[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
COMPETITION FOR DEPARTMENT OF ENERGY
LABORATORY CONTRACTS: WHAT IS
THE IMPACT ON SCIENCE?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
JULY 10, 2003
__________
Serial No. 108-24
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
______
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COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
LAMAR S. SMITH, Texas RALPH M. HALL, Texas
CURT WELDON, Pennsylvania BART GORDON, Tennessee
DANA ROHRABACHER, California JERRY F. COSTELLO, Illinois
JOE BARTON, Texas EDDIE BERNICE JOHNSON, Texas
KEN CALVERT, California LYNN C. WOOLSEY, California
NICK SMITH, Michigan NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland JOHN B. LARSON, Connecticut
VERNON J. EHLERS, Michigan MARK UDALL, Colorado
GIL GUTKNECHT, Minnesota DAVID WU, Oregon
GEORGE R. NETHERCUTT, JR., MICHAEL M. HONDA, California
Washington CHRIS BELL, Texas
FRANK D. LUCAS, Oklahoma BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland SHEILA JACKSON LEE, Texas
W. TODD AKIN, Missouri ZOE LOFGREN, California
TIMOTHY V. JOHNSON, Illinois BRAD SHERMAN, California
MELISSA A. HART, Pennsylvania BRIAN BAIRD, Washington
JOHN SULLIVAN, Oklahoma DENNIS MOORE, Kansas
J. RANDY FORBES, Virginia ANTHONY D. WEINER, New York
PHIL GINGREY, Georgia JIM MATHESON, Utah
ROB BISHOP, Utah DENNIS A. CARDOZA, California
MICHAEL C. BURGESS, Texas VACANCY
JO BONNER, Alabama
TOM FEENEY, Florida
RANDY NEUGEBAUER, Texas
------
Subcommittee on Energy
JUDY BIGGERT, Illinois, Chair
CURT WELDON, Pennsylvania NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland JERRY F. COSTELLO, Illinois
VERNON J. EHLERS, Michigan LYNN C. WOOLSEY, California
GEORGE R. NETHERCUTT, JR., DAVID WU, Oregon
Washington MICHAEL M. HONDA, California
W. TODD AKIN, Missouri BRAD MILLER, North Carolina
MELISSA A. HART, Pennsylvania LINCOLN DAVIS, Tennessee
PHIL GINGREY, Georgia RALPH M. HALL, Texas
JO BONNER, Alabama
SHERWOOD L. BOEHLERT, New York
KEVIN CARROLL Subcommittee Staff Director
TINA M. KAARSBERG Republican Professional Staff Member
CHARLES COOKE Democratic Professional Staff Member
JENNIFER BARKER Staff Assistant
C O N T E N T S
July 10, 2003
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Judy Biggert, Chairman, Subcommittee
on Energy, Committee on Science, U.S. House of Representatives. 10
Written Statement............................................ 11
Statement by Representative Nick Lampson, Minority Ranking
Member, Subcommittee on Energy, Committee on Science, U.S.
House of Representatives....................................... 12
Written Statement............................................ 13
Prepared Statement by Representative Jerry F. Costello, Member,
Subcommittee on Energy, Committee on Science, U.S. House of
Representatives................................................ 13
Witnesses:
Ms. Robin M. Nazzaro, Director of Natural Resources and
Environment, U.S. General Accounting Office
Oral Statement............................................... 14
Written Statement............................................ 15
Biography.................................................... 23
Mr. Robert Gordon Card, Under Secretary for Energy, Science, and
Environment, Department of Energy
Oral Statement............................................... 23
Written Statement............................................ 23
Biography.................................................... 26
Dr. Paul A. Fleury, Dean of Engineering, Yale University
Oral Statement............................................... 26
Written Statement............................................ 28
Biography.................................................... 32
Dr. John P. McTague, Professor of Materials, University of
California, Santa Barbara
Oral Statement............................................... 33
Written Statement............................................ 34
Biography.................................................... 37
Discussion....................................................... 37
Appendix 1: Answers to Post-Hearing Questions
Ms. Robin M. Nazzaro, Director of Natural Resources and
Environment, U.S. General Accounting Office.................... 60
Dr. Paul A. Fleury, Dean of Engineering, Yale University......... 64
Dr. John P. McTague, Professor of Materials, University of
California, Santa Barbara...................................... 66
COMPETITION FOR DEPARTMENT OF ENERGY LABORATORY CONTRACTS: WHAT IS THE
IMPACT ON SCIENCE?
----------
THURSDAY, JULY 10, 2003
House of Representatives,
Subcommittee on Energy,
Committee on Science,
Washington, DC.
The Subcommittee met, pursuant to call, at 10 a.m., in Room
2318 of the Rayburn House Office Building, Hon. Judy Biggert
[Chairwoman of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON ENERGY
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
Competition for Department of Energy
Laboratory Contracts: What Is
the Impact on Science?
thursday, july 10, 2003
10:00 a.m.-12:00 p.m.
2318 rayburn house office building
1. PURPOSE
On Thursday, July 10, 2003, the Energy Subcommittee of the U.S.
House of Representatives' Committee on Science will hold a hearing to
examine the Department of Energy's (DOE) management and operations
(M&O) contracts for its laboratories. Specifically, the hearing will
focus on DOE's use of M&O contract competition to create accountability
for scientific and managerial performance, and on whether the
application of competition as a tool to promote accountability has
particular implications for the conduct of science at the laboratories.
2. WITNESSES
Mr. Robert Card, Under Secretary for Energy, Science and Environment,
U.S. Department of Energy. Prior to his DOE employment, Mr. Card was
President and CEO, Kaiser-Hill Company, LLC. In that role he was
responsible for the cleanup and closure of the U.S. Department of
Energy's (DOE's) Rocky Flats site. Mr. Card also served as a Director
and Senior Vice President at CH2M HILL Companies, Ltd. Prior to the
Rocky Flats assignment, Mr. Card served as Group Executive,
Environmental Companies, responsible for the energy and environmental
business, which was the firm's largest business practice. Mr. Card
completed the Program for Management Development at Harvard Business
School, received a M.S. in Environmental Engineering from Stanford
University, and a B.S. in Civil Engineering from the University of
Washington.
Ms. Robin Nazzaro, Director of Natural Resources and Environment at the
General Accounting Office. Since 1993, she has overseen GAO's work on
federally funded R&D, including responsibility for NIST, NSF and PTO as
well as a number government-wide R&D programs. In addition, she is
currently responsible for the Department of Energy's National Nuclear
Security Administration, Environmental Management, and Waste programs
as well as general DOE management issues such as security and contract
management. Ms. Nazzaro has been with GAO since 1979. For several
years, she worked on tax and financial management issues and later on
information technology issues. She has also served as an assistant to
the Deputy Director for Planning and Reporting, where she was division
focal point for strategic planning and human resources management. Ms.
Nazzaro received a Bachelor's degree in K-12 education from the
University of Wisconsin and recently received a senior management in
government certificate in public policy from the John F. Kennedy School
of Government at Harvard University.
Dr. Paul Fleury, Dean of Engineering and Frederick William Beinecke
Professor of Engineering and Applied Physics at Yale University. Prior
to joining Yale, Dr. Fleury was Dean of the School of Engineering at
the University of New Mexico, following 30 years at AT&T Bell
Laboratories. In January 1992, he was chosen as Vice President for
Research and Exploratory Technology at Sandia National Laboratories,
where he was responsible for programs in physical sciences, high-
performance computing, engineering sciences, pulsed power,
microelectronics, photonics, materials and process science and
engineering, and computer networking. In October 1993, upon termination
of the contract under which AT&T managed Sandia for the Department of
Energy, Dr. Fleury returned to Bell Laboratories. He has served on the
Secretary of Energy's Laboratory Operations Board and the University of
California President's Council on the National Laboratories, is
currently a Board member of Brookhaven Science Associates which manages
Brookhaven National Laboratory, and serves on visiting committees for
Lawrence Berkeley, Sandia and Los Alamos National Laboratories.
Dr. John McTague, Professor of Materials at the University of
California, Santa Barbara. From 2001 to 2003, he served as the
University of California's Vice President for Laboratory Management,
overseeing management of Los Alamos, Lawrence Livermore, and Lawrence
Berkeley National Laboratories. Dr. McTague has over a twenty-year
history of management at the Department of Energy's National
Laboratories. Beginning in 1982, he was appointed as the first chairman
of Brookhaven National Laboratory's National Synchrotron Light Source.
He served on the Board of Overseers of both Argonne National Laboratory
and Fermilab, where he was also Chairman of the Board. Dr. McTague is a
founding co-chair of DOE's National Laboratories Operations Board and a
ten-year member of the Secretary of Energy Advisory Board. In 1999, he
retired from Ford Motor Company where he spent 12 years as Vice
President of Research and Vice President of Technical Affairs. Prior to
joining Ford, he served as Deputy Director and Acting Director of the
White House Office of Science and Technology Policy and was Acting
Science Advisor to the President. During the first Bush Administration
he was a member of the President's Council of Advisors on Science and
Technology and U.S. chair of the U.S.-Japan High Level Advisory Panel
of Science and Technology. Dr. McTague graduated from Georgetown
University and received his Ph.D. from Brown University.
3. OVERARCHING QUESTIONS
The hearing will address the following overarching questions:
Can competition of M&O contracts for laboratories
deliver management improvements? What criteria should be used
to determine if competition is appropriate?
What criteria should be used for awarding M&O
contracts? What are the advantages and disadvantages of
competition? What is the likely field of competitors, and is
the field large enough to make the effort worthwhile?
What is the impact of contractor change, or the
uncertainty of contractor continuity, on the science programs
at the laboratories? What has the result been where contractor
changes have occurred?
What is the best way to structure the relationship
between the Federal Government and scientists in a way that
ensures accountability for management and performance of top-
quality science?
4. OVERVIEW
DOE spends more federal funds on contracts than any other civilian
agency; the vast majority, over $16 billion per year, goes to
contractors to manage and operate 28 major facilities. Of this amount,
nearly $9 billion goes to the operation of the 15 national laboratories
listed in Table 1 on page five. Unfortunately, the public portrait of
performance of both DOE and its contractors has often been a source of
ongoing controversy rather than pride. The popular history of
laboratory management is characterized by repeated reports of cost
overruns, credit card abuse, and security lapses. The General
Accounting Office (GAO) designated DOE contract management as a high-
risk area in 1990, and has reiterated that designation every year
since.
The relationship between DOE and its M&O contractors is complex. In
fact, there are actually numerous relationships, and not all of them
have been contentious or problematic. For example, the relationship
with the Stanford Linear Accelerator Center (SLAC) has worked
remarkably well, with major facilities consistently delivered at or
below budget. Other contracts, such as that with Associated
Universities, Inc., at the Brookhaven National Laboratory, were
terminated due to management failures. Still others, such as the
contracts with the University of California to operate the Livermore
and Los Alamos National Laboratories, have been consistently renewed
despite cost overruns in the billions of dollars at the National
Ignition Facility at Livermore, and serious management and security
lapses at Los Alamos. However, most of these criticisms of DOE
laboratories have centered on management functions rather than the
mission-related outcomes that the laboratories were created to produce.
While management functions are important, the evaluation of science
outcomes is very different from financial reviews in time-scale,
process and specificity.
Over the years, numerous critics have observed that it is difficult
for the Department to carry out its oversight and accountability role
without some credible means of sanctioning contractors. This is why the
GAO, the Office of Management and Budget (OMB), and others have
continually urged DOE to use competitive, performance-based contracts.
However, competition also has real risks. Opponents of competition
argue that needless competition can actually increase costs, especially
if few competent competitors are likely to come forward. More
importantly, the uncertainty of leadership and the disruption of work
flow if contractors change, opponents say, can distract scientists from
their mission and delay important scientific work.
These issues of laboratory governance recently came to the fore
because of several decisions at DOE. On April 30, 2003, DOE announced
that two major laboratories' M&O contracts (that had never previously
been competed) would undergo competition: the Los Alamos Laboratory and
the Idaho Laboratory (formerly Argonne National Laboratory (ANL)-West
and Idaho National Engineering and Environmental Laboratory (INEEL).
Despite the fact that these two contracts are both slated for
competition, their situations are not similar. In the case of Los
Alamos, a new round of problems associated with credit card abuse and
procurement fraud, prompted extensive discussions with Congressional
representatives and other stakeholders. These culminated in the
announcement to compete the M&O contract, two years before to the
contract expiration. In the case of ANL-West, there had been no
allegations of mismanagement, and few prior consultations with the
Congress before the announcement, and little more than a year before
the contract expired. This extremely inconsistent treatment of two
major laboratories and contractors brings into question whether DOE had
a uniform policy or criteria for determining how contracts are
structured and whether they are competed.
The next day, on May 1st, DOE answered those questions when it
formally tasked a Blue Ribbon Commission on the Use of Competitive
Procedures for Department of Energy Laboratories to recommend
procedures and criteria for M&O contract competition decision-making.
The Commission was slated to report by the end of July. The Committee
believes that the Commission, and ultimately DOE, will need to address
the important questions that are the focus of this hearing, in
formulating a competition policy. (The Senate Committee on Energy and
Natural Resources has also been examining the issue of laboratory
governance.)
5. BACKGROUND
History of DOE Laboratory Contracting.
The tradition of the Government Owned Contractor Operated (GOCO)
structure for DOE laboratories was first established when the weapons
laboratories were created in the 1940s. While a number of factors
contributed to the selection of the GOCO approach, the size, scope, and
expense of the pursuit of nuclear weapons, posed a new challenge.
Government salaries were insufficient to attract the ``best and
brightest'' scientists, nor were government procurement rules flexible
enough to manage work on these issues of urgent national importance.
The first laboratory contractors were either universities for the more
science-oriented laboratories (such as Los Alamos and Argonne) or large
companies with major industrial laboratories, such as AT&T or Union
Carbide. Direct profit did not appear to be a motive for contractors to
manage laboratories, e.g., AT&T accepted only $1 per year to manage
Sandia. Over time, the fees have generally increased, and range from
zero at SLAC, to up to $34 million per year for INEEL. Fees constitute
a relatively small percentage of contract revenues, generally less than
1 percent, with INEEL again having the most generous contract, with
over 4.5 percent of the INEEL budget dedicated to fees.
The relationship between DOE and its laboratory M&O contractors has
evolved considerably since the first contracts were set up decades ago.
While few observers would deny the success of the science at DOE
laboratories, it is also difficult to deny that the pursuit of the
laboratories' missions has sometimes come at the expense of normal
housekeeping and care taking chores that taxpayers, rightfully, expect
with the expenditure of their funds. Consequently, the Congress and its
oversight committees, OMB, the General Accounting Office, and the DOE
Inspector General increased their scrutiny of DOE. DOE, in turn,
increased its oversight of laboratory functions, using tools like
``Tiger Teams'' to attack environmental lapses and contract reforms to
address financial and managerial shortcomings. Despite increased
scrutiny, or perhaps because of it, managerial failures continued to
come to light, causing more intensive efforts by oversight bodies, and
a proliferation of rules and regulations.
In response to this increasing regulation, scientists began to
complain that overhead costs were eating into their science budgets,
and to complain that paperwork, conflicting regulatory mandates, and
endless review processes were causing the quality and quantity of the
scientific product to decline. Dr. Siegfried Hecker, former director of
Los Alamos National Laboratory, recently commented, ``The net result
has been to significantly diminish the ability of the laboratories to
accomplish their missions and to dramatically reduce productivity.''
Furthermore, due to what Professor Bob Behn of Harvard University
calls ``the accountability bias,'' the increased scrutiny has tended to
be on the easily measurable. Behn distinguishes between accountability
for what he calls ``finances and fairness'' and accountability for
performance:
LIf you want to be in the accountability-holding business, it
makes more sense to concentrate on process rather than
performance. This is because our accountability expectations
for finances and fairness are much clearer than they are for
performance.. . .the accountability standards for money and
equity are much more formal, much more specific, much more
detailed, much more objective, much more established and much
more accepted.\1\
---------------------------------------------------------------------------
\1\ Robert D. Behn, ``rethinking democratic accountability''
Brookings Institution Press, Washington, DC, p. 12.
While Behn was commenting on government programs generally, in this
case the problem of the accountability bias is exacerbated by the
inherent difficulty of measuring scientific performance. The long-term,
technically-specialized nature of the science carried out at the
majority of DOE laboratories does not lend itself to the type of
specific measures common to many other government programs. Thus, while
it is important to make sure that accountability mechanisms are in
place, the design of those mechanisms should reflect programmatic
context and the type of accountability that we seek.
Because DOE is a large and diverse organization, with contractors
tasked with several very different types of missions--science; weapons
design, production, and stewardship; product engineering; and
environmental cleanup--it may be necessary to design different
accountability mechanisms for different missions. It is crucial that
any redesign of government-contractor relationships, including any
decision to routinely re-compete contracts, be made in the context of
these missions.
For example, the science missions of DOE have benefited by
relationships to academic institutions over the years. However, it is
not clear that non-profit institutions have the wherewithal and
motivation to compete with commercial enterprises every five years. The
motivations of academic institutions interested in operating
laboratories could be very different from those of industrial
organizations, and therefore require different incentives. In addition,
the types of incentives offered for science M&O contracts could well
differ from those for other activities. Finally, the effect on
scientific activities from ongoing uncertainty about management and
operations leadership, or from a transition from one contractor to
another, may be different than the effect on other DOE missions.
This hearing is designed to explore avenues to optimize the
management and accountability structures at DOE science laboratories
for both management and scientific performance.
6. WITNESS QUESTIONS
Questions for Under Secretary Card
What is DOE's current policy toward competition of
M&O contracts, and what led the department to reconsider that
policy?
When laboratories have changed contractors in the
past, what effect did this have on the operation of the
laboratories in question?
How specific a set of recommendations do you expect
to receive from the Blue Ribbon Commission? When do you expect
the Commission to report, and what procedures do you expect DOE
to use to review and implement its recommendations?
Why were some decisions made on laboratory M&O
contract competitions on the eve of the formation of the Blue
Ribbon Commission?
What are the advantages and disadvantages of
competing M&O contracts?
Questions for Ms. Robin Nazzaro
What public statements has the Department of Energy
(DOE) made in response to your recommendations that DOE compete
more of its laboratory contracts? Are there any trends with
regard to competition for science laboratories run by
universities?
Do your reports provide evidence that competition of
management and operations contracts for laboratory management
deliver management improvements? Are some laboratories better
candidates for competition than others? What are the criteria
that matter most in making a competition decision? How should
DOE determine the timeframe for contract competition?
What evidence do you have regarding universities
ability to compete successfully with for-profit entities? Do
you have estimates of the cost of competition which some have
estimated to be as high as $10 million? How many universities
are qualified as potential competitors?
What is the purpose of performance based contracting
for laboratory management? What criteria should be used to
evaluate proposals--do we even know what makes a good
laboratory contractor? How can one make legitimate and unbiased
comparisons of competitors? What is the likely field of
competitors? Is the field large enough to make the effort
worthwhile? Should an incumbent have an advantage if that
contractor receives high performance scores?
Questions for Dr. Paul Fleury
What motivates a contractor to want to operate a
Department of Energy (DOE) laboratory? Why did AT&T decide not
to renew the management contract for Sandia in 1993?
What is the impact, if any, on the science programs
at the laboratories due to uncertainty of contractor
continuity? How does a change of contractor affect science
operations? How did Sandia employees react to the management
changeover in 1993?
If DOE decides to compete laboratory management and
operations contracts, what criteria should be used to evaluate
proposals--do we even know what makes a good contractor? Should
an incumbent have an advantage if that contractor receives high
performance scores? How can one make legitimate and unbiased
comparisons of competitors?
What is the likely field of competitors? Is it large
enough to make the effort worthwhile?
We frequently hear criticisms of laboratory oversight
as being intrusive ``micro-management.'' What do you think the
proper review and oversight mechanisms should be? How often do
you think reviews should occur?
Do you believe the current performance-based contract
incentives deliver improved management or science results? What
should the incentives be for contractors? Should the incentives
be different for non-profit versus for-profit entities? What
can be done to better align the incentives of science
professionals at laboratories with those of the contractors?
Questions for Dr. John McTague
What motivates a contractor to want to operate a
Department of Energy (DOE) laboratory?
What is the impact on the science programs at the
laboratories due to uncertainty of contractor continuity? How
does a change of contractor affect science operations?
If DOE decides to compete laboratory management and
operations contracts, what criteria should be used to evaluate
proposals--do we even know what makes a good contractor? Should
an incumbent have an advantage if that contractor receives high
performance scores? How can one make legitimate and unbiased
comparisons of competitors?
What is the likely field of competitors? Is it large
enough to make the effort worthwhile?
We frequently hear criticisms of laboratory oversight
as being intrusive ``micro-management.'' What do you think the
proper review and oversight mechanisms should be? How often do
you think reviews should occur?
Do you believe the current performance-based contract
incentives deliver improved management or science results? What
should the incentives be for contractors? Should the incentives
be different for non-profit versus for-profit entities? What
can be done to better align the incentives of science
professionals at laboratories with those of the contractors?
Chairwoman Biggert. I now call the Subcommittee on Energy
to order.
I want to welcome everyone to this hearing.
Today we are focusing on the Department of Energy's
contracting policies with respect to the management and
operations of its national laboratories, especially the science
labs. Why are we holding this hearing? Well, be to quite frank,
the logic behind a number of the Department's recent
contracting decisions has been hard to follow.
Over the course of the last nine months, the DOE has made a
number of critical decisions to extend or compete management
and operations, or M&O, contracts at Sandia, Los Alamos, and
lab facilities in Idaho, including Argonne-West and lab
facilities--the Idaho National Environmental and Engineering
Lab, or INEEL. However, these decisions have seriously called
into question whether the DOE has or ever had a uniform policy
for determining how contracts are structured and whether or not
they are competed.
For instance, the day after the Department announced it
would compete several lab management contracts, the Department
then announced a Blue Ribbon Commission to study when, where,
and how decisions to compete lab management contracts would be
made. You can't help but wonder if the Department was putting
the cart before the horse or at least putting the horse after
the cart.
While I commend the Department for taking this--a step
toward establishing a policy to guide future decisions to
extend or compete contracts. I must confess that I am skeptical
that the Commission's report alone will enhance accountability
enough to solve management problems like the many that have
been exposed at Los Alamos. DOE has ignored or only partially
implemented advice from previous panels with a similar charge.
That is why I am particularly eager to hear from DOE about what
direction it has given the Commission, what it expects from the
Commission on the specific issue of competition, what other
measures the DOE will undertake to improve laboratory
performance and contractor accountability, and how these steps
will be integrated with the Commission's recommendation to form
a coherent policy to improve DOE's relationship with its M&O
contractors.
As we proceed, let me be clear about one thing: this
hearing should not be interpreted as supporting a blanket,
uniform policy of competition. On the contrary, a one-size-
fits-all approach to contracting may not be appropriate given
the DOE's diverse facilities and mission, including weapons
design and production, environmental clean-up, product
engineering, and of course, science.
Furthermore, the contracts we are discussing today are not
contracts to operate a cafeteria, to procure a part for a tank,
or to arrange clean-up services for a contaminated site. No,
these contracts are to undertake the work of basic science
research, which, by its very nature, is inherently risky. It
often involves failure as an element of learning and success,
and it presents a much greater challenge when it comes to
measuring performance and results.
