Department of Energy:

Contract Reform Is Progressing, but Full Implementation Will Take Years

RCED-97-18: Published: Dec 10, 1996. Publicly Released: Jan 22, 1997.

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Pursuant to a congressional request, GAO reviewed certain aspects of the Department of Energy's (DOE) contract reform initiative.

GAO found that: (1) DOE has completed action on 47 of the 48 contract reform recommendations, but 9 of the completed actions did not meet the requirements of the Contract Reform Team; (2) DOE also missed its deadlines for completing the required new policies, guidance, and plans that serve as the framework for contract reform by an average of 11 months; (3) the missed deadlines have added to the time needed to implement contract reform; (4) while DOE has changed its policy and adopted competitive contract awards as the new standard for management and operating (M&O) contracts, in practice, DOE continues to make noncompetitive awards for these contracts; (5) DOE's contracting offices are including performance goals in their M&O contracts, but the contract goals are not always clearly linked to those of the Department; (6) DOE's contracting offices have moved quickly to implement another important reform by using incentive contracts, but the negotiation of these incentives did not always prove effective; and (7) since DOE is authorized to use its own procurement regulation for M&O contracts, the contracting officers have been left to use their own judgment and have achieved different results with the use of these incentives.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On June 27, 1997, DOE revised its acquisition regulations to require that contract performance and expectations be consistent with DOE's strategic goals and objectives.

    Recommendation: The Secretary of Energy should require that the goals written into the M&O contracts be clearly linked to DOE's strategic plan and annual performance goals.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: On March 11, 1999, DOE published a final rule in the Federal Register. The rule amends the Department of Energy Acquisition Regulation by including a new standard contract clause that states that the DOE contracting officer may make a unilateral determination of goals and incentives in instances where there are differences between the contractor and the contracting officer.

    Recommendation: The Secretary of Energy should require that a mandatory standard contract clause be included in all M&O contracts that gives DOE the exclusive authority to set contract goals and incentives that support the strategic plans and missions of the Department.

    Agency Affected: Department of Energy

  3. Status: Closed - Implemented

    Comments: On March 11, 1999, DOE published a final rule in the Federal Register. The rule amends the Department of Energy Acquisition Regulation by including a section that covers "Types of Contracts and fee arrangements." The new policy refers to the Federal Acquisition Regulation (FAR) and applies FAR concepts dealing with contract type and fees. Additionally, costs are negotiated in accordance with the Truth in Neogtiations Act where appropriate. Finally, the use of a negotiation memorandum is required.

    Recommendation: To continue DOE's reforms that are aimed at placing more cost risk on its contractors through the use of cost incentives and in a further effort to bring M&O contracting into the mainstream of federal contracting, the Secretary of Energy should adopt federal contract pricing policies such as those contained in the Federal Acquisition Regulation.

    Agency Affected: Department of Energy

 

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