[Senate Hearing 110-67]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 110-67
 
                     STEVEN J. ISAKOWITZ NOMINATION

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   on

THE NOMINATION OF STEVEN J. ISAKOWITZ TO BE CHIEF FINANCIAL OFFICER OF 
                        THE DEPARTMENT OF ENERGY

                               __________

                             MARCH 20, 2007


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          RICHARD BURR, North Carolina
MARIA CANTWELL, Washington           JIM DeMINT, South Carolina
KEN SALAZAR, Colorado                BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida
                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
            Frank J. Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel










                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     1
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     6
Isakowitz, Steven J., nominee to be Chief Financial Officer, 
  Department of Energy...........................................     3
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     1

                                APPENDIX

Responses to additional questions................................    11


                 STEVEN J. JEFFREY ISAKOWITZ NOMINATION

                              ----------                              


                        TUESDAY, MARCH 20, 2007

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. Why don't we go ahead here? Senator Thomas 
has arrived. I think Senator Domenici is on his way.
    This morning's hearing is on President Bush's nomination of 
Steven Isakowitz to be the Chief Financial Officer for the 
Department of Energy.
    Congress created the post of Chief Financial Officer in 
each of the major executive agencies in 1990 to, ``Bring more 
effective general and financial management practices'' to the 
agencies. The act requires Chief Financial Officers to possess 
demonstrated ability in general management, as well as 
extensive practical experience in financial management 
practices, in large governmental or business entities.
    If confirmed, Mr. Isakowitz will bring to the Department of 
Energy many years of experience as the Chief of Science and 
Space Programs at the Office of Management and Budget. As 
Deputy Chief Financial Officer and Comptroller at the National 
Aeronautics and Space Administration. And, most recently, as 
Senior Intelligence Officer in the Science and Technology 
Directorate at the CIA. We're glad to welcome him to the 
committee and to consider his nomination.
    Let me just see if Senator Thomas had any statement he 
wanted to make at this point before we swear in the witness.

         STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR 
                          FROM WYOMING

    Senator Thomas. Thank you, Mr. Chairman.
    I want to welcome our victim this morning. We're delighted 
to have you here, and certainly the financial management of 
these groups is terribly important. I understand that you're 
more involved in the actual management of the funding than you 
are to the decisions as to where the funding goes, I suppose. 
But, we're very concerned about good use of the money, in 
energy particularly, where it's going and that it gets to the 
places where it's designed to go.
    We've been a little frustrated from time to time and we 
passed some bills here that would have established some things 
that we would like to see happen. Frankly, they haven't 
happened and so we look forward to working with you and trying 
to cause this to be as efficient as we can in providing 
assistance to energy.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. The rules of the committee, that 
apply to all nominees, require that they be sworn in in 
connection with their testimony.
    Let me ask you to stand and raise your right hand, Mr. 
Isakowitz. Do you solemnly swear that the testimony you're 
about to give to the Senate Committee on Energy and Natural 
Resources shall be the truth, the whole truth, and nothing but 
the truth?
    Mr. Isakowitz. I do.
    The Chairman. Please be seated. Before you begin your 
statement, let me ask you three questions that we address to 
each nominee before this committee.
    First question, will you be available to appear before this 
committee and other congressional committees to represent 
departmental positions and respond to issues of concern to the 
Congress?
    Mr. Isakowitz. I will.
    The Chairman. Second question, are you aware of any 
personal holdings, investments, or interests that could 
constitute a conflict of interest, or create the appearance of 
such a conflict, should you be confirmed and assume the office 
to which you've been nominated by the President?
    Mr. Isakowitz. My investments, personal holdings, and other 
interests have been reviewed, both by myself and the 
appropriate ethics counselors within the Federal Government.
    I have taken appropriate action to avoid any conflicts of 
interests. There are no conflicts of interests or appearances 
thereof, to my knowledge.
    The Chairman. And the third question, are you involved or 
do you have any assets held in a blind trust?
    Mr. Isakowitz. No.
    The Chairman. Let me, at this point, invite you to 
introduce any family members that are here with you, if you 
would like to do that, and then recognize you for your opening 
statement.
    Mr. Isakowitz. Thank you. I'd like to introduce my family 
that's with me here today. This is my wife Monica, whose been a 
devoted wife for 20 years and done a wonderful job raising the 
kids while I've been busy at work. I have three of my four kids 
here with me. Jennifer, who is a junior at Chantilly High 
School. I have Rachel, who's a seventh grader at Franklin 
Middle School, and my youngest Sophie, who is a sixth grader at 
Oak Hill Elementary. I also have with me, my father-in-law, 
Mike Sponder, and my sister Cheryl Horowitz.
    The Chairman. Well, we welcome all of you. Nice of you to 
be here today. Why don't you go ahead with your opening 
statement?

