Department of Energy:

Further Actions Are Needed to Strengthen Contract Management for Major Projects

GAO-05-123: Published: Mar 18, 2005. Publicly Released: Apr 18, 2005.

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The Department of Energy (DOE) pays its contractors billions of dollars each year to implement its major projects--those costing more than $400 million each. Many major projects have experienced substantial cost and schedule overruns, largely because of contract management problems. GAO was asked to assess, for major departmental projects, (1) DOE's use of performance incentives to effectively control costs and maintain schedules, (2) the reliability of the data DOE uses to monitor and assess contractor performance, and (3) the reliability of the Project Assessment and Reporting System (PARS) data that senior managers use for project oversight.

DOE could use performance incentives more effectively for controlling costs and schedules if it developed performance incentive guidance and assigned responsibility for reviewing a contract's project management provisions prior to award. DOE has awarded contracts for 15 of 33 major projects that use a schedule or other performance incentive without an associated cost incentive or constraint; thus a contractor could receive full fees by meeting all schedule baselines while substantially overrunning costs. DOE has relied on unvalidated contractor data to monitor contractors' progress in executing major projects and to award fees for performance. In particular, DOE's self-assessment of contract administration in 2002 found that field personnel overly relied on contractors' accounting systems and contractor-collected data in assessing performance, without significant validation of those data. No subsequent self-assessment has been conducted to determine if this problem continues. Furthermore, DOE has not required that its contracting officers receive the training needed to assess the adequacy of contractors' project management systems that generate data used to monitor progress. A lthough development of PARS is a positive step, the reliability of the project performance data that PARS provides to senior DOE managers is limited by problems with accuracy, completeness, and timeliness. Regarding accuracy, DOE has not assessed the reliability of contractors' project management systems that feed data into PARS for 31 of 33 major projects, even though DOE believes that some systems are deficient. Regarding completeness, GAO identified 3 major projects that are not in PARS. As to timeliness, cost and schedule data for 6 major projects in the June 2004 PARS report were significantly out of date because DOE has not required contractors to submit timely performance data. These contract management problems limit DOE's ability to effectively manage its major projects and avoid further cost and schedule slippages.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure the use of effective performance incentives for major projects, the Secretary of Energy should direct the Associate Deputy Secretary with responsibility for contract and project management to develop a major projects chapter in the DOE Acquisition Guide that specifies a systematic contracting approach, including, for example, criteria for (1) ensuring that incentive fee awards are based on reliable performance data, (2) using appropriate cost and schedule incentives, (3) better linking fee awards to performance for major projects that are part of larger site cleanups, and (4) determining which indirect work-related activities should and should not be considered in awarding contractors' fees.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: DOE issued a new major contracts chapter in its Acquisition Guide that references all existing guidance and provides a systematic contracting approach for the management of major projects.

    Recommendation: To ensure the use of effective performance incentives for major projects, the Secretary of Energy should direct the Associate Deputy Secretary with responsibility for contract and project management to clarify roles and responsibilities for reviewing contracts prior to award to ensure project management consistency.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: In June 2005, DOE issued Acquisition Guide Chapter 34.1, Project Management and the Acquisition of Major Systems. This chapter clarifies the roles and responsibilities for reviewing contracts prior to award to ensure project management consistency.

    Recommendation: To strengthen departmental oversight of contract administration for major projects, the Secretary of Energy should direct the Associate Deputy Secretary with responsibility for contract and project management to conduct comprehensive self-assessments of contract administration at least every 3 years.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: DOE conducted comprehensive self-assessments of federal office procurement systems in both fiscal years 2005 and 2006 with additional self-assessments scheduled for fiscal year 2007.

    Recommendation: To strengthen departmental oversight of contract administration for major projects, the Secretary of Energy should direct the Associate Deputy Secretary with responsibility for contract and project management to identify corrective actions to reduce the overreliance on unvalidated contractor data in awarding contract fees that was identified in previous self-assessments.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: DOE's Acquisition Guide has been updated to include a new chapter entitled "Project Management and the Acquisition of Major Systems." The new chapter, in part, provides guidance for contracting officers to ensure that contractors' accounting and estimating systems are adequate to support the type of contract selected and it has the ability to segregate and track costs. Additionally, the role of contracting officers to assist in, to the extent practicable, the evaluation and certification of contractors' Earned Value Management systems was stressed.

