The Department of Energy (DOE) relies on contractors to conduct its mission activities. DOE reimburses these contractors for allowable costs, including the costs of providing pension and other postretirement benefits, such as retiree health care plans. Since the economic downturn, DOE has had to devote significantly more funding toward reimbursing these benefit costs, in part because of a decline in interest rates and asset values that has increased contractor pension contributions. In a challenging budgetary environment, further growth in these costs could put pressure on DOE's mission work. GAO was asked to report on (1) the level of control DOE has over contractor pension and other postretirement benefit costs under its current business model and (2) the changes DOE has adopted since the national economic downturn to manage those costs and the extent to which those changes have enhanced its approach. To do so, GAO reviewed relevant laws, regulations, and DOE guidance; analyzed agency financial data; and interviewed officials.
Recommendations for Executive Action
|Department of Energy||1. To further improve DOE's approach to managing contractor pension and other postretirement benefit costs, the Secretary of Energy should conduct a comprehensive review, similar to the review of contractor pensions, of the department's approach to managing other contractor benefit costs, including other postretirement benefits, and evaluate options for improving oversight and better managing the cost of these benefits.|
|Department of Energy||2. To further improve DOE's approach to managing contractor pension and other postretirement benefit costs, the Secretary of Energy should expand the information provided to Congress during its annual budget deliberations to include, for example, nonpension postretirement benefit costs by site, program office, and appropriation account, as well as a discussion of factors that affect these contractor benefit costs and DOE's plans for managing those costs in coming years.|
|Department of Energy||3. To further improve DOE's approach to managing contractor pension and other postretirement benefit costs, the Secretary of Energy should issue guidance to program offices overseeing contractors with defined benefit plans that defines criteria to be considered when evaluating contractor requests to contribute more than the minimum to their pension plans.|
|Department of Energy||4. To further improve DOE's approach to managing contractor pension and other postretirement benefit costs, the Secretary of Energy should clarify existing guidance on correcting contractor benefit packages that exceed DOE's standard by: (1) establishing a defined timeline by when contractors must submit corrective action plans to their DOE contracting officer if the value of their benefit package is determined to exceed DOE's standard, as well as a timeline for when DOE contracting officers must reach a decision on such plans; (2) developing criteria for contracting officers to use when deciding whether to waive a required corrective action plan; and (3) requiring review of these contracting officer decisions by the responsible headquarters office to help ensure consistent application of the criteria across the department.|