If the DOE, the GAO, and this Congress are serious about
maintaining strong science programs at our national
laboratories while improving financial and management
accountability, we should not simply mandate contract
competition under the existing M&O contract regime. Rather, we
should look more broadly at the overall relationship between
the laboratories, their M&O contractors, and the DOE to
determine what must be done to bring about full financial and
management accountability without adversely impacting or
disrupting the kind of world-class science that we have come to
expect from our national laboratories. To start, the DOE must
establish clear criteria to guide decisions to extend or
compete contracts so that lab managers understand exactly how
they are to be judged and what the consequences will be should
they fail to meet expectations.
There is no doubt that this is a complex issue. I look
forward to reviewing the Commission's report, as I am sure the
entire panel does. But in the meantime, there is plenty to
discuss about the costs and benefits of competition and what
else can and should be done to ensure accountability at our
national labs.
[The prepared statement of Ms. Biggert follows:]
Prepared Statement of Chairman Judy Biggert
I want to welcome everyone to this hearing of the Energy
Subcommittee of the House Science Committee.
Today we are focusing on the Department of Energy's contracting
policies with respect to the management and operation of its national
laboratories, especially the science labs. Why are we holding this
hearing? Well, to be quite frank, the logic behind a number of the
Department's recent contracting decisions has been hard to follow.
Over the course of the last nine months, the DOE has made a number
of critical decisions to extend or compete management and operation--or
M&O--contracts at Sandia, Los Alamos, and lab facilities in Idaho,
including Argonne-West and the Idaho National Environmental and
Engineering Laboratory (INEEL). However, these decisions have seriously
called into question whether the DOE has, or ever had, a uniform policy
for determining how contracts are structured and whether or not they
are competed.
For instance, the day after the Department announced it would
compete several lab management contracts, the Department then announced
a Blue Ribbon Commission to study when, where and how decisions to
compete lab management contracts would be made. You can't help but
wonder if the Department was putting the cart before the horse or at
least putting the horse after the cart.
While I commend the Department for taking a step toward
establishing a policy to guide future decisions to extend or compete
contracts, I must confess that I am skeptical that the Commission's
report alone will enhance accountability enough to solve management
problems like the many that have been exposed at Los Alamos. DOE has
ignored or only partially implemented advice from previous panels with
a similar charge. That's why I am particularly eager to hear from DOE
about:
what direction it has given the Commission,
what it expects from the Commission on the specific
issue of competition,
what other measures the DOE will undertake to improve
laboratory performance and contractor accountability, and
how those steps will be integrated with the
Commission's recommendations to form a coherent policy to
improve DOE's relationship with its M&O contractors.
As we proceed, let me be clear about one thing: this hearing should
not be interpreted as supporting a blanket, uniform policy of
competition. On the contrary, a one-size-fits-all approach to
contracting may not be appropriate given the DOE's diverse facilities
and mission, including weapons design and production, environmental
clean-up, product engineering, and, of course, science.
Furthermore, the contracts we are discussing today are not
contracts to operate a cafeteria, to procure a part for a tank, or to
arrange cleanup services for a contaminated site. No, these are
contracts to undertake the work of basic scientific research, which, by
its very nature, is inherently risky. It often involves failure as an
element of learning and success, and it presents a much greater
challenge when it comes to measuring performance and results.
If the DOE, the GAO, and this Congress are serious about
maintaining strong science programs at our national laboratories while
improving financial and management accountability, we should not simply
mandate contract competition under the existing M&O contract regime.
Rather, we should look more broadly at the overall relationship between
the laboratories, their M&O contractors, and the DOE to determine what
must be done to bring about full financial and management
accountability without adversely impacting or disrupting the kind of
world-class science that we have come to expect from our national
laboratories. To start, the DOE must establish clear criteria to guide
decisions to extend or compete contracts so that lab managers
understand exactly how they are to be judged, and what the consequences
will be should they fail to meet expectations.
There's no doubt that this is a complex issue. I look forward to
reviewing the Commission's report, as I'm sure this entire panel does.
But in the meantime, there is plenty to discuss about the costs and
benefits of competition, and what else can and should be done to ensure
accountability at our national laboratories.
Chairwoman Biggert. The Chair now recognizes Nick Lampson,
the Ranking Minority Member on this Energy Subcommittee, for an
opening statement.
Mr. Lampson. Thank you, Madam Chairwoman.
I want to thank Chairwoman Judy Biggert for calling this
hearing. I think it is an important topic, and I look forward
to hearing from our excellent panel of witnesses today.
The DOE National Labs are world-class laboratories that
contribute significantly to DOE's major mission areas. DOE
spends more federal funds on contracts than any other civilian
agency: over $10.3 billion annually goes to contractors to
manage and operate the DOE's 21 national facilities.
The DOE laboratories trace their beginnings to the Nation's
atomic weapons development program during World War II, the
Manhattan Project. The government funded the construction of
lab facilities that used universities and companies with
existing expertise to carry out the work. This arrangement
avoided the need for the government to develop its own
expertise and allowed paying higher rates than generally
available in federal service. Consequently, the labs have had a
history of attracting some of the most talented scientific
workforce in producing world-class science and technology.
DOE labs are not the only governmental agency to receive
criticism for contracting issues. We all remember the bad press
that the Department of Defense received in the '80's about the
$400 hammers and the $1,000 toilet seats. And it is hard to
pick up the Washington Post today without reading about
contracting problems at other federal agencies inside the
beltway. While I am confident that DOE can work through their
contracting issues, the work that is being done at the national
labs is too important to be lost in the controversy of cost
overruns, credit card abuses, and security lapses. And I am
committed to work with this--on this committee to address the
abuses and ensure that science outcomes in the DOE labs remain
sound.
So thank you for joining us here today, and I look forward
to your testimony. And I yield back.
[The prepared statement of Mr. Lampson follows:]
Prepared Statement of Representative Nick Lampson
I would like to thank Chairwoman Judy Biggert for calling this
hearing. It is an important topic and I look forward to hearing from
our excellent panel of witnesses today.
The DOE National Labs are world-class laboratories that contribute
significantly to DOE's major mission areas. DOE spends more federal
funds on contracts than any other civilian agency--over $10.3 billion
annually goes to contractors to manage and operate DOE's 21 national
facilities.
The DOE laboratories trace their beginnings to the Nation's atomic
weapons development program during World War II--the Manhattan Project.
The government funded the construction of lab facilities but used
universities and companies with existing expertise to carry out the
work.
This arrangement avoided the need for the government to develop its
own expertise and allowed paying higher rates than generally available
in federal service. Consequently, the labs have had a history of
attracting some of the most talented scientific workforce and producing
world-class science and technology.
DOE labs are not the only governmental agency to receive criticism
for contracting issues. We all remember the bad press the Department of
Defense received in the 1980s for $400 hammers and thousand dollar
toilet seats. And it is hard to pick up the Washington Post today
without reading about contracting problems at other federal agencies
inside the Beltway.
I am confident that DOE can work through their contracting issues--
the work that is being done at the national labs is too important to be
lost in the controversy of cost overruns, credit card abuses and
security lapses. I am committed to work on this committee to address
the abuses and ensure that science outcomes in the DOE labs remain
sound.
Thank you for joining us here today and I look forward to your
testimony.
Chairwoman Biggert. Thank you. If there is no objection,
all additional opening statements submitted by the Subcommittee
Members will be added to the record. Without objection, so
ordered.
[The prepared statement of Mr. Costello follows:]
Prepared Statement of Representative Jerry F. Costello
Good morning. I want to thank the witnesses for appearing before
our committee to examine the Department of Energy's (DOE) management
and operations (M&O) contracts for its laboratories.
Earlier this year, DOE announced that two major laboratories' M&O
contracts, Los Alamos Laboratory and the Idaho Laboratory (formerly
Argonne National Laboratory-West and Idaho National Engineering and
Environmental Laboratory) would undergo competition. Los Alamos
Laboratory has been investigated for mismanagement, fraud, and abuse
while Argonne National Laboratory-West has had no allegations of
mismanagement. Despite the fact that these two contracts are both
scheduled for competition, their situations are vastly different.
Competing contracts for these two laboratories brings into question
whether DOE has uniform policies and criteria for determining how
contracts are structured and whether they are competed.
Further, I am particularly interested in the external regulation of
the DOE laboratories. The Office of Science operates numerous
laboratories, major scientific instruments, and user facilities. Yet,
the DOE currently regulates itself with regard to nuclear and worker
safety and has been criticized for weakness in self-regulation at its
facilities. External regulation by the Nuclear Regulatory Commission
and the Occupational Safety and Health Administration has been proposed
as a way to improve ES&H at DOE facilities and provide cost savings.
Despite nearly a decade of consideration, including advisory group
evaluations, pilot programs, stakeholder input, and specific direction
from Congress, the DOE has continued to use stall tactics in developing
a comprehensive plan for transition to external regulation.
When the House of Representatives considered comprehensive energy
legislation, the House Science Committee adopted an amendment,
sponsored by myself and Mr. Calvert, that would provide for the
external regulation of nuclear safety and occupational safety and
health at the DOE civilian labs. Unfortunately, it was not included in
the text of H.R. 6. Instead, a report detailing transition and cost was
included in the bill. This provision duplicates information already on
record in GAO reports and DOE reports submitted to Congress as well as
cost audits requested by the Energy and Water Appropriations
Subcommittee. After ten years of studying this issue, we already know
that external regulation is the right answer; yet, DOE insists that
more time is needed.
Accountability for scientific, managerial, and safety performance
has particular implications for the conduct of science at the
laboratories. The question of competition as a tool to promote
accountability will continue to be explored by this committee and I
look forward to hearing from our witnesses.
Chairwoman Biggert. At this time, I would like to introduce
our excellent panel of witnesses. And thank you so much for
joining us. First in order will be Ms. Robin Nazzaro, Director
of Natural Resources and Environment at the General Accounting
Office. Thank you. Second will be Mr. Robert Card, Under
Secretary for Energy, Science, and Environment, U.S. Department
of Energy. Third is Dr. Paul Fleury, Dean of Engineering and
Frederick William Beinecke Professor of Engineering and Applied
Physics at Yale University. And fourth, Dr. John McTague,
Professor of Materials at the University of California, Santa
Barbara.
So as our witnesses, I am sure, know, the spoken testimony
is limited to five minutes each, after which Members of the
Committee will have five minutes each to ask questions. So we
will try and stick to our five minutes, and if you can stick to
your five minutes. So we will start with Ms. Nazzaro.
STATEMENT OF MS. ROBIN M. NAZZARO, DIRECTOR OF NATURAL
RESOURCES AND ENVIRONMENT, U.S. GENERAL ACCOUNTING OFFICE
Ms. Nazzaro. Thank you, Madam Chairman, and Members of the
Subcommittee.
I am pleased to be here today to discuss the Department of
Energy's use of competition and other mechanisms to help ensure
effective contractor performance in managing and operating its
research laboratories.
DOE is the largest civilian contracting agency in the
Federal Government, relying primarily on contractors to manage
and operate its sites and to carry out its diverse missions,
including research. For fiscal year 2003, DOE will spend $9.4
billion on contracts to operate its 16 research laboratories
known as Federally Funded Research and Development Centers, or
FFRDCs.
Since 1990, GAO has identified DOE's contract management as
high-risk for fraud, waste, abuse, and mismanagement. In 1994,
DOE began reforming its contracting practices to, among other
things, improve contractor performance and accountability. As
part of that effort, DOE has used competition in awarding
contracts to better manage and operate its research
laboratories.
In this context, my testimony today will focus on, first,
DOE's rationale for competing a laboratory research contract,
second, the extent to which DOE has competed these contract,
and third, the role of competition and other mechanisms in
improving contractor performance.
In summary, Madam Chairman, DOE has had three main reasons
for competing its FFRDC contracts instead of extending them
non-competitively: one, when the contractor operating the
laboratory is a for-profit; two, when the mission changes
warrant a review of the capabilities of other contractors; or
third, when the incumbent contractor's performance is
unsatisfactory. DOE guidance on contracting indicates a clear
preference for competition, in part, as a result of its
contract reform initiative. While federal statutes and
regulations give DOE considerable flexibility in deciding
whether to compete or non-competitively extend an FFRDC
contract for noncompetitive extensions, DOE guidance requires
the Department to present a convincing case to the Secretary.
Among other things, DOE must certify that competing the
contract is not in the best interest of the government and must
describe the incumbent contractor's past successful
performance.
Of the 16 FFRDC contracts currently in place, DOE has
competed six. DOE's decision to compete these six contracts is
consistent with the Department's overall policy on determining
when competition is appropriate. It has not competed the
remaining ten contracts since the contractors began operating
these sites, in some cases, since the 1940's. DOE recently
decided to compete two of the ten contracts that had never
before been competed: contracts to manage and operate the Los
Alamos National Laboratory in New Mexico, and the Argonne West
Laboratory located at the Idaho National Laboratory. DOE
decided to compete the Los Alamos contract because of concerns
about the contractor's performance. The Argonne West contract
is part of an overall effort to refocus and separate the Idaho
National Laboratory's nuclear energy research mission from the
environmental clean-up mission. DOE plans to include the
activities at Argonne West in the competition for the Idaho
site's science mission, remove the Argonne West scope of work
from DOE's existing contract with the University of Chicago to
operate the Argonne West National Laboratory. DOE believes this
contract restructuring will help to revitalize the nuclear
energy mission at the Idaho site and accelerate the
environmental clean up.
Regarding the role of competition and other mechanisms in
improving contractor performance, competition is one of several
steps DOE can take to address contractor performance problems
or to strengthen contract management. However, just competing a
contract does not ensure that contractor performance will
improve. Other aspects of DOE's contract reform initiative
intended to improve contractor performance include greater use
of fixed-price contracts instead of cost-reimbursement
contracts and establishing or strengthening performance-based
incentives in existing contracts. In addition, we have reported
that DOE must effectively oversee its contractors' activities
in carrying out projects, use appropriate outcome measures to
assess overall results, and apply lessons learned to
continually improve its contracting practices. Our recent
evaluation of DOE's contract reform efforts indicates that DOE
is still working to put these management practices and outcome
measures in place.
Thank you, Madam Chairman and Members of the Subcommittee.
This concludes my statement. I'd be happy to respond to any
questions that you may have.
[The prepared statement of Ms. Nazzaro follows:]
Prepared Statement of Robin M. Nazzaro
Madam Chairman and Members of the Subcommittee:
We are pleased to be here today to discuss the Department of
Energy's (DOE) use of competition and other mechanisms to help ensure
effective contractor performance in managing and operating its research
laboratories. DOE is the largest civilian-contracting agency in the
Federal Government, relying primarily on contractors to operate its
sites and carry out its diverse missions. These missions include not
only conducting research but also maintaining the nuclear weapons
stockpile, and cleaning up radioactive and hazardous waste. For fiscal
year 2003, DOE will spend about 90 percent of its total annual budget,
or $19.8 billion, on contracts, including $9.4 billion to operate 16 of
its research laboratories.
For over a decade, we, DOE's Office of Inspector General, and
others have criticized DOE's contracting practices, including its
failure to hold its contractors accountable for results. DOE's
longstanding approach had been to develop a broadly defined statement
of work, provide considerable direction to the contractor, and
reimburse virtually all costs. This approach placed limited emphasis on
cost control or accountability for results. Furthermore, poor
contractor performance led to schedule delays and cost increases on
many of the department's major projects. Since 1990, such problems have
led us to designate DOE contract management--defined broadly to include
both contract administration and management of projects--as a high-risk
area for fraud, waste, abuse, and mismanagement.
In 1994, DOE began its contract reform initiative to improve
contractors' performance. Through this initiative DOE intended, among
other things, to strengthen contracting practices, hold contractors
more accountable for their performance, and demonstrate progress in
achieving the agency's missions. DOE implemented numerous changes, such
as performance based-contracts with results-oriented measures and a
greater use of competition in awarding contracts, including contracts
to manage and operate its research laboratories known as Federally
Funded Research and Development Centers (FFRDC). According to the
Federal Acquisition Regulation, FFRDCs are entities that engage in
activities sponsored by a government agency or agencies to conduct or
manage basic or applied research and development. Contracts to operate
such facilities differ from other contracts because the government
contemplates a long-term relationship with the FFRDC contractor and the
contractor has access to government data, employees, and facilities
beyond that common in a normal contractual relationship.
My testimony today will discuss (1) DOE's rationale for deciding
whether to compete a FFRDC contract, (2) the extent to which DOE has
competed these contracts, and (3) the role of competition and other
mechanisms in improving contractor performance. Although we have not
conducted a review solely related to FFRDC contracts, our past work on
DOE's contract reform initiative, especially our September 2002
report,\1\ focused in part on DOE's use of competition as a tool to
improve contractor performance, including the contractors that manage
and operate DOE's laboratories. My testimony today is based on the
findings in that report as well as related information we have
developed as part of our ongoing oversight of DOE's contracting
activities.
---------------------------------------------------------------------------
\1\ U.S. General Accounting Office, Contract Reform: DOE Has Made
Progress, but Actions Needed to Ensure Initiatives Have Improved
Results, GAO-02-798 (Washington, D.C.: Sept. 13, 2002).
---------------------------------------------------------------------------
In summary we found the following:
DOE has competed its FFRDC contracts in three main
situations: when the contractor operating the laboratory is a
for-profit entity, when mission changes warrant a review of the
capabilities of other potential contractors, or when the
incumbent contractor's performance is unsatisfactory. DOE
guidance on contracting reflects a strong emphasis on
competition that exists, in part, as a result of its contract
reform initiative. Statutes and regulations give DOE
considerable flexibility in deciding whether to compete or
noncompetitively extend a FFRDC contract. However, for
noncompetitive extensions, DOE guidance requires the department
to present a convincing case to the Secretary. Among other
things, DOE must certify that competing the contract is not in
the best interests of the government and must describe the
incumbent contractor's past successful performance.
Of the 16 FFRDC contracts in place, DOE has competed
six. It has not competed the remaining 10 contracts since the
contractors began operating the sites--in some cases, since the
1940s. DOE recently decided to compete 2 of the 10 contracts
that had never before been competed--contracts to operate the
Los Alamos National Laboratory in New Mexico and the Argonne
West Laboratory, located at the Idaho National Laboratory. DOE
decided to compete the (1) Los Alamos contract because of
concerns about the contractor's performance and (2) Argonne
West contract as part of an overall effort to separate the
Idaho National Laboratory's ongoing research mission from the
environmental cleanup mission at the Idaho site.
Competing contracts is one of several mechanisms DOE
can use to address contractor performance problems or
strengthen contract management. However, just competing a
contract does not ensure that contractor performance will
improve. Other aspects of DOE's contract reform initiative
intended to improve contractor performance included greater use
of fixed-price contracts instead of cost-reimbursement
contracts and establishing or strengthening performance-based
incentives in existing contracts. In addition, we have reported
that DOE must (1) effectively oversee its contractors'
activities in carrying out projects and (2) use appropriate
outcome measures to assess overall results and apply lessons
learned to continually improve its contracting practices. Our
recent evaluation of DOE's contract reform efforts indicates
that DOE is still working to put these management practices and
outcome measures in place.
Background
DOE has a large complex of sites around the country dedicated to
supporting its missions: sites that were used to produce or process
materials and components for nuclear weapons and laboratories that
conduct research on nuclear weapons, defense issues, basic science, and
other topics. These sites and laboratories are often located on
government-owned property and facilities, but are usually operated by
organizations under contract to DOE, including universities or
university groups, non-profit organizations, or other commercial
entities.
DOE contracting activities are governed by federal laws and
regulations. Although federal laws generally require federal agencies
to use competition in selecting a contractor, until the mid-1990s, DOE
contracts for the management and operation of its sites generally fit
within an exception that allowed for the use of noncompetitive
procedures. Those contracts were subject to regulation that established
noncompetitive extensions of contracts with incumbent contractors as
the norm and permitted competition only when it appeared likely that
the competition would result in improved cost or contractor performance
and would not be contrary to the government's best interests. In the
mid-1990s, DOE began a series of contracting reforms to improve its
contractors' performance. A key factor of that initiative has been the
increasing use of competition as a way to select management and
operating contractors for DOE sites. Although DOE initially focused the
increased use of competition on its contracts with for-profit
organizations, the laboratories operated by universities and other
nonprofit organizations have not been completely insulated from these
changes.
Contract administration in DOE is carried out by the program
offices, with guidance and direction from DOE's Office of Procurement
and Assistance Management. The management and operating contracts at
DOE's FFRDC laboratories are administered primarily by the National
Nuclear Security Administration, a semi-autonomous agency within DOE;
or DOE's Offices of Science, Environmental Management, or Nuclear
Energy, Science, and Technology.
DOE Has Competed FFRDC Contracts for Three Main Reasons
DOE has had three main reasons for competing its FFRDC contracts
instead of extending the contracts noncompetitively: when the
contractor operating the laboratory is a for-profit entity, when
mission changes warrant a review of the capabilities of other potential
contractors, or when the incumbent contractor's performance is
unsatisfactory. Without one of these conditions, DOE has generally
extended these contracts without competition.
DOE has considerable flexibility in deciding whether to compete a
management and operating contract for one of its FFRDC laboratories.
Although federal procurement law specifies a clear preference for
competition in awarding government contracts, the Competition in
Contracting Act of 1984 provided for certain conditions under which
full and open competition is not required. One of these noncompetitive
conditions occurs when awarding the contract to a particular source is
necessary to establish or maintain an essential engineering, research,
or development capability to be provided by an educational or other
nonprofit institution or a FFRDC.
The Federal Acquisition Regulation, which implements federal law,
defines government-wide policy and requirements for FFRDCs, including
the establishment, use, review, and termination of the FFRDC
relationship. Under this regulation (1) there must be a written
agreement of sponsorship between the government and the FFRDC; (2) the
sponsoring governmental agency must justify its use of the FFRDC; (3)
before extending the agreement or contract with the FFRDC, the
government agency must conduct a comprehensive review of the use and
need for the FFRDC; and (4) when the need for the FFRDC no longer
exists, the agency may transfer sponsorship to another government
agency or phase out the FFRDC.
DOE's 1996 acquisition guidance describes the procedures DOE
program offices must follow to support any recommendation for a non-
competitive extension of any major site contract, including a FFRDC
contract. This guidance indicates a clear preference for competition
and requires DOE program offices to make a convincing case to the
Secretary before a noncompetitive contract extension is allowed. This
preference for competition is an outcome of DOE's contract reform
initiative, which concluded that DOE needed to expand the use of
competition in awarding or renewing contracts. Among other things, the
1996 guidance specifies that, before a noncompetitive contract
extension can occur, DOE must provide
a certification that full and open competition is not
in the best interest of the department,
a detailed description of the incumbent contractor's
past performance,
an outline of the principal issues and/or significant
changes to be negotiated in the contract extension, and
in the case of FFRDCs, a showing of the continued
need for the research and development center in accordance with
criteria established in the Federal Acquisition Regulation.
In November 2000, DOE's Office of Procurement and Assistance
Management issued additional guidance on how to evaluate an incumbent
contractor's past performance when deciding whether to extend or
compete an existing contract. The guidance states that DOE contracting
officers must review an incumbent contractor's overall performance
including technical, administrative, and cost factors, and it outlines
the information required to support the performance review and the
expected composition of the evaluation team. When reporting the results
of a performance evaluation, the team should address all significant
areas of performance and highlight the incumbent contractor's strengths
and weaknesses. The evaluation team's report serves as the basis for
determining whether extending a contract is in the best interests of
the government and is subject to review and concurrence by the
responsible assistant secretary and DOE's Procurement Executive.
