Department of Energy:

Performance Evaluations Could Better Assess Management and Operating Contractor Costs

GAO-19-5: Published: Feb 26, 2019. Publicly Released: Feb 26, 2019.

Additional Materials:

Contact:

Allison Bawden
(202) 512-3841
bawdena@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Department of Energy depends on the expertise of firms, universities, and others to do much of its work, including managing and operating nuclear weapons labs. In 10 years, it spent about $193 billion on management and operating contracts.

DOE generally gave these contractors high ratings and awarded over 90% of available performance incentives. However, we found DOE could do a better job reporting on how well contractors spend these federal funds.

We made 7 recommendations, including that DOE report more useful information on cost performance.

DOE remains on our High Risk List for inadequate contractor management and oversight.

Sites where the Department of Energy has contracts for management and operations of its facilities

This map of the United States shows 22 locations.

This map of the United States shows 22 locations.

Additional Materials:

Contact:

Allison Bawden
(202) 512-3841
bawdena@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

In fiscal years 2006 through 2016, six offices within the Department of Energy (DOE) generally used one of three different approaches to evaluate management and operating (M&O) contractor performance. Although these approaches varied in the performance criteria and methodologies used for determining contractor ratings and incentives, all the offices annually set expectations for contractors and assessed performance.

In analyzing DOE's fiscal year 2016 Performance Evaluation Reports (PER), GAO found that these reports provided less information on M&O contractors' cost performance than on contractors' technical and administrative performance. The cost information provided in the PERs often was not detailed, did not indicate the significance of the performance being described, and applied only to specific activities. Further, the information is of limited use for acquisition decision-making, such as deciding whether to extend the length of a contract, because it does not permit an overall assessment of cost performance. A key reason PERs did not include more cost performance information is that the DOE offices' policies do not require specific assessments of cost performance or discuss how to ensure cost information is useful for future acquisition decision-making. By updating policies to require inclusion of quality cost performance information in PERs, DOE offices could better assess M&O contractors' costs, improve acquisition decision-making, and ensure performance evaluations fully address required elements.

Based on GAO's review of DOE M&O contractor performance evaluations from fiscal years 2006 through 2016, DOE generally provided high performance ratings and more than 90 percent of available performance incentives (see figure). Ratings for some areas of contractor performance, as well as ratings for contractor performance at specific DOE sites, varied from this trend. For example, three times during this period contractors received 50 percent or less of available award and incentive fees due to a major accident and safety and security issues.

Median Annual Percentage of Available Award Fee Provided to Management and Operating Contractors, Fiscal Years 2006 through 2016

Median Annual Percentage of Available Award Fee Provided to Management and Operating Contractors, Fiscal Years 2006 through 2016

Why GAO Did This Study

In fiscal years 2006 through 2016, the federal government spent almost $193 billion on DOE's M&O contracts—a form of contract that traces its origins to the Manhattan Project. Six DOE offices use M&O contracts to manage and operate federally owned sites that perform work to fulfill DOE's diverse missions, such as conducting scientific research and maintaining nuclear weapons.

GAO was asked to review DOE's performance management of its M&O contracts. This report examines, among other things, (1) how DOE offices evaluated M&O contractor performance in fiscal years 2006 through 2016; (2) the extent to which DOE's fiscal year 2016 M&O contractor PERs provide information on contractors' technical, administrative, and cost performance; and (3) the results of DOE's M&O contractor performance evaluations for fiscal years 2006 through 2016.

GAO reviewed performance evaluation documents for 21 of the 22 DOE M&O contracts; analyzed DOE policies, procedures, and guidelines, and federal regulations; analyzed technical, administrative, and cost aspects of M&O contracts' 2016 PERs; and interviewed DOE officials.

What GAO Recommends

GAO is making seven recommendations to DOE, including to each of the six DOE offices to update their policies requiring that PERs include quality information to enable an overall assessment of M&O contractor cost performance. In commenting on a draft of this report, DOE generally agreed with these recommendations.

For more information, contact Allison Bawden at (202) 512-3841 or bawdena@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The National Nuclear Security Administration (NNSA) concurred with the recommendation. In February 2020, NNSA issued its fiscal year 2020 Corporate Performance Evaluation Process Annual Implementation Guidance. This guidance included a new section specifying the process for collecting contractor performance information and further details regarding the preparation of interim feedback reports and final performance evaluation reports. However, the guidance is unclear regarding how this information can be traced to rating determinations. In order to provide more transparency and ensure this traceability, NNSA guidance and the Performance Evaluation Reports themselves should more clearly link how collected performance information tracks to rating determinations.

    Recommendation: The Administrator for the National Nuclear Security Administration should develop and document clear procedures for implementing NAP-4C, specifying the process for collecting contractor performance information and describing how officials are to ensure this information can be traced to rating determinations. (Recommendation 1)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  2. Status: Open

    Comments: The Office of Energy Efficiency and Renewable Energy (EERE) partially concurred with the recommendation. As of April 2020, EERE officials stated that cost performance feedback was included in the 2019 final performance evaluation for the EERE Management and Operating contractor. EERE officials also stated that they had incorporated cost performance evaluation criteria into the fiscal year 2020 Performance Evaluation Measurement Plan (PEMP) for NREL. EERE officials noted that these actions ensure cost performance will be included as part of the ongoing contractor evaluation process. We have requested documentation of the new PEMP and performance evaluation report and, in order to ensure cost performance evaluation criteria are included in the future, EERE should update its policy to require quality information on cost performance going forward.

