Department of Energy: Status of Contract and Project Management Reforms

DOE spends more money on contracts than any other civilian federal agency because it relies primarily on contractors to operate its sites and carry out its diverse missions. These missions include maintaining the nuclear weapons stockpile, cleaning up radioactive and hazardous waste, and supporting basic energy and science research activities. For fiscal year 2001, DOE spent about 90 percent of its total annual budget, or about $18.2 billion, on contracts. Of that amount, DOE spent about $16.2 billion on contracts to manage or operate 28 major DOE sites. For over a decade, GAO, DOE's Office of Inspector General, and others have identified problems with DOE's contracting practices and the performance of its contractors. Projects were late or never finished; project costs escalated by millions and sometimes billions of dollars; and environmental conditions at the sites did not significantly improve. At the same time, contractors were earning a substantial portion of the profit (fee) available under the contract. Because of these problems, since 1990 we have designated DOE contract management as a high-risk area vulnerable to fraud, waste, abuse, and mismanagement. To address these and other problems, DOE began a series of reforms in the 1990s that were intended to, among other things, strengthen DOE's contracting and project management practices, hold contractors more accountable for their performance, and demonstrate progress in achieving the agency's missions. In this context, contracting practices include, among other things, selecting the type of contract (such as fixed price), deciding whether to ask contractors to compete for the contract or offer it only to a single contractor, and determining the performance measures that will be used to assess and reward the contractor's performance. Similarly, project management practices include, among other things, planning, organizing, and tracking project activities and costs; training to ensure expertise of federal project managers; and project reporting and oversight. In addition, in February 2002, DOE's environmental management team launched an improvement initiative that places additional emphasis on contracting and project management reforms in the cleanup program, which represents almost a third of the department's overall budget. This initiative followed a review by DOE managers, who concluded that the waste cleanup program was not achieving the desired results and that further improvements were needed to make the program effective, including improvements in contracting and project management. This testimony focuses on (1) describing DOE's progress in implementing contracting and project management reforms, (2) assessing the extent to which these reforms have resulted in improved contractor performance, and (3) providing observations on DOE's latest improvement efforts.