DOE Has Competed or Plans to Compete Half of Its 16 FFRDC Contracts
In September 2002, we reported that DOE had taken several steps to
expand competition for its site management and operating FFRDC
contracts. First, DOE reassessed which sites it should continue to
designate as federally funded research and development centers. As a
result of the reassessment, DOE removed 6 of the 22 sites from the
FFRDC designation. DOE subsequently competed the contracts for two of
these--the Knolls and Bettis Atomic Power Laboratories in New York and
Pennsylvania. DOE restructured the other four contracts and, because of
the more limited scope of activities, no longer regards them as major
site contracts. The six site contracts that DOE has dropped from FFRDC
status since 1992 are listed in Table 1.
For the 16 remaining FFRDC contracts that DOE sponsors, DOE has
competed 6 of them and is planning to compete two additional contracts
in 2004 and 2005. The 16 current FFRDC sites and the competitive status
of the site contract are shown in Table 2.
DOE's decision to compete the six FFRDC sites shown in Table 2 is
consistent with the department's overall policy on determining when
competition is appropriate. For example, DOE competed the contract for
the Brookhaven National Laboratory in 1997, after terminating the
previous contract for unsatisfactory performance by the incumbent
contractor. DOE competed the contract for the National Renewable Energy
Laboratory in 1998 to incorporate additional private sector expertise
into the management team for the site. This competition resulted from
an expanded mission at the site to develop innovative renewable energy
and energy efficient technologies and to incorporate these technologies
into cost effective new products. For the remaining four FFRDC
contracts that DOE has competed, the operator of the laboratory was a
for-profit entity.
When DOE has decided not to compete its FFRDC contracts but to
extend them noncompetitively, its decisions have not been without
controversy. For example, in 2001, DOE extended the management and
operating contracts with the University of California for the Los
Alamos and Lawrence Livermore National Laboratories. The University of
California has operated these sites for 50 years or more and has been
the sites' only contractor. In recent years, we and others have
documented significant problems with laboratory operations and
management at these two laboratories--particularly in the areas of
safeguards, security, and project management.\2\ Congressional
committees and others have called for DOE to compete these contracts.
Until recently, however, DOE did not compete them. Instead, DOE chose
to address the performance problems using contract mechanisms, such as
specific performance measures and interim performance assessments. In
our September 2002 report, we commented that if the University of
California did not make significant improvements in its performance,
DOE may need to reconsider its decision not to compete the contracts.
---------------------------------------------------------------------------
\2\ For, example, see U.S. General Accounting Office, Department of
Energy: Key Factors Underlying Security Problems at DOE Facilities,
GAO/T-RCED-99-159 (Washington, D.C.: Apr. 20, 1999); U.S. General
Accounting Office, Nuclear Security: Improvements Needed in DOE's
Safeguards and Security Oversight, GAO/RCED-00-62 (Washington, D.C.:
Feb. 24, 2000); and A Special Investigative Panel, President's Foreign
Intelligence Advisory Board, Science at Its Best, Security at its
Worst: A Report on Security Problems of the U.S. Department of Energy
(Washington, D.C.: June 1999).
---------------------------------------------------------------------------
In April 2003, the Secretary of Energy decided to open the Los
Alamos National Laboratory contract to competition when the current
contract expires in September 2005. The Secretary made this decision
based on ``systemic management failures'' that came to light in 2002.
The management failures included inadequate controls over employees'
use of government credit cards, inadequate property controls and
apparent theft of government property, and the firing of investigators
attempting to identify the extent of management problems at the
laboratory.
DOE has also decided to restructure the FFRDC contracts supporting
work at the Idaho National Laboratory. Currently the laboratory has two
FFRDC contracts--(1) a site management contract that includes
activities ranging from waste cleanup to facility operations activities
and (2) a contract to operate Argonne National Laboratory, which
includes the Argonne West facility at the Idaho site. DOE plans to
restructure the two contracts so that one focuses on the nuclear energy
research mission and the other focuses on the cleanup mission at the
site. DOE also plans to include the activities at Argonne West in the
contract competition for the site's research mission and to remove the
Argonne West scope of work from DOE's existing contract with the
University of Chicago to operate Argonne National Laboratory. DOE
believes this contract restructuring will help revitalize the nuclear
energy research mission at the Idaho Site and accelerate the
environmental cleanup.
DOE is continuing to examine the nature of its relationship with
FFRDC contractors and the implications of that relationship for its
contracting approach. DOE established FFRDCs in part to gain the
benefits of having a long-term association with the research community
beyond that available with a normal contractual relationship. However,
more recent events are causing DOE to rethink its approach. As
discussed above, DOE has been criticized for not competing laboratory
contracts where the contractors are performing poorly. Furthermore,
annual provisions in the Energy and Water Development Appropriations
Acts since fiscal year 1998 have required DOE to compete the award and
extension of management and operating contracts, including FFRDC
contracts, unless the Secretary waives the requirement and notifies the
Subcommittees on Energy and Water of the House Committee on
Appropriations 60 days before contract award.
Given these concerns, in 2003 the Secretary of Energy commissioned
an independent panel to determine what criteria DOE should consider
when deciding whether to extend or compete a laboratory management and
operating contract. The panel is expected to help DOE determine, among
other things, the conditions under which competition for laboratory
contracts is appropriate, the appropriate criteria for deciding to
compete or extend laboratory contracts, the benefits and disadvantages
derived from competing laboratory contracts, and whether different
standards and decision criteria should apply depending on whether the
contractor is non-profit, an educational institution, an academic
consortium, or a commercial entity.
Competing Its Contracts Is One of Several Mechanisms DOE Has to Address
Contractor Performance, but Effective Oversight and
Improved Outcome Measures Are Also Needed
Competing contracts is one of several mechanisms DOE can use to
address contractor performance problems or strengthen contract
management. However, competing a contract does not ensure that
contractor performance will improve. Other steps DOE has taken as part
of its contract reform initiative to address contractor performance
issues include changing the type of contract, such as from a cost-
reimbursement to a fixed-price contract, or establishing or
strengthening performance-based incentives in the contract. For
example, in September 2002, we reported that DOE now requires
performance-based contracts at all of its major sites. DOE has also
increased over time the proportion of contractors' fees tied to
achieving those performance objectives. However, DOE has struggled to
develop effective performance measures and continues to modify and test
various performance measures that more directly link performance
incentives to a site's strategic objectives.
Even these changes to DOE's contracts do not by themselves ensure
that contractor performance will improve. We have reported that DOE
must also (1) effectively oversee its contractors' activities in
carrying out projects and (2) use appropriate outcome measures to
assess overall results and apply lessons learned to continually improve
its contracting practices. Effectively overseeing contractor activities
involves, among other things, ensuring that appropriate and effective
project management principles and practices are being used. Since June
1999, DOE has been working to implement recommendations by the National
Research Council on how to improve project management at DOE. In 2003,
the National Research Council reported that DOE has made progress in
improving its management of projects but that effective management of
projects was not fully in place.
Regarding the use of outcome measures to assess overall results, in
September 2002, we reported that DOE did not have outcome measures or
data that could be used to assess the overall results of its contract
reform initiatives. We recommended that DOE develop an approach to its
reform initiatives, including its contracting and project management
initiatives, that is more consistent with the best practices of high-
performing organizations. DOE is still working to put a best-practices
approach in place.
As we reported in 2001, improving an organization's performance can
be difficult, especially in an organization like DOE, which has three
main interrelated impediments to improvement--diverse missions, a
confusing organizational structure, and a weak culture of
accountability.\3\ However, DOE expects to spend hundreds of billions
of dollars in future years on missions important to the well-being of
the American people, such as ensuring the safety and reliability of our
nuclear weapon stockpile. Therefore, the department has compelling
reasons to ensure that it has in place an effective set of contracting
and management practices and controls.
---------------------------------------------------------------------------
\3\ U.S. General Accounting Office, Department of Energy:
Fundamental Reassessment Needed to Address Major Mission, Structure,
and Accountability Problems, GAO-02-51 (Washington, D.C.: Dec. 21,
2001).
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Thank you, Madam Chairman and Members of the Subcommittee. This
concludes my testimony. I would be pleased to respond to any questions
that you may have.
Contacts and Acknowledgments
For further information on this testimony, please contact Ms. Robin
Nazzaro at (202) 512-3841. Individuals making key contributions to this
testimony included Carole Blackwell, Bob Crystal, Doreen Feldman, Molly
Laster, Carol Shulman, Stan Stenersen, and Bill Swick.
Biography for Robin M. Nazzaro
Ms. Nazzaro is a Director with the Natural Resources and
Environment team of the U.S. General Accounting Office (GAO). Since
1993, she has overseen GAO's work on federally funded R&D, including
responsibility for NIST, NSF and PTO as well as a number government-
wide R&D programs. In addition, she is currently responsible for the
Department of Energy's National Nuclear Security Administration,
Environmental Management, and Waste programs as well as general DOE
management issues such as security and contract management.
Ms. Nazzaro has been with GAO since 1979. For several years, she
worked on tax and financial management issues and later on information
technology issues. She has also served as an assistant to the Deputy
Director for Planning and Reporting, where she was division focal point
for strategic planning and human resources management.
Ms. Nazzaro received a Bachelor's degree in K-12 education from the
University of Wisconsin and recently received a senior management in
government certificate in public policy from the John F. Kennedy School
of Government at Harvard University. She has received numerous GAO
honors, including the Comptroller General's Meritorious Service Award
for sustained leadership and two Assistant Comptroller General's Awards
for exceptional contributions to strategic planning.
Chairwoman Biggert. Thank you very much.
Now we will hear from Mr. Card, DOE. Thank you.
STATEMENT OF MR. ROBERT GORDON CARD, UNDER SECRETARY FOR
ENERGY, SCIENCE, AND ENVIRONMENT, DEPARTMENT OF ENERGY
Mr. Card. Thank you, Madam Chairman, Members of the
Subcommittee. GAO has done such an outstanding job of
summarizing our position that I'm just going to make a few
quick points.
First, I just want to reemphasize what you said that the
Department is very proud of the outstanding science produced by
its laboratories. These laboratories are creating breakthroughs
everyday, which will enhance our security, boost our economic
competitiveness, protect the environment, and improve our
health. Second, the Department takes its management
responsibilities for its science program very seriously. With
an objective to maximize the science contribution to the Nation
while providing taxpayer value and effective stewardship of
this $3.5 billion figure enterprise just in the science budget.
Third, in responding to calls during the late 1980's and early
1990's for increased contractor accountability and oversight,
the Department significantly increased competition for
contracts Department-wide, as you have heard from GAO. This has
also resulted in increased competition for laboratory
contracts. Fourth and finally, given the important tradeoffs
that this committee is concerned about, and so are we, between
accountability provided for in competition and continuity that
may be important for the development of a science program.
The Secretary has sought the advice of Blue Ribbon
Commission on laboratory contract competition. Its Commission
expected to complete its work later this year.
So Madam Chairman, thank you for the opportunity to
testify. I look forward to your questions.
[The prepared statement of Mr. Card follows:]
Prepared Statement of Robert Gordon Card
Good morning Madam Chairperson and Members of the Subcommittee. It
is my pleasure to join you to discuss the Department of Energy's
laboratories and the use of competitive contracting procedures to
maintain these important scientific research institutions.
Let me begin by affirming the importance of the Department's system
of laboratories to our country's national security and its scientific
leadership. DOE labs are the United States' preeminent institutions for
the conduct of long-term, often high risk, research and development.
The labs represent a major capital investment in state-of-the-art
scientific facilities and technologies which, in many cases, is beyond
the financial reach of American industry and academia. For over fifty
years, DOE labs have enhanced the ability of our nation to deter and
defend against military threats; they have expanded our understanding
of the origins and physical nature of our world; they have led the way
in high energy, nuclear, and condensed matter physics; they have helped
increase the availability of energy supplies, made energy technologies
more efficient, and supported the discovery and development of
alternative energy sources; they have expanded our knowledge, skills
and technologies in dealing with environmental hazards; and they have
helped to unlock the biologic codes which dictate who and what we are.
The preservation and enhancement of these critical scientific
capabilities is a major objective of Energy Secretary Spencer Abraham.
He is committed to ensuring that the DOE labs continue to provide our
nation with world class science and that they are managed in a
conscientious, business-like fashion by our contractors. It is my
privilege to support him in my role as Under Secretary for Energy,
Science and Environment.
You have invited me here today to address the Department's policies
and practices for the use of competitive procedures in maintaining
DOE's contractor managed and operated laboratories. Allow me to begin
with a historical perspective.
The Department and its predecessor agencies, the Energy Research
and Development Administration and the Atomic Energy Commission, have,
since their inception, relied on private sector industrial and academic
institutions to carry out weapons production, basic and applied
research, and other mission-critical activities at its government-owned
sites and facilities located throughout the United States. The
Department has obtained these services through the use of management
and operating (M&O) contracts. M&O contracts are contractual agreements
authorized under DOE's enabling legislation and regulated by the
government-wide Federal Acquisition Regulation (FAR).
The FAR characterizes an M&O contract by its special purpose in
conducting work closely related to an agency's fundamental mission as
well as by its long-term or continuing nature. The FAR further provides
that the effective work performance under management and operating
contracts usually involves high levels of expertise and continuity of
operations and personnel.
The Department historically provided for the continuing maintenance
of its major sites and facilities and their assigned mission
responsibilities through the use of non-competitive contract
extensions. The use of competitive procedures for M&Os was relatively
infrequent, and generally limited to those circumstances where a new
facility was being established or an incumbent chose not to continue
its performance at an existing facility. For example, between 1984 and
1994 when the Department had over 50 M&O contracts, only 3 M&O
contracts were competed.
In the mid 1990s, however, DOE's competition policy and practice
changed significantly. As a result of a comprehensive initiative to
assess and improve its management of M&O contracts, the Department made
a policy decision to significantly increase the use of the competitive
procedures in selecting contractors to manage and operate its
facilities. At the same time, it significantly reduced the usage of the
M&O form of contracting coincident with mission changes at certain
sites and its desire to identify more appropriate forms of contracting
to fit its needs.
DOE's new policy, which was introduced in 1994, and formally
established by regulation in 1996, provided that competition would be
the norm or default mechanism for selecting an M&O contractor at the
completion of the contract term. This policy was consistent with the
statutory principles governing all federal agencies as contained in the
Competition in Contracting Act of 1984. The policy preserved the
concept of maintaining a long-term contractual relationship, however,
by providing for a contract term of up to 10 years: a 5-year initial
term with a competitively derived option right that the Department
could exercise for an additional term of up to 5 years. The
Department's new policy recognized, however, that certain circumstances
might, nonetheless, support the noncompetitive extension of a contract
with an incumbent, as specifically authorized by the Competition in
Contracting Act. To ensure that competition was always considered and
that noncompetitive procedures were selectively and appropriately used,
a rigorous process of analysis, review, and approval was established
with the ultimate authority to approve noncompetitive actions resting
with the Secretary.
As a result of the new policy, DOE vigorously applied competitive
procedures to its M&O contracts as well as to other major contracts
which were formally M&O contracts. Since 1994 the Department conducted
26 competitions for its M&O and former M&O contracts, representing over
$50 billion in contract value. Approximately 75 percent of the
Department's contract dollars are now awarded competitively as compared
to its historic norm of less than 20 percent.
Notwithstanding this major paradigm shift in the way the Department
manages its programs and places its contracts, certain M&O contracts
have not been competed. They are a subset of the Department's research
and development laboratories, which have been officially designated as
Federally Funded Research and Development Centers (FFRDC). An FFRDC is
a unique organization that assists the United States Government with
special long-term scientific research, analysis, and systems
engineering requirements which cannot be met effectively by other
means. An FFRDC occupies a special relationship to the government
organization it serves, having access, beyond that which is common to a
normal contractual relationship, to government and private data,
including sensitive and proprietary information, as well as to federal
employees and facilities. An FFRDC is required to conduct its business
in the public interest with objectivity and independence and in a
manner befitting its special relationship. It must remain free from
organizational conflict of interest, and provide full disclosure of its
affairs to its sponsoring agency. Government-wide policies and
procedures governing the establishment and maintenance of FFRDC's are
promulgated in the Federal Acquisition Regulation. The FAR encourages
long-term relationships between government sponsors and FFRDCs in order
to maintain continuity, currency, objectivity, and independence.
The Competition in Contracting Act of 1984, which provides Federal
Executive Branch agencies with Congressional policy and procedures for
the conduct of their contracting activities, recognizes the unique
position of FFRDCs and specifically authorizes agencies, as an
exception to the general rule requiring the use of full and open
competition, to use noncompetitive procedures as necessary to establish
and maintain FFRDCs.
As a matter of general practice, most federal agencies that sponsor
FFRDCs do not use competitive procedures to maintain their FFRDCs upon
expiration of the contract terms. Indeed, the Department has been able
to identify only two incidents of competition by other federal
agencies.
Consistent with its policies on the use of competition, however,
the Department of Energy has since 1994 affirmatively considered the
use of competition for its FFRDCs at the expiration of contract term.
Although Congress authorized federal agencies to exempt FFRDC contracts
from competition, the Department has, nonetheless, engaged in
competition when an identifiable interest presents itself, such as
where it is dissatisfied with an incumbent's performance or when a
change of mission or program direction presents an opportunity for
considering the merits of alternative providers. It has also tended to
compete in those cases where an FFRDC is run by an incumbent for-profit
organization as opposed to an academic or non-profit organization. As a
consequence, the Department has competed or decided to compete FFRDCs
eight times since 1994. Most significantly, however, the Department has
demonstrated to its incumbent contractors its willingness to engage in
competition when necessary so that contractors do not consider their
continued contractual relationship with the government as a foregone
conclusion. DOE has used this competitive pressure to ensure that the
contractors focus on good performance and the Department's needs and
concerns, as well as to provide leverage to accomplish significant
changes in contract terms and conditions.
DOE believes that the changes in policy and practice with respect
to M&O and former M&O competition have had a generally positive impact.
Although some performance learning curve and program disruption may be
experienced if a non-incumbent is selected as a result of competition,
it has generally been offset by either improved longer-term performance
of the contractor or the accomplishment of other contract goals during
the competition such as the use of performance-based contracting
techniques. Further, the effects of the learning curve of a newly-
selected contractor are offset by DOE's retention of relatively long
contract terms of up to 10 years. With respect to the FFRDC's, since
they have typically been competed for cause because of a specific
objective to be accomplished through the competitive process, DOE has,
in almost every case, seen improvements in, the operation of the
laboratory.
Notwithstanding the changes in DOE policy and the significant
increase in the use of competitive procedures, generally, the issue of
competition continues to receive the attention of Congress and the
General Accounting Office.
For example, the GAO in its recent report on DOE management
challenges noted that although the Department had made much progress in
its overall competitive posture, it continued to noncompetitively
extend most of its FFRDCs including some that had experienced
performance problems. GAO concluded that it was unclear in these latter
cases whether ``. . .DOE can successfully address the performance
problems using contract mechanisms.'' Further, DOE has, on occasion,
received different perspectives from Congress regarding the use of
competition and has received complaints as to lack of clarity in DOE
policy as to when competition is and isn't appropriate. To help address
this continuing issue, Secretary Abraham requested the Secretary of
Energy Advisory Board to establish an independent ``Blue Ribbon
Commission'' to re-examine the issue of DOE's competition policies and
practices with respect to its FFRDCs. The Commission is expected to
assess the Department's competitive policies and procedures to
determine the circumstances and criteria under which competition can
best assist DOE in maintaining high quality research and efficient and
effective operation of its government-owned facilities. Among other
things, the Commission is expected to advise on whether the FFRDCs
should be routinely competed and with what frequency, or whether they
should only be competed for cause. If the former, should there be any
exceptions? If the latter, under what circumstances should a decision
to compete be made? Should different standards or decision criteria be
applied depending on the purpose of the research facility? Should
different standards or decision criteria be applied depending on
whether the incumbent is a non-profit or academic institution or a
commercial, for-profit entity?
The Commission will also assess the benefits and disadvantages of
competing the FFRDCs, offer its opinion as to whether FFRDCs should be
treated differently from other competition decisions, and recommend
potential criteria for deciding which types of entities should mange
and operate the various types of laboratories.
The Commission's analysis and recommendations on these and other
issues are due by the end of the fiscal year. Its report should provide
useful information to the Secretary of Energy to make necessary
improvements to the Department's competition policies and procedures.
This concludes my testimony, I will be happy to answer any
questions that you may have or provide any additional information that
you desire for the record.
Biography for Robert Gordon Card
Mr. Robert Card is the Under Secretary for Energy, Science and
Environment at U.S. Department of Energy. Prior to his DOE employment,
Mr. Card was President and CEO, Kaiser-Hill Company, LLC. In that role
he was responsible for the cleanup and closure of the U.S. Department
of Energy's (DOE's) Rocky Flats site. Mr. Card also served as a
Director and Senior Vice President at CH2M HILL Companies, Ltd. Prior
to the Rocky Flats assignment, Mr. Card served as Group Executive,
Environmental Companies, responsible for the energy and environmental
business, which was the firm's largest business practice. Mr. Card
completed the Program for Management Development at Harvard Business
School, received a M.S. in Environmental Engineering from Stanford
University, and a B.S. in Civil Engineering from the University of
Washington.
Chairwoman Biggert. And now Dr. Fleury.
STATEMENT OF DR. PAUL A. FLEURY, DEAN OF ENGINEERING, YALE
UNIVERSITY
Dr. Fleury. Madam Chairman, I am grateful for the
opportunity to share some of my perspectives with you this
morning on the DOE National Laboratories and on their
management and operations contracts--concepts.
The main missions of the DOE multi-program laboratories are
national security and science. These missions require that the
labs are necessarily large, complex, and expensive. In order
for them to deliver the necessary value to the country, they
must be operated efficiently and effectively. They must be able
to attract and retain the best scientific and technical talent.
I believe that over the decades, as a group, the DOE labs have
done this job better than any other comparable group.
I believe that much of the credit for this record goes to
the GOCO-M&O concept and its execution, at least in the early
years. When the government engaged contractors such as AT&T and
the University of California in the '40's, those contractors
took on the job largely out of the sense of public service. In
fact, President Truman's letter to the then-president of AT&T
stated that AT&T had an opportunity to render an exceptional
service and a national interest. And I believe that that
paradigm has persisted for many of the contractors for many
years.
But in recent years, there have been a number of changes in
the environment that the DOE and the labs face such that he
GOCO concept has come under increasing scrutiny and, I believe,
has experienced some serious distortion. For the DOE labs, this
distortion has meant that the partnership mentality has been
transformed into one of ever-increasing audits and oversights
and micromanagement. Contractors have been given more oversight
and scrutiny and greater liability while having less autonomy
and less authority.
When I was at Sandia in the early '90's, I experienced some
of these effects firsthand following the infamous ``Tiger
Teams'' visits. I believe that approach resulted in focusing
more on a mode of compliance than cooperation and has led to
decreased scientific and technical productivity, increased
staff dedicated to preparing for audits and policing
compliance, and confusion about lines of authority and
accountability.
