[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






 DEPARTMENT OF ENERGY OVERSIGHT: WHAT IS NECESSARY TO IMPROVE PROJECT 
                  MANAGEMENT AND MISSION PERFORMANCE?

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 24, 2013

                               __________

                           Serial No. 113-76







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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
GREG WALDEN, Oregon                  ELIOT L. ENGEL, New York
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee          JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                      JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi            Islands
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BILL CASSIDY, Louisiana              JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky              JERRY McNERNEY, California
PETE OLSON, Texas                    BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
CORY GARDNER, Colorado               BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas                  PAUL TONKO, New York
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

                                 _____

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia                BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana             JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
PETE OLSON, Texas                    KATHY CASTOR, Florida
CORY GARDNER, Colorado               PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
BILL JOHNSON, Ohio                   GENE GREEN, Texas
BILLY LONG, Missouri                 JOHN D. DINGELL, Michigan (ex 
RENEE L. ELLMERS, North Carolina         officio)
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)

                                  (ii)

























                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, opening statement.....................................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    74

                               Witnesses

Daniel B. Poneman, Deputy Secretary, Department of Energy........     9
    Prepared statement...........................................    12
    Answers to submitted questions...............................    79
Gregory H. Friedman, Inspector General, Department of Energy.....    17
    Prepared statement...........................................    19
    Answers to submitted questions...............................   103
David C. Trimble, Director, Natural Resources and Environment 
  Team, Government Accountability Office.........................    29
    Prepared statement...........................................    31
    Answers to submitted questions...............................   106

                           Submitted Material

Hearing memorandum, dated July 22, 2013, submitted by Mr. Murphy.    75

 
 DEPARTMENT OF ENERGY OVERSIGHT: WHAT IS NECESSARY TO IMPROVE PROJECT 
                  MANAGEMENT AND MISSION PERFORMANCE?

                              ----------                              


                        WEDNESDAY, JULY 24, 2013

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Members present: Representatives Murphy, Burgess, 
Blackburn, Scalise, Harper, Olson, Gardner, Griffith, Johnson, 
Ellmers, Braley, Lujan, Castor, Tonko, Green, and Waxman (ex 
officio).
    Staff present: Carl Anderson, Counsel, Oversight; Charlotte 
Baker, Press Secretary; Sean Bonyun, Communications Director; 
Annie Caputo, Professional Staff Member; Karen Christian, Chief 
Counsel, Oversight and Investigations; Andy Duberstein, Deputy 
Press Secretary; Vincent Esposito, Fellow, Nuclear Programs; 
Brad Grantz, Policy Coordinator, Oversight and Investigations; 
Brittany Havens, Legislative Clerk; Brandon Mooney, 
Professional Staff Member; Peter Spencer, Professional Staff 
Member, Oversight; John Stone, Counsel, Oversight; Brian Cohen, 
Democratic Staff Director, Oversight and Investigations, and 
Senior Policy Advisor; Kiren Gopal, Democratic Counsel; Hannah 
Green, Democratic Staff Assistant; and Stephen Salsbury, 
Democratic Special Assistant.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning, and welcome.
    We convene this hearing as part of the committee's ongoing 
oversight of the Department of Energy to review how the 
Department may improve its project management and its mission 
performance.
    The hearing will feature testimony from Daniel Poneman, the 
Deputy Secretary of Energy, who will describe and explain the 
reorganization of the Department's management structure 
announced just last week by the new Secretary of Energy, Ernest 
Moniz. We will also hear from Greg Friedman, the DOE Inspector 
General, and from David Trimble, of the Government 
Accountability Office, both of whom will provide important 
context to help understand the potential of the Secretary's 
plans. Welcome, gentlemen.
    The announced reorganization makes some significant changes 
to the Department's management structure with a more explicit 
focus on project management, so-called enterprise-wide mission 
support, and the integration of the agency's science and 
applied energy programs. The new structure will transform the 
Office of Under Secretary, which previously managed the 
Department's energy programs, into the Office of Under 
Secretary for Management and Performance. Under this setup, a 
new Under Secretary will manage the agency's large and 
challenging environmental cleanup responsibilities as well as a 
number of agency-wide mission support offices, and national 
laboratory operations.
    The energy programs, including the Offices of Fossil 
Energy, Nuclear Energy, Energy Efficiency and Renewable energy, 
the Office of Electricity Delivery and Reliability will now be 
managed more closely with the Department's Office of Science by 
an Under Secretary for Science and Energy. In addition, the 
Secretary plans to reform agency safety and security oversight 
and also plans to establish various secretarial councils to 
address select policy issues.
    On paper, these changes look like positive steps to help 
DOE address the tremendous challenges and opportunities before 
the agency. On the energy-mission side, we know that the 
prospects of North American energy production have surpassed 
all expectations in recent years. How this agency integrates 
the strength of its world-class science and engineering with 
its applied energy and various energy infrastructure programs 
to help maximize the benefits of this new reality for the 
American public is of key importance.
    Meanwhile, DOE's core science and engineering missions must 
also confront the Federal Government's tremendous environmental 
responsibilities. Fifty years of Cold War nuclear research, 
development and weapons production have left behind 
contaminated water and soils, and tens of millions of gallons 
and millions of cubic meters of waste that must be cleaned up. 
Cleanup costs, estimated at more than $250 billion, are a 
Federal liability surpassed only by Social Security and 
Medicare.
    Repeated audits for this subcommittee by GAO have found 
that over the past two decades, DOE has suffered from 
substantial and continual weaknesses in effectively overseeing 
contractors and managing large, expensive and technically 
complex projects. But multibillion-dollar projects aren't the 
only problem. This past December, GAO told us that DOE did not 
have sufficient documentation to assess performance on almost 
40 percent of its non-major projects--those costing less than 
$750 million.
    Lessons generated out of the serious security failure that 
occurred one year ago at the Y-12 site in Oak Ridge, Tennessee, 
has indicated how the successful reliance on Department 
contractors depends on strong and clear lines of accountability 
and on meaningful and consistent measurement of contractor 
performance. Attempts to institute what is called on the ``eyes 
on, hands off'' contractor oversight in recent years weakened 
accountability and were taken to a point that Washington had no 
clue about the mounting security risks in Tennessee.
    We heard testimony from then-Secretary Steven Chu's own 
outside advisors that the Department's decentralized management 
of the national security sites allowed them to leverage their 
unique missions and geography to justify being held to 
different levels of security standards. Confused accountability 
and conflicting priorities and messages from Washington created 
a culture of what is called ``tolerating the intolerable,'' as 
one of the Secretary's advisors put it.
    That episode relates to DOE's governance of the nuclear 
security enterprise, but it points to accountability, 
management and oversight issues that require constant attention 
across all of the agency's operations and projects if the 
agency is to perform its work safely, securely, and protective 
of taxpayers' dollars.
    Of course, whether and how the Secretary's efforts will 
help improve the documented deficiencies in the Department's 
performance will remain to be seen. The object of today's 
hearing is to build a record that will help the committee 
monitor progress and conduct constructive oversight in coming 
months. Our goal is to help ensure the Department can sustain 
management and performance improvements and develop a culture 
of accountability, safety and security that extends throughout 
the agency's operations.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    We convene this hearing as part of the committee's ongoing 
oversight of the Department of Energy to look particularly at 
what is necessary for the Department to improve its project 
management and mission performance.
    The hearing will feature testimony from Daniel Poneman, the 
Deputy Secretary of Energy, who will describe and explain the 
reorganization of the Department's management structure 
announced just last week by the new Secretary of Energy, Ernest 
Moniz. We will also hear from Greg Friedman, the DOE Inspector 
General, and David Trimble, of the Government Accountability 
Office, both of whom will provideimportant context to help 
understand the potential of the Secretary's plans.
    The announced reorganization makes some significant changes 
to the Department's managementstructure, with a more explicit 
focus on project management, so-called enterprise-wide mission 
support, and the integration of the agency's science and 
applied energy programs.
    The new structure will transform the Office of Under 
Secretary, which previously managed theDepartment's energy 
programs, into the Office of Under Secretary for Management and 
Performance.Under this set-up, a new Under Secretary will 
manage the agency's large and challenging environmental cleanup 
responsibilities as well as a number of agency-wide mission 
support offices, and national laboratory operations.
    The energy programs--including the Offices of Fossil 
Energy, Nuclear Energy, Energy Efficiency and Renewable Energy, 
the Office of Electricity Delivery and Reliability--will now be 
managed more closely with the Department's Office of Science, 
by an Under Secretary for Science and Energy. In addition, the 
secretary plans to reform agency safety and security oversight 
and also plans to establish various Secretarial councils to 
address select policy issues.
    On paper, these changes look like positive steps to help 
DOE address the tremendous challenges and opportunities before 
the agency. On the energy-mission side, we know that the 
prospects of North American energy production have surpassed 
all expectations in recent years. How this agency integrates 
the strength of its world-class science and engineering with 
its applied energy and various energy infrastructure programs 
to help maximize the benefits of this new reality for the 
American public is of key importance.
    Meanwhile, DOE's core science and engineering missions must 
also confront the Federal Government's tremendous environmental 
responsibilities. Fifty years of Cold War nuclear research, 
development and weapons production have left behind 
contaminated water and soils, and tens of millions of gallons 
and millions of cubic meters of waste that must be cleaned up. 
Cleanup costs, estimated at more than $250 billion, are a 
Federal liability surpassed only by Social Security and 
Medicare.
    Repeated audits for this subcommittee by GAO have found 
that, over the past two decades, DOE has suffered from 
substantial and continual weaknesses in effectively overseeing 
contractors and managing large, expensive, and technically 
complex projects. But multibillion-dollar projects aren't the 
only problem. This past December, GAO told us that DOE did not 
have sufficient documentation to assess performance on almost 
40 percent of its nonmajor projects--those costing less than 
$750 million.
    Lessons generated out of the serious security failure that 
occurred one year ago at the Y-12 site in Oak Ridge, Tennessee, 
has indicated how the successful reliance on Department 
contractors depends on strong and clear lines of accountability 
and on meaningful and consistent measurement of contractor 
performance. Attempts to institute ``eyes on, hands off'' 
contractor oversight in recent years weakened accountability 
and were taken to a point that Washington had no clue about the 
mounting security risks in Tennessee.
    We heard testimony from then-Secretary Steven Chu's own 
outside advisors that the Department's decentralized management 
of the national security sites allowed them to ``leverage'' 
their unique missions and geography to justify being held to 
different levels of security standards. Confused accountability 
and conflicting priorities and messages from Washington created 
a culture of ``tolerating the intolerable,'' as one of the 
Secretary's advisors put it.
    That episode relates to DOE's governance of the nuclear 
security enterprise, but it points toaccountability, 
management, and oversight issues that require constant 
attention across all of the agency's operations and projects--
if the agency is to perform its work safety, securely, and 
protective of taxpayers' dollars.
    Of course, whether and how the secretary's efforts will 
help improve the documented deficiencies in the Department's 
performance will remain to be seen. The object of today's 
hearing is to build a record that will help the committee 
monitor progress and conduct constructive oversight in coming 
months. Our goal is to help ensure the Department can sustain 
management and performance improvements and develop a culture 
of accountability, safety, and security that extends throughout 
the agency's operations.

    Mr. Murphy. With that in mind, I look forward to an 
informative hearing, and I now recognize for 5 minutes the 
gentlelady from Florida, Ms. Castor, who is sitting in today 
for Ranking Member DeGette.

  OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Ms. Castor. Well, good morning, and thank you, Chairman 
Murphy. I am glad we are here today to discuss management and 
performance issues at the Department of Energy.
    This committee has held a number of productive hearings on 
these important but sometimes overlooked areas. On this 
committee, there is a bipartisan consensus and there has been 
for some time regarding the importance of making sure that DOE 
is effectively managing its contractors and its environmental 
management and keeping the nuclear complex safe.
    The recent confirmation of Energy Secretary Moniz and his 
efforts to reorganize the Department make this the perfect time 
to reexamine the longstanding agency weaknesses because for too 
long, the structure and culture at DOE has allowed for 
inadequate focus on management and performance. Because of the 
size of the agency, the complexity of its mission and its 
reliance on contractors--it is the largest civilian contracting 
agency in the Federal Government--it has proved difficult to 
set up effective performance and benchmarking procedures. But 
these tasks are essential in order to evaluate the quality of 
the work being carried out by the agency.
    So I am interested in hearing from the witnesses today 
about the progress the Department of Energy has made in 
resolving these issues and about the GAO's and IG's recent work 
in the area. The Secretary's announcement last week regarding 
DOE reorganization that created a new Under Secretary for 
Management and Performance is an encouraging development, and 
she must tackle these challenges head on. I am eager to learn 
more about how exactly this role will function and how the new 
integrated organizational approach will further DOE's mission 
and help build a clean energy economy.
    It is a positive sign that DOE has a renewed commitment to 
resolving some of the thorny issues that have plagued the 
agency across multiple administrations. The effort must be 
sustained, and while there are no easy answers, I am confident 
that these challenges are not insurmountable. The Government 
Accountability Office designed contract administration and 
project management as a high-risk area in 1990. That it remains 
on the list is 2013 is proof of both the mistakes that have 
been made since that time and the inherent challenges of 
managing one of the most complex Federal agencies, especially 
when it comes to nuclear safety and security.
    Security lapses at the Nation's nuclear weapons complex 
have been well documented from the Los Alamos National Lab to 
the shocking breach last year at the Y-12 facility in Oak 
Ridge, Tennessee, where an 83-year-old nun broke into what was 
supposed to be a highly secured area.
    GAO reported recently that DOE and NNSA continue to face 
challenges in ensuring that oversight of safety and performance 
activities is effective. I would like to hear from DOE today 
about what more the agency can do to instill a culture of 
safety and what security measures have been put in place over 
the past year to ensure that critically important facilities 
are protected. The persistent issues at our nuclear facilities 
make very clear the need for strong oversight from this 
committee. Because DOE so heavily relies on contractors to 
carry out its mission activities, effective contractor 
governance is critical. But in January of this year, the 
Inspector General reported that despite at least 5 years of 
effort, NNSA had not yet implemented fully function and 
effective contractor assurance systems. NNSA must improve upon 
these efforts.
    Finally, I continue to be concerned by DOE's longstanding 
problems relating to inaccurate cost estimates. The GAO has 
reported that cost-estimate practices are not uniform and that 
cost-estimating guidance is not up to date. The bottom line 
here is that taxpayers' dollars are at risk if the Department 
of Energy cannot accurately estimate costs. If we can conduct 
world-class nuclear research, then surely we can have 
consistent cost-estimating practices. So I would like to hear 
from the Deputy Secretary about what is being done to remedy 
these problems and how the new management structure will bring 
greater focus to these challenges.
    The restructuring at the Department of Energy presents an 
opportunity for a fresh start with respect to DOE's management 
and performance issues. There is bipartisan agreement that 
these issues must be taken seriously, so thank you, Chairman 
Murphy, for holding this hearing today, and I look forward to 
having a productive session.
    Mr. Murphy. The gentlelady yields back, and now I recognize 
the vice chair of the subcommittee, Dr. Burgess, for 5 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman, and thanks to our 
witnesses for being here today to help us as we study this 
subject.
    Last month, before the Subcommittee on Energy and Power, 
Secretary Moniz testified that he would be addressing the 
restructuring of management and performance within the 
Department of Energy as one of his top priorities. This 
admission comes as welcome news to those of us who have been 
concerned for several terms of Congress about the structure of 
the Department of Energy. As such, it is the intention of this 
hearing to identify what concerns Department officials have 
themselves, and going forward to the extent that they can be 
remedied.
    But I can't help but reference, since the ranking member 
brought it up in her opening statement, in a previous 
subcommittee hearing many, many years ago when the problems at 
Los Alamos Lab were surfacing and apparently the thumb drive 
was a relatively new invention and was utilized for the 
inappropriate transfer of information, the response of the 
Director of Los Alamos was to fill the little USB ports with JB 
weld, which did solve the problem temporarily but I have got to 
believe that the clever criminal mind could find a way around 
that.
    Members of Congress are not the only ones who have 
apprehensions that the structure of the Department of Energy 
has given rise to security risks and mismanagement. Because of 
the way the Department of Energy has been set up, in 1990 the 
Government Accountability Office designated the Department's 
contract management as high risk, saying that inadequate 
oversight has left it ripe for fraud and abuse. For the most 
part, Department of Energy has tried to address such high-risk 
areas, and the GAO has since removed the designation from its 
Office of Science. Since being listed as high risk, the 
Department of Energy has also taken the initiative to implement 
a corrective action plans and hopes to be removed from GAO's 
list. Despite this effort, a total of 12 projects are currently 
either at risk of breaching performance baselines or expected 
to breach performance baselines.
    Unfortunate incidents have occurred. A year ago, last July, 
antinuclear activists entered the Y-12 complex and sprayed 
antiwar slogans on the exterior of a highly enriched uranium 
materials facility, a very dangerous exercise for them 
personally and certainly exposed the risks of that facility.
    To date, the GAO, the Department of Energy, the Inspector 
General and Secretary Moniz himself have stated that 
reorganization is paramount in order to address future concerns 
at the Department of Energy. I will tell you as a physician 
that in order to prescribe the right medicine, you need to 
correctly diagnose the problem, so with that in mind, I am 
looking forward to the testimony of our witnesses today, and 
thank you, Mr. Chairman. I will yield back.
    Mr. Murphy. The gentleman yields back. Now to the ranking 
member of the full committee, Mr. Waxman of California, for 5 
minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you Mr. Chairman. I appreciate you 
holding this hearing on management and performance at the 
Department of Energy.
    Secretary Moniz has gotten off to a very good start at DOE, 
and I am pleased with the extent to which he has moved quickly 
to make positive changes since his confirmation. I think he has 
a good vision for the agency.
    The energy subject at the top of my priority list is 
climate change. Secretary Moniz understands the challenges 
posed by rising levels of carbon pollution. He will play a key 
role in the implementation of the President's National Climate 
Action Plan. His efforts to identify the threats our energy 
sector faces due to climate change and to improve energy 
efficiency are important.
    I am also impressed at the quick action he has taken to 
address the subject of this hearing: longstanding DOE problems 
with cost management, environmental compliance and physical 
security at the Nation's nuclear complex. These are not new 
problems at DOE. The agency is the largest civilian contractor 
in the Federal Government. For more than 20 years, dating to 
the first President Bush, GAO has placed DOE contract 
management on its high-risk list.
    As one of his first acts, Secretary Moniz announced a 
reorganization that will create a new Under Secretary for 
Management and Performance. The President has nominated Beth 
Robinson, currently NASA's Chief Financial Officer, to fill the 
position. This restructuring will put one official in charge of 
strengthening environmental cleanup, contracting oversight, 
human capital and other important functions. I am interested in 
learning today about how this reorganization will strengthen 
lines of authority, program oversight, and internal 
coordination. I appreciate that Deputy Secretary Poneman is 
here today to discuss these changes and to explain to us how 
this new focus will represent an improvement over previous 
agency efforts. I also appreciate that the DOE Inspector 
General and Mr. Trimble from the Government Accountability 
Office are here to provide their views on these changes.
    Mr. Chairman, I hope this is not the last hearing we hold 
on this subject. This committee has held multiple hearings on 
the subject of DOE management. Most recently, we held a hearing 
in March on the alarming incident involving an 83-year-old 
breaking into the highly secure DOE Y-12 facility in Tennessee. 
One of the conclusions from that hearing was that NNSA and DOE 
and their contractors need more oversight: from within their 
own agencies, from Congress, and from independent entities like 
GAO and the Inspector General.
    The organizational changes announced by Secretary Moniz are 
promising. We know that the longstanding problems at DOE will 
not be easy to solve. But the Department of Energy's vital 
missions to develop new clean energy technologies and protect 
our nuclear stockpile are too important to the Nation for us to 
ignore.
    I look forward to today's hearing and appreciate this 
committee's efforts to make sure that DOE's project management 
and mission performance improvements are on track.
    I want to apologize in advance to the witnesses. I think 
every subcommittee on this committee is having meetings 
simultaneously this morning, and so I am telling each one when 
I am not present I am at the other one, and then I am going to 
go fishing. No, no, no, I will be at one hearing or the other, 
and I will try to get back here, Mr. Chairman.
    Mr. Murphy. We thank the ranking member for being 
omnipresent as well, and the same goes for the chairman of the 
full committee, Mr. Upton, who will probably be joining us 
here, but thank you.
    I now want to introduce our witnesses for today. I 
mentioned them before but let me give you a little more 
background. The first is the Honorable Daniel Poneman, the 
Deputy Secretary for the U.S. Department of Energy, and as 
Deputy Secretary, he also serves as the Chief Operating Officer 
of the Department. Nominated to this position by the President 
on April 20, 2009, and confirmed by the Senate later, and in 
addition between April and May of 2013 was the Acting Secretary 
of Energy. Good to have you here, sir.
    Our second witness is the Honorable Gregory Friedman, the 
Inspector General for the U.S. Department of Energy. In this 
capacity, he is responsible for nationwide independent program 
of audits, inspections and law enforcement efforts related to 
the Department of Energy's programs and operations. In addition 
to these responsibilities, Mr. Friedman also serves as a member 
of the Recovery Act Accountability and Transparency Board and 
the Government Accountability and Transparency Board.
    Our third witness, David Trimble, serves as Director in the 
U.S. Government Accountability Office Natural Resources and 
Environmental Group. In this role, he provides leadership and 
oversight on U.S. and international nuclear security and 
cleanup issues including a number of projects conducted for 
this subcommittee.
    I will now swear in the witnesses. As you are aware, this 
committee is holding an investigative hearing, and when doing 
so has the practice of taking testimony under oath. Do you have 
any objections to testifying under oath? Thank you. The chair 
then advises you that under the rules of the House and the 
rules of the committee, you are entitled to be advised by 
counsel. Do you desire to be advised by counsel during the 
hearing today? None of the witnesses wishes to be advised by 
counsel, so in that case, if you would please rise and raise 
your right hand, I will swear you in.
    [Witnesses sworn.]
    Mr. Murphy. You are now under oath and subject to the 
penalties set forth in Title XVIII, section 1001 of the United 
States Code. You may now each give a 5-minute summary of your 
written statement. We will begin with Mr. Poneman.

 STATEMENTS OF DANIEL B. PONEMAN, DEPUTY SECRETARY, DEPARTMENT 
 OF ENERGY; GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT 
 OF ENERGY; AND DAVID C. TRIMBLE, DIRECTOR, NATURAL RESOURCES 
     AND ENVIRONMENT TEAM, GOVERNMENT ACCOUNTABILITY OFFICE

                 STATEMENT OF DANIEL B. PONEMAN

    Mr. Poneman. Thank you, