DEPARTMENT OF ENERGY: Additional Opportunities Exist to Streamline Support Functions at NNSA and Office of Science Sites
What GAO Found
Support function costs at NNSA and Science sites for fiscal years 2007 through 2011 are not fully known because DOE changed its data collection approach beginning in 2010 to improve its data and, as a result, does not have complete and comparable cost data for all years. In fiscal years 2007 through 2009, total support costs for NNSA and Science sites grew from $5 billion to about $5.5 billion (nominal dollars). Costs for fiscal year 2010 are unknown because DOE was pilot-testing its new reporting system and only collected data from some sites. For fiscal year 2011, the data are more complete, but changes to DOEs definitions for support functions make it difficult to compare costs across all years. DOE has taken some steps to ensure the quality of the data in its new system and plans to fully implement a quality control process, such as peer reviews, to ensure data can be compared across sites, but has not yet done so.
DOE and contractors have undertaken various efforts since 2007 to streamline and improve the efficiency of sites support functions. Streamlining efforts reported by officials from DOE and the eight NNSA and Science sites GAO reviewed focused mainly on procurement; human resources, including employee benefits; and facilities and infrastructure. Some efforts were part of larger initiatives involving multiple sites, while others were initiated at the site level. To streamline procurement and leverage the buying power of multiple sites, for example, NNSA began operating a central Supply Chain Management Center to negotiate with vendors for lower prices on goods and services, such as laboratory supplies and equipment. To streamline human resources, contractor officials from the eight NNSA and Science sites reported automating various processes, such as for hiring and training employees. Furthermore, DOE and contractors identified opportunities to expand these efforts and undertake new ones but also identified challenges to further streamlining. In August 2010, for example, the Deputy Secretary of Energy cited further opportunities to leverage DOE and sites buying power through a more centralized, and less fragmented, approach. Similarly, NNSA is considering centralizing certain human resource tasks at its sites, currently provided by individual contractors. DOE and contractor officials, however, said that centralizing functions can be challenging.
DOE and its contractors have estimated savings for some streamlining efforts, particularly in procurement, but it is difficult to compare or quantify total savings across sites because DOEs guidance for estimating savings is unclear and the methods used to estimate savings vary. For example, one laboratory estimated a $9 million savings from a software purchase in 2010 using its preferred estimation method. By other methods used elsewhere in DOE, however, the site estimated that its savings could have been as high as $35 million. DOE recently issued guidance on acceptable methods for estimating procurement cost savings, but the guidance is unclear and could lead to widely varying savings estimates. The guidance identifies some estimation methods that sites can usesuch as comparing the price paid for goods or services with a previous pricebut does not specify which methods are preferred when multiple options are available. Furthermore, the guidance allows sites to use any other methods approved by DOE officials. For support functions other than procurement, sites also have flexibility in cost savings estimation methods, potentially leading to widely varying estimates for similar efforts to streamline these functions.
Why GAO Did This Study
The Department of Energy (DOE) spends 90 percent of its annual budgetwhich totaled $27 billion in fiscal year 2011on the contractors that carry out its diverse missions and manage its sites. These management and operating contractors also provide sites support functions, such as procuring goods, managing human resources, and maintaining facilities. With a unique contractor at each site, support functions have traditionally been managed in a decentralized, or fragmented, manner. In light of todays pressures to trim budgets and find efficiencies, GAO was asked to review support functions at the 17 National Nuclear Security Administration (NNSA) and Office of Science sites and determine (1) the costs of providing support functions for fiscal years 2007 through 2011; (2) efforts undertaken during that period to streamline sites support functions, as well as additional opportunities and challenges, if any; and (3) the extent to which cost savings from streamlining efforts can be quantified. GAO reviewed data and documents and spoke with DOE, NNSA, and Science officials and with contractors at eight sitesthe four largest by budget from NNSA and Science.
GAO recommends that DOE (1) fully implement a quality control system for cost data on sites support functions, (2) ensure that all appropriate streamlining steps are being taken at the 17 sites and that challenges are addressed, and (3) clarify guidance on estimating cost savings from streamlining efforts. DOE agreed with the recommendations.
Recommendations for Executive Action
|Department of Energy||To help reduce support costs or make more effective use of DOE and contractor resources, as well as to improve oversight of management and operating (M&O) contractors' support functions at NNSA and Science sites, the Secretary of Energy should -- or, as appropriate, direct the Administrator of NNSA and the Director of the Office of Science to -- fully implement a quality control system for DOE's institutional cost system, including steps such as peer reviews, to ensure that data collected and used by DOE on support function costs are complete and comparable for monitoring sites' support functions.||
In our June 2013 report, NATIONAL NUCLEAR SECURITY ADMINISTRATION: Laboratories' Indirect Cost Management Has Improved, but Additional Opportunities Exist, GAO-13-534, we reported on DOE's progress to implement this recommendation, noting that "DOE established joint DOE and contractor teams to perform peer reviews intended in part to standardize the data collected through Institutional Cost Reporting. In May 2013, DOE officials said they had completed the reviews for several sites, including Lawrence Livermore, Los Alamos, and Sandia."
|Department of Energy||To help reduce support costs or make more effective use of DOE and contractor resources, as well as to improve oversight of management and operating (M&O) contractors' support functions at NNSA and Science sites, the Secretary of Energy should -- or, as appropriate, direct the Administrator of NNSA and the Director of the Office of Science to -- assess whether all appropriate efforts to streamline DOE support functions or reduce support function costs are being taken at NNSA and the Science sites and ensure that necessary steps are taken to address challenges limiting implementation of cost savings efforts.||
In March 2012, the Office of Science established a Science Laboratory Operations Improvement Committee whereby Energy and contractor representatives meet quarterly to identify additional streamlining and cost-savings opportunities available to Office of Science sites. According to committee officials, working groups have begun implementing streamlining opportunities and identifying potential cost savings in the areas of procurement, information technology, human capital, and infrastructure management, and will monitor them quarterly to ensure any implementation challenges are addressed.
|Department of Energy||To help reduce support costs or make more effective use of DOE and contractor resources, as well as to improve oversight of management and operating (M&O) contractors' support functions at NNSA and Science sites, the Secretary of Energy should -- or, as appropriate, direct the Administrator of NNSA and the Director of the Office of Science to -- clarify DOE's guidance on the preferred methods to use for estimating cost savings, including under what circumstances each method should be used, to ensure more consistency in how cost savings are estimated for various streamlining efforts and a more comparable assessment of results.||
In September 2012, DOE and NNSA issued guidance on the preferred methods for estimating cost savings in the area of procurement, including guidance on when particular methods--in order of preference--should be used to estimate procurement savings. The guidance, which went into effect in Fiscal Year 2013, included a template with detailed instructions for estimating and reporting procurement cost savings to help ensure greater consistency.