oversight

Department of Energy: Clearer Missions and Better Management Are Needed at the National Laboratories

Published by the Government Accountability Office on 1997-10-09.

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

                   United States General Accounting Office

GAO                Testimony
                   Before the Subcommittee on Oversight and Investigations,
                   Committee on Commerce, House of Representatives




For Release
on Delivery
Expected at
                   DEPARTMENT OF
10:00 a.m. EDT
Thursday           ENERGY
October 9, 1997



                   Clearer Missions and Better
                   Management Are Needed at
                   the National Laboratories
                   Statement by
                   Victor S. Rezendes, Director,
                   Energy, Resources, and Science Issues,
                   Resources, Community, and Economic
                   Development Division




GAO/T-RCED-98-25
             Mr. Chairman and Members of the Subcommittee:

             We are pleased to testify on the changing missions of the Department of
             Energy (DOE) national laboratories and their management. In the past we
             have reported on how improved management is needed if DOE and the
             laboratories are to successfully meet new mission responsibilities. The
             information included in this testimony is drawn from our past work on
             DOE’s national laboratories, contract reform, and other issues.1


             In summary, Mr. Chairman, despite a consensus on the need to sharpen
             the laboratories’ focus and improve DOE’s management of them, achieving
             these goals has been elusive. DOE currently manages the national
             laboratories program by program, not laboratory by laboratory or as a
             coordinated research system with diverse objectives. Major new efforts in
             such areas as stockpile stewardship and major research projects—projects
             that heavily involve laboratories—will require significant improvements in
             how DOE and the laboratories are managed. Past frustration over the
             laboratories’ loss of mission focus and management weaknesses has led
             some experts to suggest alternatives, such as privatizing them or
             developing quasi-governmental entities to oversee their missions and
             activities. While the lack of consensus on what the laboratories should do
             has made fundamental changes hard to achieve, some changes are
             occurring in laboratory management. Nevertheless, the challenges facing
             the Department—in important areas such as managing the stockpile
             stewardship program—raise concerns about how effectively DOE can
             manage these new initiatives given their past weaknesses in project
             management. The Government Performance and Results Act offers a
             framework to achieve fundamental change.

             Before discussing these issues in more detail, we would like to provide
             some background on the national laboratories.


             DOE manages the federal government’s largest research and development
Background   system, consisting of about 30 laboratories, with about 58,000 employees
             and operating budgets of about $7.5 billion annually. Nine of these are
             multiprogram national laboratories that account for about 70 percent of
             DOE’s laboratory budget. DOE estimates that it has invested more than
             $100 billion in all of its laboratories over the past 20 years. Most of DOE’s
             multiprogram national laboratories were established during or just after
             World War II as part of the Manhattan Project, which developed the

             1
              See Related GAO Products at the end of this testimony.



             Page 1                                                        GAO/T-RCED-98-25
                          world’s first atomic bombs. These national laboratories have since
                          expanded their missions to encompass civilian research and development
                          in many disciplines—from high-energy physics to advanced computing to
                          human genetics. DOE owns the laboratories but contracts with universities
                          and private-sector organizations for their management and operation.
                          Nearly all of DOE’s national laboratories are operated by nonprofit
                          institutions.


                          The nine national laboratories are an important national resource, having
Laboratory Missions       made significant contributions in a variety of scientific disciplines.
                          However, they have also expanded their original missions and suffer many
                          management weaknesses. In prior work on the national labs, we found
                          that:

                      •   DOE had not ensured that work at the national laboratories was focused
                          and managed to make maximum contributions to national priorities.
                      •   DOE had not established clear missions for the laboratories or developed a
                          consensus among laboratory and government leaders on the laboratories’
                          appropriate missions in the post-Cold War environment. The laboratories’
                          missions are set forth as broad goals and activity statements rather than as
                          a coordinated set of objectives with specific implementation strategies for
                          bringing together the individual and collective strengths of each facility to
                          meet departmental and national priorities.