I did go through a contract change as part of the AT&T
disengagement from the DOE in 1993 when that contract was
competed. It was a long, complex, and expensive process, and it
was done by mutual agreement, not by any dissatisfaction of the
DOE with AT&T. Nevertheless, there were considerable impacts,
at least in the short term, on the staff throughout the
laboratory.
As I think you may hear more from John, I won't talk about
the Lab Operations Board, but I will mention that that was the
major reaction of the DOE to the Galvin report that took place
in the mid-'90's to look at the overall management of the suite
of laboratories. Many of their recommendations seemed to imply
that there was an opportunity for substantial increase in
productivity and efficiency in the laboratories. But to date,
only a fraction of this potential has been realized.
Let me just turn briefly to the question of competition and
competing contracts. I do not believe that problems that have
come up in recent months and years can be fixed by merely
tweaking the current reactive approach. I believe that there is
an urgent need for a strong and visible commitment on the part
of Congress and the Department to restore the GOCO concept to
its earlier structure and mode of operation. Such a commitment
will influence substantially all of the contractor-related
questions that we're discussing here today. If we don't make
such a commitment, I believe that the result will be a
restriction in the pool of potential bidders for new contracts.
It will influence negatively their motivation. It may result
even in contractors who are willing to operate more in a
compliance mode, even at the expense of mission completion.
I, in my written testimony, made some more concrete
suggestions about what I believe are attributes of a good
contractor and what some of the initial steps could be--that
could be taken.
In closing, let me just say that I believe that competing
for these contracts should either be the rule or the exception.
If it is the rule, then I believe you will get into needless
expense without necessarily a positive outcome. That could lead
to the evolution of a sham process. If it is the exception,
then you have to understand what the exception is for. I would
say that unless the incumbent wants to terminate the
relationship or the DOE wants them to terminate it, then it
should not be necessary for re-competing. The primary goals
should be to have effective management at the labs to enable
mission accomplishment, not to measure compliance to particular
rules or regulation.
Thank you.
[The prepared statement of Dr. Fleury follows:]
Prepared Statement of Paul A. Fleury
National Laboratories Overview
Madam Chairman, I am grateful for the opportunity to share with you
some of my perspectives on the DOE National Laboratories management and
some of the issues raised by the current concern for the status and
trajectory of the GOCO and M&O contract concept.
My background and past affiliations with many of these laboratories
are described in my brief bio attached to these remarks, so let me not
spend time on that here. Rather let me begin by stating my belief that
world leadership in research and development is absolutely vital for
the U.S.; that technology based on the methods, discoveries and laws of
science is the basis for innovation, productivity enhancement, and
improvement in the human condition; that the position of the U.S. is
seriously threatened by a steadily declining competency in our schools
in the areas of science, math and technology; that the virtual
disappearance of real research in the U.S. industrial sector adds to
this threat and puts an increasing burden on our universities and
national laboratories to fill the resulting gaps.
The main missions of the DOE multiprogram laboratories are:
national security and science. The former embraces economic and energy
security as well as physical security. The latter embraces technology
development appropriate to the security mission as well as large
facility based fundamental research. In order to fulfill these vital
missions, the national laboratories are necessarily large, complex, and
expensive. Over the past five decades they have become more so. Thus it
is increasingly important that the labs operate efficiently and
effectively. I believe that despite some managerial shortcomings at
virtually all levels the DOE labs as a group have done an outstanding
job in meeting these challenges. As a group they are superior to any
other set of FFRDC's.
GOCO-M&O Concept
Much of the credit for this record goes to the GOCO-M&O concept. As
Sig Hecker has detailed in his testimony to the Senate Energy and
Natural Resources Committee on June 24, 2003 the GOCO relationship
began as a partnership that was deliberate and innovative. For several
decades it was also quite successful. The Congress and the agency
[first the AEC and then the DOE] set the missions and strategic
objectives, and the Management and Operations Contractor was
responsible for their execution. Motivation for becoming an M&O
contractor in those days was in large measure related to the
`opportunity to render an exceptional service in the national
interest'--to quote from President Truman's letter to the then
president of the Bell System [AT&T] requesting him to accept the
management of Sandia National Laboratories. Similar motivation surely
played a dominant role in the University of California's management of
its three national laboratories.
Though conceived and initially implemented for the weapons
laboratories, the M&O GOCO model was successfully adopted for the DOE's
science laboratories as well. Aspects of the `inherently governmental
function' associated with nuclear weapons laboratories--namely long-
term commitment, superb technical judgment, complex science and
engineering projects, and operation of unique and expensive
facilities--were and are still also to be found in the DOE science
laboratories. They house and host facility based fundamental research
in particle and nuclear physics, in chemical, materials and
computational science and increasingly in biology. For several decades
successive generations of large scale science facilities and projects
have successfully operated under the GOCO-M&O paradigm. Though the
short-term stakes for the Nation appear higher when it comes to
effective management of the DOE weapons labs, I believe that the long-
term stakes are equally high for the science labs.
In the past decade and a half or so there have been numerous
changes in the technological and geopolitical landscapes with the
result that the GOCO concept has come under increasing criticism and
has experienced serious distortion if not complete destruction. Too
numerous and complex to describe here, these include changes in the
nature of threats to our national security, expansion of global markets
and technology bases, shrinkage of U.S. industry supported basic
research, increasing dependence on foreign technical talent, an
increase in the litigiousness of our society, and the growth of
government bureaucracy. For the DOE labs these changes have meant a
distortion of the partnership mentality which once characterized the
DOE-contractor relationship into one of a more vendor-supplier
relationship characterized by ever increasing oversight, audits,
orders, compliance requirements and micromanagement. Contractors were
given more oversight and greater liability, while having less authority
and autonomy.
The Sandia-AT&T Experience
This distortion has had many negative consequences--several of
which have been documented in the Galvin Report [Alternative Futures
for the Department of Energy National Laboratories] of 1995. I
experienced many of these effects first hand as Vice President of
Research and Exploratory Technology at Sandia in 1992 and 1993. The
infamous `Tiger Teams' under then Secretary Watkins had just completed
their work at Sandia. In their wake was left a seemingly unending set
of orders, rules, directives and procedures, indicative of an approach
DOE was to follow for years hence: increased audits and paperwork, a
mode of compliance rather than cooperation. This approach led to
decreased scientific and technological productivity, increased staff
both inside and outside the lab dedicated to preparing for endless
audits and policing compliance, confusion about lines of authority and
accountability and a noticeable erosion of the sense of trust and
teamwork so necessary for a productive partnership.
I had gone to Sandia expecting renewal of the AT&T M&O contract due
in October of 1993, only to find soon after my arrival that the DOE and
AT&T were not going to renew their 45-year-old relationship. AT&T's
management of Sandia stood out as one of the finest examples of a
contractor performing `exceptional service in the national interest.'
But with the DOE's decision not to renew its presidential
indemnification of AT&T and the increasing replacement of oversight for
trust, AT&T declined to be considered for a contract renewal.
Additional factors such as the profound change the corporation itself
was experiencing as a result of the 1984 break up of the Bell System
were undoubtedly also involved.
The contract was thus open to the long, complex, and expensive
bidding process. As I recall dozens of potential bidders attended the
first briefings in 1992 and eight eventually went through the entire
bidding process--at considerable expense to themselves and considerable
disruption, uncertainty and angst to thousands of Sandians. The bidders
were down selected to two finalists: Battelle and Martin Marietta [now
Lockheed Martin], the eventual winner.
I remained at Sandia until Sept. 30, 1993 and participated in the
transition before returning to Bell Laboratories. In this case the
decision to compete the contract was made not out of any concern on the
part of DOE for the performance of AT&T as M&O contractor [they had
never collected any fee, despite being a `for profit' corporation, and
had implemented a very successful management structure and philosophy
at the labs] but rather out of the vacuum created by AT&T's rejection
of the dramatically changed ground rules imposed by DOE. In my opinion
the management staff and laboratory culture within Sandia at that time
was very strong and competent, so that while there was considerable
apprehension about the change of contractors, the lab has succeeded
very well. Lockheed Martin has now managed Sandia for almost ten years,
and was awarded a renewal of its contract in 1998.
University of California President's Council on the National
Laboratories
I was given the opportunity for another view of the DOE-contractor
relationship when I was invited to join the Science and Technology
Panel of the UC President's Council on the National Laboratories in
late1996. By then I was Dean of Engineering at the University of New
Mexico and was serving on technical review committees for divisions at
both Sandia and Los Alamos [as well as Berkeley and Brookhaven National
Laboratories].
For nearly four years I had the opportunity to participate in the
evaluation of all the technical divisions at the three UC managed
laboratories. As has been repeatedly stated by others, the dominant
impression from all of these reviews remains that the quality of the
technical work at these DOE labs is at least excellent throughout and
uniquely outstanding in certain key areas. I also observed that the day
to day style of execution, the management tools and practices, indeed
the very culture of the laboratories are substantially influenced by
the contractor. This was as true of Sandia under AT&T as it is of
Berkeley, Livermore and Los Alamos under UC, and as it was at
Brookhaven under AUI.
UC is the longest standing of the M&O contractors in the DOE
system. They have therefore experienced in the greatest measure changes
in the operation of the GOCO concept, and I was able to observe that as
well as some of UC's reactions to them.
Secretary of Energy's Laboratory Operations Board
The events outlined above were by no means unique, and the DOE
commissioned a comprehensive study of the management of its entire
suite of laboratories [perhaps not entirely coincidentally] shortly
after the demise of the AT&T contract. The DOE's principle response to
the resulting Galvin Report was the formation by then Secretary O'Leary
of the Laboratory Operations Board, tasked to advise her on ways to
implement the Galvin recommendations and to generally improve the
strategic planning and operations of the DOE Laboratories.
The Board originally consisted of eight external members and eight
internal DOE members. Deputy Secretary Charles Curtis and retired Ford
executive John McTague co-chaired the LOB in its early days. While it
is difficult to assess the impact of such committees, one clearly
positive aspect of the LOB was the quarterly convening in the same room
of a set of external [mostly industry] members with their DOE
counterparts as a committee together with the Assistant Secretaries
from all of the DOE headquarters offices. We were told more than once
that this was a unique collection. We worked hard to change it from a
collection to a system--but without much evident success.
Much of our effort in the LOB was aimed at understanding and
simplifying the relationships between the DOE and its contractors and
laboratories. In many quarters a strong CYA [cover your anatomy]
mentality had developed, associated with proliferating audits from the
OMB, GAO and IG-like organizations. Typically the DOE had responded by
adding more audits and layers of staff. The sense of partnership with
the contractors continued to erode. The unbelievably convoluted
`management chain' involving the DOE HQ, field offices, area offices,
site officers, contractors, and internal lab management defied rational
analysis. [For those interested I commend to their attention Figure I-1
on page I-9 of the Institute for Defense Analysis Paper P-3306 of March
1997. The paper is entitled ``The Organization and Management of the
Nuclear Weapons Program''].
The LOB addressed many concerns, but to me our primary objective
was to improve the efficiency of laboratory operations so that the best
efforts of the best technical staffs could properly execute the
missions of science and national security. To this end we engaged many
issues, carried out many studies and wrote many reports. These can be
traced through, for example: Contributions and Value of the Laboratory
Operations Board-December 7, 2000; White Paper on Performance Based
Management-Dec.7, 2000; Review of the DOE's Laboratory Directed
Research and Development Program-Jan. 2000; Analysis of Headquarters
and Field Structure Issues-September 1997. All are available through
the website: http://www.seab.energy.gov/publications/pubs.htm.
I believe there have been some improvements in the subsequent years
with regard to several of the issues the LOB considered: progress
toward reducing `stealth overhead'; clarifying lines of authority
especially with the identification of Principal Secretarial Officers;
willingness to pilot simplifying reforms at one or two labs prior to
directing their system wide adoption; restoration of the LDRD ceiling
to a reasonable level, etc. However, there is still very much to be
done.
In my opinion we have barely begun to exploit the increases in
efficiency envisioned in the Galvin report [30 to 50 percent]. Such
increases are still possible, but not by continued piling on of more
rules and compliance checkers, nor by merely trading out one contractor
for another, possibly more compliant replacement. Rather the
restoration of the practice of the GOCO concept to its former
partnership based status is necessary. A high level commission of the
Galvin type is needed now in my opinion to reverse the negative trends
that have recently begun to undo the modest progress that was beginning
to be made and to position the laboratories to execute their
increasingly vital national missions more efficiently.
Going forward with M&O Contracts
Let me turn now to some questions related to the competing of M&O
contracts in today's world. I do not believe the problems can be fixed
by merely tweaking the current reactive approach that intimidates or
penalizes an incumbent contractor with the threat of competing their
contract or by adding more layers of oversight and micromanagement to
new contracts.
I believe that in view of the basic soundness of the GOCO concept
for the management of these laboratories and the deterioration of the
practical execution of that concept, there is an urgent need for strong
and visible commitment on the part of Congress and the Department to
restore it. Such a commitment will influence substantially and, I
believe positively, all of the contractor related questions with which
we are concerned here today. Failure to make such a commitment will
restrict the pool of potential contractors, will influence negatively
their motivation and may result in new contracts and contractors who
are willing to operate in a compliance mode, even if that means
compromising [perhaps as an unintended consequence] the vital missions
of the laboratories.
I believe that the attributes of a good M&O contractor include:
-- Experience in efficiently managing mission oriented,
complex technical organizations.
-- Experience in efficient planning, constructing and
operating large, complex scientific research facilities.
-- Ability to recognize, recruit, retain, and reward the best
scientific and technical talent.
-- Sufficient internal expertise and personnel to provide
sustained technical and operational leadership.
-- Sufficient `clout' to push back on ill conceived directives
from the Department.
-- A true sense of service to the Nation.
-- Absence of conflict of interest.
Among the for-profit organizations, it is difficult to imagine a
company like AT&T or Dupont being interested or willing to bid for a
DOE M&O contract in today's environment. Defense, aerospace or
environmental firms might well be willing--certainly they were in
evidence during the Sandia process in 1993. Issues of management fees,
reward structure and potential conflict of interest all come strongly
into play with such candidates. Nevertheless, there is at least some
evidence that these issues can be managed. There remains, however, at
least for me a concern for the level of in-house understanding of and
commitment to science and basic research with such bidders.
Among universities, there are few if any universities that have the
breadth of capabilities to match the University of California and none
that have their experience. Nevertheless there may be some with
sufficient intellectual, managerial and financial resources to mount
competitive bids. Partnerships between universities and not-for-profit
organizations have been forged and are today operating some science
labs with evident success. So partnerships appear to be an attractive
option. However, they involve additional interfaces and the need for
particular attention to delineation of roles and responsibilities which
may not prove workable for a weapons laboratory.
It is perhaps worth commenting on the question of laboratory
culture. This colors significantly the laboratory's approach to
accountability, efficiency, safety, security, trust between scientist
and manager and a host of other `soft' issues. Over the decades each
laboratory has developed its own culture which has been influenced
noticeably by the M&O contractor. One only has to compare Sandia with
Los Alamos or Berkeley with Brookhaven to see this. An important goal
in considering any contractor is in my opinion to ingrain safety,
efficiency, accountability and security in the modes of mission work
itself for every employee and to reduce the need for overseers and
auditors. This is perhaps too idealistic a goal in today's world, but a
commitment to working in that direction will do a lot for morale of the
scientists and would expand the pool of potential bidders.
On the question of what can be done to `better align the incentives
of science professionals at the laboratories with those of the
contractors?', I would say that the contract should make clear that
delivering on the mission is paramount. What is not paramount is
counting the number of orders complied with or the number of staff
hired to oversee their compliance. Any contract provisions that put
process or order compliance at odds with achievement of the science and
security missions will naturally set the contractor and the scientists
at odds.
How can we ensure that those most capable of doing the job will
actually take it on?
What should incentives be for contractors? I believe the most
compelling incentive will be to break the cycle of micromanagerial
oversight-orders-audits-compliance checking-increasing bureaucracy-
resulting inefficiency-penalties and threats that now exists. Some
progress had been made in this direction during the latter half of the
1990's, but we are now slipping back noticeably. Hence my call above
for a visible commitment from Congress and the department to rectify
these trends.
I realize that this can not be done all at once, but some initial
steps might involve:
-- Increased focus on mission outcomes rather that process
compliance.
-- Fewer, less redundant and better coordinated audits and
reviews of technical and operational performance.
-- Allowing resources saved by efficiency improvements to be
reinvested for more science.
-- Increasing size of programs managed per manager to reduce
stealth overhead.
-- Reward good performance with less frequent contract
recompetes or threats thereof.
-- Identify steps toward working together to solve a problem
[e.g., inappropriate accounting charges] before taking punitive
action.
Summary of Main Points
1. Science and National Security are the main missions of the
DOE multiprogram national laboratories.
2. These vital missions require that these laboratories be
large, complex, and expensive.
3. These attributes require that the laboratories attract the
very best technical talent and be operated efficiently.
4. Changes in the geopolitical, economic and technology
landscapes have made the labs more important than ever to the
Nation.
5. The GOCO-M&O concept was well conceived and well practiced
for several decades at the national labs, but has been severely
distorted by micromanagement and compliance driven approaches
that substantially reduced much needed mutual trust.
6. The Galvin Task Force, the LOB and other committees have
identified several aspects of the GOCO breakdown and have
suggested solutions which have not been implemented.
7. Strong commitment by the congress and the DOE to restore to
the GOCO-M&O practice its former trust is needed to attract
qualified bidders with the requisite commitment to `exceptional
service in the national interest.'
8. It is time for a follow up to the Galvin Task Force in
order to give sufficient visibility and clout to the steps
needed for reform.
Thank you for the opportunity to share my thoughts on these
important matters with you today.
Biography for Paul A. Fleury
Paul Fleury has been Dean of Engineering and Frederick William
Beinecke Professor of Engineering and Applied Physics at Yale
University since December of 2000. Prior to joining Yale Dr. Fleury was
Dean of the School of Engineering at the University of New Mexico from
January 1996 following 30 years at AT&T Bell Laboratories. His last
position there was Director of the Materials and Processing Research
Laboratory in Murray Hill, New Jersey. In January 1992, he was elected
Vice President for Research and Exploratory Technology at Sandia
National Laboratories, where he was responsible for programs in
physical sciences, high performance computing, engineering sciences,
pulsed power, microelectronics, photonics, materials and process
science and engineering, and computer networking. In October 1993, upon
termination of the contract under which AT&T managed Sandia for the
Department of Energy, Dr. Fleury returned to Bell Laboratories.
He received his Bachelor of Science and Master of Science degrees
from John Carroll University, and his doctorate from the Massachusetts
Institute of Technology all in Physics. He holds five patents and has
authored more than 130 scientific publications. He is a Fellow of the
American Physical Society and the American Association for the
Advancement of Science; and a member of the National Academy of
Engineering and the National Academy of Sciences. He has received the
1985 Michelson-Morley Award and the 1992 Frank Isakson Prize of the
American Physical Society for his research on optical phenomena in
condensed matter systems. He has served on the Secretary of Energy's
``Laboratory Operations Board'' and the University of California
President's Council on the National Laboratories. He is currently a
Board member of Brookhaven Science Associates which manages Brookhaven
National Laboratory, and serves on visiting committees for Lawrence
Berkeley, Sandia and Los Alamos National Laboratories.
Chairwoman Biggert. Thank you very much. The bell that you
heard, of course, is we are going to have a vote, but it is
just one vote. So I think we will continue with Dr. McTague and
then we will recess for a few minutes to make the mad dash over
to the Capitol to vote and come back. So Dr. McTague or we will
miss our vote.
Dr. McTague. I agree with almost everything----
Chairwoman Biggert. I don't think you have your mic on.
STATEMENT OF DR. JOHN P. McTAGUE, PROFESSOR OF MATERIALS AT
UNIVERSITY OF CALIFORNIA, SANTA BARBARA
Dr. McTague. I agree with almost everything that has been
said so far, so I will try not to be repetitious and to address
things from a different perspective.
My experience with DOE labs goes back to 30 years ago this
month when I spent the summer at Brookhaven National Lab. It
was a really exciting time and just incredibly electric
environment, things happening all over the place. One of the
more exciting things was in the area of subatomic particle
physics where a group there and a group at the Stanford Linear
Accelerator, another DOE FFRDC, were competing to characterize
what has now come to be called the J/Psi particle. Both
laboratories have researchers that won the Nobel Prize for
that.
At the same time, if you looked across all of the other
federal--FFRDCs, such as Lincoln Lab, other very exciting
things were going on. At that time, Lincoln Lab had just put up
there experimental satellites eight and nine, which were the
first space-based communication satellites. They are still
flying. If you look around the spectrum of the other FFRDCs, I
could give you examples all over the place. Their research has
been superb. If you look today, the same sorts of things are
happening. At Brookhaven, there is very exciting work going on
the so-called quark-gluon, a plasma, for example. And at
Lincoln Labs, they now have a communication satellite up there
based on lasers, which can communicate directly to airplanes
flying in the sky and to ships at sea.
So the track record is superb, and the track record of
FFRDCs is not just in DOE. A substantial fraction of the FFRDCs
is outside DOE. Yet somehow, the FFRDCs within DOE receive the
scrutiny of a microscope but the ones sponsored by other
agencies, such as DOD, the IRS, FAA, or the National Science
Foundation are not treated the same way. This should lead to
the question: what is different about DOE's management, which
causes such scrutiny? And I think that is an important area to
take a look at.
The characteristic of FFRDCs across the spectrum has been
one of long-term relationships. Of all of the Federal R&D
centers, I believe only a single one of them where an existing
contractor was in place and willing to continue was ever
competed, and I believe that is Oak Ridge National Lab. None of
the non-DOE FFRDCs, and there are more of them than there are
in DOE, have ever been competed. Most of them go back to the
'40's and '50's, including Lincoln Labs or NASA's JPL, for
example.
Yet--and the relationships have been stable. This is not
the case with DOE. There has been a series of more than a
decade long sets of experimentation with the interaction with
their laboratories. And I have--can find no way to demonstrate
that their experimentation with contracting and with
interactions has improved their situation relative to the other
successful FFRDCs that we have in this country.
Yet things will go ahead. There will be changes, I am sure.
As changes are made, I think we should look at certain
characteristics, many of which I have put in my testimony. But
the first one is to take the Hippocratic oath. First, do no
harm. The mission performance, as you have mentioned, Madam
Chairman, and as you, Congressman Lampson, have mentioned is
exceptionally good, and it is the purpose of the laboratories.
And we must be careful that anything we do doesn't disturb
that.
It is also true, as has been noted by many, is that one
size doesn't fit all. DOE has a lot of so-called GOCOs, some of
which are research laboratories, yet their missions are
different and the way they should be interacted with are quite
different. And indeed, within even the research laboratories
there is a big difference.
The core of the FFRDC's success has been that the sponsor
dictates the mission goals while the contractor specifies and
implements the methods for carrying these out. Yet over the
past two decades, DOE has constantly, in one guise or another,
specified the hows. The results haven't been good.
As one makes changes, it is important also to note that
there can be unintended consequences. And I give an example in
my written testimony of the Harwell Laboratory in Great
Britain, which has a history similar to Argonne, actually. It
goes back to the 1950's. It was a very successful research
laboratory, but it got swept up with other changes occurring in
the government.
Chairwoman Biggert. If you could, conclude, because we have
five minutes left in our vote.
