Secretary of Energy Promises to Improve DOE Contracting Practices
The new Secretary of Energy, Hazel O’Leary, has definite plans to change the way DOE’s contracting system operates. She presented her ideas at a May 26 hearing of the House Energy and Commerce Subcommittee on Investigations and Oversight. In his opening statement, chairman John Dingell (D-Michigan) declared that “DOE has consistently ranked among the worst” federal agencies for fraud, waste, and mismanagement by its contractors. (See FYI #24, 2/25/93, for mention of a previous Dingell hearing on this subject.)
Over 70 percent of the department’s budget goes to contractors, who run most of DOE’s facilities. DOE has a relationship with its contractors which is unique among federal agencies, originating with the Manhattan Project during World War II. Most DOE contracts are designed to protect contractors from liability for mismanagement, and DOE may even pay the fines and legal fees incurred by the contractors through their own negligence or improper behavior. In addition, the department lacks sufficient staff for effective oversight of its contractors. The ratio of DOE field staff to contractor employees is 28-to-one.
Dingell opened the hearing by recounting numerous examples of waste and mismanagement incidents from past administrations. He acknowledged the “enormous size of the task [O’Leary] faces in straightening out DOE contracting.” O’Leary agreed that problems existed, but was adamant in her intentions to fix them. She announced that she planned to terminate contractors and sanction employees who didn’t “get it” and operate by the new rules. But she also stressed the importance of first setting clear performance guidelines and incentives for compliance.
In her written testimony, O’Leary set forth a series of both short and long term actions she proposes to get DOE’s contracting problems under control. She has already taken some near-term action: DOE contractor salaries have been frozen for one year, reducing the base for future salary increases and saving the department an estimated $1.5 billion over the next five years. Additionally, DOE will attempt to reduce its support service contracts by 10 percent in fiscal year 1994 by reviewing which support services might be performed more appropriately and cheaply by DOE employees. Contractors will risk a reduction in award fees or possible contract termination by incurring civil penalties. DOE plans a review of indirect costs to determine whether any charges are inappropriate, and intends to clarify and standardize its acquisition regulations.
Over the longer term, O’Leary plans to establish a DOE-wide team to examine contracting reform and recommend improvements by December 1993. She has also announced a departmental reorganization, to take effect next week. She promised to involve organized labor in the contract reform effort, and to provide training to DOE personnel in order to improve contract management. O’Leary intends to revise DOE’s hiring practices and job descriptions to insure that employees have the necessary management skills.
O’Leary also wants to increase the ratio of DOE staff to contractor employees. Noting that this ran counter to the administration’s intentions to reduce departmental staffs, she said she had begun a dialogue with OMB Director Leon Panetta, to convince him that DOE’s “needs are quite different” than other agencies. This issue is also of concern to Dingell, who told O’Leary he has written to Panetta on the subject. Dingell raised the possibility of asking Panetta to testify before the subcommittee about it.
Several subcommittee members questioned DOE’s commitment to clean-up efforts at its nuclear facilities. Dan Schaefer (R-Colorado) criticized O’Leary’s recent statement that some clean-up contracts might need to be renegotiated. She responded that “some milestones were improperly embraced,” and might not be achievable with current technologies. She assured Schaefer, however, that DOE was “not backsliding” on its commitments to the clean-up effort.