    Recommendation: The Assistant Secretary for the Office of Energy Efficiency and Renewable Energy should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 2)

    Agency Affected: Department of Energy: Office of Energy Efficiency and Renewable Energy

  3. Status: Open

    Comments: The Office of Environmental Management (EM) concurred with the recommendation. As of April 2020, EM officials stated that they will include the requirement for quality information on cost performance in EM's Cleanup Project Management Policy. According to officials, EM is working on this policy, along with an additional Cleanup Program Management Policy that they expect to complete by the end of fiscal year 2020.

    Recommendation: The Assistant Secretary for the Office of Environmental Management should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 3)

    Agency Affected: Department of Energy: Office of Environmental Management

  4. Status: Open

    Comments: The Office of Fossil Energy (FE) concurred with the recommendation. As of April 2020, FE officials stated that they had revised and executed the Performance Evaluation and Measurements Plan (PEMP), for the current Management and Operating contract to add a new PEMP measure that addresses monitoring cost growth, additional activities in internal audit, and data quality that addresses our recommendation. We have requested documentation of the PEMP showing the new measures and an updated policy requiring inclusion of quality information on cost performance in Performance Evaulation Reports. Upon receiving those, we will review to determine if it addresses our recommendation.

    Recommendation: The Assistant Secretary for the Office of Fossil Energy should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 4)

    Agency Affected: Department of Energy: Office of Fossil Energy

  5. Status: Open

    Comments: The National Nuclear Security Administration (NNSA) concurred with the recommendation. In February 2020, NNSA issued its fiscal year 2020 Corporate Performance Evaluation Process Annual Implementation Guidance. This guidance provides instructions regarding the evaluation of cost performance, including examples of the types of cost information that should be collected and how cost data should be analyzed and described. However, the guidance's template for Performance Evaluation and Measurement Plans does not include any explicit cost performance Objectives or Key Outcomes and it is unclear how the cost performance information discussed in the guidance would enable an overall assessment of Management and Operating contractor cost performance. In order to provide quality cost information that does enable such an overall assessment, NNSA should clarify its guidance regarding cost performance information and how this information links to overall Management and Operating contractor performance.

    Recommendation: The Administrator for the National Nuclear Security Administration should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 5)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  6. Status: Open

    Comments: The Office of Nuclear Energy (NE) partially concurred with the recommendation. As of May 2020, NE officials stated that they will include criteria for "day-to-day" cost performance in the annual Performance Evaluation Measurement Plan (PEMP) for fiscal year 2020. NE's evaluation of the contractor's performance against those criteria will be included in the year-end performance reports of its Management and Operating contractor beginning in fiscal year 2020. NE officials stated that modifying the fiscal year 2020 PEMP with added cost criteria, usually done in April, has been delayed due to COVID-19 and that they expect to complete the modification by the end of May 2020. Once the cost criteria are included and evaluated in the Performance Evaluation Report, we will review to determine if it addresses our recommendation. In addition to changes to the fiscal year 2020 report, NE should update its policy to require such criteria for evaluating contractor cost performance going forward.

    Recommendation: The Assistant Secretary for the Office of Nuclear Energy should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 6)

    Agency Affected: Department of Energy: Office of Nuclear Energy

  7. Status: Open

    Comments: The Office of Science (SC) partially concurred with the recommendation. In commenting on our report in August 2019, DOE stated that by focusing on the annual Performance Evaluation Reports (PER), our report does not capture the cost performance reviews conducted in day-to-day contract oversight, the annual laboratory planning process, and contract extend/compete decisions. In its comments, DOE stated that since SC conducts cost performance reviews in normal operations and at the year-end annual evaluation process, adequate information is available to assess whether the contractor cost performance is acceptable to the department. As of April 2020, SC had not updated these comments. In the report, we note that SC conducts some cost performance evaluation activities outside of the annual performance evaluation process, although we did not assess these efforts. While there may be adequate information available, SC does not commonly document this information or assessments from such activities in the PERs. We continue to believe that the PERs are important sources of information for contract management--particularly for acquisition decisions and oversight of spending on cost-reimbursement contracts--and that action is needed to improve these formal records of contractor performance. By not including quality information on overall cost performance and assessments in PERs, SC is missing a valuable opportunity to better document contractors' cost performance, improve acquisition decision-making, and strengthen oversight of billions of dollars in contracting. We continue to believe that it is important for SC to implement the recommendation and that by doing so, the office would have better assurance that Management and Operating contractor performance evaluations fully address required elements.

    Recommendation: The Director of the Office of Science should update its policy to require that Performance Evaluation Reports include quality information on cost performance to enable an overall assessment of Management and Operating contractor cost performance. (Recommendation 7)

    Agency Affected: Department of Energy: Office of Science

 

Explore the full database of GAO's Open Recommendations »

Jun 24, 2020

Jun 9, 2020

May 13, 2020

May 12, 2020

Apr 29, 2020

  • energy icon, source: Art Explosion

    Priority Open Recommendations:

    Department of Energy
    GAO-20-285PR: Published: Apr 22, 2020. Publicly Released: Apr 29, 2020.

Apr 17, 2020

Mar 11, 2020

Mar 4, 2020

Feb 26, 2020

  • energy icon, source: Art Explosion

    Science & Tech Spotlight:

    Nuclear Microreactors
    GAO-20-380SP: Published: Feb 26, 2020. Publicly Released: Feb 26, 2020.

Jan 30, 2020

Looking for more? Browse all our products here