Dr. McTague. And the changes caused Harwell to be, in
effect, privatized, and that--results of that have been that
Harwell no longer has a research capability.
[The prepared statement of Dr. McTague follows:]
Prepared Statement of John P. McTague
Madame Chairman Biggert, Congressman Lampson, and other Members of
this subcommittee, thank you for inviting me to testify on this
important subject. I am John McTague, Professor of Materials at the
University of California at Santa Barbara. I formerly served as Vice
President for Laboratory Management at the University of California,
Vice President of Research for the Ford Motor Company, and as Deputy
and Acting Presidential Science Advisor during the Reagan
Administration, among many other positions, and have spent much of my
professional life engaged in federal government science policy issues.
I am appearing here representing my own views, however, and not those
of any institution I am or have been affiliated with.
Thirty years ago this month when I was a young associate professor
at UCLA, I spent a summer at Brookhaven National Laboratory doing
research on their unique facilities. The atmosphere was electric. Some
of the best scientists from around the world were there doing forefront
research in materials science, biology, and elementary particle
physics. Indeed, at that time, there was a fierce competition between
researchers at Brookhaven and the Stanford Linear Accelerator, both DOE
National Labs, to characterize a new subatomic physics particle, the J/
Psi. A few years later, researchers from both DOE laboratories shared
the Nobel Prize for this important discovery.
During this timeframe, exciting and important mission
accomplishments were in progress at other Federally Funded Research and
Development Centers (FFRDCs). NASA's Jet Propulsion Laboratory,
operated by Caltech, was preparing the Viking probes for launch to Mars
in 1975. JPL was also in the early stages of the Voyager projects whose
two probes, launched in 1977, have provided us with a quarter of a
century of fundamental data on the outer planets.
At Lincoln Lab, a national security FFRDC managed by MIT, was
focused on two of their satellites, which were the first ``switchboards
in the sky,'' and which are still flying; and at Lawrence Livermore
National Laboratory, two of the prime research areas were high
performance computing and high power lasers.
Thirty years from now, I suspect that someone looking back on these
same FFRDCs in 2003 would find the same level of mission
accomplishment. At Brookhaven, it might focus on the quark-gluon
research at the Relativistic Heavy Ion Collider (RHIC), a search for a
fundamentally new state of matter. At JPL, it would be the Mars Rovers.
At Lincoln Lab, it would be an optical communications satellite, a
descendant of the 1970s ones, and at Lawrence Livermore, high
performance computing and the successful turn on of the National
Ignition Facility, an unprecedented high power laser, once again come
to mind.
These specific examples spanning a three-decade time scale
illustrate what many more comprehensive studies have documented. The
FFRDCs have a more than half-century track record of continuing
accomplishment of important national technical missions. There have
been many systematic studies done over the decades, which more
comprehensively and uniformly have reached the same conclusion.
The FFRDC concept has been a superb success in mission
accomplishment. No other country has had anything like this success
with its government-sponsored laboratories--not the former Soviet
Union, not France or Germany, not Great Britain or Japan.
Yet despite what is in plain sight one subset of the FFRDCs, those
sponsored by the Department of Energy, have been subjected to the
scrutiny of a microscope. Sometimes the microscope focuses on something
really ugly, like an improper travel voucher or an inadequate safety
document. Sometimes it is somewhat out of focus and may seem to show
something egregious, like the apparent purchase of a Mustang automobile
by a laboratory employee using government money. Better focus sometimes
shows a different picture.
The accurately identified flaws certainly call out for processes
for continuous improvement, and sometimes for individual personnel
actions. We all simply must do better, especially with government funds
and property. What the sum of the microscope images does not do,
however, is give a picture of the overall landscape. It does not tell
us about overall mission accomplishment. It does not tell us about the
overall safety record or overall operational efficiency.
To my mind, the fundamental question is: How do we make the
requisite improvements without deleterious effects on the fundamental
mission outcomes, and taking into consideration the overall safety,
environmental, security, and operational performance? A second question
is: What, if anything, is fundamentally different about the DOE
management of FFRDCs, which has caused the focus on their labs and not
on the many other FFRDCs sponsored by other agencies such as NASA, DOD,
NSF, FAA, and IRS?
These are complex questions and deserve answers that acknowledge
this complexity as well as the risk in implementing the wrong
solutions.
As former Caltech President and Nixon Science Advisor, Lee
DuBridge, noted many years ago, ``In a republic many people are
concerned with the government. On the other hand, few people are
directly concerned with science. How can the many be made to understand
the concerns and the problems of the very few? This is a major problem
in our democracy.''
One of the first to face up to the DuBridge problem was General
Leslie Groves, as he directed the Manhattan Project. When Los Alamos
was being set up in late 1942, it was assumed that it would be a purely
government laboratory, with the scientists as government employees,
indeed commissioned military officers. But several key scientists
refused to join under military hierarchy and bureaucracy. Science, they
believed, thrived when scientists were free of bureaucratic constraints
and judged according to their competence.
In a February 25, 1943, letter to J. Robert Oppenheimer, General
Groves set the pattern for all future government owned, contractor
operated FFRDCs. He decreed that Los Alamos would be a civilian
operation managed by the University of California; what in modern
parlance is referred to as a Government Owned, Contractor Operated
(GOCO) entity, or an FFRDC.
As we look forward to improvement, we should first document where
we are. What are the salient characteristics of these successful
FFRDCs? Once again, there are several more comprehensive studies, but
they all include:
1. Working in the public interest, FFRDCs operate as long-term
strategic partners with their sponsoring agencies.
2. As private agencies, FFRDCs have greater flexibilities than
the government in recruiting and managing a highly skilled
technical workforce.
3. Sponsors conduct comprehensive reviews of their FFRDCs
every five years to ensure the quality, efficiency, and
appropriateness of the work program.
What are the principles that should guide us as we aim for
continuous improvement? Some that come to my mind are:
1. Take the Hippocratic Oath: First, do no harm. Our existing
system is successful, important, and of unknown fragility.
Whatever we do should be incremental, not revolutionary, and
should be reversible if experience warrants it. Beware of
unintended consequences.
2. The role of universities in managing FFRDCs has led to
exceptional quality, especially in personnel (JPL, Lincoln
Labs, the National Center for Atmospheric Research, Argonne,
LANL, LLNL, LBNL, etc.).
3. The predictably long-term relationship and commitments by
both sponsors and contractors are at the heart of the FFRDCs.
4. One size does not fit all. The DuBridge observation points
out that managing a research laboratory with its long-term
relationships is different from, say, the contract for cleanup
at Rocky Flats, a finite life government procurement activity,
where optimal performance is simpler to define.
5. The core of the success of the FFRDC concept is that the
government sponsor dictates the mission goals (the ``whats''),
while the contractor specifies and implements the methods for
achieving the goals (the ``hows''). Unlike the sponsors of the
other FFRDCs, since its founding as a cabinet department, DOE
has had a persistent history of trying to specify the ``hows.''
These have been at several levels. The most egregious was
``management by Directive.'' Others have been ``performance
based management,'' with a large series of ``hows'' included.
The current fad in DOE is ``your GOCO will have a two-fold
management structure.'' Can you picture Ford or IBM, for
example, running its laboratories this way? Also, unlike all
the other Government FFRDC sponsors, DOE now seems to be
devaluing long-term relationships in favor of contract
competition.
DOE should return to the fold of the other sponsors of FFRDCs and
specify the ``whats,'' and not the ``hows.'' Their own track record is
the best justification for this recommendation.
It is fine to have philosophical debates on how to make
improvements, but implementation is another matter. Here history gives
us a cautionary guide on unintended consequences.
The United Kingdom Atomic Energy Authority (UKAEA) was formed in
1954 with responsibility for developing that nation's civil nuclear
program and to provide all the associated R&D. The Harwell Laboratory
played a central role in this UK and, indeed, global research.
In the early 1980s the UK undertook a revolutionary and very
successful privatization of many previously governmental activities,
such as coal mining and telecommunications. Swept up into this was the
Harwell Research Laboratory, a world class facility comparable to
Brookhaven or Argonne. The government focused on privatization and
external competition. It ignored the DuBridge caution that research
needs separate consideration. The research part (Harwell Lab) initially
did well, but the profit focus has inexorably killed off almost all of
its research excellence, and it is now mainly a consulting and modeling
agency. This particular UK ``goose'' has laid its last ``golden egg.''
The moral of this story is that DOE, unlike the other FFRDC
sponsors, has a decade long history of detrimental experimentation with
the FFRDC concept. It should learn a lesson from this history and
rejoin the fold of the other FFRDCs. It should reaffirm the efficacy of
long-term relationships, and it should focus on the ``whats,'' and
leave the ``hows'' to the contractor partners, as the other agencies
have done. The Department should then intensely evaluate, on a periodic
basis, how well the contractor has performed the ``whats.''
Thank you again for inviting me; I would be happy to answer any
questions you may have.
Biography for John P. McTague
John P. McTague is Professor of Materials, University of
California, Santa Barbara, a position he has held since 2001. He has a
more than twenty year history with management issues at the Department
of Energy's National Laboratories beginning in 1982 when he was
appointed as the first chairman of Brookhaven National Laboratory's
National Synchrotron Light Source. He has served on the Boards of
Overseers of both Argonne National Laboratory and of Fermilab, where he
was also chairman of the board. He was also founding co-chair of DOE's
National Laboratories Operations Board and a ten year member of the
Secretary of Energy Advisory Board.
Most recently he has been University of California Vice President
for Laboratory Management from 2001 to 2003, overseeing UC's management
for DOE of Los Alamos, Lawrence Livermore, and Lawrence Berkeley
National Laboratories.
On January 1, 1999, he retired from Ford Motor Company, where he
spent twelve years first as Vice President, Research, then as Vice
President, Technical Affairs. At Ford he was, at various times,
responsible for worldwide research, environmental and safety
engineering, technical personnel development, plant engineering, and
worldwide product and technical planning.
Prior to joining Ford in 1986, he served as Deputy Director and
Acting Director of the White House Office of Science and Technology
Policy, and was Acting Science Advisor to the President. During the
first Bush administration, he was a member of the President's Council
of Advisors on Science and Technology and U.S. chair of the U.S.-Japan
High Level Advisory Panel on Science and Technology.
A physical chemist, Dr. McTague received his undergraduate degree
with honors in chemistry from Georgetown University in 1960 and his
Ph.D. from Brown University in 1965. Brown also bestowed on him an
honorary Sc.D. in 1997. From 1970 to 1982, he was a professor of
chemistry and member of the Institute of Geophysics and Planetary
Physics at UCLA.
He is a member of the National Academy of Engineering and a Fellow
of the American Physical Society and of the American Association for
the Advancement of Science.
Chairwoman Biggert. Thank you. The Committee will stand in
recess, which will hopefully be in a short while.
[Recess.]
Discussion
Chairwoman Biggert. The Committee will come to order. It is
now time for our questions, so we will try and keep those to
five minutes, but we really want to elicit the responses from
you. So our--I will yield myself five minutes.
I think the first question I would like to ask is for all
of you and that is, first of all, competition has real risks,
and most people don't go to a new mechanic if they are happy
with the one that they have just for the sake of enhancing
competition. So in--to assure that we don't interfere with well
run, successful programs just for the sake of competition, what
other mechanisms could we use to ensure accountability in our
labs? Would anyone like to start with that? Okay. You can turn
on your mike. Thank you.
Ms. Nazzaro. I can start. We certainly have identified
other approaches as well. We see competition as being one tool
to hold contractors more accountable, but there certainly are
other mechanisms that could be used as well in that process.
One: alternative contract approaches that emphasize results,
having good performance measures and tying them in with some
incentives based on results. Two: performance based contracts
where you have a contractor fee or profit potentially at risk.
And certainly, just having the right people and the right
skills available. We have talked a lot about leadership and
management, the right technical skills available. Oversight by
DOE has been something that is missed a lot of times as far as
improving contractor performance.
Chairwoman Biggert. Anyone else? Mr. Card.
Mr. Card. Yeah, I would agree with GAO's conclusions. The--
I--we are using more performance measures and penalties. There
are competitive options available. There is competition for
scope, which is probably a thing the labs worry about a lot
right now of who gets what mission. And there are stiffer
exercising contract provisions we already have.
Chairwoman Biggert. Dr. Fleury.
Dr. Fleury. I think performance based measures are fine.
The question is, what is the performance measured against? Is
it measured against the mission or is it measured against
regulations and directives? And I emphasize that it has to be
measured against mission. That means that you have to provide
an environment where contractors capable of delivering on the
mission are incented to actually want to be management
contractors. People who have the ability to attract and retain
the top technical talent, who have sufficient internal
expertise and personnel in their own organizations to provide
leadership. They should have experience in managing large
facilities in complex technical organizations. In other words,
where the best business practices, like safety, as well as
safety and security are ingrained in the daily operations of
every employee rather than pasted on from the top. And I think
those are, if you will, levers that can be applied to, and
against which contractors can be measured that will provide
alternatives to competing for competition's sake.
Dr. McTague. I--once again, I am sorry I agree with
everyone. I should have stayed in Santa Barbara.
Chairwoman Biggert. Absolutely not. Your testimony was
outstanding.
Dr. McTague. Their--in judging the performance of a
technical operation, there is nothing like the review, the
qualitative review made by experts, so-called peer review. As
some of the background material for this hearing has taken note
of, there is a tendency to evaluate things that are easily
quantifiable: how many ball-point pens get lost, for example,
as opposed to has the mission for keeping nuclear weapons safe,
secure, and reliable been carried out? Carrying that mission
out really requires people who are expert in that area giving
an evaluation. Also, as has been mentioned by just about
everybody, one of the most important things to measure is the
quality of the technical staffs in these organizations, because
that is their asset.
Another important thing in terms of performance-based
management, which also I believe in, is that the performance
measured--measures have to have been agreed upon, consented, by
the contractor and the contractee at a very high level. It
should not be relegated to a sum of small level issues at lower
level people. The laboratory or the organization is not the
arithmetic sum of 100 small organizations--small operations.
Chairwoman Biggert. It--one mechanism that has been
proposed to ensure accountability and yet remain faithful to
the ideal of competition is an occasional review, say every
seven to ten years and by three panels who would not be allowed
to collaborate. But these teams would evaluate and rank the
labs on performance and then only, say, the bottom tier would
be required to compete. Have you heard about that approach or
thought about that? Dr. McTague.
Dr. McTague. I agree. One of the really important
characteristics of the FFRDCs, in general, has been that there
is periodic review in depth, not annually, but usually every
five years, five, seven, ten years. A length of time
commensurate with the length of the kinds of missions that are
involved, I think, would be quite helpful. There is no question
in my mind about that.
Chairwoman Biggert. My time is expired.
The Ranking Member is recognized for five minutes. Mr.
Lampson.
Mr. Lampson. Thank you, Madam Chairwoman.
Let me ask Dr. McTague a question of clarification of
something that you said. And I didn't get it down right, but
you said something about the differences in management of
agencies cause a need for different scrutiny. Do you--what you
said, and can you clarify that for me a little bit, what----
Dr. McTague. What I was trying to state is that there are
different types of activities. For example, in the Department
of Energy, there are a fair number of so-called GOCOs,
Government Owned, Contractor Operated, entities, some of which
are research labs, some of which are not. Some of them are
basically clean-up sites or production facilities. The one-
size-fits-all does not work for DOE. On the other hand--and the
DOE research labs are much more like the FFRDCs in other
organizations, the research labs like Lincoln Lab, which is
managed by MIT for the national security agencies, or the Jet
Propulsion Lab, which is managed by Cal Tech for NASA. So that
should be looked at in a similar way, FFRDCs, not just the
FFRDCs in DOE. We should be looking, I think, at what is
working in the FFRDCs in other agencies that we can use as best
practices for DOE. And in fact, Under Secretary Card undertook
such a look, what was it, last year. And he might want to
comment on this.
Mr. Lampson. Please.
Mr. Card. In trying to figure out how we could reduce the
bureaucracy that our contractors have to work under, we did
engage in a bench-marking activity with Jet Propulsion Lab and
ENCAR, JPL is operated by NASA and ENCAR by National Science
Foundation. And we actually implemented a number of reforms. I
can't think of the entire list right now that we put in place
as a result of that benchmarking effort. We found some positive
things, and I think they were helped by it as well, so it was a
good exercise and we intend to do more of it.
Mr. Lampson. I--they all need, I guess, experience that I--
issue with comes from healthcare and watching the Healthcare
Finance Administration some years back scrutinize the
activities of a number of healthcare providers. And that became
a pretty intrusive activity. It was one that, I think
ultimately, led to driving an awful lot of people just totally
away from being interested in offering themselves to perform
services. So I guess I am concerned a little bit. At that same
time, it is--it was a cost plus type operation, so let me ask
this question. With my concern about M&O contractors seeing the
government as a limitless source of funds and since profit is
not a factor, spending accordingly with little regard for
efficiency, do you believe there is a disconnect between
contractors and expenditure of taxpayer money? Can any of you
comment on----
Dr. McTague. There are some reasonably standard measures of
efficiency, such as percentage of costs, which are related to
overhead, for example, which are fairly easily documentable.
And the history of the DOE labs in this area, I think, has been
a rather good one of improvement, of cutting the fraction of
costs which are a part of over--which are attributed to
overhead as opposed to actual mission performance. Over the
past, what 10 or 15 years, that rate has gone down
continuously. And it is certainly in a range similar or better
than many private organizations. So the fact that it is federal
money ``limitless pockets,'' I don't think that the situation
is quite that bad. Most people who are running these
laboratories really have a dedication to the mission. And they
really want to be efficient. They want the money spent on
science and research and not on overhead.
Mr. Lampson. Is that the case with non-profits over
private? Do you feel that they are doing a more creditable job?
Dr. McTague. I don't--I am--from--I haven't looked at the
statistics for the various laboratories most recently, but when
I used to be co-chair of the National Labs Operations Board for
DOE, there was no discernible difference between the quality of
efficiency performance between, say, Sandia and Livermore.
Mr. Lampson. Thank you.
Chairwoman Biggert. The gentleman from Maryland, Mr.
Bartlett, is recognized for five minutes.
Mr. Bartlett. Thank you very much.
Ms. Nazzaro, I understand that DOE contract and project
management remains on GAO's list of high-risk areas that are
vulnerable to fraud, waste, abuse, and management. Can you
explain to us the criteria that were used to put them there and
what they need to do to get removed from that list?
Ms. Nazzaro. Yes, sir. GAO put DOE on that list, as far as
high-risk, back in the early '90's. It continues to be on that
list. Initially, we looked at things such as the fact that 90
percent of DOE's budget is spent on contractors. They had a
history of inadequate management and oversight of contractors.
And there was a failure to hold the contractors accountable. So
those were the kinds of things. It is a judgment call that we
make, but there are certain factors that we look at, and we
reassess those factors each year. And DOE has continued to be
on that list.
DOE has taken some of the first steps to get off of that
list. One of the first things is to have proper management
attention at the right levels in the organization, and we
currently see that with DOE. They have tasked each of their
areas to address all of the management challenges, not only the
contracting high-risk area. DOE is addressing all of the
management challenges that GAO has identified and is developing
corrective actions. That is currently in place.
Mr. Bartlett. Do the labs have a clear road map as to what
the problems are and what they need to do to correct those
problems so that they can get removed from that list?
Ms. Nazzaro. Right. Our bottom line is to see contracts
come in on time and within cost. The most recent evaluation
that we did for that was issued in early 2002, and we have not
seen that level of attainment yet. We are seeing that they are
taking some of the right actions to move in that direction but
yet have not seen the bottom line.
Mr. Bartlett. Mr. Card, do you think that your people
understand how they got there and what they need to do to get
off that list?
Mr. Card. Well, first let me say I think contracting is a
very serious issue for DOE, whether we are on somebody's high-
risk list or not. And as GAO identified, when you are
outsourcing 90 percent of your work, which I think is a good
model, by the way, it is something that requires paying a lot
of attention to. I think how we get on or off, I don't know
that I am personally so concerned of whether we are on or off
the high-risk list. What I would like to be doing is performing
well.
Mr. Bartlett. If you are performing well, shouldn't you be
off that list? Do you think that their criteria are irrelevant?
Mr. Card. No, I think GAO's criteria make a lot of sense.
We may disagree from time to time on exactly how well we are
doing with regard to the list, but I think cost and scheduled
performance----
Mr. Bartlett. Do you have a time schedule for changing what
you need to change so that you will no longer be on that list?
Mr. Card. Well, we have been on an aggressive schedule
since Secretary Abraham came on board. He made this one of his
very top priorities. And as GAO has mentioned, we have actually
gone down their list in total and have people tasked
individually to deal with each of the issues that they have
raised. So we are taking it very seriously. I don't--am
reluctant to predict a time, because as was mentioned, it is a
subjective evaluation. But I think we are making some great
improvements, and we are taking it very seriously.
Mr. Bartlett. When you were talking----
Ms. Nazzaro. If I could just add----
Mr. Bartlett. Excuse me. Go ahead.
Ms. Nazzaro [continuing]. The task is something that is
very difficult to attain. We are not taking this lightly. We
are recognizing that there are significant challenges here for
DOE in managing this kind of an environment. It would take
quite a bit of effort. And it may not all be something within
their control with some of these issues, but I don't know that
it is all totally what they do and what kind of time frame, but
DOE is certainly moving in the right direction as a first step.
Mr. Bartlett. I wanted to talk for just a moment about
evaluation of performance. You have got to measure that against
something. Clearly what the labs are doing today is quite
different from what they used to do. The labs used to design
and build and maintain nuclear weapons. Now we no longer design
and build nuclear weapons, we maintain nuclear weapons. The
metamorphism from what the labs used to do to what they are now
doing, I was at Sandia years ago, and I noticed they are very
focused on nanotechnology. They are very focused on alternative
energies, and these are both very good things. Was there a
conscious effort to change the mission, some of the missions of
the labs? Or did they just kind of wander there? We--you know,
clearly the focus of the labs has changed, because we no longer
design and build nuclear weapons. We now have a number of labs
that are focused entirely on maintaining the stockpile. How did
we get to where we are now? Was it a conscious directed
metamorphosis or did we just kind of get there?
Dr. Fleury. I will give you my opinion that the mission of
the weapons labs remains principally national security, but it
is no longer restricted to designing and building nuclear
weapons, although it includes, very strongly, the assurity of
the stockpile. And that does require continued attention to, in
replacing the stockpile components to having to design with
different processes and different materials and the same type
of deliverable weapons. Nevertheless, I think with the
terrorism in the--and the evolution of the threat, the national
threat since the end of the Cold War, the laboratories have
consciously evolved their security mission to include a
different range or a broader range of technologies than they
did before. This is----
Mr. Bartlett. My time is up. If there is an opportunity for
a second round, we can come back to this. Thank you, Madam
Chairman.
Chairwoman Biggert. Thank you.
The gentleman from California, Mr. Honda.
Mr. Honda. Thank you, Madam Chairman. I appreciate the
testimony of the experts here.
Just very quickly to GAO. You mentioned that there are
examples of content that is--of areas that are not in DOE's
control. Can you just give us a couple of examples of what is
not under DOE's control?
Ms. Nazzaro. Well, when we designate areas as a management
challenge or a high-risk area, some of it is just inherent by
the very basic nature of it. And certainly managing----
Mr. Honda. Such as?
