A new Government Accountability Office report examines the extent to which defense laboratories have leveraged special administrative authorities designed to enhance their ability to innovate and it details impediments the labs have encountered.
The Government Accountability Office released a report last month analyzing defense laboratories’ use of the special administrative “authorities” that Congress has granted them. The authorities give lab directors (or equivalent individuals) flexibility to circumvent ordinary hiring procedures and fund in-house R&D and renovation projects, among other prerogatives.
Congress has created and modified these authorities in recent years as part of its ongoing efforts to help DOD conduct more innovative R&D and compete for science and engineering talent. However, there have also been concerns that bureaucratic inertia has inhibited the authorities’ full use. To gain a better understanding of DOD lab practices and inform future policymaking, in 2016 the Senate Armed Services Committee directed GAO to assess the labs’ use of their authorities and compare the governance models of federally operated and contractor-operated labs.
To conduct its study, GAO focused on four major authorities: laboratory initiated research authority, direct hire authorities, the Laboratory Enhancement Pilot Program, and micro-purchase authority. It interviewed agency officials and leaders from across the DOD “laboratory enterprise,” comprising 63 DOD-operated labs and R&D centers. It also administered a survey to 44 lab directors, of whom 31 responded. In addition, GAO undertook a less intensive comparison of governance at DOD labs, NASA research centers, and the Department of Energy’s national labs.
Flexible spending authority valued, but its use is constrained
Laboratory initiated research authority is often referred to as “section 219” authority, after the provision in the fiscal year 2009 National Defense Authorization Act (NDAA) that created it. In its current form, it requires lab leaders to expend between 2 and 4 percent of their budgets on projects that they select. To secure additional funding for such projects, labs are also permitted to charge external customers of their services a fee of up to 4 percent of costs.
Projects initiated under this authority may be devoted to basic and applied research, technology transition, workforce development, and the construction and renovation of lab infrastructure. Lab leaders have often said the authority allows them to direct resources to high priorities with relative ease. GAO’s report spotlights several examples of the authority’s use, such as the initiation of work on a high energy laser technology laboratory at the Army’s Space and Missile Defense Command (SMDC) Technical Center in Alabama.
GAO notes that use of this authority varies considerably across labs and services. In the case of the SMDC Technical Center, the lab used the authority for the first time in fiscal year 2018 because its new executive director made it a priority. However many lab leaders who want to use the authority reported roadblocks to doing so. For example, although it was recently raised, lab leaders said DOD’s current $6 million cap on infrastructure projects still effectively prohibits use of the authority for new construction because it is insufficient to build advanced facilities. The report traces the Navy’s meager use of the authority for infrastructure to a lack of DOD guidance on how the authority functions with respect to the Navy Working Capital Fund.
The fees that labs collect from customers also vary considerably. The Air Force Research Laboratory, for instance, reported it charges no fees because the Air Force’s accounting system cannot accommodate such charges. The Navy requires its R&D facilities to uniformly charge a 2 percent fee to prevent labs from “inadvertently” competing with each other for customers by charging lower fees. To encourage full application of the authority, the Army requires its labs to peg the rate it charges customers to the percentage of their budget reserved for using the authority. But GAO finds this policy has actually suppressed use of the authority because many labs have sought to keep fees low to avoid driving customers away.
Use of other authorities limited by variety of factors
GAO finds the other authorities it examined have similarly checkered patterns of use.
Of the 31 respondents to the GAO survey, 30 reported having used direct hire authorities in the last four years and consistently rate them as a useful means of fostering innovation. GAO notes it found in another recent study that use of direct hire procedures decreased median time to hire from 162.5 days to 80 days.
However, GAO finds that labs do not use these authorities to hire as many employees as they are allowed. It reports that a number of factors have reduced the efficacy of direct hiring procedures, including the imposition of federal hiring freezes, delays in processing security clearances, and the need to use ordinary procedures for processing personnel actions. According to GAO, even when hiring decisions are made quickly, subsequent delays have caused candidates to find work elsewhere.
The Laboratory Enhancement Pilot Program, which was created by the fiscal year 2017 NDAA, permits labs to waive a variety of rules, regulations, and other such encumbrances to implement their own management methods, so long as they follow statutory obligations. GAO finds that to date only the Navy has taken advantage of the program. Although some labs within the Army and Air Force have submitted proposals, those services have not yet taken action on them. According to GAO, service officials are moving slowly due to concerns that labs might “sidestep” the oversight of various stakeholders if they are given too much autonomy.
Finally, GAO reports that 26 of 31 respondents to its survey made use of the increase from $3,500 to $10,000 in their micro-purchasing authority that Congress provided in the fiscal year 2017 NDAA. Labs reported the increase will allow them to purchase many more kinds of scientific equipment using simplified procedures, reducing acquisition time from two or three months to a few days. However, some officials in the services raised concerns that the authority enables labs to circumvent purchasing set-asides that benefit small businesses.
GAO finds contractor-operated labs encounter similar challenges
While granting DOD labs special authorities has been a primary mechanism for giving defense researchers more flexibility, another mechanism is the use of contractor-operated facilities not subject to the same laws and regulations as federally operated ones. Outside its laboratory enterprise, DOD currently sponsors 13 University Affiliated Research Centers (UARCs) as well as 10 Federally Funded Research and Development Centers (FFRDCs), of which three are classified as labs.
GAO observes that FFRDCs and UARCs have considerable latitude in hiring, firing, and compensation, and they can often quickly redirect R&D into promising areas. However, it finds the use of such labs is hampered by annual work-hour limits that Congress sets on them, and that, like DOD-operated labs, they suffer from aging infrastructure and lack of access to military construction funds.
To examine the merits of using contractors to operate R&D facilities, GAO compared the situation at DOD labs to that at the Department of Energy’s national laboratories, which are predominantly contractor operated, and at NASA, which operates most of its own R&D centers.
In general, GAO finds that DOE labs face similar challenges as DOD labs, but that it is more the case for DOE’s nuclear security labs than those sponsored by the DOE Office of Science. It notes, for example, that DOE labs face infrastructure challenges, are limited in their discretion to initiate new projects, and have difficulty meeting salary requirements in places with a high cost of living such as the San Francisco Bay Area.
GAO finds that, like DOD, NASA has infrastructure challenges and experiences workforce shortages. It observes, though, that through the NASA Flexibility Act of 2004, Congress provided the agency’s centers with significant administrative leeway. In addition, NASA centers compete for agency support for R&D projects that they propose. GAO notes that Ames Research Center officials told them that process can “foster innovation, encourage employees to keep skills honed, and mitigate complacency.”