    Recommendation: To strengthen departmental oversight of contract administration for major projects, the Secretary of Energy should direct the Associate Deputy Secretary with responsibility for contract and project management to train contracting officials in earned value management.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: DOE recorded a training presentation on "Using Earned Value Management for Better Contract Administration" and required that all DOE contracting professionals nationwide view this video. The video was made available for viewing on the DOE Procurement Professionals homepage. Additionally, a DVD video of the presentation was sent to all DOE Procurement Directors for viewing by their staffs.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, the Secretary of Energy should direct the appropriate managers to develop a schedule for assessing the reliability of the contractors' project management systems, giving priority to major projects and those projects with systems believed to be using incorrect methods to generate PARS data.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: DOE developed a schedule for certification reviews of eight project management systems in FY 2005, which they completed, and has scheduled an additional ten certification reviews for FY 2006. The FY 2005 certification reviews included several systems believed to be using incorrect methods.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, the Secretary of Energy should direct the appropriate managers to revise DOE manual 413.3-1 to provide guidance that enhances the accurate reporting of total cost and project performance data into PARS, such as the reporting of life-of-project cost and schedule variances.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: DOE's Office of Engineering and Construction Management (OECM) has decided to replace the original Project Assessment and Reporting System (PARS system) with a more advanced PARS Version 2 designed, among other things, to provide the capability of an automated interface with field project management systems. Specifically, OECM's Functional Requirements Document, issued in June 2008, specifies that PARS Version 2 needs to allow senior DOE managers to (1) review the root cause of problems causing projects to re-baseline, (2) increase the accuracy of systems information, and (3) identify estimation and planning shortfalls prior to CD-2 by reviewing the relationship between project funding and scheduling estimations at CD-0 and the baseline established at CD-2.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, the Secretary of Energy should direct the appropriate managers to expedite training for major project directors in earned value management concepts.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: On August 10, 2005, the Secretary of Energy required that all DOE federal project directors be certified by the Project Management Career Development Program, which includes training in earned value management.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, the Secretary of Energy should direct the appropriate managers to ensure that program office officials receive currently available project management training so that they can better identify the elements of a project, and apply the project management concepts necessary for them to report performance data in PARS.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: On August 10, 2005, the Secretary of Energy required each program office to (1) provide project management training to all contracting officers, (2) determine its current and future personnel needs regarding project and contract management training, and (3) develop a plan to meet these training needs by the 4th quarter of fiscal year 2006.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, the Secretary of Energy should direct the appropriate managers to incorporate forward-looking trend data into PARS reports so that senior managers can better identify negative trends and potentially take corrective action.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: In July 2005, DOE incorporated project cost and schedule performance trend data--showing positive and negative trends--into PARS reports to senior managers.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, the Secretary of Energy should direct the appropriate managers to explore options for ensuring that contractors provide cost and schedule performance data to PARS on a monthly basis, such as making monthly submissions a requirement in all applicable contracts.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: To improve the timeliness of the PARS data that senior DOE managers review, DOE's Office of Engineering and Construction Management (OECM) has decided to replace the original Project Assessment and Reporting System (PARS system) with a more advanced system designed, among other things, to provide the capability of an automated interface with contractors' project management systems at field locations. Specifically, OECM has contracted with Energy Enterprise Solutions to implement this new PARS Version 2 and, in June 2008, issued its PARS Version 2 Functional Requirements Document. The functional requirements specify that the Federal Project Director is responsible for verifying that data on budgeted cost of work scheduled and performed is inputted monthly into PARS through the project's completion, in accordance with Order 413A.

    Recommendation: To improve the reliability and usefulness of project performance data in PARS, we the Secretary of Energy should direct the appropriate managers to explore options for providing senior DOE managers with more timely project performance data by, for example, electronically linking contractors' project management systems to PARS.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: To improve the reliability and usefulness of the project performance data in its Project Assessment and Reporting System (PARS), DOE's Office of Engineering and Construction Management (OECM) has decided to replace the original PARS with a more advanced Version 2 designed, among other things, to provide the capability of an automated interface with contractors' project management systems at field locations. Specifically, OECM has contracted with Energy Enterprise Solutions to implement this new PARS Version 2 and, in June 2008, issued its PARS Version 2 Functional Requirements Document. OECM also has accepted Energy Enterprise Solutions' recommendation to acquire Dekker's PMIS project tracking and reporting COTS software to form the core of the solution.

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