Ms. Nazzaro [continuing]. Nuclear materials, national
security, the security of facilities. In light of September 11,
regardless of what DOE was doing, these kinds of things would
probably be identified as high-risk, just because of their
inherent nature. Contract management, with 90 percent of DOE's
budget, and over 100,000 employees that are carrying out the
mission for the agency, inherently, is an area that you would
want to watch closely.
Mr. Honda. I don't--I still don't understand what you mean
by inherently. Are you saying that there are certain kinds of
processes that need to be reexamined in order to provide
security?
Ms. Nazzaro. What I am saying is by its very nature, it is
something that should be kept under a watchful eye. Certainly
the security area is one area that we have been working with
DOE on.
Mr. Honda. Okay.
Ms. Nazzaro [continuing]. In light of September 11.
Mr. Honda. I understand what you are saying now. But it
just seems like there are two kinds of discussions we are
having here. One is about the mission of the labs and the
scientists, and the other is oversight.
Ms. Nazzaro. Correct.
Mr. Honda. Okay. And in the mission of the labs, has GAO
made any kinds of conclusions?
Ms. Nazzaro. We have not assessed the science----
Mr. Honda. Okay. So what is at--really at stake is the
mission of these labs and where we want to go with them. And
what is controlling the whole argument is who is doing it and
who is responsible for the management.
Ms. Nazzaro. Correct.
Mr. Honda. And within this process, is--are there
mechanisms where folks who are working the labs can sort of
criticize what is going on without being targeted in such a way
that there is improvement in the management process? I mean,
GAO, I mean--are--have you looked at that?
Ms. Nazzaro. We looked at the internal controls.
Mr. Honda. Right.
Ms. Nazzaro. Is that what you are asking?
Mr. Honda. Right. I mean, if you are looking at management
efficiency, have you looked for those kinds of things?
Ms. Nazzaro. We have looked at internal controls in the
financial area. In fact, we have an ongoing review right now
looking at the financial management.
Mr. Honda. Okay. I am looking at the whole management with
the human resources, too.
Ms. Nazzaro. We have addressed the issue that there have
been inadequate resources in some areas from a leadership
standpoint. We have also talked about the changing mission and
unclear mission.
Mr. Honda. And these would be issues whether you contracted
out to private industry or to the universities and things like
that? It is all internal, is that correct?
Ms. Nazzaro. They could be, but I think it is further
complicated because it is a contract relationship.
Mr. Honda. Okay. Are there IGs inherent in these kinds of
processes? You have instructed----
Ms. Nazzaro. The DOE IG certainly has looked at these
issues as well, yes.
Mr. Honda. Are they independent of the Department of
Energy, or are they part and parcel of the Department?
Ms. Nazzaro. Well, they report to Secretary Abraham, but
they are independent of the programs.
Mr. Honda. But are they independent of the Department of
Energy?
Ms. Nazzaro. No.
Mr. Honda. Like, pretty much----
Ms. Nazzaro. No, that would be a role that someone like GAO
would play.
Mr. Honda. I see. Okay.
Ms. Nazzaro. But the IG for the Department of Energy is
within the department.
Mr. Honda. Okay. So just very quickly, there is a
bifurcation of our issues that one is the mission of the
scientists and what we want them to do and the other is the
administration of the contract by management. And we are mixing
them up, and I think that I--to throw the baby out with the
water in the tub.
The other question I have is have we spoken with the
employees, this is an open question, to get their feedback as
to what could improve the process rather than just looking at a
finite study of a portion of the problem?
Ms. Nazzaro. Within the course of our reviews, we talk with
employees, both at the labs and at DOE headquarters. We do
extensive interviews of these individuals to identify problems
within the organization and potential corrective actions.
Anytime we issue a report, we also run it by the agency to get
their perspective.
Mr. Honda. The agency is different from employees, is that
correct?
Ms. Nazzaro. Well, we would run it by various components
within the organization. We do what we call exit conference
where we verify facts and we certainly provide it to the
agency. And a lot of times, it is the program people who
comment.
Mr. Honda. Okay. Okay. And in terms--this is the last
question. In terms of accountability, what level of
responsibility does the Department of Energy have in oversight
of the contracts that they let? I mean, we are focusing only on
the contractee. And what is going to suffer is going to be the
mission and the employees, it seems to me. It--you know, and
the law of ultimate responsibility seems like those who let the
contracts have a considerable amount of responsibility and
success of efficiency and bench marking.
Ms. Nazzaro. I agree. They do have a responsibility. I
don't know if Mr. Card wants to respond to what you do in that
regard.
Mr. Card. Well, I think most people would argue we have a
very robust oversight, particularly to the contractors, in
terms of our oversight role. And I think--it wasn't clear to me
whether you were asking about what the oversight is on the
people who awarded the contract in the first place or how we
are managing it. But we have--in addition to the IG, we have an
independent oversight organization in the Department, and then
each functional area has its own oversight role, and the
programs do. So one of my challenges has been to try to knit
that together so the contractor sees as few different oversight
incursions into their work as possible. But I believe that
there is plenty of oversight going on.
Mr. Honda. Well----
Chairwoman Biggert. The gentleman's time has expired.
The gentleman from Washington, Mr. Nethercutt.
Mr. Nethercutt. Thank you, Madam Chairman. I want to
welcome all of you. Thank you for your testimony today.
I want to talk with you for a moment about how effectively
the Department of Energy manages its contracts currently. It is
my understanding that by 2005 Department of Energy will have
competed 1/2 of its Federally Funded Research and Development
Centers. I am interested to know from each of you what you
think is the most important criterion that might compel the
Department of Energy to compete laboratory maintenance and
operations contracts? Anyone and everyone who wants to answer,
I am interested in isolating what particular important
criterion you think are important to compel DOE to compete.
Yes, sir.
Dr. McTague. Clearly the most important is are the prime
missions that have been assigned to those laboratories being
carried out? Are nuclear weapons safe, secure, and reliable,
for example, in terms of how Sandia and Los Alamos and
Livermore perform? That is the first item. And that tends to
get forgotten in these processes. The secondary aspects are
those related to the business aspects of how the missions are
carried out. Are the accounting systems up-to-date? Is there
excess waste, fraud, and abuse? Are safety, security, and
environmental standards being adhered to? Those should be the
secondary--but those should be secondary. And the evaluation of
a laboratory should not be the arithmetic sum of individual
items. That is the way it used to be in the past. And what
could be easily measured, which are the management aspects,
often was 70 percent of the evaluation of a laboratory. And the
science and the performance were just sort of over there on the
side. ``Let us not worry about them.''
Mr. Nethercutt. Um-hum. So substance over form, right?
The--I might just parenthetically say there is a shock physics
lab at Washington State University, which happens to be in my
District and my alma mater. And they are doing some fabulous
work on the integrity--determining the integrity of the current
nuclear stockpile through shock physics. And it is performance
based. I assume all of the accounting and the mechanical
requirements of contracts are being met and adequately provided
and--but yet, I tend to agree with you, sir, with respect to
the substantive of findings and the value of these M&O
contracts.
So does anybody else have a comment or care to discuss what
criteria are most important?
Ms. Nazzaro. I don't know that we could identify one
criteria as being more important than the other. I think the
science is important, but so is the management. We talk about
three issues in our report. One, is it in the best interest of
the Department to also look at contractors' past performance
and whether the mission of the organization is aligned with the
work that they are doing. If you have a change in mission or a
change in scope, there may be a need to realign.
Mr. Nethercutt. Sir?
Dr. McTague. I have a separate comment to make, and that is
that the individual who runs that laboratory at your university
is a very important advisor to the Lawrence Livermore Lab.
Mr. Nethercutt. Yogi Guptah.
Dr. McTague. Yes.
Mr. Nethercutt. Dr. Guptah is a fabulous person. I have
great respect for his intellectual capacity as well as his
experience, so I appreciate you mentioning that. I will pass
that on to him. I talk with him fairly regularly.
Dr. Fleury, let me ask you. In your testimony, you
mentioned that several groups, such as the Galvin Task Force,
have suggested improvements to the lab management structure
that have not been implemented. And I am wondering which of
these suggestions you feel would be the most beneficial, how
would the implementation of those suggestions ensure that
accountability is still maintained?
Dr. Fleury. Well, I think that at the higher level, the
most important thing is to step back from, or break the cycle
of compliance, auditing and rules that is this partnership
sense that I mentioned earlier. I think that there should be an
increased focus on the mission outcomes rather than the focus
on measuring process compliance.
Mr. Nethercutt. Um-hum.
Dr. Fleury. This is a dichotomy that has already been
noted, and I think we have to put more emphasis on the former.
There should be fewer--less redundant and more coordinated
reviews of both the technical and operational performances. It
is not unusual for a laboratory to have hundreds of audits or
reviews in the course of a year, many of which are
uncoordinated and don't speak to one another. I think that
allowing some of the savings resulting from increased
efficiency to be reinvested to improve the science and the
mission, the technical capabilities of the laboratories, many
of which have long neglected maintenance problems that can come
to bear negatively on the mission is another aspect that could
be addressed.
So I would say finally to take a posture that identifies
steps where the Department and the contractor can work together
to solve problems rather than focusing so soon on taking
punitive action for shortcomings. And I would tend to say that
default condition, which puts the threat of competing one's
contract up as a first resort rather than a last resort is the
wrong way to go about it.
Mr. Nethercutt. Thank you all.
Chairwoman Biggert. The gentleman's time has expired.
Mr. Nethercutt. Thank you.
Chairwoman Biggert. The gentlewoman from California, Ms.
Woolsey, is recognized for five minutes.
Ms. Woolsey. Thank you, Madam Chairman.
First of all, I apologize for being here after your
testimony, so if you have already answered this, I am sorry,
but I guess you have to answer it again.
First of all, I hope you acknowledge the interest in this
subject. It is--these are really busy days for us right now,
and people are here and they are staying, and they are
interested, so know how valuable you are to us as our
witnesses.
Okay. In discussions of competition for management
contracts, we usually hear terms like lower costs and/or a goal
of more efficient operations. And we--absolutely I understand
that that is necessary, because we are looking for good
governs, but I am also concerned that we are missing other
important issues and--that have to do with competition like in
terms of access to intellectual resources, the best and the
brightest, employee morale, scientific achievement. I mean, how
can those of us in Congress and those of us that are
considering these issues ensure that these other key points are
considered when--in the proposal process? So let us just start
at the beginning, and if you can answer me, I would appreciate
it.
Ms. Nazzaro. Maybe there is a misunderstanding here. What
we are looking for is competition as one tool. We have
mentioned a number of other tools. What we are looking for is
accountability. And we just don't see that that would preclude
world-class science by making them accountable. We are all for
the world-class science and having the best and brightest. But
all we are asking for is that there is some accountability for
the taxpayer dollar.
Ms. Woolsey. Dr. Fleury.
Dr. Fleury. Well, again, I come back to accountability in
what sense. There is accountability in operational efficiency,
which is, as several people have mentioned, relatively easy to
measure and sometimes difficult to achieve, but I think
progress can be made. I think there is a lot of focus in the
whole lab system, at least in my nearly two decades of
interactions with it, on accountability toward the mission.
There are, as John McTague mentioned, substantial, frequent and
deep reviews, peer reviews, by scientists from around the
country who serve, usually, pro bono, on review committees who
are experts in the technical fields and in the content parts of
the mission. And I believe that while some of these things may
be more difficult to measure than strictly accounting measures,
those reviews are taken seriously and are used to refine the
practice within the laboratories. I don't think that that has
been neglected at all. I think it is a very serious and ongoing
responsibility that the system is actually taking and working
seriously.
Ms. Woolsey. Dr. McTague, I haven't heard your voice since
I got here, so I am going to ask for your voice.
Dr. McTague. Thank you.
Once again, I agree with my colleagues here. But you--I--
one aspect of your question, I think, is very interesting and
that is in looking at, let us say, contract proposals. If there
is a competition, how do you evaluate within different
proposals the likelihood that this will improve, for example,
the ability of the organization to successfully perform? And
that rests in very large measure, in main measure, on the
quality of the technical staff. And the question is, will--can
you, in meeting a contract proposal from Proposer A and
Proposer B, as compared to the present contractor, get anything
out of that contract proposal which will give you really
substantive information on that? And I personally can not think
of such. Therefore, I think there really should be a bias
toward maintaining contractors unless their performance is
egregious, because the risk you take of damaging the quality of
the technical staff is of unknown proportion. And we can't make
a mistake there.
Ms. Woolsey. So tried and true versus going out and
experimenting with something new without being able to--so, can
I ask the fourth witness to respond, Madam Chairman?
Chairwoman Biggert. [No response.]
Ms. Woolsey. Thank you.
Mr. Card.
Mr. Card. Well, I think your question, and many of them
here, are focused on the crux of the matter of how do we either
combine or separate the science from the management. I would
say my personal view is that the labs across the board are
producing excellent science, and I can't think of but a small
handful of cases where we might be disappointed in the science
performance. What we see is that the management issues, in
fact, having the most significant determinate on the labs'
performance, because the expectations by people in this body
and across the aisle and across the Capitol and in other
constituencies with the Department of Energy, for whatever
reason, have developed very high expectations on management.
Those are one of these things where we can probably influence
it, but I doubt that we can control it. And so we are eager to
seek direction of where do we strike the compromise on how to
decide which is more important or how to weight the science and
management performance. And I think if you look at our
competitions in the science laboratories, they have
overwhelmingly been driven by management issues, rather than
science issues.
Ms. Woolsey. Thank you.
Chairwoman Biggert. Thank you.
The gentleman from Michigan, Dr. Ehlers.
Mr. Ehlers. Thank you, Madam Chair. And I also have to
apologize for missing your testimony. I was at another hearing
in trying to control the escalating cost of higher education.
And if you think you have got problems, you should listen to
the other--listen to the students.
I am probably unique on this panel. I think I am the only
one here who has worked at not one, not two, but three federal
laboratories, National Laboratories, all DOE. And so I may have
a slightly different perspective. But in my experience, not
only at the DOE labs, but other labs where I have worked, by
far, the best management from the bench scientist perspective
is invisible management. They don't give two hoots about the
management and how they run it as long as they get their
equipment, they get their time on the computers or accelerators
or reactors or whatever they need, and they are not bothered by
administrative details. And I have noticed a dangerous trend in
my visits to--not only to DOE labs, but to other labs during
the last decade, that more and more the bench scientists are
being asked to perform managerial tasks, which some of them
perform it very well and others have no taste for it and no
desire to do it. And that may be part of the problem.
But that was--that is the background for my question. The
scientists are there to do science. The problems that I
generally hear about from my colleagues and from the press
don't very often involve the scientists. They involve support
staff, management, and so forth. And if we are talking about
changing contractors, I would have a great concern about what
is the impact on the science programs if you do what I consider
rather a draconian step of changing contractors. And I agree
with, I think it was either Dr. Fleury or Dr. McTague that said
that shouldn't be the first recourse. That should be--Dr.
Fleury. There should be other steps that can be taken before
that.
But what has happened in the cases where you have changed
contractors? What--has there been any measurable impact on the
science that it performed in that laboratory? Would you have
gone through a change of contractors? Is it, indeed, draconian?
Does it cause problems with the morale and the science that is
done? Or do the scientists just take this in stride and keep on
with their work? I would like to ask all of you to respond. And
let us go right to left this time instead of the usual pattern.
Dr. McTague.
Dr. McTague. There has been only one--let us see.
Recently--let me put it this way. The one laboratory where a
contractor was removed for poor performance and a new one was
put in was Brookhaven National Laboratory. The quality of the
staff, as far as I can tell, is as good now as it was then, but
I am not certain of that. But the point is is that I haven't
seen any egregious effects. On the other hand, I don't know if
that would be the same thing at another organization. At that
particular organization, the contractor, in fact, was a
consortium of the university, so there was no particular
identification of the staff at that laboratory with University
A or University B. Their association--their identity was with
each other.
Mr. Ehlers. I suspect that is generally true.
Dean Fleury.
Dr. Fleury. Yes. Actually, the Brookhaven situation was one
where the AUI, Associated Universities, was a loose collection
of faculty from northeastern universities and was the
contractor. Their principal focus was on the science and not so
much on the management, and as a result, they were dismissed.
We could get different opinions as to whether that was the
right thing to do at that time, but that is what happened. They
were replaced by a partnership between Batelle, a not-for-
profit, and Stony Brook plus six other universities, of which
mine is one. And so I sit on the Board--the Brookhaven Science
Associates Board at the moment. I would say that in that case,
the change, as John has indicated, was not discontinuous or
disruptive, but a lot of--there was a lot of that continuity
provided by, at least on the academic and science content side,
by those six core universities that had formerly been--formerly
but less formally involved in AUI.
The other case in which I am familiar is where a contractor
wasn't replaced but where it was a mutual parting of the ways
when AT&T left Sandia in '93. And there, I think, there was a
bit more disruption because it had been a long-standing
relationship and they were taken over by a for-profit
contractor, now Lockheed Martin. By I believe that after some
initial concern on the part of the staff and so forth, that
that has worked out reasonably well as well.
So it isn't inherently disruptive, but I think it really
depends on the style and capabilities of both the contractor
that is being replaced and the one that is replacing them that
determines how disruptive it is to the science.
Mr. Ehlers. Mr. Card.
Mr. Card. Just a grain of salt for all of these answers is
that the sample that you have proposed have all got one thing
in common: either the contractor withdrew, there was visibly
bad performance, or a change in missions. So you pretty much
needed to do it. But I would say that in each case where we
have competed based on performance, there has been an
improvement, from our perspective in this--the technical and
business relationship of the lab, because in the end the
business relationship, when it becomes an issue of public
visible concern, affects the science and affects the mission of
the lab. So we think that those were successful. I don't know
that you would apply that across the board.
Mr. Ehlers. Ms. Nazzaro.
Ms. Nazzaro. There are the two examples we have seen here.
There are not many examples of what has happened when you
change the contractor of a science laboratory.
Mr. Ehlers. Wasn't Oak Ridge also--didn't Oak Ridge also go
through?
Ms. Nazzaro. Yes, Oak Ridge was also re-competed. At
Brookhaven we have some indication of the effect. The
Brookhaven Science Associates have won their fees since the
changeover, so we would assume DOE is happy with the science
that is coming out of the laboratory. We have more experience
with other organizations, such as the environmental management
area. There we have seen it is mostly management that turns
over, and there isn't a significant change in scientists.
Mr. Ehlers. All right. Thank you.
Just--I think those three cases that I am familiar with
was--either has a--they may have withdrawn or there were
serious breaches of faith, I believe, between DOE and the
contractor. Without throwing any stones, they were problems.
But I would agree with Dean Fleury that this is something to be
used very, very carefully and very, very rarely. There should
be intermediate steps, if necessary, put into the contract to
punish contractors who are not performing well.
But I would also have to comment, as a scientist, whatever
you do, be careful not to disrupt the scientists. And I am very
concerned with what I have seen and the amount of time that
bench scientists are having to spend on administration. I mean,
these are people who tend to work 60 hours a week, at least,
without being prodded to do it, as long as you leave them alone
and give them a meaningful task. The accountability has to be,
I think, just in looking at the overall mission rather than
examine each detailed aspect of it. But the problems of the
labs, I think, have been primarily in the management of the
non-technical employees, or at least the non-scientific
employees. And that clearly has to be addressed. And that
requires very good management.
Dean Fleury, were you trying to say one last thing?
Dr. Fleury. I just wanted to comment on the point you made
about invisible management becoming intrusive management. This
takes the form of what I call ``stealth overhead,'' that
scientists from the ground up are spending more and more of
their time trying to find sponsors for their individual work,
so it doesn't appear as--necessarily as adding managers. But it
does reduce the efficiency of the process. And that is one of
the things I suggest in my written testimony that we should
take a look at: the scope of management of program managers in
the labs. I think it has been creeping in the wrong direction.
Mr. Ehlers. Thank you.
Chairwoman Biggert. Thank you. And Dr. Ehlers, if I just
might comment on that and--what you have brought up. I think
one of the reasons for this hearing is the fact that perhaps we
are--that DOE is looking at, and there is the Blue Ribbon
Commission that might come up, that would suggest that all labs
be competed. And I think, you know, we have got 16 labs, and
just with the three that you have talked about, that this could
be a real change in our labs. And so we want to make sure that
we know exactly, you know, what the criteria is for competition
and how that will occur. And I think that is what we are trying
to get at.
Thank you.
The gentleman from Tennessee, Mr. Davis, is recognized for
five minutes.
Mr. Davis. Thank you, Madam Chairman.
I represent an area that--several people work in the area
around the Oak Ridge National Lab. And obviously there has been
a change in contractors during the last three or four years.
Under Secretary Card, the question I want to ask, when you make
a decision to competitively bid a contract currently, in
today's atmosphere, how do you--what process do you go through?
How do you evaluate that? How would you look at the
contractors, say, at Oak Ridge National Lab today and decide
that there should be competitively bidding two, four, six,
eight years down the road? And if you have a good contractor,
who is doing an excellent job that has had excellent ratings, I
know there are several labs that have been operated that have
not had competitive bidding for as much as 50 or 60 years. If
you have someone doing the job, managing well within budget,
operating well, what induces the Department of Energy to ask
for a competitive bid for that particular lab that will be
operated for the next few years?
Mr. Card. I can answer on how we have done it, but not how
we would do it yet until we get the results from the Blue
Ribbon Commission and the Secretary makes a policy decision on
that. How it occurred in the past, we would look at the
stewardship of the contractor over the laboratory asset, which
is both the intellectual aspect, that has been discussed, and
the physical asset and how they are--how well they are
protecting the, what I will call, mission viability of the
laboratory. And the--in the case of Oak Ridge, some of the
improvements we noted is we are noticing improvements in the
intellectual and physical infrastructure and on project
performance, particularly of the flagship project, which is
Spallatia Neutron Source, which, in my opinion, was not doing
well and was probably the catalytic event that created the
desire on DOE's part, I wasn't here at the time and part of the
decision, but I was in the community, to compete that contract.
And that project is, in my opinion, a benchmark project now in
its--both its technical performance and its safety performance.
And it--just let me reemphasize that while safety may not be
science, the lack of events on Spallatia Neutron Source has, in
fact, saved the taxpayer a lot of money by allowing that
project to proceed smoothly, as it is doing.
Mr. Davis. Well, I certainly applaud the contractors there
today and what they are doing and how the process has worked
and continues to work. And the reason I ask the question that I
am somewhat concerned if we--about competitive bidding two, or
three, or four years down the road, and my hopes are that as
you look at labs throughout America, if the job is being done
on budget, on target, then the process of having competitive
bidding, obviously, just for competitive bidding is not
something that I would recommend or advise to do.
But on the other hand, when there is a need or when there
are needs for a change, and it is obvious with all of the
different reviews that you have that--the auditing process that
you go through, when you ask for a new bid, what kind of talent
pool do we have? How many different contractors do we have in
this country today that are capable that--of actually bidding
to do management and operations over labs? Do we have a pretty
good--are they shrinking? Are we seeing bidders grow? Is it
usually one or two people who bid for competition? More than
two? Generally, could you give me an idea of how many bidders
we have when that decision is made to actually competitively
bid the operation in management?