                          DOE  exacerbated this problem by treating the laboratories as separate
                          entities, rather than as a coordinated national research system with unified
                          goals. We believe the lack of proper departmental mission direction was
                          compromising the laboratories’ effectiveness in meeting traditional
                          missions and their ability to achieve new national priorities. DOE currently
                          manages the national laboratories program by program, not laboratory by
                          laboratory or as a coordinated research system with diverse objectives.
                          This approach prevents the laboratories from fully capitalizing on one of
                          their great strengths—combining multidisciplinary talents to solve
                          complex, cross-cutting issues. For example, research on preventing the
                          proliferation of nuclear weapons requires combining expertise in
                          nonproliferation and weapons design—activities that are carried out by
                          different labs and managed by different assistant secretaries at DOE. The
                          laboratories themselves believed that better linkages are also needed
                          among the energy conservation, fossil fuel, and nuclear energy research
                          areas.




                          Page 2                                                      GAO/T-RCED-98-25
    We, along with others, have reported that DOE’s management approach has
    impeded the laboratories’ ability to achieve their goals and administrative
    responsibilities. The guidance and direction from DOE offices was not
    always consistent, and laboratories are forced to meet similar
    requirements from many different offices. For example, we found that
    laboratories were subjected to hundreds of reviews annually, ranging from
    program evaluations to compliance reviews on administrative
    requirements. DOE has been slow in setting priorities for compliance with
    its environmental requirements, forcing the laboratories to treat each
    requirement as equally important. Consequently, DOE had no assurance
    that the laboratories address more pressing concerns first, or with enough
    attention. As a result, laboratory officials were kept from managing their
    research in the most effective manner, according to many experts.

    Over the past several years, many government advisory groups have also
    urged DOE to clarify its laboratories’ missions and improve their
    management. For example:

•   In 1983, the White House Science Council Federal Laboratory Review
    Panel issued a report (commonly known as the Packard Report) about all
    federal research and development laboratories. It found that while DOE’s
    laboratories had defined their missions for part of their work, most
    activities were fragmented and unrelated to the parent agency’s policies. 2
•   In 1992, DOE’s Secretary of Energy Advisory Board found that the broad
    laboratory missions, coupled with rapidly changing world events, had “. . .
    caused a loss of coherence and focus at the laboratories, thereby reducing
    their overall effectiveness in responding to their traditional missions as
    well as new national initiatives. . . .adding that DOE and its laboratories
    suffered the. . . .lack of a common vision as to the missions . . . .”3
•   A 1993 report by an internal Energy Department task force on laboratories
    reported that their missions “must be updated to support DOE’s new
    directions and to respond to new national imperatives . . . .”4




    2
     Report of the White House Science Council, Federal Laboratory Review Panel, Office of Science and
    Technology Policy, May 15, 1983.
    3
     Secretary of Energy Advisory Board, Final Report, 1992.
    4
      Changes and Challenges at the Department of Energy Laboratories, Final Draft Report of the Missions
    of the Laboratories Priority Team, 1993.



    Page 3                                                                          GAO/T-RCED-98-25
                     •   The 1995 Galvin Task Force—the latest of these initiatives—called for a
                         more “disciplined focus” for the national labs and also reported that the
                         labs may be “oversized” for their role.5
                     •   The Interagency Federal Laboratory Panel, chartered by presidential
                         directive in 1994, has been examining all federal laboratories, including
                         DOE’s. The panel’s March 1997 report noted that “none of the agency
                         strategic plans, however, includes a clear and specific vision describing
                         the role and nature of that agency’s laboratory system—the ‘end point’ of
                         reform—in sufficient detail to guide its evolution.” In addition, the panel
                         noted that “continuing micromanagement of the laboratories impedes
                         progress, particularly at DOE.”


                         As DOE contemplates the future missions of the national laboratories, a
Current Management       variety of management issues will require its full attention. DOE struggles
Issues Facing the        to manage big projects successfully, is slow to reap the benefits of its own
National Labs            contract reforms, and continues to face recurrent problems as it manages
                         the laboratories through its complex organizational structure.

                         DOE’s success with managing big projects is not outstanding. From 1980
                         through 1996, DOE conducted 80 projects that it designated as “major
                         system acquisitions” (MSAs), which are its largest and most critical
                         projects, ranging in cost from $100 million to billions of dollars. Many of
                         these projects were managed directly by the laboratories. As of June 1996,
                         31 of the projects had been terminated prior to completion after total
                         expenditures of over $10 billion. Only 15 of the projects were completed,
                         and most of them were finished behind schedule and with cost overruns.
                         Furthermore, 3 of the 15 completed projects have yet to be used for their
                         intended purposes. The remaining 34 projects continue, many with
                         substantial overruns and “schedule slippage.”