TESTIMONY OF STEVEN J. ISAKOWITZ, NOMINEE TO BE CHIEF FINANCIAL 
                 OFFICER, DEPARTMENT OF ENERGY

    Mr. Isakowitz. Thank you.
    Mr. Chairman and members of the committee, I am sincerely 
honored to appear before you today as the President's nominee 
to serve as the Chief Financial Officer at the Department of 
Energy. I am fully aware of the challenges that face the person 
who holds this position, and I am deeply appreciative of the 
President and Secretary Bodman's confidence in my abilities to 
meet those challenges. I also want to thank the committee for 
holding this hearing and considering my nomination. And I'd 
also like to recognize and thank Clay Sell, the Department 
Deputy Secretary for being here today.
    I would also like to recognize my parents for being a 
shining example of hard work, honesty, and integrity. My mother 
and recently-deceased father are both survivors of the 
Holocaust. Indeed, their example has ingrained in me the 
importance of freedom, justice, and tolerance, and the desire 
to leave our children a better world. I share those principals 
and am thankful and honored to serve a government that does, 
too.
    My career ambitions were instilled in me at an early age. 
During my childhood, I was inspired by the Apollo program as I 
watched in amazement as this nation, galvanized by a 
President's vision, landed a man on the moon. I was compelled 
by the notion of a Nation undertaking something that appeared 
impossible, yet by ingenuity and partnership of government and 
industry, made it happen.
    Starting with literally nothing, hardly the ability to 
orbit a satellite, we achieved the national goal of stepping on 
the moon. Consequently, throughout my career, I have been 
driven and motivated by the desire to fulfill large national 
goals. In particular, I am drawn to big goals that require the 
innovative applications of science and technology to get it 
done.
    Indeed, after receiving engineering degrees from MIT, my 
career has spanned 23 years across a variety of positions both 
technical and financial in pursuit of major national goals.
    I began my career in the private sector. Wanting to be a 
true rocket scientist, I was engaged in the engineering design 
and business planning of efforts to privatize and commercialize 
space launch vehicles. However, I quickly learned that the 
success of such goals can often depend on the Government 
establishing the right policies and conditions for enabling 
private industry to succeed. So, I decided to join the 
Government in 1991.
    At the Office of Management of Budget, I had the honor of 
serving under three different Presidents, overseeing a roughly 
$50 billion budget of science and technology across multiple 
Federal agencies, and supporting the development of major 
interagency initiatives, such as high performance computing and 
nanotechnology research. I learned to appreciate the importance 
of establishing clear policies, setting budget priorities, 
ensuring the agencies have the wherewithal to execute as 
planned, and working closely with the Congress throughout.
    After OMB, I chose to work within agencies in pursuit of 
major national goals, namely, space exploration and national 
security. At NASA, I was Deputy CFO and Comptroller, 
responsible for directing the formulation and evaluation of the 
agency's $16 billion annual budget, developing the agency's 
strategic plan, conducting independent cost analyses for major 
programs, and managing first-in-government financial reforms to 
improve program performance.
    At the CIA, I am working within its Science and Technology 
Directorate and am responsible for devising innovative 
technical collection systems, strengthening advance research 
capabilities within the Agency, and resolving high-priority 
issues with other agencies in the intelligence community.
    These experiences have taught me the criticality of 
achieving success through strong agency leadership, effective 
communications, capable workforce and institutions, sound 
financial systems and acquisition management, and the close 
partnership with private industry and academia.
    If confirmed, I plan to apply my experience and excitement 
for meeting national challenges as the CFO at the DOE. The 
Department stands at the nexus of economic, national security, 
and environmental goals that are at the top of the Nation's 
goals. I am anxious to roll up my sleeves and join a team that 
is focused on getting the job done.
    The Department has an impressive array of laboratories, 
workforce, major programs, and unique industry and academic 
partners. Indeed, it is an agency addressing national goals of 
paramount importance, as ambitious as landing an astronaut on 
the moon.
    If confirmed, I will work hard as the CFO to support the 
mission priorities of the Department. I look forward to working 
closely with the committee and the Congress and will be fully 
available to address the critical issues important to you.
    It is indeed a high honor and privilege to be considered 
for this position and have the opportunity to so serve our 
Nation.
    Mr. Chairman, this concludes my prepared statement. I would 
be glad to answer the committee's questions at this time.
    [The prepared statement of Mr. Isakowitz follows:]
    Prepared Statement of Steven J. Isakowitz, Nominee to be Chief 
                Financial Officer, Department of Energy
    Mr. Chairman, Senator Domenici, and Members of the Committee, I am 
sincerely honored to appear before you today as the President's nominee 
to serve as the Chief Financial Officer at the Department of Energy. I 
am fully aware of the challenges that face the person who holds this 
position, and I am deeply appreciative of the President's and Secretary 
Bodman's confidence in my abilities to meet those challenges. I also 