Mr. Card. Well, it depends on the lab and what--how big it
is and what its mission is and where it is and a number of
issues. But typically, what will happen is there will be half a
dozen potential contenders. They usually congeal into two or
three bidders, and we have--we can give you, for the record,
statistics, but I believe in all but a couple competitions, we
have had more than one bidder. And in fact, I am familiar with
one that was not a science contract, but it was pretty obvious
that it had been competed just to compete it. And so the other
bidders understood that and didn't bid. But we haven't had
trouble getting competition, but these gentlemen associated
with prominent universities might know better how their
institutions would look at such a situation.
Mr. Davis. Would you respond, please?
Dr. McTague. If one looks at the--at history, there were
two science labs that were competed. At, namely, Oak Ridge and
Brookhaven, each one of them had two bidders. It is easier to
get bidders for more engineering-oriented operations, things
that are more similar to what a BWXT kind of company does. It
is not so easy to find organizations that are willing and able
to manage mainly scientific laboratories.
Mr. Davis. So what you are saying is if through the
auditing process the job was getting done, then there can be a
continuity of contracting from the current contractors? That is
an assumption.
Dr. McTague. Almost all of the laboratories have had fairly
continuous relationships with contract--with the organization.
The University of California runs three laboratories: one of
them for 50 years, one for 60, one for 70 years. The
different--and if you look at the other FFRDCs outside DOE,
such as Lincoln Labs, which is managed by MIT for the national
security agencies of the government, they have run that
laboratory without bidding since it was established when--it
actually grew out of the radiation lab during World War II.
Every single FFRDC, outside of DOE, has never been competed.
Never.
Mr. Davis. Thank you. I yield back the rest of my time.
Chairwoman Biggert. The gentleman from Oregon, Mr. Wu.
Mr. Wu. Thank you, Madam Chair.
Mr. Under Secretary, welcome to the Science Committee. Are
you familiar with this GAO report dated April 2002, Department
of Energy Weapons Laboratory's actions needed to strengthen
oversight is a report requested by Eddie Bernice Johnson and
me? And in the report, there appears to be some differences by
contractor of--in terms of women and minorities promotions,
personnel actions, percentages of workforce in the different
energy laboratories. And what is interesting and relevant to
this hearing is that there appear to be differences by
contractor. Are you familiar with that report, Mr. Under
Secretary.
Mr. Card. I am familiar with the report, although its
focus, as I believe, was on NNSA, which is the other part of
DOE that I am not responsible for. And do you want me to----
Mr. Wu. Now it--I believe that the report was focused on
three laboratories: Sandia, Los Alamos, and Lawrence Livermore.
And you are not responsible for those three facilities?
Mr. Card. Not as of when I left for the hearing.
Mr. Wu. Well, you never know. The--what is of concern to me
is that, as part of the DOE's response to the report, there was
a commitment on the part of the Department of Energy to work
with this Congress and other departments in addressing the
disparities found in the various laboratories and as between
contractors. And since we are talking about the contracting
process now, I am--since the Department made a commitment to
move forward with this. And I--my understanding is that I have
a commitment from Secretary Abraham and his predecessor,
Secretary Richardson, to work on these issues, we have not done
the oversight process in public or by news release. I think
that we have been more than patient in addressing some of these
issues. I am curious as to whether those commitments to work
with--to work on these disparities continue to be good.
Mr. Card. I can tell you that it is very important to the
Secretary personally. I know it is important to Administrator
Linton Brooks. He spends a lot of time on this issue. I spend a
lot of time on the issue any time we have a big group of
managers together. It is on the agenda, so I can assure you
that we take those issues very seriously. And we would be glad
to provide an update for the record for you as well.
Mr. Wu. Thank you very much, Mr. Under Secretary. And I
will take your answer as a reaffirmation of the Department's
commitment, is that correct?
Mr. Card. Absolutely. And my part of the Department as well
as NNSA.
Mr. Wu. Thank you very much. And I just wanted to
underscore before I turn to Dr. McTague here, that you know,
there are a couple of different aspects of national security,
and we want, very much, to protect those aspects of national
security, which we can do so by keeping secrets. But one of the
things that challenges America constantly is we live in an open
society. And one of the ways that we also provide for national
security is by inventing new things that other people don't
have. And the only thing--the only way that we can do that is
by recruiting the best and brightest and providing them with an
environment in which they can best exert their creative
energies and focus on their job rather than deal with some of
these other distracting and negative issues, which I believe
are identified in this GAO report. And so I view this very much
as part of this two-pronged approach to national security. And
I look forward to working with the Department on that. Doctor?
Dr. McTague. I guess I can speak from experience in that
for the last two years, up until January of this year, the
Livermore Laboratory and Los Alamos, two out of the three
laboratories reported to me at the University of California.
And from examining DOE's attitude, in particular that of
General Gordon and of Ambassador Brooks, the two heads of NNSA
during that time period, they had very strong personal
commitments in this area. And indeed, General Gordon spent a
large amount of time going around doing focus groups at the
laboratories, browbeating the lab directors, et cetera.
But has there been improvement? I don't have the----
[PA Malfunction.]
Dr. McTague. At Livermore, the main problem probably was in
the area of Asian Americans and Pacific Islanders, not in terms
of the numbers in the laboratory, but----
[PA Malfunction.]
Dr. McTague. One of the actual results are----
[PA Malfunction.]
Dr. McTague. But they are positive. That being said, these
are areas that require continuous attention from the top
levels, the directors of the lab, the undersecretaries and the
director--and the assistant secretaries within the Department
of Energy and the highest level in the contractors themselves.
Mr. Wu. Well, I welcome your comment. I think it is a
forward step in addressing this issue, but what I found rather
striking in the statistics that I saw was that it was rather
counterintuitive of----
[PA Malfunction.]
Mr. Wu [continuing]. In California to be----
[PA Malfunction.]
Mr. Wu [continuing]. At the numbers, it seemed like the
private sector contractor----
[PA Malfunction.]
Mr. Wu [continuing]. Perhaps statistically did a better job
on some of these issues than the university did and I hope the
universities are working on that. And----
[PA Malfunction.]
Dr. McTague. I think you are absolutely right. And my
perception of what was the problem was that the university did
not face up to this issue in a systematic way. And once they
started looking at it systematically, progress took place.
[PA Malfunction.]
Mr. Wu [continuing]. The Department and contractors,
potential contractors----
[PA Malfunction.]
Mr. Wu. Thank you very much.
Chairwoman Biggert. Thank you.
Just one quick question, Mr. Card, if I may. You expect
that the Blue Ribbon Commission----
[PA Malfunction.]
Mr. Card. The process for the report, we would expect in
that time frame that the Commission itself may finish its work.
But for it to be complete, it will have to be reported to us
from the Secretary of Energy Advisory Board. So it would be
some time after that before we would have a--we would expect to
finish our process by the end of the calendar year.
Chairwoman Biggert. And then when do you think that you
will announce whether the recommendations have been accepted or
that you intend to implement?
Mr. Card. Well, I would assume by the end of the calendar
year. Of course, that will be the Secretary's decision, and he
is, I can assure you, very personally engaged in this issue.
Chairwoman Biggert. Is there a timetable, then, for
implementation?
Mr. Card. Well, the implementation could be quite rapid,
because we have--the transaction that need to be made are
known, and we have--we are fairly far along on thinking through
how we would deal with those, depending on what the policy
would be.
Chairwoman Biggert. The question came up that as far as the
cost of bidding, and certainly if there are at least two bids,
do you think that this will then be more like----
[PA Malfunction.]
Chairwoman Biggert [continuing]. Bidding for some of these
contracts rather than the universities----
[PA Malfunction.]
Chairwoman Biggert. And it is a cost to the taxpayer, but
what about the bidder that loses out on it, because they do
spend quite a sum----
Mr. Card. Well, the costs of bidding are substantial. And
the--few to several million dollars. Clearly, if the--in my
opinion, if the Department----
[PA Malfunction.]
Mr. Card [continuing]. Were to adopt a more aggressive
competition strategy, we would have to take a serious look at
the fee structure of the resulting contract to see that the
people investing in a bid would have an opportunity to recover
their bid cost.
Chairwoman Biggert. Thank you.
The gentlewoman from California.
Ms. Woolsey. Madam Chairman, witnesses, Representative
Jerry Costello could not make it. He was trying throughout the
entire process to get here. But he will provide questions, and
he--we would ask your cooperation in responding to his
questions. Thank you very, very much.
Mr. Ehlers. [Presiding.] Yeah, I want to follow up just a
little bit on the questions I asked earlier, and particularly
Dr. Fleury. You administer or manage--try to manage, and Dr.
McTague, you have experience in the industrial area. Just
looking at this, and instead of going out for new contractors,
what intermediate steps do you see as being very useful in the
case of non-performance? How would you handle it based on your
administrative experience? And we will start with you, Dean
Fleury.
Dr. Fleury. Well, I think that there should be regular and
deep dialogue between the Department and the contractor, not
just in the question of assessing compliance at the small scale
level, but if there are changes or impending areas of concern
that these be addressed in a sense of teamwork rather than in a
punitive way, as I mentioned before. It could be that contracts
in the future might have provisions for evolution during the
period of the contract so that rather than go or no go in
certain areas, or what they used to call off ramps on some of
these contracts. For example, I think the Appendix O that was
in the Los Alamos contract, which was stuck in--or put in to
deal with certain aspects of some of the problems that occurred
up there in the last couple of years is one example. So I would
say that there--it would be from a sort of scientific
description, more of an adiabatic, continuous process rather
than a bunch of discontinuous and hopefully non-punitive steps.
Mr. Ehlers. Well, in terms of punitive, can you think of
small steps in conjunction with an adiabatic approach?
Dr. Fleury. Well, I think one of the things is to look at
the composition of the top management team, whether there
should be removal or reassignment of people for not adequately
performing rather than throwing out the entire baby and the
bath water at the same time, as happened, say, at Brookhaven,
for example. That is one type of punitive approach that is
graded.
Mr. Ehlers. What about financial penalties?
Dr. Fleury. For--you know, for non-profits and for not-for-
profits, I don't know that that is particularly effective. I
think that a positive incentive of--as was said before,
improved efficiency--being able to result in returned funds to
the laboratories that could be invested in improving their
performance of the mission is a better way to go. To me,
punitive steps are a sign of failure rather than a sign of
teamwork, so I prefer to focus on rewards rather than
punishments. Sometimes it is necessary, and in that case, I
think replacement of people in key positions rather than going
for the jugular of the entire contract is the way to go.
Mr. Ehlers. Well, I am primarily referring to cases where
there is--such as Los Alamos where there was specifically--
where there was money wasted. Should the contractor bear part
of the cost of that?
Dr. Fleury. Well, I think the contractor has, and my
understanding is that where that has occurred that those costs
were reimbursed to the government by the contractor.
Mr. Ehlers. Okay.
Dr. Fleury. And I think that the actual--some of these even
was--occurred at the--in the case where there was still dispute
as to whether those costs were allowable or not allowable----
Mr. Ehlers. I see.
Dr. Fleury [continuing]. But the university went that way.
Mr. Ehlers. Dr. McTague.
Dr. McTague. Well, first I want to endorse everything that
Paul Fleury has said. The most important thing is to deal with
small problems before they become big problems. And when I was
Vice President for Laboratory Management at the University of
California, the Under Secretary of the NNSA and I, about a year
ago, put in place a system for three times a year meetings at
the highest level, that is to say, the undersecretary and the
assistant secretaries, our lab directors, and myself, to
discuss what are the big issues, how can we solve these things
together, how are we doing, by the way, on what we said we were
going to do at the beginning of the year, and how do we need to
readjust? I think that process is continuing. And I think that
is the kind of thing that should be occurring, not just an
assessment five years down the road on, ``Gee whiz, wasn't that
terrible?''
The second thing on, sort of, intermediate steps, I agree
with Paul. Managers have to be held accountable personally. And
I know that that has happened in several cases with lab
directors. I don't want to get into names or laboratories, but
that has happened. And it does happen continuously at lower
levels. There was an announcement recently, for example, at
Sandia in the security area.
One of them that is also very effective with organizations
that do these things for public service is public shame,
because these organizations do do the--do care about their
reputations. They are not in this for the money. They are in it
as a national service, and if it is being pointed out that they
are not doing a good job at national service, they react. No
question about it. It is more valuable than money.
Mr. Ehlers. I might just comment that the one concept that
Congressmen are very familiar with is public shame. And indeed,
it is very effective. Generally--frequently, it results in loss
of employment, too.
Well, thank you. Those comments have been very insightful.
I am sorry I couldn't hear the entire testimony, but I
certainly appreciate what I have heard during my time here. I
certainly thank you for being here. It has been very, very
helpful testimony and certainly useful to me as a Member, and I
am sure to the entire Committee and to their staff.
One thing I will be asking the staff for, and they may in
turn have to ask you, Mr. Card, I personally want to see a list
of all of the National Laboratories that are under contract,
who the contractors are, who the administrators are, et cetera.
And that is some basic knowledge I don't have, which I should
have, and should have had before the hearing, but I don't. So
you may get a request from that if the staff doesn't have it on
hand.
Thank you. Thank you very, very much for participating. I
truly appreciate it. And with that, I declare the hearing
adjourned.
[Whereupon, at 12:05 p.m., the Subcommittee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Responses by Robin M. Nazzaro, Director of Natural Resources and
Environment, U.S. General Accounting Office
Questions submitted by Republican Members
Q1. LThe Department of Energy (DOE) has been accused of both lax
oversight and micromanagement. Can both these things be true
simultaneously? This suggests that there is effective oversight that we
need more of and ineffective oversight that we should reduce. Does it
matter who is doing the oversight and on what schedule? Does it matter,
if there is more than one overseer--how coordinated and consistent they
are? What specific steps should DOE take to ensure that oversight is
done effectively and at the appropriate level? What proportion of DOE's
reform efforts should be directed to contracting reforms and what
proportion to administrative steps to rationalize day-to-day oversight?
A1. DOE spends almost $20 billion each year so that contractors can
carry out DOE's missions and operate its facilities. Because of this
relationship, DOE needs to have adequate oversight to ensure that
mission work is done safely and effectively. In addition, DOE has a
fiduciary responsibility to the taxpayers to guard against the
possibility of fraud, waste, abuse and mismanagement in its contracting
activities.
Determining the appropriate level and frequency of oversight is
DOE's responsibility, since the department is ultimately accountable
for what goes on at its sites and facilities. In addition, DOE is not
generally subject to external regulation for safety, including nuclear
safety at its facilities. Therefore, the department must ensure that
workers, the public, and the environment are protected.
Prior to implementing performance-based contracts in the mid-
1990's, DOE's traditional approach to its M&O contracts was to provide
broadly defined statements of work and provide considerable direction
to the contractors as to how that work should be performed. With
performance-based contracts, DOE generally uses a results-oriented
statement of work and gives the contractor more latitude on how to
accomplish those results. The amount of oversight necessary may vary
depending on the nature of the work to be performed and the performance
level of the contractor.
The extent and frequency of oversight may vary depending on the
risks involved in an activity. Certain activities at DOE sites are
subject to oversight by more than one organization. For example, the
Defense Nuclear Facilities Safety Board can raise concerns about the
safety of nuclear facilities and operations, or the Environmental
Protection Agency and state regulators approve DOE's plans for cleanup
of hazardous or radioactive wastes. In these cases, DOE is still the
single point of contact for oversight and coordinates with these
agencies in providing feedback or direction to the contractors.
Q2. You cite, as a reason for non-competitive extensions of lab
management and operations (M&O) contracts, ``the benefits of having a
long-term association with the research community beyond that available
with a normal contractual relationship.'' Are there any other reasons
not to compete M&O contracts?
A2. The Federal Acquisition Regulation (FAR) Part 35.017 sets out
federal policy regarding the use, review, and termination of Federally
Funded Research and Development Centers (FFRDCs). According to this
policy, a FFRDC must meet a special long-term research or development
need that cannot be met as effectively by existing in-house or
contractor resources. Long-term relationships between the government
and FFRDCs are encouraged under this policy in order to provide the
continuity that will attract high-quality personnel.
The Competition in Contracting Act of 1984 (CICA), which
established ``full and open competition'' as the federal norm,
contained seven specific statutory exceptions that authorize the use of
``other than'' full and open competition in certain situations,
including when an agency has the need to ``establish and maintain an
essential engineering, research, or developmental capability to be
provided by an educational or other nonprofit institution or a
federally funded research and development center.''
Even though DOE is not required to compete its FFRDC contracts
under this exception in CICA, the department's 1996 acquisition
guidance describes the procedures that DOE program offices must follow
to support any recommendation for a non-competitive extension of any
major site contract, including a FFRDC contract. The guidance specifies
that, before a noncompetitive contract extension can occur, DOE must
provide (1) a certification that full and open competition is not in
the best interest of the department, (2) a detailed description of the
incumbent contractor's past performance, (3) an outline of the
principal issues and/or significant changes to be negotiated in the
contract extension, and (4) in the case of FFRDCs, a showing of the
continued need for the research and development center in accordance
with criteria established in the FAR.
DOE's practice for competing FFRDC contracts has been to non-
competitively extend those contracts provided that the 1996 guidance
has been followed and there is no compelling reason to compete the
contract--that is, if the mission has not changed and the performance
of the incumbent contractor is satisfactory.
Q3. In a recent Senate hearing on DOE laboratory contracts, former Los
Alamos National Laboratory Director Sig Hecker testified that
``numerous governmental audits and investigations by offices such as
the GAO or the Inspector General. . .consistently fault the DOE for
lack of sufficient oversight'' but fail to note that efforts to
increase oversight reduce ``trust and flexibility'' and create an
environment in which ``we cannot get our work done productively.'' Is
this a fair characterization of GAO's reports?
A3. It is true that GAO and Office of Inspector General audits have
criticized DOE for either not having sufficient qualified staff to
provide oversight or not providing adequate oversight of major
projects. However, we do not agree with Mr. Hecker's view that efforts
to increase oversight automatically reduce trust and flexibility or
create an environment in which work cannot get done. We know of no
evidence that would show that effective oversight is detrimental to
accomplishing an agency's mission. In fact, we believe that effective
oversight is essential to ensuring that an agency's mission is
successfully accomplished.
DOE has a fiduciary responsibility to provide adequate oversight of
the contractors that carry out its missions, including basic research
and other activities. Federal oversight is necessary to ensure that
mission requirements are being met and to provide a reasonable level of
assurance that work is carried out safely and efficiently. This is
especially true when the work done by contractors has substantial
inherent risks--such as NASA's space shuttle missions or DOE's nuclear
weapons research and stockpile stewardship efforts.
Q4. Is it fair to say that GAO has not subjected other agencies' non-
competitive contracts to the same level of scrutiny as DOE's? Why or
why not?
A4. GAO has designated contract management as a high-risk area that is
vulnerable to fraud, waste, abuse, and mismanagement in three
agencies--DOE, the Department of Defense, and NASA. GAO continues to
review contracting activities and monitor any corrective actions taken
by these three agencies.
Competition for contracts has been an issue at DOE because prior to
the mid-1990's, competing DOE's M&O contracts was the exception rather
than the norm. As part of its contract reform efforts begun in 1994,
DOE has increased the percentage of its major site contracts that are
competitively awarded and has changed its procurement regulations to
establish competition as the norm.
Q5. Both DOE and GAO cite three reasons for M&O contract competitions
at DOE: mission change, unsatisfactory performance, and if a commercial
entity was the operator. While this may explain the three most recent
decisions, does GAO see this as a consistent practice on the part of
DOE? Given this policy, do DOE's decisions over the last two years fit
this pattern?
A5. DOE has described three main reasons for competing its Federally
Funded Research and Development Centers (FFRDCs) instead of extending
the contracts non-competitively: when the contractor operating the
laboratory is a for-profit entity, when mission changes warrant a
review of the capabilities of other potential contractors, or when the
incumbent contractor's performance is unsatisfactory. Without one of
these conditions, DOE has generally extended these contracts without
competition.
Over the past decade, it appears that DOE has consistently followed
these guidelines. Of the six FFRDC contracts that have been competed
since 1993--for Brookhaven National Laboratory, Idaho National
Engineering and Environmental Laboratory, National Renewable Energy
Laboratory, Oak Ridge National Laboratory, Sandia National Laboratory,
and the FFRDC at the Savannah River Site--DOE's decision to compete
those contracts was consistent with the department's overall policy on
determining when competition is appropriate. For example, DOE competed
the contract for the Brookhaven National Laboratory in 1997, after
terminating the previous contract for unsatisfactory performance by the
incumbent contractor. DOE competed the contract for the National
Renewable Energy Laboratory in 1998 to incorporate additional private
sector expertise into the management team for the site to reflect an
expanded mission. For the remaining four FFRDC contracts that were
competed, the operator of the laboratory was a for-profit entity.
DOE's decisions over the last two years also fit this pattern. The
decision to open the Los Alamos National Laboratory contract to
competition when the current contract expires in September 2005 was
based on ``systemic management failures'' at the laboratory under the
incumbent contractor. In addition, the decision to restructure the M&O
contracts for the Idaho National Laboratory and include the Argonne
West scope of work in one of the new contracts was based on a change of
mission and direction at the Idaho site.
Q6. Please comment in detail on the proposal to ensure excellence in
science and remain faithful to the ideals of competition by means of an
occasional review (say, once every seven to ten years). As currently
discussed, three panels that are not allowed to collaborate would do
these reviews. The teams would evaluate and rank the labs on
performance, and only the bottom tier would be required to compete.
What are the important considerations for setting a timeframe for such
a review process? Do you think such an approach would be workable?
A6. Peer review panels such as those discussed in the above proposal
are not new to DOE research laboratories. Such peer review panels are
already used to evaluate the science and technology work performed by
some of the contractors at DOE laboratories as part of the overall
assessment of the contractors' performance. It appears that the panels
in the proposal would also be evaluating and ranking the labs on
performance in the science and technology area. However, there are
other important aspects of contractor performance including safety,
security, and sound financial management that should also be assessed.
Furthermore, the quality of contractor performance is only one of the
reasons to compete a contract for a DOE research laboratory. Other
reasons to compete a contract could include when the mission of the
laboratory changed significantly and different expertise was needed, or
when an incumbent contractor decided not to continue, which happened at
Sandia National Laboratory in the early 1990's.
If DOE used peer review panels to evaluate contractors'
performance, the final decision on whether to compete a contract should
remain with the department. DOE cannot delegate such a responsibility
to independent review panels, but could use the panels in an advisory
capacity.
Questions submitted by Democratic Member Questions
Q1. Looking back through GAO reports on lab management for the last
decade, how does the performance of university, non-profit, or profit-
seeking institutions compare in managing contracts? What are the
relative merits of each and which type (or combination thereof) is
proving to be an ideal contractor? Is the pool of potential lab M&O
contract bidders growing or shrinking? Why?
A1. GAO's past work on contract management has not generally involved
comparing the performance of contractors based on the for-profit or
non-profit status of the contractor. However, there are some
indications that there have been performance problems with each type of
contractor. For example, in a 1999 report on DOE's nuclear safety
enforcement program, GAO presented information on the enforcement
actions taken against contractors who violated DOE's nuclear safety
rules and were assessed civil penalties under the Price-Anderson
Amendments Act of 1988. Of the nine enforcement actions with assessed
civil penalties exceeding $100,000, four of those involved non-profit
contractors. In addition, from 1996 through 1998, only two of the 33
enforcement actions were for severity I violations, the most serious--
the contractors involved represented one for-profit and one non-profit.