                         We believe there are four key factors underlying the cost overruns,
                         schedule slippage, and terminations of DOE’s largest projects:

                     •   DOE’s constantly changing missions often make it difficult to maintain
                         departmental and congressional support for these long-term, high-cost
                         projects.
                     •   The MSAs’ incremental, annual funding subjects them to potential delays
                         or terminations in each year.


                         5
                          Alternative Futures for the Department of Energy National Laboratories, Secretary of Energy
                         Advisory Board, Task Force on Alternative Futures for the Department of Energy National
                         Laboratories (Feb. 1995).



                         Page 4                                                                         GAO/T-RCED-98-25
•   A flawed system of incentives does not always reward individuals and
    organizations for “doing the right thing” and has often rewarded
    contractors despite poor performance.
•   DOE has difficulty in hiring, training, and retaining enough people with the
    requisite skills to provide effective oversight and/or management of
    contractors’ operations.

    Many of these problems stem from DOE’s longstanding weak contract
    management. Proper oversight of its 110,000 contractor employees, who
    perform nearly all of the Department’s work, has never been easy.
    Historically, these contractors worked largely without any financial risk,
    were paid even when performing poorly, and enjoyed a management
    policy of “least interference” by DOE and its predecessor agencies. DOE is
    now reforming its contracting practices to make them more business-like
    and results-oriented. While we believe that these reforms are generally a
    step in the right direction, at this time we are unsure whether the
    Department is truly committed to fully implementing some of its own
    recommendations. For example, despite the change in DOE’s contract
    award policy from sole source to one favoring full and open competition,
    DOE decided to extend, rather than compete, its $2.3 billion contracts with
    the University of California to operate three laboratories. Furthermore,
    DOE may have weakened its negotiating position when it conditionally
    decided to extend these three contracts before negotiating the contract
    terms. Also, through mid-1996, DOE chose to extend 12 contracts that have
    never been competitively awarded, including those for Argonne National
    Laboratory and Ames Laboratory, whose contractors have been in place
    continuously since 1946 and 1943, respectively. In another example, some
    problems have arisen in DOE’s implementation of performance-based
    contracting, which is a key component of contract reform, according to
    the Department. For example, the fees that the Brookhaven National
    Laboratory could earn are not linked to performance.

    DOE  continues to miss the benefits of competition, which is a major feature
    of its much-promoted contract reform effort. While DOE has changed its
    policy and adopted competitive contract awards as the new standard for
    its management and operating contracts, in practice, DOE continues to
    make noncompetitive awards. Of the 24 decisions to award new
    management and operating contracts between July 1994 and August 1996,
    DOE noncompetitively awarded 16 of them.


    Findings from DOE’s Office of Oversight (under the Assistant Secretary for
    Environment, Safety and Health) raise old concerns about how DOE



    Page 5                                                       GAO/T-RCED-98-25
manages its laboratory contractors. Reports conducted since 1996 from
this office on three major DOE laboratories (Los Alamos National
Laboratory, Brookhaven National Laboratory, and the Idaho National
Environment and Engineering Laboratory) show that DOE’s chronic
management problems continue. Each laboratory points to new or
recently implemented programs that, given time, may correct the
problems. But taking a historical perspective, these “corrective” programs
are implemented, then are overtaken by events or management changes,
then other corrective programs are implemented in a seemingly unending
succession. The end result is that the original problems are never fully
resolved. The main problems continue to be confusion about
responsibilities; confusion about which regulations and/or guidelines
apply; inadequate management attention to environment, safety and health
issues at the contractor and subcontractor levels; and inadequate DOE
oversight of contractor operations. We and others (including DOE’s
Inspector General and the Defense Nuclear Facilities Safety Board) have
identified these problems repeatedly over the years.

New challenges await DOE as it prepares to orchestrate its ambitious
Stockpile Stewardship and Management Program, a $4.5 billion a year
enterprise to test and maintain nuclear weapons without conducting
explosive tests. Laboratories will have an integral role in the program.
With no underground nuclear testing, and no new nuclear weapons
designs, DOE expects existing weapons to remain in the stockpile well into
the next century. This means that the weapons will age beyond original
design expectations and DOE believes an alternative to underground testing
must be developed to verify the safety and reliability of the weapons. This
program includes a multimillion-dollar a year Accelerated Strategic
Computing Initiative, involving three different manufacturers as well as
three laboratories in a plan to integrate supercomputing facilities from
distant sites.

