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Energy Management: Problems With Martin Marietta Energy Systems' Affiliate Relationships

RCED-87-70 Published: Mar 05, 1987. Publicly Released: Apr 15, 1987.
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Highlights

Pursuant to a congressional request, GAO evaluated a Department of Energy (DOE) contractor's actions in operating the DOE Oak Ridge National Laboratory to determine whether: (1) the contractor's relationship with an affiliate violated DOE conflict-of-interest regulations; and (2) DOE maintained adequate control over the contractor's procedure for acquiring personal services from its parent company.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Energy To strengthen DOE oversight of Martin Marietta Energy Systems' compliance with conflict-of-interest requirements, the Secretary of Energy should direct the Oak Ridge Operations Office Manager to require Energy Systems to identify all of its current affiliates and report them to the DOE contracting officer. This could be accomplished through a one-time review, then updated by determining whether any new business contact is an affiliate and periodically reporting such contacts to DOE.
Closed – Implemented
In a May 13, 1987, letter, DOE requested Energy Systems to provide it a list of affiliates and to periodically update the list in the future.
Department of Energy To strengthen DOE oversight of Energy Systems' compliance with conflict-of-interest requirements, the Secretary of Energy should direct the Oak Ridge Operations Manager to carry out periodic reviews of Energy Systems to ensure that business contacts with affiliates and potential conflict-of-interest situations are identified and reported to DOE.
Closed – Implemented
DOE concurred with this recommendation and scheduled the first review to be performed with the next Energy Systems' performance appraisal period. DOE provided evidence that a review was performed on July 28, 1987. DOE also stated that follow-on reviews will be performed annually. An accomplishment report will be prepared.
Department of Energy The Secretary of Energy should direct the Manager of the Oak Ridge Operations Office to strengthen controls governing the use of Interdivisional/Intercompany Operating Directives (IDOD), including: (1) directing that Energy Systems amend its IDOD procedure to require specifically that advance DOE approval be obtained before work may begin on IDOD, and ensure that IDOD have been approved by DOE before performance begins; (2) requiring that sole-source justifications, as defined in Energy Systems' procurement manual, be included in the submission of IDOD involving substantial dollar amounts; (3) requiring supporting documents on costs incurred, including labor charges, to be submitted to Energy Systems for review and verifications before payment is made; and (4) directing that audits of IDOD be included in regularly scheduled DOE audits of Energy Systems' activities.
Closed – Implemented
DOE strengthened controls over IDOD by directing Energy Systems to require that IDOD be approved by DOE prior to beginning work and that audit verification of IDOD be performed. DOE did not believe sole-source justifications were needed, but will obtain additional information on why IDOD are being used instead of purchasing procedures.

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Topics

Conflict of interestsContract oversightContract performanceContractor personnelEnergy industryEnergy researchResearch and development facilitiesService contractsTechnology transferProcurement