want to thank the Committee for holding this hearing and considering my 
nomination.
    I would like to introduce my wife Monica who has been a wonderful 
companion in our 20 years of marriage and deserves my endless devotion 
and thanks for taking care of our family and supporting me throughout 
my career. Also with us are three of our four children: Jennifer a 
junior at Chantilly High School, Rachel a seventh grader at Franklin 
Middle School, and Sophie a sixth grader at Oak Hill Elementary. I also 
want to recognize my son Matthew who could not be here today because of 
his obligations as a sophomore at Princeton University. Monica and I 
are very proud of all four of our children.
    I would also like to recognize my parents for being a shining 
example of hard work, honesty, and integrity. My mother and recently 
deceased father are both survivors of the Holocaust. Indeed, their 
example has ingrained in me the importance of freedom, justice, and 
tolerance, and the desire to leave our children a better world. I share 
those principals and am thankful and honored to serve a government that 
does too.
    My career ambitions were instilled in me at an early age. During my 
childhood, I was inspired by the Apollo program as I watched in 
amazement as this nation, galvanized by a President's vision, landed a 
man on the moon. I was compelled by the notion of a nation undertaking 
something that appeared impossible, yet by the ingenuity and 
partnership of government and industry, made it happen. Starting with 
literally nothing, hardly the ability to orbit a satellite, we achieved 
the national goal of stepping on the moon. Consequently, throughout my 
career, I have been driven and motivated by the desire to fulfill large 
national goals. In particular, I am drawn to big goals that require the 
innovative application of science and technology to get it done. 
Indeed, after receiving engineering degrees from the Massachusetts 
Institute of Technology, my career has spanned 23 years across a 
variety of positions both technical and financial in the public and 
private sectors in the pursuit of major national goals.
    I began my career in the private sector. Wanting to be a true 
rocket scientist, I was engaged in the engineering design and business 
planning of efforts to privatize and commercialize space launch 
vehicles as called for by President Reagan after the failure of Space 
Shuttle Challenger. However, I quickly learned that the success of such 
goals can often depend on the government establishing the right 
policies and conditions for enabling private industry to succeed. So, I 
decided to join the government in 1991 and held positions that would 
enable me to initiate and support major undertakings of national 
importance, applying my interest and skills in engineering, project 
management and business planning.
    At the Office of Management of Budget, I had the honor of serving 
under three different Presidents, overseeing a roughly $50 billion 
budget of science and technology across multiple Federal agencies, and 
supporting the development of major interagency initiatives such as 
high performance computing and nanotechnology research. I worked with 
various agencies to establish appropriate funding levels and monitored 
their financial and technical performance in getting the job done. I 
learned to appreciate the importance of establishing clear policies, 
setting budget priorities, ensuring the agencies have the wherewithal 
to execute as planned, and working closely with the Congress 
throughout.
    After OMB, I chose to work within agencies in pursuit of major 
national goals, namely, space exploration and national security. At the 
National Aeronautics and Space Administration, I was the Deputy Chief 
Financial Officer and Comptroller responsible for directing the 
formulation and evaluation of the agency's $16 billion annual budget, 
developing the agency's strategic plan, conducting independent cost 
analyses for major programs, and managing first-in-government financial 
reforms to improve program performance. At the Central Intelligence 
Agency, I am working within its Science & Technology Directorate and am 
responsible for devising innovative technical collection systems for 
use against challenging intelligence targets, strengthening advanced 
research capabilities within the Agency, and resolving high priority 
issues with other agencies in the intelligence community. These 
experiences have taught me the criticality of achieving success through 
strong agency leadership, effective communications, capable workforce 
and institutions, sound financial systems and acquisition management, 
and the close partnership with private industry and academia.
    If confirmed, I plan to apply my experience and excitement for 
meeting national challenges as the Chief Financial Officer at the 
Department of Energy. The Department stands at the nexus of economic, 
national security and environmental goals that are at the top of the 
nation's agenda. I am anxious to roll up my sleeves and join a team 
that is focused on getting the job done. The Department has an 
impressive array of world class labs, highly specialized workforce 
skills, major multi-year programs, and unique industry and academic 
partners. Indeed, it is an agency addressing national goals of 
paramount importance, as ambitious as landing an astronaut on the moon. 
If confirmed, I will work hard as the CFO to support the mission 
priorities of the Department. I look forward to working closely with 
the Committee and the Congress and will be fully available to address 
the critical issues important to you.
    It is indeed a high honor and privilege to be considered for this 
position and have the opportunity to so serve our nation.
    Mr. Chairman, this concludes my prepared statement. I would be glad 
to answer the committee's questions at this time.

    The Chairman. Thank you very much. Before we start 
questions, let me just call on Senator Domenici for any opening 
statement that he would have at this point.

       STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Domenici. Thank you very much. I have a very brief 
statement. Good morning to you and welcome to the committee.
    Mr. Isakowitz. Thank you.
    Senator Domenici. First, I want to thank the chairman, 
Senator Bingaman, for promptly holding this hearing for the 
Chief Financial Officer position at the Department of Energy. 
The position has been open for some months and it is difficult 
for the Department to continue without a permanent appointment.
    Mr. Isakowitz, I want to thank you for your willingness to 
understand this responsibility. The Department's program and 
facilities are critical to almost all of the energy policy that 
we develop here in Congress. New management of the financial 
part of the Department's resources will be crucial to 
successful implementation of the energy policy that we craft. I 
welcome your testimony today, and hope that we can quickly move 
your nomination to the floor of the Senate.
    Thank you, Mr. Chairman.
    And thank you, sir.
    Mr. Isakowitz. Thank you.
    The Chairman. Thank you.
    Let me just start with a couple of questions. One issue 
that we have come back to many times here in the committee in 
the last couple of months is this issue of the loan guarantee 
program that was in our Energy Policy Act of 2005. The 
Department's been slow in getting that program started. I think 
many on the committee have expressed their frustration about 
that.
    The Government Accountability Office has also voiced 
concerns that the Department has not done a great deal to put 
in place the policies and procedures and mechanisms needed to 
ensure that the financial risks involved in this loan guarantee 
program are well managed.
    If you're confirmed as the Chief Financial Officer for the 
Department, what would you believe your role might be in 
ensuring both that the program get up and running, but also 
that the financial risks are well managed in that program?
    Mr. Isakowitz. Thank you, Mr. Chairman.
    Indeed, over the last couple weeks I've had a chance to 
meet with members of this committee and their staff and I don't 
think there's been a single meeting I have gone to where this 
issue of the loan guarantee hasn't been raised as a top 
priority of the committee.
    So, given that it clearly is important to the committee, 
given that I see it's important as part of the Energy Policy 
Act of 2005, it's clearly going to be a priority of mine, if 
confirmed, for CFO for the Department.
    Once I get there, clearly, this will be something that I 
know that the Department has started to put in place those 
procedures, has begun to request the money to stand up an 
office. I understand that the CFO will have a key role in that 
regard. I'm not at the Department yet, but certainly, once I 
get there, I will try to--quick as I can get up to speed and 
certainly be happy to come back to you, your office, and have 
discussions on how best to go forward.
    The Chairman. Thank you for that answer.
    One of the recent jobs you had is with NASA. You were the 
Deputy Chief Financial Officer and Comptroller from 2002 to 
2005, early 2005.
    The Government Accountability Office has been very critical 
of NASA's financial management system since, at least, 1990. 
GAO's concerns arose long before you arrived at NASA and they 
continue today after you've left NASA. But, could you elaborate 
for the committee some of the steps that you took to try to 
address GAO's concerns and improve the financial management, at 
NASA, while you were the Deputy CFO?
    Mr. Isakowitz. Yes. Thank you. As you point out, financial 
management has been, not only a challenge, actually at NASA, 
but other major agencies. Particularly agencies that are like 
NASA, having a lot of contract activity. Financial management 
systems are critical when you're trying to operate, 
particularly multiple laboratories.
    Contract management is an issue that has been raised by the 
Government Accountability Office, and faces Departments like 
Defense, Energy, and NASA. And, at NASA, we were one of the 
first in the Federal Government to introduce a new financial 
management system. As has been the case, whether it's in 
private industry or in government, the introduction of these 
new systems can often be disruptive at first, but ultimately 
they provide high dividends.
    In the case of NASA, when I got there in 2002, we had 10 
NASA centers, each operating their own financial management 
system. And indeed, at the time, the auditors thought that 
things were okay until we brought on-line this new financial 
management system that all centers were required to use. And as 
a result, we started to uncover a lot of problems across the 
board, not only with the system itself, but some of the ways 
the accounting was done at the various centers.
    So, in the 3\1/2\ years that I was there, we were able to 
uncover a number of the problems, working with the auditors. We 
did get qualified opinions on audit statements, but at least we 
were able to address issues that heretofore, actually, some did 
not even know existed. And, I felt that that was a major step 
forward.
    Also, in that regard, the financial management system has 
been critical for tracking the performance of contractors. And, 
knowing that it would take time to get the financial management 
system up, we actually had gone forward, while I was 
Comptroller, and began to institute changes that would put more 
rigor and discipline on how we provide the oversight of 
contracts.
    For example, when I got there we had a major problem on the 
Space Station program. It was about a $4.5 billion cost overrun 
and we made it one of our top priorities. By the time we had 
left, we had significantly reduced the size of that overrun and 
even as of today, the program is on much more sound financial 
footing just based on the interim capabilities we were putting 
in place.
    The Chairman. Thank you very much. My time's up.
    Senator Domenici.
    Senator Domenici. Well, Senator, I think, since we're on 
the subject, maybe we will stay on it just a while longer.
    I can't imagine how a department can get a mission charge, 
like it has in the new bill that created the Energy Policy Act. 
I don't understand how it can--and not have a position and an 
office to fill this mandate that's there, and part of its 
operation. It seems to me that it's almost negligence on the 
part of somebody not to do it.
    I don't understand where--where does it come from? Have you 
had enough time to look at what's going on and determine why we 
can't get it established after all this time? We will soon be 
in the third year. There are loan guarantee offices throughout 
government, aren't there? Am I mistaken, I thought there have 
been loan guarantees at agriculture for a long, long time? They 
never closed them down, one Administration to another. They 
just kept them, right? To my knowledge, I don't understand 
what's going on. Do you have an explanation for what's going 
on, or is it nobody wants to squeal on anybody else, or what's 
the story?
    Mr. Isakowitz. Senator, I appreciate the importance and 
urgency you're putting behind the loan guarantee program. I'm 
not at the Department yet. As soon as I get there, I will have 
the opportunity to find out, you know, what are the obstacles 
and what are the issues before it.
    Senator Domenici. I understand that's not a great question 
to put to somebody who hasn't been approved yet and will soon 
be joining them. It would be better to answer that question in 
a way in which we would get your answer, but they would not, 
but that can't happen.
    Actually, I think there's also been some arguing between 
the appropriators on the House side and here as to where they 
should--House arguing that they should not let the money, let 
any money out of the appropriation programs to take care of 
this. Without that, obviously you don't have the--the way that 
the program works is with setting it up with an operating 
budget and the like.
    You don't, without answering with specificity, just 
generally, if charged with setting up an office for this 
purpose and with this mission you accede, you have no reason to 
be against doing that. Is that a fair statement?
    Mr. Isakowitz. Yes sir, that's a fair statement.
    Senator Domenici. All right. I have no further questions, 
maybe one.
    Do you know how long it might, under normal circumstances, 
take to get an office going and open so that those out in 
hinderland trying to establish this kind of activity know that 
we have one up and running, ready to go? Do you have any 
feelings on that?
    Mr. Isakowitz. The short answer is, no. I do know that the 
Department has asked for funding to, in fact, establish an 
office. And, it was my understanding that when USDA also had 
created their loan guarantee program, it took them 3 years to 
stand it up.
    Having said that, I'm sure the circumstances vary by 
department and they are unique to departments, so I can't speak 
to how long it would take for this Department until I get 
there.
    Senator Domenici. Good luck.
    The Chairman. Senator Thomas.
    Senator Thomas. Thank you.
    You mentioned in your statement that you would be involved 
in making independent cost analysis of various kinds of things. 
DOE has seen increasing costs of a 50 to 60 percent FutureGen. 
Now these new costs will split, of course, between the Agency 
and others. What role would you have as CFO in projecting these 
costs and do you believe we could do a better job of managing 
these kinds of costs?
    Mr. Isakowitz. Yes, if confirmed, this is one of the things 
I will, personally, have a strong interest in, is to better 
establish what my role will be in exactly that. In the case of 
NASA, it was a high priority of mine, because cost growth is 
not a unique problem to the Department of Energy. You see it at 
all the major departments that are, particularly, trying to 
build one of a kind, high-risk hardware and new systems.
    At NASA, what we had tried to put in place--practices--best 
practices, that would empower the program management to kind of 
make the decisions so they can move expeditiously, make sure 
that we had milestone reviews, and acquisition strategies, so 
at the appropriate points in time we could review the status of 
a program.
    And, particularly, what helped us is a--what we looked at 
in the case of NASA--we found that usually it's at the front 
end of programs that the cost growth occurs. That is usually 
when you get past about 20 percent in spending on your program, 
the program tends to settle down. So, the key is understanding 
up front where your risks are, to address those risks, to 
identify early, so that the program manager and contractors 
understand, and to establish decision gates along the way to 
make sure that they're meeting the promises that are made, and 
then you approve of them at the appropriate points.
    It's not a unique problem, and it's a hard one to fix, but, 
I think, we've learned a lot in the Federal Government in the 
last few decades on things that work well, and not so well, and 
I hope to be able to apply some of those best practices.
    Senator Thomas. That's good.
    What is the CFO's responsibility and role? I mean, is it 
just simply allocating and overseeing the expenditures that are 
approved by someone else, or is there a role in ensuring and 
having ways to ensure that the programs are done as efficiently 
from a financial standpoint as possible?
    Mr. Isakowitz. You raise an excellent point, Senator. It's 
much more than just tracking where the dollars go. It's 
ensuring that the programs meet the objectives that they've set 
before them and the promises made to the Congress.
    One of the key responsibilities of a CFO is to track the 
performance of programs, in fact, to report them to the 
Congress as part of the budget submission that is sent up every 
February.
    I personally see it as a very high priority of mine to 
understand the programs and to provide independent counsel to 
the Deputy Secretary and the Secretary on those issues, if 
confirmed.
    Senator Thomas. Well, of course, it's a little difficult 
when you're just entering into it, where we've been dealing 
with some of these issues. But, the increasing cost thing that 
I mentioned on FutureGen is very much a concern and Global 
Nuclear Energy Partnership, as well. Now, I don't believe these 
are bad programs. The clean coal technology and recycling 
nuclear waste are essential components of that, but we need to 
know what we're getting ourselves into. And, are there ways to 
ensure that the Global Nuclear Partnership does not balloon in 
cost, as FutureGen has?
    Mr. Isakowitz. I'm not sure that we could ever provide 
guarantees for programs that are of a risky nature, such as a 
GNEP and some of the other significant R&D activities at the 
Department.
    But, I do think that there's practices that you can put in 
place to identify risks up front, to bring in people who have 
outside expertise to look at programs, to help you identify 
where those risks are, and to set up, as I said earlier, those 
milestones to ensure that those risks are addressed up front so 
that before you give a final contract and just let things move 
out--only to find out halfway through that you've got a big 
problem--we try to identify those problems as early as 
possible.
    And problems will occur, but if you can catch them at the 
front end it usually costs a lot less to fix it, then when 
you're halfway through these activities.
    Senator Thomas. Well, that's good. I hope we do remember 
that in the management of government programs, that over here 
there's the decision makers with regard to where we're going on 
policy. And, then there's somebody overseeing how that is 
implemented in terms of the finances. And, I think that's a 
very key issue.
    We, of course, are faced with something of a dilemma, in 
terms of looking out in the future for alternative sources of 
energy, which is a good idea. On the other hand, understanding 
that that--those are a number of years away and that we have to 
provide for incentives, and loan guarantees, and other things 
for the things that we do know how to do--like clean coal, and 
nuclear power, and all those things in the mean time.
    In any event, welcome to the area of interest and 
difficulties. But really, I think, the opportunity to do a 
great deal for our country and for our people to provide long-
term energy opportunities and at the same time, provide the 
energy sources that we need to keep our economy going. So, we 
look forward to working with you. Thank you.
    Mr. Isakowitz. Thank you.
    Senator Thomas. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. There may be some 
additional questions that members of the committee want to have 
answered and we will allow that. Such additional questions may 
be filed with the committee staff up until 5 o'clock this 
evening. So, if any such questions are forthcoming, we would 
hope you could respond to those quickly and then we would hope 
we could act quickly on your nomination.
    Thank you very much for being here, and we appreciate the 
Deputy Secretary being here with you.
    And, we will conclude the hearing with that.
    Thank you.
    Mr. Isakowitz. Thank you very much.
    [Whereupon, at 10:35 a.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

      Response of Mr. Isakowitz to Question From Senator Bingaman
    Question. The Department of Energy is the largest civilian 
contracting agency in the Federal Government. It spends 90 percent of 
its annual budget on contracts to operate its facilities and carry out 
its many missions. The Government Accountability Office has reported 
that the Department takes much longer than anticipated to award most 
contracts, and that at least some of the delays are avoidable. GAO 
recommended that the Department develop more accurate and comprehensive 
performance measures for awarding contracts. Are you familiar with the 
GAO's recommendations and do you agree that these or similar steps need 
to be taken?
    Answer. A GAO report issued on June 30, 2006, entitled ``DOE 
Contracting: Better Performance Measures and Management Needed to 
Address Delays in Awarding Contracts,'' underscores the importance in 
planning and carrying out the contract award process and awarding 
contracts in a timely manner, since delays in awarding contracts could 
increase costs both to DOE and to companies competing for DOE work. The 
report cites a sampled set of competitive contracts and states that 
delays in some could have been avoided.
    I share the GAO concern that Federal agencies, including DOE, need 
to be as accurate as reasonably possible in projecting dates for 
contract awards. Such dates are important to contractors in forming 
their teams and in maintaining the availability of critical personnel 
until the contract award date. As for DOE's performance on this matter, 
if confirmed, I will work with DOE's Office of Management, which is the 
DOE office primarily responsible for contract management, and seek to 
better understand the Department's metrics for assessing timeliness and 
the results to date. It is certainly in the interest of the CFO that 
resources be used as efficiently as possible by both the government and 
the contractor.
       Responses of Mr. Isakowitz to Questions From Senator Wyden
    Question 1. Contract management: Both at OMB and as the Deputy CFO 
at NASA you have been in key position to shape how NASA operates. I am 
not going to hold you responsible for everything that's happened at 
NASA for the past 17 years since you started at OMB, but I also can't 
ignore the fact that NASA is a very troubled agency, a dysfunctional 
agency. NASA has been on GAO's ``High Risk'' list since 1990. And 
that's been on your watch. DOE has also been on that list since 1990, 
for much the same reason--its inability to manage its contractors. Both 
agencies are completely dependent on contractors to carry out their 
missions and both are unable to manage them effectively. What 
assurances can you provide me that you can turn things around at DOE in 
terms of contract and contractor management when NASA's record is so 
poor and much of that poor management occurred on your watch?
    Answer. I fully agree that contract management is a critical 
function of Federal agencies. Unfortunately, contract management issues 
are not new to the Federal government, as three of the most procurement 
intensive agencies--Department of Defense, NASA, and DOE--have all been 
cited by GAO as having contract management as a high risk. Although 
contract management was not my direct responsibility during my time at 
OMB and NASA, I worked very closely with OMB's Office of Federal 
Procurement Policy and NASA's Office of Procurement to address the 
issues. Similarly, if confirmed as CFO of DOE, I look forward to 
working with DOE's Office of Management to improve the performance of 
contract management.
    GAO has cited contract management as a high risk issue for NASA 
since 1990, and I was at NASA from 2002-2005. GAO acknowledges in its 
more recent report that in the last few years progress has been made. 
This progress is a result of, among other things, instituting a new 
financial management system that began during my time at NASA. The new 
financial management system, although with its own challenges, has been 
a pathfinder for many other federal agencies that seek to modernize 
their business operations. The NASA core financial system consolidated 
ten different financial systems into one, an ambitious undertaking. 
During my tenure at NASA, we were in the process of deploying a new 
contract management module to be added to the core financial system to 
improve program management and contractor oversight.
    While the module was being developed, I led initiation of improved 
cost estimation procedures and tools, including creation of a new cost 
estimation cadre, new procedures for conducting independent cost 
analysis, and information technology tools for monitoring development 
projects. With these and other changes to include earned-value 
management and cost-risk analysis, we successfully reduced earlier 
projected cost overruns on the International Space Station program, and 
instituted changes that kept the program within budget. Moreover, my 
team received a White House award for being the first in the Federal 
government for getting a ``green'' rating on the President's Management 
Agenda for budget performance integration, which is vital for linking 
resource decisions to program performance. Contract management is a 
major challenge for the Federal government, and I look forward to 
having the opportunity, if confirmed, to help address the issue at DOE.
    Question 2. Energy expertise: Energy made it into the President's 
State of the Union speech both this year and last year, but I couldn't 
find even a single reference to energy in your resume. Basic research, 
yes. Energy, no. Not once. Yet, you're being nominated as the CFO for 
the Energy Department. Oil is almost $60 a barrel. There is a 
compelling need to address climate change. Have effective energy 
programs is not a luxury, it's a necessity. What assurance can you give 
me that you have a working knowledge of industry? How do I know that 
programs like the new loan guarantee program called for by EPACT 2005 
are not going to end up soaking the taxpayers?
    Answer. I believe that I have the qualifications to be an effective 
Chief Financial Officer at the Department of Energy.