DOE and the Congress should pay close attention to how this costly and
complex program is being managed in light of DOE’s past problems in
managing similar programs. For example, DOE is responsible for managing
the nation’s nuclear weapons stockpile, including providing surveillance of
weapons currently in the stockpile. DOE provides three types of stockpile
surveillance tests—flight tests, nonnuclear systems laboratory tests, and
nuclear and nonnuclear component tests—on nine types of nuclear
weapons. DOE has been behind schedule in conducting flight tests on three
types of weapons and in conducting laboratory tests on one type of
weapon and most if its key components (in some instances, several years



Page 6                                                     GAO/T-RCED-98-25
                    behind). Reasons for the delays include the suspension of testing at one
                    facility because it lacked an approved safety study required to disassemble
                    and inspect one type of weapon, and at another facility because of
                    concerns about safety procedures. We found that DOE lacked written plans
                    needed to put testing programs back on schedule, and several factors
                    could cause further delays. These factors included the possible expiration
                    of required safety studies, future limitations on the number of flight tests,
                    and the lack of contingency plans in the event a test facility is shut down.


                    DOE has several initiatives under way that it believes address mission and
Opportunities for   management problems raised by us and by others. For example, DOE
Improvement         believes its strategic planning process provides the framework for more
                    focused missions for the laboratories. It also established the Laboratory
                    Operations Board in 1995 to provide mission focus and management
                    attention on the national laboratories. The Board published a strategic
                    plan for the laboratories with more reports to follow. The Board also
                    points to the laboratories’ significant productivity gains and to streamlined
                    systems in DOE to help improve management.

                    DOE  also believes that reforming its contracts, specifically by introducing
                    performance measures to guide and evaluate the laboratories’ activities,
                    will form a basis for a more productive management approach that better
                    integrates the laboratories’ missions.

                    We generally agree that these initiatives have some potential for helping
                    DOE  to refocus the missions of the laboratories and improve their
                    management. However, these initiatives have not yet been implemented,
                    or in the case of contract reform, will take years to be fully operational.
                    The recent reviews by DOE’s Office of Oversight mentioned earlier,
                    however, suggest that considerably more attention is needed before these
                    reforms can be judged totally successful. Thus, their outcome, while
                    initially promising, is very uncertain.

                    We also caution that in the past, DOE has introduced planning systems and
                    reorganized many times—all without significant success. Additionally, as
                    we noted earlier, previous advisory groups have recommended that DOE
                    refocus the laboratories’ missions and improve its management of them,
                    yet the Department has failed to achieve fundamental change.

                    The lack of long term, fundamental change in DOE has prompted some
                    experts to suggest alternatives to how DOE’s national laboratories are



                    Page 7                                                       GAO/T-RCED-98-25
    managed. For example, to sharpen focus and improve management, the
    Galvin Task Force suggested creating private or federal-private
    corporations to manage most or all of the laboratories. Under this
    arrangement, nonprofit corporations would operate the laboratories under
    the direction of a board of trustees that would channel funding to various
    laboratories to meet the needs of both government and nongovernment
    entities. DOE would be a customer, rather than the direct manager of the
    laboratories. Although the task force provided few details about how such
    an alternative structure would be developed and implemented, its
    proposal raises important issues for DOE and the Congress to consider,
    such as (1) how to monitor and oversee the expenditure of public funds by
    privately managed and operated entities; (2) how to continue the
    laboratories’ significant responsibilities for addressing environmental,
    safety, and health problems at their facilities, some of which are governed
    by legal agreements between DOE, The U.S. Environmental Protection
    Agency, and the states; and (3) how to maintain federal access to facilities
    so that national priorities, including national security missions, are met.

    In addition, other organizational options that have been proposed by
    experts include the following:

•   Convert some laboratories, particularly those working closely with the
    private sector, into independent entities.
•   Transfer the responsibility for one or more laboratories to other agencies,
    whose responsibilities and mission are closely aligned with a particular
    DOE laboratory.
•   Create a “lead lab” arrangement, under which one laboratory is given a
    leadership role in a mission or technology area and other laboratories are
    selected to work in that area.
•   Consolidate the responsibility for research, development, and testing on
    nuclear weapons within a single laboratory.