In a September 2002 report on DOE's contract reform efforts, GAO
reported on the cost and schedule performance of 16 major projects
(those with a total project cost greater than $200 million). Although
we did not specifically name the contractors associated with each of
the projects with cost and schedule overruns, both for-profit and non-
profit contractors were represented in the sample. Regardless of these
indications and examples, we are not in a position to address the
relative performance or merits of different types of contractors, or
whether there is an ``ideal'' contractor. Furthermore, GAO has done no
work on the pool of potential lab M&O contract bidders, so cannot
address whether such a pool is growing or shrinking and the reasons for
such differences, if any.
Q2. Given the difficulty of establishing concrete performance metrics
for basic and applied science, should other evaluation mechanisms be
employed to facilitate decisions on contracts? For instance can metrics
be developed for activities in technology transfer, patents or
intellectual property to evaluate a laboratory's performance? Are there
lessons learned from other agency M&O contract-type situations that can
be applied to DOE M&O contracts? How do performance metrics for basic
science play into the administration and competition for M&O contracts?
How do they pertain to fees awarded to the contractor?
A2. Developing performance measures for basic science and research has
long been a challenge. It is difficult to determine the long-term
impact of basic science, since many factors are involved in a
successful transition from basic to applied research and to product
development and economic impact. This is a recognized problem across
the federal government. For example, the President's Management Agenda
for Fiscal Year 2002 included better research and development (R&D)
investment criteria as one of the challenges, and tasked DOE to work
with the Office of Management and Budget to solicit input from other
R&D agencies and experts to develop objective investment criteria.
Regarding lessons learned from other agencies that can be applied to
DOE M&O contracts, we have not conducted such an assessment. Even
within the DOE research laboratories, the missions and science can be
very different and there is no one measure that could be applied to all
situations.
An acceptable alternative to outcome-oriented objective performance
measures for basic science has been the peer review process. DOE's
laboratory contractors already use this technique to evaluate
performance in the science and technology areas. Administrative
controls are necessary to ensure that the peer review of science is
done in a timely manner and that the members of the peer review panel
are independent of the research being evaluated.
The evaluation of science and technology at the laboratories--
regardless of whether performance is assessed by peer review panels or
some other method--is just one of the activities that should be
included in an overall evaluation of the contractor's performance.
Other activities that should be evaluated include nuclear safety,
security, worker safety and health, and financial controls over areas
such as procurement and property management. What impact that
evaluation has on the fees awarded to the contractor varies depending
on the fee structure in the individual contract. For example, some
contracts include base fee amounts that are not tied to performance
measures. The amount of fee ``at-risk'' can be allocated to individual
performance measures or to an overall area, such as science and
technology or mission support.
Q3. Should contractors be subject to more or less oversight and
regulation by DOE? In what areas should DOE governance be improved? In
what areas should the Department give the contractors more autonomy?
A3. DOE needs to exercise sufficient oversight to ensure that
contractors are carrying out the department's missions effectively and
safely. The specific level of oversight for a contractor or subject
area could be determined using a risk-based approach. For example,
above some minimum level, the extent of oversight on mission support or
administrative functions could vary depending on whether the contractor
was performing these functions satisfactorily. In addition, major
projects involving substantial investment by the government may require
more oversight to ensure that these projects meet cost, schedule, and
technical baselines. Furthermore, in areas such as nuclear safety,
environmental protection, and national security, DOE needs to ensure
that contractors meet certain standards.
Q4. What are the merits of shorter contracts (five yrs.) compared to
longer contracts (10+ yrs.)? Are we allowing lessons to be learned
before jumping into another contract competition prematurely? Should
there be a DOE policy to compete lab contracts on a periodic basis? If
so, what time period would be appropriate?
A4. We are not aware of an ideal contract length for DOE's research
laboratory contacts. DOE's acquisition regulations generally allow a
contract period that consists of an initial term up to five years with
options to extend the contract provided that the total contract period
does not exceed ten years. For the contracts to operate DOE's FFRDCs,
competition is not required by law. Nevertheless, DOE guidance requires
that these contracts be evaluated prior to approving a non-competitive
extension.
Having a DOE policy that requires competing contracts for the
research laboratories on a periodic basis is not necessarily a solution
to all problems. The department needs to consider competition as just
one of the mechanisms available to deal with contractor performance
problems. Deciding when it is appropriate to compete a contract for a
research laboratory depends on a number of factors, including the
stability of the mission, the benefits of a long-term relationship with
the contractor, and whether the incumbent contractor is performing at
an acceptable level.
Answers to Post-Hearing Questions
Responses by Paul A. Fleury, Dean of Engineering, Yale University
Q1. Your written testimony seems to indicate that you do not believe
competition is the appropriate way to create accountability in
Department of Energy (DOE) laboratories. However, in answer to a
question during the hearing, you found little impact at the labs with
which you were familiar, Brookhaven and Sandia National Laboratories.
If this is the case, then why are you so adamant that the labs should
not be competed without cause? Is there something unique about Sandia
or Brookhaven that made the change of contractor less harmful than it
otherwise would have been? Is there a negative impact prior to the
contractor change due to distraction of upper laboratory management for
extended periods, increased retirement and turnover of staff
scientists; an increase in confusion, anxiety and lowering of morale
throughout the laboratory? Does the prospect of competition affect the
ability of the contractor to hire an outstanding Director?
A1. First, I believe that there are many ways to achieve accountability
in the DOE laboratories that are less disruptive and more effective
than the threat of competing M&O contracts. I believe that contracts
should be competed only for cause [such as failure to perform on the
laboratory mission or decision by an incumbent contractor to withdraw].
The process of competing a contract is both costly and disruptive. The
financial and managerial costs to the bidders is substantial. The work
of the laboratory and the attention of laboratory management at all
levels is seriously distracted during the process and during the
transition. Focus on the laboratory mission is diffused during the
process and for sometime afterwards especially if the competition
results in a change in contractor.
All of these factors were in evidence at both Sandia in 1993 when
AT&T withdrew and at Brookhaven following the cancellation of the AUI
contract. Both of those cases met the criteria I outlined for a
justified competition. But the costs and disruptions ensued
nonetheless. I believe that these examples support the position that
contract competition for multi-program national laboratories should be
done as a last resort only and not as the `default condition.' Both
Sandia and Brookhaven have survived the change in contractor and appear
to be functioning well. But both have now had several years to digest
and accommodate the changes. And both experienced staff uncertainty and
I believe some increased turnover during the period of bidding,
selection and transition.
As for the prospect of competition affecting the hiring of an
outstanding Lab Director, I observe that identifying the Director is an
integral part of any bid and so must be secured by the bidder as a
member of their team before any contractor change. So I do not think
the prospect of competition per se would affect a contractor's ability
to identify and attract an outstanding Director. Rather, the quality of
the contractor organization and its relationship with the DOE [whether
cooperative or antagonistic] would be more likely to influence the
attractiveness of the Director position for likely candidates.
Q2. In answer to a question about Brookhaven, you suggested that when
a contractor is a consortium of universities, contractor change has
less of an impact than when the contractor is a single university. How
else does the management of a laboratory by a single university differ
from that of a consortium including universities and the private
sector? Do you feel there is anything lacking in the labs where these
partnerships are currently the managing contractor? Will increased
competition tend to force more universities to form partnerships with
commercial enterprises to be able to compete with for-profit
institutions?
A2. I did not mean to suggest that there is any inherent difference
between a single university and a consortium when it comes to impact on
the laboratory accompanying a contractor change. I do believe that in
general, relative to a consortium the lines of authority,
communication, and decision-making are clearer in the case of a single
entity. In that sense a single university is preferable, in general, to
a consortium. However, a properly constructed partnership involving
multiple members can work well also. I believe that the current
Brookhaven situation is one such example. The university partners bring
special experience and familiarity with research and the scientific
community while the industrial or commercial partner often brings
experience and familiarity with business operations and management
processes. In my experience it is rare that the university sector alone
can bring all the necessary elements together. If any university system
can do it, UC with its size, breadth and national lab experience should
be the one. Were they not in the picture, I believe that competing for
M&O contracts in the future will tend to encourage more partnerships
between the universities and other organizations, or leave the field in
the hands of `for-profit' organizations.
Q3. Please comment in detail on the proposal to ensure excellence in
science and remain faithful to the ideals of competition by means of an
occasional review (say, once every seven to ten years). As currently
discussed, three panels that are not allowed to collaborate would do
these reviews. The teams would evaluate and rank the labs on
performance, and only the bottom tier would be required to compete.
What are the important considerations for setting a timeframe for such
a review process? Do you think such an approach would be workable?
A3. The premise of the question, I believe, is faulty because it
implies that some fraction of the M&O contracts will always have to be
competed. I would address the issue in two parts: the review process
and the consequence of the review process.
I believe that for some years now, all of the laboratories have
been subject to too many uncoordinated, detail-oriented reviews every
year. These number in the many tens, if not hundreds, for large
laboratories. What is needed is not ultra-long intervals between
reviews, but better coordination among the reviews themselves and more
emphasis on using the results to evaluate and improve mission
performance rather than to impose penalties or meaningless `grades'.
Properly conducted annual reviews [or at the most biennial reviews] are
essential to keep track of the performance against the mission in the
areas of science and national security. These reviews also should cover
management practices and operations as affect these missions.
However, I do not support the notion of separate, independent
reviews of the same laboratory, each giving grades or rankings that
would be used to determine which laboratory's contract is to be
competed. Like every scheme, this one could easily be `gamed'.
Furthermore, it would entail costly and redundant efforts on the parts
of all involved. The proposal to compete the X percent of the most
lowly graded lab contracts also sends the wrong message. This implies
that there is no such thing as good performance across the entire set
of all the laboratories, whereas that should be very much the goal of
the entire system. Alternatively, it could be the case that all the
laboratories are performing below standard--in which case every
contract should be competed, not merely the most poorly graded. On the
other hand, if every laboratory is performing at an acceptable level,
no laboratory contract should be competed in that period.
The important considerations for setting a timetable such reviews,
I believe, are to be found in the nature of the work and the mission.
For fundamental research work where one is attempting to address
fundamental questions, annual review or even biennial review is
sufficient. In the case of more deliverable oriented applied work and
engineering projects, frequent project reviews such as is done in
industry are appropriate. Finally, overall M&O contract performance
could be reviewed on a less frequent basis than annually, but not
anywhere near as long as seven to ten years. At least twice during the
contract period is a reasonable compromise if the review is done in a
sufficiently comprehensive manner and it is free of fictitious grading
requirements.
Answers to Post-Hearing Questions
Responses by John P. McTague, Professor of Materials, University of
California, Santa Barbara
Questions submitted by Republican Members
Q1. Your written testimony seems to indicate that you do not believe
competition is the appropriate way to create accountability in
Department of Energy (DOE) laboratories. However, in answer to a
question during the hearing, you found little impact at the labs with
which you were familiar, Brookhaven and Sandia National Labs. If this
is the case, then why are you so adamant that the labs should not be
competed without cause? Is there something unique about Sandia or
Brookhaven that made the change of contractor less harmful that is
otherwise would have been? Is there a negative impact prior to the
contractor change due to distraction of upper laboratory management for
extended periods, increased retirement and turnover of staff
scientists; an increase in confusion, anxiety and lowering of morale
throughout the laboratory? Does the prospect of competition affect the
ability of the contractor to hire an outstanding director?
A1. Competition is at the heart of the success of the U.S. scientific
enterprise. I hope it will always remain so. We need to support the
best and the brightest and encourage risk taking in the pursuit of new
ideas, while ensuring that ongoing missions are effectively
implemented.
Historically, we have done these aspects extremely well. The secret
of our success has been the competition for the best ideas and for the
best means for implementation. Peer review has served us very well. For
example, if SLAC has a better idea for a fundamental particle facility
than Fermilab, then the community backs SLAC. Our system is very
effective at placing work with the best provider, be it SLAC or
Fermilab, Los Alamos, or Livermore, Argonne, or Oak Ridge. A lab grows
or shrinks based on its technical ideas and capabilities, and that is
as it should be.
Competition for management is an entirely different matter, and
here one size does not fit all, as was pointed out in the testimony of
Dean Fleury. Some laboratories, such as Fermilab or Brookhaven, were
historically managed by associations of universities or boards with
essentially no assets and no purpose other than such management.
Others, such as Ames, SLAC, LBNL, LANL, LLNL, Lincoln Lab, JPL, and
NCAR have grown integrally from their university sponsors. Indeed,
Ames, SLAC, and LBNL reside on university land. In all these cases, lab
employees are, and consider themselves to be, employees of their
respective universities.
Other laboratories grew up as separate entities, often initially
managed by corporations. Examples include Sandia, PNNL, and Oak Ridge.
These three classes are quite different and should be treated
differently. In particular, those laboratories which have grown out of
university campuses (Ames, SLAC, LBNL, LANL, LLNL) have some of the
characteristics of campuses in complex university systems. Several
states (e.g., California, New York, Texas) have multi-campus
enterprises. When a management problem occurs on an individual campus,
it is addressed by the central system. It is not ``competed'' to a
rival institution.
Whether an announcement of competition causes significant problems
in terms of laboratory function (recruitment, retirement, etc.) is not
well known, because competing of FFRDCs has been so rare. In
particular, no university managed FFRDC has ever been competed. Note,
however, that this year, the University of California, in a deviation
from custom, did not do an open recruitment process for the recently
appointed director of LANL. Also, the UC Vice President for Lab
Management position has gone for more than half a year without a
permanent occupant.
Q2. One of the explicitly stated intentions in creating federally-
funded research and development centers was to facilitate long-term
relationships with research institutions. However, you correctly note
in your testimony that the trend at DOE laboratories has been to
compete contractors, and consequently, to signal that the relationship
(at least in relative terms) is expected to be shorter than in the
past. What is the ideal length of a relationship with a research
institution? If regular competition becomes a requirement for
management and operations (M&O) contracts, what would be an appropriate
review period?
A2. I believe that the ongoing assumption for management of research
FFRDCs, including DOE National Labs, should be for a continuing
relationship unless the contractor withdraws or is no longer able to
perform effectively in terms of mission results or of malfeasance.
Continuous rebalance of workloads among the competing laboratories is
an effective and minimally disruptive means of encouraging mission
performance and efficiency. It is the best form of competition.
I do not believe that there should be any ``normal'' time period
for laboratory management competition. Rather, one should look to the
way universities traditionally handle evaluation. It is common for
university presidents and chancellors, and indeed, laboratory
directors, to be comprehensively evaluated at five-year time periods.
The overall quality of our research universities suggests that this
time scale is appropriate.
A similar time scale, five to seven years, might be adopted for
government evaluation of overall performance of FFRDCs, including DOE
National Labs. Criteria might include appropriateness of mission
balance, effectiveness of exploratory research, quality of staff, and
quality and efficiency of operations.
Only in the case of a ``failing'' evaluation where improvement
measures appear inappropriate should termination occur. In this case, I
believe termination should be announced and a new competition,
excluding the incumbent, or laboratory closure should occur.
The notion of competition as a norm seems to devalue public service
as a motive for managing FFRDCs, including DOE National Laboratories. I
believe the Nation would not be served well by a system which would
cause universities to withdraw from lab management.
Q3. In general, Americans believe that competition is a good thing,
because it prompts innovations, can solve past problems, and lowers
costs. Indeed, this hearing is focused on the question of whether
competition for M&O contracts for science laboratories is a proper tool
to ensure scientific results as well as financial and managerial
accountability. In your testimony, you mention that when you arrived at
Brookhaven as an associate professor, ``there was a fierce competition
between researchers at Brookhaven and the Stanford Linear Accelerator
Center.'' This implies that, due to rivalry between the laboratories,
at least some of the benefits we seek from competition are produced in
scientific results. If this competition is sufficient to produce the
results we want on the science side, how do we ensure the fiscal and
managerial accountability that Americans expect and deserve without
competing M&O contracts for the laboratories?
A3. The U.S. system for ``competition of ideas'' has surely served us
well as a nation. The ongoing challenge has been how to ensure that the
``business of science'' is handled as well.
All too often, the business aspect has been treated as a ``second
class citizen.'' We simply must do better, even though I am unaware
that the environmental, safety, financial, security, personnel, etc.
operations of FFRDCs are poorer than those of commercial enterprises or
defense contractors.
What is missing, however, is transparency to enable confidence in
and to improve practices. Here, the recent DOE initiatives to implement
private best practices are encouraging. Focusing on, and auditing,
process as opposed to transactions and comparison with best practices
can be quite helpful.
Such audits should be independent, credible, and published for all
to see. The light of day is an effective disinfectant. For instance, I
believe that the financial and other management systems of FFRDCs
should be audited by nationally-recognized organizations who specialize
in this area (e.g., Price Waterhouse, Cooper).
Q4. Please comment in detail on the proposal to ensure excellence in
science and remain faithful to the ideals of competition by means of an
occasional review (say, once every seven to ten years). As currently
discussed, three panels that are not allowed to collaborate would do
these reviews. The teams would evaluate and rank the labs on
performance, and only the bottom tier would be required to compete.
What are the important considerations for setting a timeframe for such
a review process? Do you think such an approach would be workable?
A4. I strongly support competition within our FFRDCs, including DOE's
national labs. This competition occurs every working day, as a federal
manager decides to place a program at laboratory X instead of
laboratory Y, or to terminate funding for a particular project. This
form of competition is effective and efficient, especially as it
utilizes peer or expert evaluation.
That being said, it is valuable from time-to-time to step back and
get a broader perspective. At a given laboratory, is the whole greater
than the sum of its parts? Does the laboratory as a whole address
important agency missions? Are business operations being accomplished
efficiently, effectively, and ethically?
It would be helpful to have such a long-term, broad review of the
laboratory system. The goal should be to rebalance the agency portfolio
as a whole and to improve management practices as a whole. If the
legislative and executive branches could have the discipline to carry
out such a program, it would be helpful. History, however, is replete
with examples of short-term reactions to the latest real or perceived
outrage, ignoring long range perspectives.
Nevertheless, we should try once more to focus on the big picture
and the long term. The focus of this long-term, broad review should be
on a rebalancing the agency's portfolio. This may require shifting
programs, closing laboratories, opening new ones, and utilizing best
business practices across the complex, or selective re-competition of
M&O contracts. It should not, however, focus primarily on the latter,
nor should there be an arbitrary target on the number of research lab
M&O contracts to be competed, if any.
Questions submitted by Democratic Members
Q1. It's been said that ties between National Laboratories and
Universities should be strong and weak relationships suffer in the
quality of science they produce. Do you believe a strong relationship
with the University community is essential for a laboratory to produce
good science? If so, how should a laboratory be involved with the
University community?
A1. The United States is unique in the close, complementary ties of
their University researchers and their national laboratories. National
laboratories have many unique facilities, such as the high-energy
accelerators at Fermilab and SLAC, which are user facilities for the
broader community. Indeed, almost every DOE national lab has one or
more such facilities that create research synergy. I believe all labs
also have guest researcher programs, and often joint appointment
programs with Universities.
Our DOE national labs all have mission responsibilities in areas
such as national security, energy, environment, and fundamental
science. As large as these laboratories are, the total world research
enterprise is much larger. By budget, the DOE national labs are almost
two percent of world research. Thus, close interaction and
collaboration with the other 98 percent of industry and University
researchers is essential for the labs to fulfill their missions.
The importance of University ties has been acknowledged for over a
half century, with many FFRDCs, including the DOE national
laboratories, being integral parts of a University system. Examples
include Ames Lab at Iowa State, Lincoln Lab and MIT, LLNL, LBNL, and
LANL within the UC complex, UCAR and the University of Colorado, JPL
and Cal Tech, etc.
My own knowledge is closest for the UC managed labs, LBNL, LANL,
and LLNL. Here fully 25 percent of all published papers from each of
these labs have a UC faculty member as a co-author. Clearly, the record
of accomplishment shows the effectiveness of these collaborative
relationships. Our challenge is to preserve it. It works like no other
on the planet.
Q2. Incumbent contractors have agreed that re-competing and changing
contractors has a detrimental effect on the science personnel at the
labs. Given the modern environment where people switch jobs all the
time, how important is continuity of employers for science personnel,
especially if their jobs do not change? How does that answer differ
from industrial contractors compared to University contractors? Do
changes in contractors adversely affect the culture of the lab? Does a
change in contractors result in turnover or retirement of senior
scientist?
A2. Clearly the quality of the staff, particularly the scientist and
engineers, is at the heart of the ability of laboratories to accomplish
the missions that agencies assign to them. It is true that in many,
even most commercial areas, the connection of employees with their
organization has weakened resulting in significant migration even of
professionals. The situation in our FFRDCs, including DOE's national
labs, is quite different, and hopefully will remain so.
For example, the two nuclear weapons laboratories, LANL and LLNL,
managed by UC, have individuals with unique experience, which cannot be
replaced, by the general technical job pool. Their loyalty to their
organization and its mission is very important to national goals.
As pointed out earlier by both Dean Fleury and me, there are very
different historical groups of labs with different cultural connections
between the contractor and employees. They need to be treated
differently.
Many FFRDCs, including some DOE national labs, grew integrally from
University sponsors. These include Ames, SLAC, LBNL, LANL, LLNL, JPL,
Lincoln lab, and NCAR. Here, employees rightly consider themselves to
be integral parts of their Universities.
Some laboratories, such as Fermilab or Brookhaven, have been
managed by consortia, whose main purpose has been this relationship and
who have essentially no asset or other purpose.
A third class is labs, which grew up as separate entities, often
managed by corporations as national trusts. Some of these have been
taken over by more traditional defense contractors.
Potential changes in contractors are likely to have different
effects in the three classes. The greatest unknown, and the greatest
risk, is in the group managed by Universities, where the lab employee
identification with the contractor is the closet. Since none of these
has ever been competed, we don't know the consequences. Do we want to
learn it by doing the experiment?
Q3. How do University, non-profit, or profit-seeking institutions
compare in managing contracts? What are the relative merits of each and
which type (or combination thereof) is proving to be an ideal
contractor?
A3. Who manages FFDRCs, including DOE national labs, best? A good
question.
First, it is important to ask whether the missions have been well
served by the labs and whether there is an observed difference in
performance, given the character of task.
Recall that several major U.S. corporations, among them AT&T, Union
Carbide, and Dupont, once agreed to manage labs as a national service.
That is no longer the case.
From a practical point of view, the present pool of actual and
potential for profit contractors excludes most corporations, with
exception of traditional government (mainly defense) contractors.
This group probably should include Battelle, which for tax purposes
is not for profit, but which has a goal to raise funds for certain
charitable purposes.
This group of contractors has historically focused on laboratories
with a more systems engineering role and has done well here. Sandia is
a prime example.
At the other extreme is the single purpose lab, such as SLAC,
Fermilab, Jefferson. Here, it is difficult to imagine that anything
other than a University or University consortium would be the most
appropriate manager.
Then there are the large numbers of labs that have grown as
integral parts of University systems (Lincoln Lab, NCAR, LANL, LLNL,
JPL, etc.). It seems quite risky to wrench such labs from their present
culture.
Perhaps the real question is how, within each class, to ensure
optimal management.
The answer may differ for each class. I have tried to approach
these issues in many of the earlier questions, but I don't have
definitive answers and only hope that whatever is done, reinforces the
tremendous success of our present system and acknowledges the uncertain
fragility to change.