oversight

Department of Energy: Fiscal Year 1998 Budget Request

Published by the Government Accountability Office on 1997-07-21.

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

7
    A0
         United   States
         General Accounting   Office
1        Washington,  D.C. 20548

         Resources, Community,      and
         Economic Development       Division


         B-277024

         July 21, 1997

         The Honorable Duncan Hunter
         Chairman, Subcommittee on
          Military Procurement
         Committee on National Security
         House of Representatives

         Subject:          Denartment of Energv: FiscaI Year 1998 Budget Reauest

         As agreed with your office, we are providing you with information on our
         review of the Department of Energy’s (DOE) j&al year 1998 budget request.l
         This report provides information on (1) fiscal year 1998 budget requests for
         funds that may not be needed and (2) funding balances remaining from prior
         years-carryover balances-that may be available to reduce the fiscal year 1998
         funding requests. Our review of DOE’s fiscal year 1998 budget request focused
         on requests to support two programs-Environmenti         Management (EM) and
         Defense Programs (DP)-which together account for over one-half of the
         Department’s budget. Specifically, we examined requests for funds to support
         EM’s “privatization” initiative,2 specific projects at EM’s Sava;nnah River and
         RocQ Flats sites, and EM’s Technology Deployment Initiative. We also
         examined DP’s requests for specific projects managed by its Nevada Operations
         Office. Our review of carryover balances focused on operating and capital
         equipment funding for DOE’s six major program areas-Environmental
         Management, Defense Programs, Energy Efficiency and Renewable Energy,
         Energy Research, Fossil Energy, and Nuclear Energy. We also examined
         potential carryover balances in EM construction projects and additional prior-
         year savings loom DOE’s overall Strategic Alignment and Downsizing Initiative.




         ‘We previously provided this information to your office in briefings during Apr.
         1997.

         2This approach does not involve the transfer (sale) of government-owned assets
         or functions to the private sector. Rather, it relies on the use of a competitively
         awarded fixed-price performance contract, through which DOE purchases waste
         cleanup services through a private contractor.
                                               GAOIRCED-97-171R   DOE’s Fiscal   Year 1998 Budget   Request
B-277024

SUMMARY

As discussed in enclosure I, we questioned about $400 million in funding
requested for fiscal year 1998 that may not be needed or is based on
questionable justifications. SpecifmalIy, EM’s fiscal year 1998 privatization
request included $47.4 million in funding for five projects that is not needed. In
addition, the justification for funding other privatization projects was
questionable because (1) eight projects worth $225.1 million had projected cost
savings based on very preliminary assumptions and (2).three projects worth
$44.5 million were not required by any existing compliance agreements and
could be postponed. 3 We also identified $34.1 million in fiscal year 1998
requests for individual EM and DP projects that may not be needed. Finally,
EM’s $50 million Technology Deployment Initiative request for fiscal year 1998
is not based on any detailed study of project needs.                 I

In addition, our review found that DOE’s major program areas may have $1.1
billion in potentially available carryover balances for operating and capital
equipment funding at the beginning of fiscal year 1998. Also, EM has $19
million in potentially available carryover balances from construction line item
funding. It is important to stress that the $1.1 billion represents only a starting
point from which to identify the amount that could actually be used to offset
DOE’s budget. Potentially available carryover balances in fiscal year 1998 may,
in part, be a result of DOE’s Strategic Alignment and Downsizing Initiative,
which realized about $223 million of additional savings above its planned
 savings for fiscal year 1996.

BACKGROUND

DOE’s fiscal year 1998 budget request totals $19.2 billion, of which EM’s request
($7.2 billion) and DP’s request ($5.1 billion) represent 64 percent of the total.
EM is responsible for managing and addressing the environmental problems
resulting from the production of nuclear weapons, nuclear energy activities, and



3EM is responsible for complying with numerous federal and state
environmental requirements, including the Comprehensive Environmental
Response, Compensation, and Liability Act; Resource Conservation and
Recovery Act; and Clean Water Act. DOE has signed agreements with federal
and state regulators to correct violations at its sites. These agreements identify
activities-generally called milestones-and schedules for achieving compliance,
many of which are legally binding and enforceable. About 65 percent of EM’s
budget is driven by schedules for completing milestones.
 2                              GAOLRCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024

energy research activities. EM’s fiscal year 1998 request includes $1.006 billion
for the Privatization Initiative, $2.2 billion for the Savannah River and Rocky
Flats sites, and $50 million for the Technology Deployment Initiative. EM’s
Privatization Initiative seeks to identify and fund discrete cleanup projects
through which DOE can share the risk with p&ate-sector companies to reduce
costs and accelerate project completion. EM’s Technology Deployment
Initiative is designed to increase the use of innovative technologies that will
reduce the costs, time, and risks associated with cleanup projects, DP’s
mission is to maintain the safety, security, and reliability of the nation’s nuclear
weapons stockpile. DP’s fiscal year 1998 request includes about $226 million
for activities at its Nevada Operations Office.

Carryover balances represent funding from prior years’ budgets and consist of
both unobligated balances and uncosted obligations. Each fiscal year, DOE
requests obligational authority from the Congress to meet the costs of running
its programs.4 Once DOE receives this authority, it obligates funds by placing
orders or awarding contracts for goods and services that will require payment
during the same fiscal year or in the future. Unobligated balances represent the
portion of its authority that the Department has not obligated. Uncosted
obligations represent the portion of its authority that the Department has
obligated for goods and services but for which it has not yet incurred costs.
The carryover balances are distributed among operating activities, capital
equipment procurement, and construction projects. Over the last several years,
the Congress has reduced DOE’s budget request and recommended that the
agency use carryover balances in lieu of new funding. In April 1996, we
reported on DOE’s efforts to analyze its carryover balances in developing its
annual budget.5

DOE’s Strategic Alignment and Downsizing Initiative is part of a broader set of
efforts the agency uses to reduce its budget. In fiscal year 1996, DOE
introduced five strategies to achieve savings of $1.7 billion over 5 years-reduce
federal stafiing levels, travel budgets, and support service contracts, as well as
improve information management and streamline the National Environmental
Policy Act process. For fiscal year 1996--f&e most recently completed fiscal


4Some appropriations do not restrict the time in which the funds must be
obligated but state that the funds are “to remain available until expended.” This
is generally referred to as “no-year” authority. DOE receives no-year authority
for most of its activities.
“DOE Management: DOE Needs to Imnrove Its Analvsis of Carrvover Balances
(GAORCED-96-57, Apr. 12, 1996).   ,
3                               GAOLRCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024
year-DOE planned to save $206 million using these strategies and adjusted its
budget request accordingly.6

EM’S PRIVATIZATION REQUEST RAISES CONCERNS

We identified several concerns with EM’s Privatization Initiative and fiscal year
1998 request for $1.006 billion. First, EM’s request for this initiative included
funding for five projects that is not needed. In addition, the justification for
funding other privatization projects was questionable because (1) some projects
proposed to be funded under privatization had projected cost savings based on
very preliminary assumptions and (2) other projects were not required to be
done by any existing compliance agreements and could be postponed.7 Finally,
EM’s request does not include the total capital costs for some of the projects
and does not include any operating costs for the projects. As a result, it is
d3l5cult to measure the full impact of the requested funding on the overall
federal budget. 8

We identified five privatization projects for which $47.4 million in requested
funding was not needed. For example, DOE officials told us that since the
budget request had been prepared, they had reduced the scope of the Spent
Nuclear Fuel Dry Transfer and Storage project at the Idaho National
Engineering and Environmental Laboratory (INEEL) and that they would need
$21 million less for the construction of this project in fiscal year 1998. Table 1
identifies the five projects, the amount of funding not needed, and the reasons
the funds are not needed.




%Vhile DOE planned for savings of $206 million, DOE actually reduced its
budget request by $208 million. Additional savings may be realized through the
sale of DOE assets, but these savings will not be used to reduce the budget
because any proceeds from selling assets will be returned to the Treasury.
7Some privatization projects fit in more than one category. For example, we
found that the Power Burst Facility funding request was not needed in fiscal
year 1998 and that the project was supported only by very preliminary cost
savings estimates.

 ‘After we raised questions about the lack of information on total costs for
 privatization in DOE’s fiscal year 1998 budget request, DOE prepared detailed
 Project Data Sheets containing total cost information. These sheets were
 distributed to congressional staff in Apr. 1997.

 4                               GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024
Table 1: EM Privatization    Project Reauests Not Needed

Dollars in millions


                            Fiscal year 1998
    Privatization project   requested funds that
                            are not needed               Reason funding is not needed
    TRU Waste                                  $7.7      Error was made in calculating        funds
    Transportation                                       needed.
    Low Activity Waste                             2.6   Regulatory approval is not likely to
                                                         be granted until fiscal year 1999.
    Power Burst                                 7.9      Facility will not be ready for
    Facility                                             deactivation until fiscal year 1999.
    Silo 3                                      8.2      Site will not be ready to award
                                                         contract until late in fiscal year
                                                         1998.
    Spent Nuclear Fuel                          21 .O    Project’s scope was reduced.
    Dry Transfer and
    Storage
    Total                                      $47.4

While EM has justified its request for privatization funding on the basis that
privatization will lead to significant costs savings, we identified eight projects
representing $225.1 million in requested funding whose projected cost savings
were based on very preliminary assumptions. For example, for the Low Activity
Waste Treatment project at INEEL, DOE simply reduced the cost estimate for
the project prepared by the Management and Integration (M&I) contractor by 20
percent and assumed that this new estimate would represent the cost of the
privatized contract. No detailed studies or market analyses have been
performed to validate this estimate. Similar approaches were used for the other
seven projects9 Another important reason justifying the funding for
privatization projects is to help ensure that DOE meets the milestones in its
compliance agreements. However, we identified three projects-Buildings 886
and 779 at Rocky Flats and the Power Burst Facility at INEEL-representing
$44.5 rniUion in requested funding that are not required by existing compliance
agreements and, therefore, could be postponed.


