Challenges and Program
Risks: National Aeronautics and Space
Administration (GAO/OCG-99-18)

Major Management Challenges and Program
Risks: Nuclear Regulatory Commission
(GAO/OCG-99-19)

Major Management Challenges and Program
Risks: Social Security Administration
(GAO/OCG-99-20)

Major Management Challenges and Program
Risks: U.S. Postal Service (GAO/OCG-99-21)

High-Risk Series: An Update (GAO/HR-99-1)



The entire series of 21 performance and
accountability reports and the high-risk
series update can be ordered by using
the order number GAO/OCG-99-22SET.




Page 36          GAO/OCG-99-6 Dept. of Energy Challenges
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