   First, I have a solid technical background having graduated 
        from MIT with engineering degrees, and worked in both the 
        private and public sector on major development projects, 
        similar to DOE in terms of being high-risk and one-of-a-kind.
   Second, I can bring to DOE a diverse background and fresh 
        perspective on major management issues such as financial 
        operations, contract management, program evaluation, and 
        project management. Having a different background from most at 
        DOE may help avoid groupthink on issues and allow me to raise 
        important questions that may otherwise be inadvertently omitted 
        during decision meetings.
   Third, I am a quick learner, but I also know that it is 
        often more important to find experts in various subject matters 
        to help resolve issues than to try to do it alone. I look 
        forward to reaching out to the expertise within DOE as well as 
        those outside the Department to help address the tough issues.
   Lastly, my background applies to the type of issues that I 
        would face at DOE. For example, at NASA I dealt with issues 
        regarding major national labs, a highly technical workforce, 
        complex development projects, and large procurement activities. 
        At OMB, I worked on large interagency initiatives such as high 
        performance computing and nanotechnology as well as policies to 
        enhance fundamental research. In the private sector, I worked 
        on commercial projects and development activities that depended 
        on clear Federal policies and regulations.

    I believe these experiences have direct relevance to DOE and will 
help prepare me for my responsibilities should I be confirmed as CFO at 
DOE.
    I also understand that it is important that good procedures and 
practices be put in place for programs to succeed, such as the DOE loan 
guarantee program. The Federal government has a mixed history of 
success on such programs and there are many lessons learned to be 
applied. I look forward to working with the Committee and Congress and 
other key players to ensure that the program will ultimately prove 
successful for the U.S. taxpayer.
                             budget issues
    Question 3a. For the second year in a row, the DOE requires BPA 
customers to make extra payments to the Treasury to reduce the Federal 
debt. These aren't appropriated dollars. These are electric customers' 
dollars. What assurance can you give me that these budget tricks are 
going to end?
    Answer. If confirmed to be the CFO at DOE, I will place a high 
priority on the integrity, accuracy, and completeness of the 
Department's budget submission to the Congress and the need to be 
honest and forthright. I appreciate the importance of the Power 
Marketing Administrations and look forward to working with the Congress 
on matters affecting the PMAs' and their customers.
    Question 3b. For the second year in a row, the DOE budget has 
zeroed out funding for two very promising energy technologies--
geothermal and the next generation of hydroelectric technologies--
tidal, wave, and ocean currents. MIT, which you attended, came out with 
a report saying we could have 100,000 megawatts of electricity--100 
nuclear power plants worth--geothermal in the next 50 years if 
geothermal received adequate funding over the next 10 to 15 years. But 
the Department zeroed out the program. EPRI, in a 2005 study, said 
developing ocean wave energy technology in the U.S. could essentially 
equal the output of our conventional hydroelectric capacity, but DOE 
asked for zero for hydro technologies. As CFO what assurance can you 
give me that there is going to be a more objective, more balanced, more 
transparent process for deciding what energy research is funded? And 
that we are going to see funding for technologies like geothermal and 
ocean energy?
    Answer. DOE certainly has an important role in shaping our nation's 
energy policy and investing in renewable energy technologies. Should I 
be confirmed as CFO, I will have a strong interest in a budget process 
that will be clear, credible and forthright when deciding and 
describing how decisions are made in providing the best possible 
portfolio of research programs with the limited funds we have to work 
with. As CFO, I work with the DOE leadership team to help articulate 
why the promising energy technologies are important, relevant, and 
appropriate for Federal investment; how funds will be allocated to 
ensure quality; and how programs will be monitored for performance. I 
will examine and learn more about promising energy technologies such as 
geothermal and ocean energy and the possible role for DOE.
    Question 4. NASA Climate change: As you know, there has been a 
great deal of concern that NASA and White House officials have tried to 
muzzle NASA's scientists working on climate change and climate research 
such as Dr. James Hansen. What role, if any, did you play in overseeing 
NASA's climate research activities since 2000? What role, if any, did 
you play in overseeing the scientific integrity and independence of 
NASA's climate research since 2000?
    Answer. Since 2000, I was involved in resource issues associated 
with NASA's earth science program while at the Office of Management and 
Budget (OMB) and NASA.

   At OMB, I was the Branch Chief for Science and Space 
        Programs through 2002 and addressed budget issues associated 
        with NASA's overall budget, including specific programs such as 
        earth science.
   At NASA, I was the Deputy Chief Financial Officer and 
        Comptroller and the Deputy Associate Administrator for 
        Exploration from 2002 to 2005. When I was NASA Deputy CFO and 
        Comptroller, I was responsible for the formulation and planning 
        of the agency's budget, including earth science. When I was 
        NASA's Deputy Associate Administrator for Exploration, I had no 
        involvement with earth science.

    For both my positions at OMB and at NASA, I had no direct role in 
overseeing the scientific integrity and independence of NASA's climate 
research.

                                    

      
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