!Tn commenting on our report, DOE said that it is continuing to refine its cost
estimates to improve their accuracy.

5                                    GAO/RCED-97-171R      DOE’s Fiscal Year 1998 Budget      Request
B-277024

In evaluating EM’s fiscal year 1998 privatization request, it is important to
recognize that EM’s request does not include funding for the total capital costs
for some of the projects over their lifetime. For example, EM is requesting $427
million in fiscal year 1998 for its Tank Waste Remediation System (TW’RS)
project, but an additional $853 million will be needed to complete the
construction of the project. Furthermore, the privatization funding request does
not include any of the long-term operating costs of these projects, which will be
paid annually once the projects begin operations. The long-term impact of the
operating costs, estimated at $5.8 billion, will be significant, since they exceed
the capital costs, estimated at $2.8 billion. As a result, assessing the long-term
impact of EM’s privatization projects on the overall federal budget is difficult
because the full cost of the projects is not included in the budget request.

SPECIFIC EM AND DP PROJECT REQUESTS MAY NOT BE NEEDED

Our review of EM’s fiscal year 1998 request for specific projects at its Savannah
River and Rocky Flats sites identified $23.4 million for three projects that may
not be needed. This amount includes $4.9 million of a $9.8 million request for
well sampling at Savannah River that may not be needed, $2.4 million for the
conceptual design of a new interim plutonium storage vault at Rocky Flats that
is not scheduled to be constructed, and $16.1 million for lower-risk cleanup
activities at Rocky Flats that could be postponed. In addition, our review of
DP’s fiscal year 1998 request for projects managed by its Nevada Operations
Office identified $10.7 million for two projects that may not be needed. This
amount includes $0.7 million for educational initiatives and $10 million for
operating and maintaining the Device Assembly Facility, which lacks a mission
because the ending of the cold war reduced testing activities. In addition, up to
$40 million requested for four subcritical experiments at Nevada may not be
needed because the need for these experiments is uncertain.1o All fiscal year
 1996 subcritical experiments were canceled, and none of the fiscal year 1997
 experiments have been conducted to date. As a result, it is not clear how
 much, if any, of the fiscal year 1998 request is needed.

EM’S TECHNOLOGY DEPLOYMENT INITlATlVE HAS UNRESOLVED
IMPLEMENTATION ISSUES




“A subcritical experiment involves high explosives and nuclear materials such
as plutonium. High explosives are detonated to create high pressures similar to
those achieved in the early nonnuclear stages of a nuclear weapon.
 6                              GAO/RCED-97-17lR   DOE’s Fisca.l Year 1998 Budget   Request
B-277024

The goal of EM’s Technology Deployment Initiative is to move innovative
technologies into more widespread use across DOE. These technologies are
expected to reduce costs, speed cleanup, or reduce risks. To achieve this goal,
EM has requested $50 million to provide to sites for the first deployment of an
innovative technology that has been tested and demonstrated. EM plans to use
a competitive process to review and select proposals from sites. However, EM
did not base its $50 million request on any detailed study of project needs, and
it is uncertain that additional sites beyond the first deployment will use the
technologies selected for funding. In addition, under this program, sites may
receive additional funding for doing what they should be doing anyway-
selecting the best technologies for the job.

SOME CARRYOVER BALANCES MAY BE AVAILABLE

On the basis of DOE’s program cost estimates for fiscal year 1997, we project
that DOE will have about $2.4 billion in carryover balances at the beginning of
fiscal year 1998 for operating activities and capital equipment procurement in its
six major programs.11 Using the minimum goals for carryover balances
discussed in our April 1996 report,12 we estimate that DOE will need a minimum
of $1.3 billion to pay for commitments made in prior years that have not yet
been completed-leaving a total of $1.1 billion in potentially available carryover
balances at the beginning of fiscal year 1998. DOE has proposed using $53.5
million in carryover balances to offset its fiscal year 1998 budget request for its
six major programs.



?Five of DOE’s six major programs-DP, EM, Energy Efficiency and Renewable
Energy, Fossil Energy, and Nuclear Energy-were able to provide cost estimates
for fiscal year 1997. The sixth program, Energy Research, accepted our cost
estimates, which were based on actual costs through the tist 4 months of fiscal
year 1997. Also, because the cost estimate for DP was higher than the actual
costs for fiscal year 1996, we used our cost estimate for this program.
12Asdiscussed in enc. II, to develop goals for the minimum level of carryover
balances needed to meet program requirements, we adopted goals that are
based on an approach first developed by EM. For example, for operating
funding, these goals assume a minimum of a l-month lag between a
commitment of funding and the actual expenditure of funding for that
commitment. Thus, for a year’s operating funding, a carryover balance goa of 1
month’s funding (or 8 percent of the total obligational authority) would
represent the minimum carryover balance needed to meet program
requirements.
7                               GAOIRCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024
It is important to stress that the $1.1 billion represents only potentially available
balances-the amount of projected carryover balances that exceed the minimum
goal for balances needed to meet program commitments. As we noted in our
April 1996 report, this balance represents a starting point from which to identify
the amount that could actually be used to offset DOE’s budget. DOE should be
able to quantify the unique program characteristics that determine the need for
balances over the goal in order to determine the amount of the available
balances.

In addition to analyzing the carryover balances in DOE’s operating and capital
equipment funding, we identified $19 million in carryover balances available in
EM construction projects at its Savannah River and Rocky Flats sites. (See
table 2.) The balances included $17.9 million from various projects at Savannah
River. For example, from the F&H Canyon Exhaust project, we found $6.4
million in funding that will be available at the completion of the project due to
cost under-runs. At Rocky eats, we identified another $1.1 million in existing
funding for design work to support construction of a interim plutonium storage
vault which, under current plans, will not be constructed.




 8                                GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024

Table 2: EM Construction     Proiects With Available Carrvover         Balances

Dollars in millions


    Construction project      Available canyover
    description /site         balances                       Reason balances are available
    Tritium Loading Line                     $0.831          Cost underrun.
    Modification (SRI                                    I
    Domestic Water                              0.8          Excess contingency       funds.
    Upgrade (SR)                                         I
    Radio Trunking System                          1.1       Cost underrun.
                                                         I
    (SW
    F&H Canyon Exhaust                             6.4       Cost underrun.
    (SR)
    Productivity Retention                    0.068          Project completed.
    Program (SR)
    Additional Separations                    1.129          Cost underrun.
    WV
    Plantwide Fire                            5.882          Cost underrun.
    Protection (SR)                                      I
    Disassembly Basin                              0.6       Cost underrun.
    Upgrade (SR)                                         I
    Tank Farm Services                        1 .I 12        Cost underrun.
    Upgrade (SR)
    Interim Plutonium                              7.1       Project not planned to be
    Storage Vault (RF)                                       continued.
    Total                                    $19.022

Note: Savannah River (SR); Rocky Flats (RF).

STRATEGIC ALIGNMENT AND DOWNSIZING INITIATIVE’S SAVINGS
WERE GREATER THAN PLANNED

In fiscal year 1996, DOE reduced its budget request by $208 million to
reflect anticipated savings of $206 million under the first year of its
Strategic Alignment and Downsizing Initiative. At the end of fiscal year
1996, DOE reported that actual savings under the Initiative were $373

9                                  GAO/RCED-97-171R          DOE’s Fiscal   Year 1998 Budget   Request
B-277024
million. However, our calculation of actual savings for fiscal. year 1996 is
$429 million. This amount represents an increase of $223 million in savings
above the original DOE-planned savings of $206 million, which the fiscal
year 1996 budget request was based upon. These additional prior year
savings may, in part, contribute to potentially available carryover balances
in fiscal year 1998. Unanticipated savings from this program may be an
important consideration as the fiscal year 1998 budget and future budgets
are developed over the 5-year life of this cost-savings program.

AGENCY COMMENTS

We provided a draft of this report to DOE for its review and comment.
DOE said that there were no policy disagreements between us; however,
DOE had some detailed concerns about five areas discussed in our report-
EM’s Privatization Initiative, specific DP projects, EM’s Technology
Deployment Initiative, carryover balances, and the Strategic Alignment and
Downsizing Initiative. Where appropriate, we made changes to the report in
response to specific agency comments. (See enc. III for DOE’s comments.)

With respect to EM’s Privatization Initiative, while DOE agreed that it did
not need $39.2 miLlion for the TRU Waste Transportation, Low Activity
Waste, Power Burst Facility, and Spent Nuclear Fuel Dry Transfer and
Storage privatization projects in fiscal year 1998, it disagreed with our
conclusion that $8.2 million in funding for the Silo 3 project was not needed
in fiscal year 1998. DOE noted that the Silo 3 funds were needed to provide
full up-front funding prior to the contract award to comply with the Office
of Management and Budget’s policy for capital leases. However, in offering
this comment, we do not believe DOE is being consistent. Specifically, as
we note in our report, DOE is not requesting full funding for its largest
privatization project-the TWRS project. DOE officials told us that they did
not request full funding for TWRS because they did not think their budget
request could absorb the full amount of $1.445 billion.

 The officials also expressed concerns about our statement that assessing
 the long-term impact of EM’s privatization projects on the overall federal
 budget is difficult because the f&l cost of these projects is not included in
 the budget request or in agency budget jusmcations. DOE noted that it has
 distributed detailed Project Data Sheets which include the total costs, to
 congressional staff. We note that the Project Data Sheets were prepared at
 the request of congressional staff after we raised questions about the total
 cost of these projects and that the sheets were not distributed until April


 10                            GAOLRCED-97-171R   DOE’s Fisca.l Year 1998 Budget Request
B-277024

1997. However, we have made changes to the report to reflect the fact that
the agency’s justifications-the Project Data Sheets-do include the total cost.

Regarding the specific DP projects, in general, DOE’s comments reflect
corrective actions taken since we completed our work and clarifications on
why questionable funds are needed. Specifically, regarding educational
initiatives, at the time of our review DOE had $670,326 in uncosted
obligations and had requested an additional $700,000 for fiscal year 1998 for
educational initiatives. After our review, DOE said that it has committed
these uncosted obligations and has reduced its fiscal year 1998 budget
request to $315,000. We agree that, if appropriately committed, the
uncosted obligations are no longer available for funding DOE’s fiscal year
1998 budget request and that the reduced request should be considered on
its own merits. Regarding the Device Assembly Facility, we recognize that
DOE is proposing various possible future missions for the facility once it
becomes operational. However, the facility is not yet operational and
currently lacks authorized, defined missions with specific time frames.
Furthermore, DOE has not considered the alternative of temporarily closing
the facility since its original mission is no longer viable.12We believe that
the absence of a mission for the facility raises questions about whether all
of the $10 million requested for fiscal year 1998 may be needed. Finally,
although none of the six subcritical experiments planned for fiscal year
1996 or 1997 have been conducted to date, DOE says that two experiments
are still planned for fiscal year 1997. Furthermore, DOE claims that
significant funding is required to plan for these experiments even if they are
not actually conducted. However, since all of these postponed experiments
were fully funded in fiscal years 1996 and 1997, we believe that it is
appropriate to question whether some funding may remain that may reduce
the need for all of the $40 million requested for fiscal year 1998.

Regarding EM’s proposed Technology Deployment Initiative, DOE
acknowledged that a formal detailed study was not performed to arrive at
its funding request. According to DOE, the $50 million figure was based on
past experience and the agency’s belief that a sufkient number of
proposals should be funded to represent a majority of EM’s cleanup
problems. DOE provided updated information on the- anticipated number of
projects, which we have incorporated. Regarding the possibility that



12Thefacility’s original mission was to assemble nuclear test devices. This
mission is no longer viable because underground testing was banned with
the signing of the Nuclear Test Ban Treaty of 1992.
11                             GAO/WED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024
additional sites beyond the first deployment might not use the innovative
technologies, DOE commented that the initiative requires the identikation
of additional deployment opportunities; however, as noted in our May 1997
testimony,‘3 additional sites are required to submit only letters of interest.

Regarding carryover balances, DOE noted that there are significant
methodological differences in how we and the Department analyze
carryover balances that could yield substantially different results. In
particular, DOE cited (1) our application of the goal fcr operating and
capital funding to the total obligational authority, versus its preference for
applying the goal to the total resources that can be costed, and (2) its use
of a 50-percent goal for operating funds associated with management and
operating contractor’s subcontracts and nonmanagement and operating
prime contracts. DOE also said that the analysis of carryover balances only
identifies areas where the balances should receive greater scrutiny and does
not mean that the balances could actua3ly be used to offset DOE’s budget.

 We recognized and discussed our views on the first difference in our April
 1996 report on carryover balances. We noted that DOE’s approach assumed
 that a percentage of the uncosted balances existing at the beginning of the
 year would again be carried over for an additional fiscal year. We stated
 that this assumption was inconsistent with the assumption made in
 developing the goal in the first place, that is, that uncosted obligations
 would be needed for only a certain amount of time. We continue to hold
 this view. Regarding the issue of the 50-percent goal for certain types of
 contracts, we found that DOE did not have data available to quant@ how
 much its balances were affected by this issue. Therefore, we did not make
 an adjustment to our analysis to reflect this issue. We did make
  adjustments to reflect other unique program requirements, such as an
  adjustment to the capital equipment carryover balance goal for the Energy
  Research program that removes the funding for major items of equipment
  that have the characteristics of construction projects. (See table II.1 for a
  discussion of the adjustments we did make in our analysis.) Finally, we
  agree that the analysis of carryover balances is a tool for focusing on
  balances that should receive greater scrutiny and does not necessarily mean
  that all balances are available to offset DOE’s budget. We have included
  wording in the report to emphasize that this analysis represents only a
  starting pointing from which to analyze carryover balances.


 13Cleanun Technoloerv: DOE’s Program to Develon New Technologies for
 Environmental Cleanun (GAO/T’-RCED-97-161,May 7, 1997).

  12                             GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
B-277024
Regarding our finding that DOE exceeded its Strategic Alignment and
Downsizing Initiative’s savings goal, DOE noted that it had taken a
conservative approach in reporting these savings. It also noted that the
actual higher saving estimates were known to its offices and taken into
account when preparing budget submissions. However, we reported these
additional amounts as potentially available because DOE could not
document the extent to which they were considered during its budget
preparation process.



We performed this work from October 1996 through June 1997 in
accordance with generally accepted government auditing standards. We did
not, however, verify the accuracy of the information contained in DOE’s
Financial Information System, which we used to analyze the carryover
balances. We did not verify the accuracy of this information because of the
limited time available to effectively review the system while still achieving
our primary objectives of reviewing DOE’s fiscal year 1998 bqdget.
Enclosure II describes our objectives, scope, and methodology.

As agreed with your office, unless you publicly announce it contents earlier,
we plan no further distribution of this report until 10 days after the date of
this letter. At that time, we will send copies of the report to the
appropriate congressional committees and the Secretary of Energy. We will
also make copies of this report available to others upon request. Please
contact me on (202) 512-3841if you or your staff have any questions, Major
contributors to this report included Chris Abraham, Gene Barnes, Linda
Chu, Jim Crigler, Mark Gaffigan, Ron Guthrie, Jeffery He& Rachel
Hesselink, John Hunt, Anne McCaf&ey, James Noel, Tom Perry, Ilene
Pollack, Robert Sanchez, Bill Swick, and Charles Sylvis.




Enclosures - 3


13                            GAO/RCED-97-171R   DOE’s Fiscal   Year 1998 Budget   Request
ENCLOSURE I                                                  ENCLOSURE I




GAO



        Department of Energy’s              Fiscal Year
        1998 Budget Request




   14                 GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget Request



                          .. ,: ..
ENCLOSURE I                                                       ENCLOSURE I




GAO Objectives

      l   identify Department of Energy (DOE)
          fiscal year 1998 requests for funds that
          may not be needed.
      l   identify carryover balances that are
          potentially available.




 15                      GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request

               .

                             .(.’..
ENCLOSURE I                                                             ENCLOS‘LTRE1




GAo Scope

       l       Environmental Management (EM)
               program, including
           l    Privatization Initiative
           l    Projects at Savannah River and Rocky
                Flats sites
           l    Technology Deployment Initiative
       l       Defense Programs (DP)--Nevada
               Operations Office




  16                             GAO/BCED-95171R   DOE’s Fiscal Year 1998 Budget Request



                                     .   .;   1
ENCLOSURE I                                                     ENCLOSURE I




GA0 Scope, Continued

     0 Carryover balances in DOE’s major
       programs
     l   Strategic Alignment and Downsizing
         Initiative (SAI)




                       GAWRCED-97-171R   DOE’s F&xl   Year 1998 Budget Request



                          . ..,.’   ..
ENCLOSURE I                                                         ’ ENCLOSURE I




G&3 Summary

        l       EM’s fiscal year 1998 privatization
                request contains at least
            l    five projects that do not need the
                 $47.4 million requested for fiscal year
                 1998,
            l   -eight projects worth $225.1 million
                that have very preliminary cost
                savings assumptions, and
            l    three projects worth $44.5 million not
                 reauired by comPliance agreements.




   18            ..            GAWKED-97-171R   DOE’s Fiscal Year 1998 Budget   Request



                                   .,:
ENCLOSURE I                                                          ENCLOSURE I




GM         Summary, Continued

       l   EM and DP have requested $34.1
           million for specific projects that may not
           be needed.
       l   EM’s $50 million Technology
           Deployment Initiative has unresolved
           implementation issues.
       0   $1 .I billion in potentially available
           carryover balances exist in DOE.
       0   SAI produced more savings than
                  ted.




  19                        GAOIRCED-97-17lR   DOE’s Fiscal Year 1998 Budget   Request
ENCLOSURE I                                                               ENCLOSURE I




GACI EM’s Privatization Request
               Some projects do not need requested funds
 Dollars   in millions




   Project                           Amount not needed
   TRU Waste                                                              $7.7
   Transportation
   Low Activity Waste                                                       2.6
   Power Burst Facility

   Spent Nuclear Fuel Dry
   Transfer and Storage




     20                           GAOIRCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request



                                     :::
ENCLOSURE I                                                            ENCLOSURE I




GAL) EM’s Privatization Request, Cdntinued
           Some projects’ cost savings are based on very
           preliminary assumptions.
       l   TRU Waste Transportation, Low Activity
           Waste Treatment, -Power Burst Facility,
           Spent Fuel Dry Transfer and Storage,
           Waste Pits Remedial Action, Silo 3, and
           Buildings 886 and 779.
       l   Total requested--$2251                 million.




