DOE Contractor Management:

Opportunities to Promote Initiatives That Could Reduce Support-Related Costs

GAO-02-1000: Published: Sep 20, 2002. Publicly Released: Oct 22, 2002.

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Robin M. Nazzaro
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The Department of Energy (DOE) has 30 major research, development, production, and environmental cleanup sites around the country that account for three-fourths of DOE's over-$20 billion annual budget. DOE manages these sites largely through contractors, which can be either industrial firms or educational institutions. Since fiscal year 1999, DOE's major contractors have spent $6 billion each year on support-related activities. This amount represents 40 percent of the contractors' total annual costs. DOE's management of support-related costs on a departmentwide basis is limited, consisting mainly of the Chief Financial Officer's (CFO) annual analysis, and departmentwide dissemination, of summary data on these costs. The CFO's analysis includes comparing the most recent data with data for previous years, highlighting trends and potential anomalies. At the DOE field and contractor level, virtually all contractors examined during GAO's review have in recent years implemented initiatives to manage certain support-related costs. Some of these initiatives have resulted in millions of dollars in savings reported by the contractor. To achieve these savings, contractors have sometimes set targets for reducing specific types of support-related costs, such as overhead costs.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, DOE's Office of the CFO has obtained more detailed information on contractor cost saving initiatives and assessed their application departmentwide. DOE's fiscal year 2002, and 2003 reports on Support Costs by Functional Activity (1) highlight contractors' cost saving initiatives with potential application across sites, and (2) provide information on site specific cost saving initiatives. The CFO's memorandum accompanying each report encouraged site contractors to consider applying other contractors' initiatives at their sites.

    Recommendation: The Secretary of Energy should direct the Chief Financial Officer to develop a system to analyze the merits of cost-saving initiatives implemented at contractor sites, identify those that have broader applicability in DOE, and work with program officials to promote those most likely to reduce support-related costs.

    Agency Affected: Department of Energy


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