    Each of these alternatives has advantages and disadvantages, as does the
    Galvin Task Force proposal, and needs to be evaluated in light of the
    laboratories’ capabilities for designing nuclear weapons and pursuing
    other missions of national and strategic importance. Furthermore, the
    government may still need facilities dedicated to national and defense
    missions, a factor that would heavily influence any future organizational
    decisions.

    Some policymakers have suggested that as an alternative to the current
    DOE laboratory structure, the laboratories should be uncoupled from DOE




    Page 8                                                      GAO/T-RCED-98-25
                         and placed under other agencies or privatized where warranted. The
                         proposals mostly stem from discussions about dismantling DOE. Changing
                         mission focus—coupled with DOE’s long-standing management
                         difficulties—has prompted reevaluating of DOE as an institution. In this
                         context, experts we consulted in a 1994 survey—which included several
                         former Secretaries of Energy—suggested that DOE’s laboratories could be
                         placed in other entities if DOE were dismantled. For example, many
                         respondents suggested moving DOE’s basic research functions to the
                         National Science Foundation, the Commerce or Interior departments,
                         other federal agencies, or a new public-private entity. Some also suggested
                         that some multiprogram national laboratories could move to other federal
                         agencies, or share their missions with other agencies. A more complicated
                         issue is the placement of the defense laboratories—Lawrence Livermore,
                         Sandia, and Los Alamos—whose responsibilities include important
                         national defense responsibilities.

                         Dismantling DOE would likely lead to other problems. Federal agencies are
                         willing to accept functions but not employees, for doing so may add to the
                         risk of a reduction-in-force. Transferring functions with an elaborate field
                         structure — such as DOE’s — can be very expensive. And, unavoidably,
                         transferred functions could duplicate existing ones.


                         A past roadblock to achieving consensus on the laboratories’ missions has
The Government           been the absence of a framework within which policymakers, including
Performance and          the Congress, could focus attention on mission and management issues.
Results Act Offers a     The Government Performance and Results Act of 1993 (Results Act)
                         provides such a framework. The Results Act requires agencies to
Framework for            implement meaningful measures of output, and to use assessments of
Focusing the National    productivity and quality in combination with measures of efficiency and
                         cost reduction to characterize the progress of reform. Each agency and
Laboratories’ Missions   laboratory would be expected to have some customized performance
and Management           measures appropriate to its missions, but not necessarily applicable or
                         useful to other agencies and laboratories. While agencies are just now
                         completing their early strategic plans, and it is too soon to fully evaluate
                         the results, the Results Act process provides an opportunity for debating
                         the future of the laboratories. In our recent examination of DOE’s draft
                         strategic plan, we found that while DOE has been actively pursuing the
                         objectives of the Results Act, its draft plan had several deficiencies. For
                         example, the plan failed to spell out the relationship between long-term
                         goals and the annual performance goals, key factors external to DOE, and
                         the effect of program evaluations on the development of strategic goals.



                         Page 9                                                      GAO/T-RCED-98-25
This is important because such linkages show how missions will be
translated into actual strategies throughout the organization—an
important component of the Results Act process that could guide how
laboratories are to be used and evaluated. We are now in the process of
reviewing DOE’s September 1997 plan.

Mr. Chairman, this concludes my statement. I would be happy to respond
to any questions from you or members of the Subcommittee.




Page 10                                                   GAO/T-RCED-98-25
Page 11   GAO/T-RCED-98-25
Related GAO Products


              Results Act: Observations on the Department of Energy’s Draft Strategic
              Plan (GAO/RCED-97-199R, July 11, 1997).

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

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

              Nuclear Weapons: Improvements Needed to DOE’s Nuclear Weapons
              Stockpile Surveillance Program (GAO/RCED-96-216, July 31, 1996).

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

              Department of Energy: National Laboratories Need Clearer Missions and
              Better Management (GAO/RCED-95-10, Jan. 27, 1995).

              Department of Energy: Challenges to Implementing Contract Reform
              (GAO/RCED-94-150, Mar. 24, 1994).

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




(141061)      Page 12                                                   GAO/T-RCED-98-25
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