  21                         GAWRCED-97-171R     DOE’s Fiscal Year 1998 Budget   Request



                                .   c   I   ..
ENCLOSURE I                                                            ENCLOSUREI




GAD EM’s Privatization Request, Continued
           Some projects are not required by existing
           comr>liance aareements
       l   Buildings 886 and 779 and the Power
           Burst Facility.
       . Total requested--$445                    million.




  22                           GAOIRCED-97-17lR    DOE’s Fiscal Year 1998 Budget Request



                                    ,,.   ..
ENCLOSURE I                                                           ENCLOSURE I




Gtv-) EM’s Privatization Request, Continued
           Scoring issues

       l   EM is requesting $1.006 billion for 11
           new projects and 1 existing project-.
       l   EM is not requesting budget authority for
           the total capital costs for some projects,
           e.g., the Tank Waste Remediation
           System (TW RS).
       l   DOE’s capital funding request is not
           always related to a useful segment of a
           project, e.g., TWRS.




  23                        GAO/RCED-97-17l.R   DOE’s Fiscal Year 1998 Budget   Request
ENCLOSURE I                                                         ENCLOSURE I




GAo EM’s Privatization Request, Continued
           Scoring issues

       l   DOE’s privatization projects do not fit the
           scoring approach in the Office of
           Management and Budget’s Circular A-1 I
           very well.
       l   Because budget authority is requested
           for only the capital portion of projects,
           operating costs are not addressed in the
           budget request.




  24                        GAO/RCED-97-171R   DOE’s l?iscal Year 1998 Budget Request



                                . ..’
ENCLOSURE1                                                            ENCLOSURE1




GAD EM’s Privatization Request, Continued
          Scoring issues

      l   Operating costs exceed capital
          costs--$58 billion vs. $2.8 billion.
      l   The long-term impact of operating costs
          on outlays will be significant.




 25                         GAOLRCED-97-171R   DOE’s F’iscaI Year 1998 Budget Request

                . .   . .
                                 ... ..
 ENCLOSURE I                                                                                                 ENCLOSURE I




GAO EM’s Privatization Request, Continued
                     Budget Outlays by Fiscal Year

Dollars      in millions
1,400 1




1,000

  800

  600

  400

  200

     0
              1997     1998   1999   2000     2001   2002     2003      2004   2005     2006   2007   2008    2009    2010
                                                           Fiscal year
                                       q    Capital reimbursement q Operating costs




        26                                                  GAO/RCED-97-171R          DOE’s Fiscal Year 1998 Budget   Request

                                 .
                                                                ... .
ENCLOSURE I                                                                 ENCLOSURE I




a0                EM’s Specific Requests

      l           EM has requested fiscal year 1998 funds
                  for specific projects that may not be
                  needed.
              l    $4.9 inillion for well sampling at
                   Savannah River.
          l        $2.4 million for the interim storage vault
                   at Rocky Flats.
          l       $16.1 million for lower-risk cleanups at
                  Rocky Flats.




 27                              GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request




                                    ...%
                                       .
ENCLOSURE I                                                             ENCLOSURE I




w            DP’s Specific Requests

         l       DP has requested funds for specific
                 projects that may not be needed.
             l    $0.7 million for educational               initiatives            at
                  the Nevada Operations Office.
             l    $10 million for operating and
                  maintaining the Device Assembly
                  Facility, which lacks a mission.




    28                           GAOIRCED-97-171R   DOE’s Fiscal Year 1998 Budget Request

                           .

                                     . ‘...’
ENCLOSIJRE I                                                                ENCLOSURE I




GA!O DP’s Specific Requests, Continued

          l       $40 million was requested for four
                  subcritical experiments in fiscal year
                  1998 at Nevada.
              l    All fiscal year 1996 experiments were
                   canceled.
              l    Nbne of the fiscal year 1997
                   experiments have been conducted.
      l           All of the $40 million requested may not
                  be needed.




 29                              ;;AO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget Request



                                    . ..; ..
ENCLOSURE I                                                              ENCLOSURE I




GAO EM’s Technology Deployment Initiative

       l       initiative’s goals:
           l    To move innovative environmental
                technologies into more widespread use
                across DOE.
           9 To use innovative technologies to
             reduce costs, speed cleanups, or
             reduce risks.




  30                             GAOLRCED-97-171R   DOE’s Fiscal Year 1998 Budget Request
ENCLOSURE I                                                       ENCLOSURE I




MO        EM’s Technology Deployment
          Initiative, Continued
      l   Process for achieving goals:
           The Technology Deployment Initiative
           would provide $50 million to sites for
           the first deployment of an innovative
           technology that has been tested and
           demonstrated.
           The Technology Deployment Initiative
           will use a competitive process to review
           and select proposals from sites.




 31        ‘(           GAOLRCED-97-171R   DOE’s Fiscal Year 1998 Budget   Bequest
ENCLOSURE I                                                    ENCLOSURE I




G&I EM’s Technology Deployment
    Initiative, Continued
       l   Sites will issue a request for proposal for
           each project.
       l   The Army Corps of Engineers will help
           develop data on cost savings from the use of
           innovative technologies.
       l   Projects may run from 1 to several years.
       l   Sites may retain any cost savings from the
           first deployment.


                                                      .




 32        ..            GAO/RCED-97-l?lR   DOE’s m   Year 1998 Budget   Request
ENCLOSJJ-fiEI                                                          ENCLOSURE I




WCJ EM’s Technology Deployment
    Initiative, Continued
       l       Issues:
           l    Sites will receive additional funds to do
                what they should do anyway--select the
                best technology for the job.
           0 EM did not arrive at its $50 million
             request through a detailed study.




  33                          GAOLRCED-97-17lR   DOE’s Fiscal Year 1998 Budget Request

                     .   ..
ENCLOSURE I                                                          ENCLOSURE I




GA* EM’s Technology Deployment
    Initiative, Continued
       l   It is uncertain whether additional sites
           (beyond the first deployment) will use
           the innovative technologks.
       l   The number of projects that should be
           funded is uncertain.
           l    - EM recently selected 16 projects to
               ’ fund in FY 1998, pending
                 appropriations decisions.




  34           .’            GAO/RCED-97-17lR   DOE’s Fiscal Year 1998 Bad&t   Reqmst



                                 . :_ .’
 ENCLOSURE I                                                                                            ENCLOSURE I




GA* Status of Carryover Balances for Operating
    and Capital Equipment Funding


                                                                                                          Proposed     use
                                              Projected                                                     of carryover
                      Fiscal year           fiscal year                Carryover                             balances     in
                              1997                  1998           balance goal           Potentially       DOE’s fiscal
                       beginning            beginning             for fiscal year           available          year 1998
   DE program           balances               balances                      1998            balance              request
   ?ergy and
   2itei
   welopment
   ?fense           $597,705,435          $376,514,966             $330,670,692          $45,844,274                        0
   ograms
Et-lvironmental      960,455,457           659,666,594              529,810,518          129,856,076                        0
fvltlnagement
Nrlclear Energy      112,768,365            t&964,365                28,478,831           27,485,534          $3,535,000

El?lergy             474,617,166           487,189,315              242,390,688          244,798,627          15,000,ooo
REsearch
  lergy              237,054,288           146,305,094               21,855,174          124,449,920          -i5,OQQ,OoO
  kiency and
RE?newable
Enlergy
To tal            $2,382,600,711      $1,725,640,334             $1 ,X3,205,903         $572,434,431        $33,535,000




     35                                            GAO/RCED-97-171R               DOE’s FSscal Year 1998 Budget   Request

                                     ..

                                                         . ...
ENCLOSURE I                                                                                             ENCLOSURE I




GA*             Status of Carryover Balances for Operating
                and Capital Equipment Funding, Continued



                                                                                                         Proposed     use
                                           Projected                                                       of carryover
                     Fiscal year         fiscal year                 Carryover                              balances in
                            1997                 1998            balance goal             Potentially      DOE’s fiscal
                      beginning           beginning            for fiscal year              available         year 1998
DOE program            balances             balances                       1998              balance             request
Interior



Fossil Energy      $598,577,883        $515,681,575              $67,493,760           $448,187,815                      0


Energy              356,823,127         1T/,847,063                48,370,042            129,477,021       $20,000,000
Efficiency and
Renewable
Emrgy
Total              $955,401 ,010       $693,528,638             $115,863,802           $577,664,836         $2o,ooo,ooa




        36                                       GANRCED-97-171R                  DOE’s Fiscal Year 1998 Budget   Request

                                   .




                                                        ‘...
 ENCLOSURE I                                                                           ENCLOSURE I




GA!!    Status of Carryover Balances for Operating
        and Capital Equipment Funding, Continued



                                                                                               Proposed use
                                         Projected                                               of carryover
                   Fiscal year         fiscal year          Carryover                             balances in
                           1997                1998      balance goal        Potentially         DOE’s fiscal
                    beginning           beginning      for fiscal year         available            year 1998
                     balances             balances                1998           balance              request
               $2,382,600,711     $1,725,640,334      $1,153,205,903       $572,434,431          $33,535,000


                   955,401 ,010      693,528,638         115,863,802         577,664,836          20,000,000

               ;                                      $1,269,069,705     $1 ,150,099,267         $53,535,000




  37                                       GAO/RCED-97-17lE      DOE’s F’iscal Year 1998 Budget Request
ENCLOSURE1                                                             ENCLOSURE1




GKJ DOE’s Carryover Balances

       l       Carryover balances from line item
               funding are’ also potentially available.
           l    $17.9 million in various line items at
                Savannah River.
           l    $1 .I million for the interim storage vault
                at Rocky Flats.




  38                            GAOIRCED-97-171R   DOE‘s Fiscal Year 1998 Budget   Request




                                     _: ..
ENCLOSUREI                                                        ENCLOSURE1




G&I SAl’s Savings Greater Than Planned

      l   DOE reduced its fiscal year 1996 budget
          request to deal with an anticipated
          savings of $206 million under SAL
      l   We calculated the savings for fiscal year
          1996 at $429 million.
      0 Therefore, about $223 million of
        additional savings have resulted.




 39                       GAWRCED-97-171R   DOE’s F3sc.d Year 1998 Budget Request

               .    . .

                             :,..
ENCLOSURE             I                                                                  ENCLOSURE I




mo             Sources of SAl’s Savings

Dollars in millions




                                  DOE                    DOE                   GAO                Total
                              planned                reported           calculated          additional
Area                          savings                 savings              savings            savings
Support Service                    $90                   $184                   $208
Contracts
Staff
information
Resources
            -
                                    45

                                    30        y-4
 Management
Travel                              35                     40                      56

National                                 6                      6                   6
Environmental                                                       I
Policy Act

Total                          _. $206




       40                                    GAO/RCED-97-171R       DOE’s Fiscal Year 1998 Budget   Request

                          .
                                                 ..i .
ENCLOSURE II                                                                     ENCLOSURE II

                       OBJECTIVES, SCOPE, AND METHODOLOGY


       Our objectives in this review were to identify (1) the Department         of Energy’s
(DOE) fiscal year 1998 budget requests for funds that may not be needed and 12)
funding balances remaining from prior years--carryover bahnces-that may be available
to reduce the agency’s fiscal year 1998 funding requests.


       To identify fiscal year 1998 budget requests for funds that may not be needed,
we focused on DOE’s requests for funding to support the Environmental Management
(EM) program’s Privatization Initiative, specific EM projects at DOE’s Savannah River
and Rocky Flats sites, EM’s Technology Deployment Initiative, and Defense Programs’
(DP) requests for speci.& projects managed by its Nevada Operations Office. In
keviewing privatization, we interviewed officials in EM’s Privatization Initiative office
at headquarters as well as the managers of specific projects slated for privatization at
various facilities in the field. We obtained and reviewed program guidelines, budget
request justifications, project plans and cost estimates, and other pertinent       documents
related to privatization.   For OUTreview of specific EM projects at Savannah River and
Rocky Flats and DP projects managed by the Nevada Operations Office, we reviewed
supporting documentation that justi3ied speciEic project requests for funding. We also
interviewed   local DOE field office staff and management and operating (M&O)
corkactors wifh responsibility for managing these projects and developing the fxxal
year 1998 budget request For the Technology Deployment Initiative, we interviewed
program managers at headquarters and reviewed the fiscal year 1998 budget
justification. We also reviewed the implementing program guidance and policy that
describe the initiative’s process. for deploy$g technologies at different sites.


       To ident@ carryover .balances that’tiay be available to reduce fiscal year 1998
funding requests, we estimated potentially available c-over    balances for operating


41                                      GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
ENCLOSUREII                                                                   ENCLOSURE II
activities and capital equipment procurements for DOE’s six major program areas-EM,
DP, Energy Efficiency and Renewable Energy, Energy Research, Fossil Energy, and
Nuclear Energy. We also examined potentiai carryover balances in EM construction
projects and additional prior year savings from DOE’s overall Strategic Alignment and
Downsizing Jnitiative.


      To estimate potentially available carryover balances for operating activities and
capital equipment procurements at the beginning of fiscal year 1998 for DOE’s six
major program areas, we (1) projected the six major programs’ carryover balances at
the beginning of tical year 1998, (2) set carryover balance goals for each program,
and (3) analyzed the difference between the goals and the projections to identify
potentially excess balances.


       We developed our projected total carryover balances for DOE’s six major
programs by adding carryover balances at the beginning of fiscal year 1997 and new
funding in fiscal year 1997 to calculate the total resources available for operating and
capital equipment activities. We then developed fiscal year 1997 cost estimates based
on the actual costing rate for the first 4 months of fiscal year 1997 as compared with
the costing rate for fiscal year 1996. We then subtracted fiscal year 1997 cost
estimates from the total resources available to arrive at projected carryover balances
for the beginning of fiscal year 1998. We then provided these cost estimates and the
resulting carryover balances to DOE program officials. Five of the program offices
provided their fiscal year 1997 cost estimates-EM, DP, Energy Efficiency and
Renewable Energy, Fossil Energy, and Nuclear Energy. Energy Research accepted our
projected fiscal year 1997 costs. For EM, Energy Efficiency and Renewable Energy,
Fossil Energy, and Nuclear Energy, we used their costs to arrive at the Enal projected
carryover balance for the b@nning of liscal year 1998. Because DP’s fiscal year 1997
cost estimates were higher than actual fr.scal year 1996 costs, we used our fiscal year


42                                    GAO/RCED-97-171R   DOE’s Fiscal Year I.998 Bndget   Request
ENCLOSURE II                                                                     ENCLOSUREII

1997 cost estimates to arrive at its projected carryover balance for the beginnkg of
fiscal year 1998.


       To develop goals for the minimum level of carryover balances needed io meet
program requirements, we adopted goals based on an approach first developed by EM
that we discussed in our April 1996 report on DOE’s carryover balances. Specifically,
for operating funding, these goals assumed a minimum of a l-month lag between a
commitment of funding and the actual expenditure of funding for that commitment.
Thus, for a year’s operating funding, a carryover balance goal of l-month’s funding (or
8 percent of the total obligational authori@) would represent the minirnum carryover
balance needed to meet progrq     requirements. For capital equipment, these goals
assumed a minimum of a 6-month lag between a commitment of capital equipment
funding and the actual expenditure of funding for that commitment.           Thus, for a year’s
capital equipment funding, a carryover balance goal of 6-month’s funding (or 50
percent of the total obligational authority) would represent the minimum carryover
balance needed to meet program requirements. However, in fiscal year 1997,
operating and capital equipment activities are no longer funded as separate categories.
Thus, we used the fiscal year 1996 ratios of funding for operating and capital
equipment activities for each program to estimate the type of funding it received in
fiscal year 1997. This allowed us to determine carryover balance goals that were
consistent with this approach.


       We then compared projected fiscal year 1998 beginning balances to a goal for
the minimum level of carryover balances needed to meet program requirements for
iiscal year 1998. The differen& between the projected balances and the carryover
balance goal represents the pool of potentially available -over          balances for fiscal
year 1998. In analyzing the,@fferences, we adjusted the goals, where possible, to
account for individual programs’ characteristics that would afYect the amount of the


43                                    GAOiRCED-97-171R   DOE’s Fiscal   Year 1998 Budget   Request
ENCLOSURE II                                                                       ENCLOSURE II

carryover balances needed to meet unique program requirements. Table II.1
summarizes   the areas where we made adjustments to DOE’s programs.

Table ii.1: Adiustments   to Carrvover Balance Goals for DOE Programs


  DOE program             Specific program adjustment

  Environmental           EM privatization funding: Not included in the analysis because it
  Management              consists of unique financing for long-term, construction-reiated projects.
  Energy Research         All programs: The carryover balance goal for capital equipment
                          procurement was adjusted to remove funding for major items of
                          equipment that have the characteristics of construction projects.
  Energy Research         Small Business innovative Research program: Not included in the
                          carryover balance analysis because it is not funded by a specific
                          appropriation but by an assessment on all government research and
                          development funding.
  Nuclear Energy          Naval Reactors program: Excluded because these activities are not
                          controlled by Nuclear Energy.

  Nuclear Energy          International Nuclear Safety program: Not included in the analysis
                          because funding is for construction-related projects in the former Soviet
                          Union.
  Nuclear Energy          Isotope Production and Distribution fund: Fiscal year 1997 beginning
                          uncosted obligations were reduced to reflect revenues and
                          reimbursements. The fiscal year 1997 new obligational authority was
                          adjusted to reflect the net appropriation and cash collected from the
                          sale of isotopes.

  Fossil Energy           Clean Coal Technology program: Not included in the analysis because
                          funding is primarily for long-term, construction-related projects.
  Defense Programs        Weapons Activities and Other Defense Activities appropriations:
                          Adjusted to subtract funds for nuclear nonproliferation, worker training,
                          and inventory because these funds are not managed by DP.


        We did not develop -over           balance projections and goals to identify potential
excess funding for DOE’s constiction          projects. As we noted in k-u- April 1996 report,
there is no need to establish a goal for carryover balances for construction projects
because each one is unique, and its level of -over             balances can be easily measured


44                                          GAOIRCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
ENCLOSURE II                                                                   ENCLOSURE II

against the remaining scope of work, milestones, and specific budget request.
Therefore, we reviewed line item funding for specific EM construction projects at
Savannah River and Rocky Flats to identify any carryover balances that may be
available. We examined project cost and budget plans, actual cost data, scope
information, and scheduled milestones for completion.       We interviewed DOE and
contractor officials at the site to determine if any projects have carryover balances
that are in excess of project needs.


      Independently of our analysis of carryover balances for DOE’s major programs,
we also examined DOE’s Strategic Alignment and Downsizing Initiative to identify any
savings above planned budget reductions that may have been realized in prior years.
To measure the savings under DOE’s initiative, we reviewed the areas designated for
savings and DOE’s fiscal year 1996 amended budget request. We checked the status of
each of the 45 implementation plans, including the six key strategies for achieving cost
savings, and calculated actual fiscal year 1996 savings under the initiative. We
discussed procedures for claiming and reporting savings with officials at the Offices of
the Chief Financial Officer and the Chief Information Officer.




45                                     GAO/RCED-97-171R   DOE’s Fiscal Year 1998 Budget   Request
ENCLOSURE   III                                                                             ENCLOSURE III


                      COMMENTS      FROM     THE DEPAR’IMENT              OF ENERGY


                                                   Department        of Energy
                                                       Washington.   DC 20585




                                                        June 18, 1997


                  Mr. Victor S. Rezendes
                  Director, Energy, Resources,
                   and Science Issues
                  Resources, Community and
                   Economic Development Division
                  U. S. General Accounting Office
                  Washingtoq DC. 20548

                  Re:    GAO draft report “Department of Energy: Fiscal Year 1998 Budget Request,“.June 1997,
                         .GAO/RCED-97- 17 1R

                  Thank you for the opportunity to provide agency comments on the referenced draft report. We
                  have reviewed the subject report and held discussions with General Accounting Of&e (GAO)
                  representatives. We believe that there are no policy disagreements between us, but onIy
                  questions of timing and execution.

                  The Department’s detailed comments are provided in the enclosure to this letter. A summary of
                  the major issues is provided as follows:

                  .      We believe that the characterization of the Department’s carryover balances by GAO as
                         “‘potentialIy available” (based on GAO’s goals for carryover balances) may be misleading.
                         We request that GAO further highlight its finding that these “potentially available”
                         balances merely represent a starting point by which to identify amounts of balances that
                         might be available to offset DOE’s budget. Additionahy, there are significant
                         methodological d&rences between the Department and GAO in the analysis of carryover
                         balances which may yield SubstantiaUy difkent resuits.

                  .      GAO has indicated that the Department has exceeded its Strategic Alignment Inhiative
                         (SAT) savings goals and should take fkh advantkge of these savings in fiture budget         -
                         requests. We agree with that conchtsion, and it is our planning objective. The
                         Department does consider a variety of costing changes/reductions to on-going programs,
                         includin&4I,   and expects its budgets to reflect such savings. :
                                                                                        .
                  .      GAO has characterized requested tiding for the Devi&Assembly kaoility (DAR) and
                         selected subcritical expknents as potentially surphts to the needs of the Department.
                         While .t$e end of the Cold Wai and the Comprehensive Test Ban Treaty have reduced
                         some testing.a&ities,   DAF remains i vakble fidity with seyerd planned missions.
                         Additionally, two subcritical tests are planned for fiscal year 1997with more planned for

46                                              GAOIRCED-97-171R        DOE’s Fiscal Year 1998 Budget    Request,
 ENCLOSUREIII                                                                                    ENCLOSUREIII




                  the future. These tests serve as a critical component of our Science Based StockpiJe
                  Stewardship program and will re&force and demonstrate our readiness to wnduct a
                  nuclear test if required. Therefore, these funds wntinue to be required to meet the
                  Department’s evolving missions. Additionally, subcritical tests are planned in fiscal year
                  I998 and, as a critical component of our Science-Based Stockpile Stewardship program,
                  serve to reinforce and demonstrate our read-in-s to conduct a nuclear t&f if required.
                  Therefore, these fimds continue to be required to meet the Department’s evolving
                  missions.

              .   GAO suggests that the Environmental Management Technology Development budget
                  request was not based on a detailed study of project ne+ds. While a detaiied study was
                  not performed, a reasonable estimate was developed based on past experience and
                  anticipated future technoIogical requirements. The projects that we plan to select will
                  have to meet these requirements and demonstrate mu!&application potential.

          .       The GAO report has concluded that a sma.Upercentage of the privatization.fimds
                  requested in fiscal year 1998 will no longer be needed in fiscal year 1998 for those projects
                  because of project deferraIs which have arisen since the time the fiscal year 1998 budget
                  was formulated, reductions in project scope or cost reestimates. The Department will
                  keep the Congress informed of developments in our budget request, and when significant
                  changes are warranted, the Department will propose budget amendments, supplement&,
                  or reprogrammings to recognize these changes.

          .       We share GAO’S view that privatization cost savings estimates are important and we are
                  committed to making available detailed cost estimates prior to c&t-act award. This
                  information wilI supplement other wntractual information which the Secretary has
                  wmmitted to provide to key Congressional wmmitiees prior to contract award.

          We are available to discuss these matters with you at your convenience. If you have any
          questions, please call me or have your staff contact Mr. Richard Sweeney (30 1) 903-255 1.




                                                                 J.kbeth E. Smedley
                                                                Acting ChiefFtnanciaI 03icer
                                   :
          Enclosures




47                                            . , GAOLRCED-97-171R DOE’s Fiscal Year 1998 Budget Request




                                                  :. ..: .
 ENCLOSURE   III                                                                               _ ENCLOSURE III



                                                                                      Enclosure 1

        The following comments are prepared to assist GAO in understanding the Department’s detailed
        concerns or explanations related to the various issues which GAO hasraised in its report:

        I.     Carrvover Balances

               a. The Depamnent believes that the GAO report should make clear that the GAO model for
               uncosted balances identifies areas where balances should receive greater scrutiny; that does
               not mean that the balances could aetuahy be used to offset DOE’s budget.

               b. The Department does not agree with the methodology applied by the GAO in its
               development of “potentially available” uncosred balances. GAO’S projected numbers were
               based on percentages of totaI obligational authority (TOA). The Department currently uses
               actual cost as a basis for anaieng unwsted balances rather than TOA We believe GAO
               should recognize “actual costs incurred” as the basis for the development of their “potentially
               availabIe” uncosted baiakes because cost (i.e., past performance) is more indicative of future
               performance in ongoing program execution than total obhgational availability.

              c. There are significant methodologic.aI diierenees between the Department &d the GAO
              in the analysis of carryover balances which may yield substantially different results. In
              response to the April 1996 GAO Report, the Department initiated a new systematic approach
              for the analysis of uncosted balances. This approach differs from the GAO approach as
              follows: GAO applies a flat 8% goal to operating funds, while the Department applies i 50%
              goal (threshold) to those operating funds associated with M&O/lMC subcontract (external)
              costs and non-M&O @rime) contracts, The Department’s threshold of 50% is based on the
              current operationaI procurement prackes of the Department and its M&O/IMC contractors.
              The normal execution of prime contracts and subcontracts of M&Os/IhJCs is to award them
              throughout the fiscal year. The even distribution of awards throughout the fiscal year
              supports the expectation that approximately 50% of the costs will occur in the next fiscal
              year: The GAO threshold of 8% of total obligational authority suggests that awards for a.lI
              annual contracts would occur in the first month of the fiscal year, thereby generating an
              unwsted balance of about one month (8%) at year end. Under current operations, neither
              the Department nor its M.&OAMC conkactots could award ah contracts in such a short
              period.

              d. We believe the GAO. approach may foster th$ false perception that the Department’s
              unwsted balances are not being managed effxtively. In fit& the Department’s uncosted
              lxdances are at the lowest point in over 15 years, dropping $4.2 billion since IT 1993. We
              believe the Depar&u$ has been working diiigedy with GAO to develop a methodology for
              analy%g miwsted l@anceswhicb will yield results in the form of reduced uncoskxl balances.
              As the Depaztment’s ~ormance       over the last three years has shown, we are moving in the       .
              right direction, We believe ,the DOE approach is more consistent with the realistic
              expe&tions forprogkm exeu.rtion, +rd more closely refkcts the Department’s perfannarice            _
              in reduking tnx.o&d balances over the last several years.




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        2.      Strategic Alirmment Initiative

              We are pieased that the GAO has reported that the Department has exceeded its Strategic
              Alignment initiative (SAI) target goals. In order to avoid charges that savings were not real,
             theDepzftmenthastaconsenatk              e approach to reporting these savings. However, any
             actual higher savings estimates were known to field and HQ offices long before the
             publication of year-end savings reports, and these ofkes routinely take all such actual
             execution infbrmation into &count when preparing budget submissions such as the FY 1998
             submission There is no way of knowing whether or not these additional savings contributed
             to FY 1996 year-end unwsted amounts.




                                                 . 1GAO/RCBD-97-171R   DOE’s Fiscal    Pear 1998 Budget        Requat
49


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      3.   Defense Pro&rns

           a.     Defense Promams Education Tnitiatives - Paee 8

                   (1) The FY 1998 budget request for the Education program for Nevada is $3 15,000,
           not $700,000 as stated in the GAO report. The unwsted balan- as of March 3 I, 1997,
           were $670,326, of which !i479,124 has since been costed. The remaining unwsted balance,
           as of May 3 1, 1997, is $191,202, which has been wmmirted and wilI be costed once the
           grants are closed out.

                    (2) The FY 1998 budget requirement of $3 15,000 is needed to continue support to
           the HistoricaIly Black CoIIeges and Universities (HECU), l5spanic Association of Colleges
           and Universities (HACU), and educational partnerships. Specifically, the fimding requested
           for the HBCU wiLl provide support to the Fort Valley State Co#ege 3+2 program through
           which students are recruited into Fort Valley State College for three years and then transfer
           to the University of Nevada-Las Vegas for two years and earn dual degrees in health
           physi&nathernatics or environmental enginee-ringImath~cs.       The HBCU fimding will also
           fund an ongoing research and development project at Fisk University. The HACU funding
           also will provide support to a Hispanic serving institution in support tif the Department’s
           Hispanic OutreachInitiative. The requirements &ndiig till also provide support to dontinue
           our ongoing education activities in local communities. The& educational partnership
           activities include the Science Bowl, Science Now, and Spanish 30~1.

           b. Device Assemblv Faciiitv t’DAF) - Page 8

                    (1) Although the end of the CoId War and the nuclear test moratorium that led to the
           Comprehensive Test Ban Treaty have reduced some testing activities, the Nevada Test Site
           remains a key experimental faciIity for Stockpile Stewardship. Defense Programs plans the -
           following missions for the Device AssembIy Facility (DAF), once it becomes operational: 1)
           Subcritical Experiments - the assembly of subcritical experiments; 2) Test Readiness -
           maintainthe capabilityto assemblephysics packagesfor a series of one to three nuclear tests
           in the event the President de&es a “Supreme N&o&l Interest” test; 3) Damaged Nuclear
           weapons - maimin the capabiity to accept and disable a damagednuclear weapon (assume
           one exercise every other year to maintain skills, capabilities, fkilities, and to main&in and
           develop proceszs and procedures); 4) Replacemeat of AbIe Site, A-27 - the assexnbly/staging
           of High Explosives (HE) and radioactive materials in support of LLNLL&K              activiiies
           previously performed iri Able Site, (emmpks in Fy 1996 & Fy 1997 included Raincoat,                   _
           Rainwit ICI.,Nellie IO, l&12,1?; J&saw and Monarch).        .

                     (2., Possible fbturi missions for DAF include: I) . T&g       1 ingelleral,thisarea
           &o$d include la6 hands-on practice on m+ar weaponsIr&xrs,              and “off$ne”. work by      .
           laboratory personnel with one df a kind components or assemblies. The mdst developed of _
           these initiatives is the Joint Nuclear Explosives Training Facility, a.Los Alamos sponsor@
           initiative to provide form&xl,      structured training to laboratory personnel in a realistic




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         setting. This initiative is currently structured to use either Area 27, or DAF when it is
         available, as an extension oftraining facilities at Los Alamos; ii) Enhanced Surveilkme - the
        DAF could be used for field testing and demonstration of advanced techniques for the
        surveillance program; iii) Advanced Manufacturing, Design and Production Techniques
        (adapt) - the DAF could be used for field testing and demonstration of these techniques prior
        to full implementation; iv) Weapons Modifications/Life Extension Programs - the DAF is
        well suited to weapon modifications and life extension programs which, if conducted at
        Pantex, couId significantly disrupt the ongoing assembly and disassembiy operations being
        conducted there. DO33NV developed a mode! for DAF contribution to a life extension
        program which c&Id be adapted to a variety of weapon systems needs. The activities
        associated with getting DAF operational by the end of fiscal year 1997 are estimated to cost
        $14 mihion. Beginning in fiscal year 1998, operational costs of the facility wiIl be
        approximately $1 I r&lion per year for maintenance and operation, excluding project activity
        C0St.S.


        c. Subcritical Exueriments - Pace 8

                 (1) The Department of Energy is planning to conduct two “subcriticaI” high
       explosive experiments underground at the Nevada Test Site in fkcal year 1997. These
       scientific experiments will involve subcritical configurations of high explosives and nuclear
       weapon materials, such as plutonium, and will provide te&nical information important for the
       Stockpile Stewardship and Management Program. These will be the first in a continuing
       series planned for the titure at the Nevada Test Site.

                 (2) Even though no subcritical experiments have been conducted to date, significant
       finds have been required to prepare for their execution. When the Secretary determined that
       it was mxxsary to postpone these experiments in fiscal year 1996, actions were taken to put
       the first two planned experiments in a semi-operational state so they couid be restarted and
       compieted when the go-ahead was given without sign&ant additional te&nical delay, or
       rebuild and restart costs. Rather than abandoning the experimental site, the diagnostic and
       other schtific equipm for the experimentswaspreservedin a v&y that damagewould not
       result from the hiatus, andthe undergroundcomplexwas also maintained. In addition, in this
       time pea-id the Departmentconductedtwo over#l omonal exercisesfor the experimental
       teams and several other “dry-runs” and trials have taken place to assure that sbff and
        equipment are in good condition. Not only will these activities benefit future experimental
       e.Sorts at the NTS, but they have also served to reinforce and demonstrate our readiness to
       conduct a nuclear test ifthat were required by the President: Fiiy,       planning work and
       diagnostic development was b&m on the tech&al aspects of futuze experiments to optiinize
       their value in expectation that the go-ahead for them would be forthcoming..




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     4.   Environmental Management

                   a. $50 Million Technolozv Dedovment Initiative

            I. The GAO draft report has suggested that “sites will receive additional funds to do
            what they should do anyway-select the best technology for thejob.” However, we
            believe additional factors need to be considered. There’are regulatory barriers and
            perceive business risks associated with the use of new technology. Ofkn an exkting,
            albeit less efficient, technology is proposed to the regulator since it represents the
            surest opportunity for acceptance. The proposed Technology Depioyment Initiative
            (TDI) wouId eliminate the business risks by helping fund the first implementation of
            competitively selected alternative technology projects that meet a multi-site
            pet5ormancespecScation This approach is intended to spur widespread application
            of alternative technologies, thereby accelerating cleanup schedules and ultiitely
            reducing costs.

            ii. The GAO draft report also states that: ‘Zh4 did not arrive at its $50 million request
            through a detailed zxudy.” While a formal detaiIed study was not performed, the $50
            million figure is based on our past experience and the belief that s&&ant funding to
            support proposals that represent a majority of the EM probIem set should be
            supported in order to demonstrate the viability of the multi-application model. We
            believe that IO to 20 projects annua.Uy,resulting in an estimated 50 TDI projects over
            a four-year period of this prograq would be sufficient to institutionalize the concept
            in EM.

             iii. GAO’s briefing charts include a statement that, “The number of projects that
            should be or will be funded is uncertain.” The TDI approach cahs for DOE
            Operations Offices to compete for funding of prospective projects. We have selected
            16.projects for tinding through the TDI in fiscai year 1998, subject to available
            appropriations.

            iv. Finally, the GAO dr& report states that, ‘It is uncertain that additional sites
            (beyond the first deployment) wiIl use the innovative technologies.” Participation in
            the TDI q&-es identitication of specificdeploymentopportunities beyond the initial
            application prior to selectionof a project for i$nding, Field Office Managerswill be
            requiredto submit letters of commitmeJ&that cite the .site!oper&.ionalfimding to be
            &cat& to the proposed deployment. The TDI-process will requk all participating
            sites to wo& coopekively during the qualification and implementation stagesto
            ensurethat barriers to deployment are defined and resolved.’ The initiative enables
            earlyresolutionto theseharriers, includiq$regulat&y, stakeholder,and/or operational         .
            concerns.,.

            v. The Department’s environmental management technology development program
            has sponsored over 700 alternative te+kologies since its inception Over 200 are
            alreadycommerciaIlyavailable., O&r 100 new technoIogiesha4 been implemented-




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              or have been selected for implementation. Half of these have occurred since jun
               1995; but it is .onIy through widespread deployment that the full potential of our
              investment in new technologies can be realized. We are confident that the TDI wit1
              spur multipIe applications of ahemative technologies that reduce risks to peopIe and
              the environment and reduce cieanup costs.




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              b. Privatization

              GAO s@ficahy addressedfunds requested in the fiscal year 1998 budget for projects
              EM is targeting for privatization. Environmental Management has work4 very
              do&y with the GAO on the privatization issues during the last seve~akmontbs with
              a focus on explaining the compIexities and opportunities of this new program and to
              improve our own efforts. ’

               In an effort to foster this continuing dialogue, we recommend the following changes
               in your report. Fist, we suggest a modification of page 2 (and supporting pages 5
              and 6) relating to fiscal year 1998 funding requirements. We agree with your               -
              conclusion that X39.2 &lion in f&ding relating to four projects is not needed in fiscal
              year 1998. These funds will not be needqdfor these projects because of project
              deferrals which have arisen since the time the fkal year 1998 budget was formulated,
              reductions in project scope, or reestimat es ofcost. These projects will require $10.5
              million of the X39.2 m&on in funding in fiscaI year 1999. However, we disagree with
              your conclusion &at the $8.2 miliion in fhclmg foi the Fernaid, Ohio Silo 3 project
              is not required in fiscal year 1998. We believe these funds are needed to comply with
              the O&e of h4anagementand Budget’s policy for budgeting of capital leases, which
              requires t%Il up-front funding for the project at contract award,.and to avoid the risk
              that Congress might not follow through in f&iii     a project in 1999 if the project was
              partially funded in 1998.

              Second, we share the view that cost savings estimates are very important and plan to
              make available detailed cost estimates prior to wntract award. This information
              would supplement contractual information which the Secretary has wmmitted to
              provide to key Congressional Committees thirty days prior to contract execution.
              (See enclosure 2)

             At the same the, it should be noted that the use of fixed-price, competitive wntracts
             that shift performance risk to the contractor have been found in many cases
             worldwide to offer sign&ant         cost savings potential over traditional cost



               and upgraded to be mu& more accurate. For cxautple,.one of the eight projects cited
               by GAO is the Fernal% Ohio Waste Pits pro&& DOE has developed an independent
               government estimate and has obtained Severat tied price competitive bids for this
             . project which are currently being evaluated Although the detailed i&ormation is
               procurement se&&q these bids support DOE’s savings estimate for this project.
               In additiop., for theLow Adivity Waste project at Idaho, a w&act wig awarded in
               April 1997’with Fluor-Dar@ (for completion in &to&r) to study the project and to              .
               prepare detailed life-cycle wst and schedule estimates.
       ,;-
             Third, t&G&~        rqicrifails   to e&in   that there were important reasons(apart Corn




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              wmpfiance) to include three decontamination and decommissioning projects in its
              privatization request. DOE agrees that these three projects worth $44.5 mihion were
              not required by any existing wmpliance agreements and could be postponed” (page
              2). However, we b&eve that this language should be cIarified (as well as supporting
              page 7) because GAO’s conclusion implies that EnviromnentaI Management should
              0nIy rtxxive privatization fimding for compliancedriven activities. These three
              projects, for which $44.5 miIIion in fiscal year 1998 funds were requested,were
              chosen for their mortgage reduction potential; that is, by completing the early
              decommissioning of these facilities, the life-q&e cat-tying costs for theso facilities
              couid be reduced significantly.

              Fourth, the GAO repott states that “EM’s privatization request does not include the
              total capital costs for some of the projects and does not in&de any operating costs
              for the pro&z&s. As a result, it is difkult to measurethe fidi impact of the requested
              i%ndiig on the overall federal budget” (page 5). Also, on page 7, the statement was
              made that-“assessing the long-term impact of EM’s privatization projects on the
             overall federal budget is dif&uIt because the I11 cost of these projects is not included
             in the budget request or in agency budget justifications.” The Department has widely
             distributed, i3Iy and openly a detaikd accounting-of a.costs related to the proposed
             privatization projects. Briefings on numerous .occasioti by the Assistknt Secretary
             for Environmental Management to Members of the Congressand their st.&s, which
             commenced in February, provided detailed capital, operating and support costs.
             Further, detailed Project Data Sheets for each of the twelve fiscaI year I998
             Privatization Projects were given wide distribution, including the House and Senate
             authorizing and appropriations wmmittw staffs and the GAO staff These same
             Project Data Sheets, which provide a l%II accounting of & project costs on a year-by-
             year basis, were formally provided to the House Energy and Water Development
             Subcommittee of the House Appropriations Committee in April.

             Fii we do not agree with GAO’s conclusion on page 6 that “EM.... did not review
             savings estimates for these projects.- In fact, the cost savings estimates and cost
             effectiveness anaIyses were subject to detailed reviews at both the field and
             Headquarters IeveI. The management review process for the fiscal year 1998 projects
             started in SeptemkerI!396 and wntinues to the present TheXscal year 1998 projects
             were subjected to a fortnaI “murderboard” cost review process. Intensive interaction
             between Headquarters and the field of&es resulted in nurnqo~ improvementsto the
             cost estimates and cost effkctiveness analyxs.           At the same time, we intend to
             continue strengthetig this process.

             GAO should make clear @at there is sqme double counting of projects among the
             three fqding amouib cited in the report ($47.4 millioq $+I.5 million, and $225.1
             million).
                                .     -




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                The EM program is irnpkknenting numerous measures to improve our accountability
                and effectiveness in managing the Privatization Program These include:

                         The establishment of regular reviews of the Tank Waste Remediation System
                and Advanced Mixed Waste Treatment projects, the Department’s two largest
                privatization projects. These reviews are being conducted by the Assistant Secretary
                for Environmenta Management and’other Headquarters officials. -

                      The review, and evaIuation during source selections, of contractor project
                managers’ qualifications and experience in large, fixed-price environmental work.

                       The review, by DOE Headquarters, of privatization Requests For Proposals
                and contracts and the inclusion of DOE Headquarters privatization team members on
                Source Evaluation Boards.

                        The development of the Privatization Program Management Plan and the
                Privatization Handbook to describe organizational roles and responsibilities and to
                promuIgate lessons-Ieamed in managing the fiscal years 1997/1998 privatization
                projects.

                         The independent review of privatization project team qualifications      .and
                staffing by the Department’s Office of Field Management.

                         The issuance of guidance in March 1997 for EM-wide use in developing
                privatization cost estimates and conducting cost-effectiveness analyses.

                In addition, Secretary Peiia has directed the appointment of a senior official to head
                the Office of Contract Reform and Privatization and report to the Deputy Secretary.
                That Office will coordinate the implementation of privatization policies and oversee
                the overall privatization &ort across the Department, including the I34 privatization
                program.




                                                 .GAO/RCED-97-17lR         DOE’s F’iscal Year 1998 Budget Request
 56

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                                                                                          Enclosure   2

                                           The Secretary of Energy
                                              Washington, DC 20585

                                                      June 6, 1997

              The Honorable Bob Livingston
              Chairman
              Committee on Appropriations
              U.S. House of Representatives
              Washington, D.C. 20515

              Dear Mr. Chairman:

              I am writing to express the Department ofEnergy’s (DOE) concern about possible
              large reductions in the funding level included in the President’s budget request for
              Defense Environmental Management Privatization projects for fiscal year 1998.
              The Department is particularly concerned .tfiat fimdii for these projects may be
              totally eliminated in fiscal year 1998. At the same time, we recognize that
              Congress has raised some serious issues about the implementation of our
              privatization program. This letter outlines the impkance of our fiscal year 1998
              budget request for privatization and several major steps that the Department is
              taking to address issues raised by the Congress.

              Insufficient funding for privatization in fiscal year 1998 would increase both the
              short- and long-term costs of the Environmental Management program, would
             disrupt the progress that has been made in accelerating the ckanup of many of the
             Department’s contaminated sites, and could subject the Department to significant
             fines and penalties for failure to meet milestones in compliance agreements and
             other legal requirements in 1998 and later years. Moreover, deferral of substantial
             funding for the Department3 privatization program from fiscal year 1998 would be
             expected to cause serious problems because of the difiiculty of obtaining major
             increases in outyear fundimg under the statutory caps on discretionary spending
             under the Bipartisan Budget Apxmem             This situation will be exacerbated
             significantly if the Committee also rejects the Department’s request for @I up
             front funding for construction projects in the Defense Assets Account.

             The Federal Government is legally obligatedto conduct eight of the projects for
             which privatization funding is requested in fiscal year 1998. The Department must
             perform these activities, either as privatized projedts or through traditional
             contracting mechanisms. These projects are in various States, including Idaho,
             New Mexico, Ohio, Tennessee, and Washington. The Departmeni does not have




57                                              GAO/RCED-97-171R       DOE’s Fiscal Year 1998 Budget      Request
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               suf5cient funding in its base budget request to accommodate the compli&e-
               related privatization projects in addition to other required Environmental
               Management activities.

               Privatization will enabIe the Department to conduct the environmental cleanup
               program at our sites faster and at lower cost than under the Department’s
               traditional contracting approaches. Private sector firms, however. wili be
               unwilling to invest their capital without a commensurare commitment to
               privatization from the FederaI Government.

               At the same time, I recognize the need to strengthen~the management of the
               privatization program to assure that the Department delivers its important benefits.
               I also believe that the Department must increase its accountability to the Congress
               concerning its privatization projects. To advance both of these goals. I will:

                      ( 1) Appoint a senior individual to guide and coordinate the implementation
                      of the Department’s privatization initiatives. This individual wiIl direct’the
                      Department’s Offtce of Contract Reform and Privatization and will report
                      directly to the Deputy Secretary/Chief Operating Officer;

                      (2) Support legislation providing a 3O-day waiting period for k&y
                      Congressional Committees to review planned privatization contracts
                      funded under the privatization account, as well as the next phase of the
                      Har&ord Tank Waste Remediation System contract. The-Department will
                      not sign these privatization contracts without providing ‘the opportunity
                      for review under these legislative provisions; and

                      (3) Direct the Office of Environmental Management, in coordination with
                      other appropriate DOE offices, to strengthen training programs for DOE
                      personnel involved in privatization initiatives, enhance DOE cost estimating
                      capabilities for privatization projects, and expand and supplement DOE
                      expertise in reviewing priyatization contract solicitations and contracts.

               The Department has made sigt$icant progress in recent years in improving the
               efficiency of Environmental Management projects, tid we are intensifying our
               efforts in this area. We believe that privat+ion   is ,an important element of this
               strategy and is essential to assure implementation of our environmental compliance
               agreements. I strongly urge you to support this critical Environmental
               Management initiative.          ’




                                                      Federico Peiia


(302205)~
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58                                                GAO/RCED-97-171R        DOE’s Fiscal    Year 1998 Budget   Request
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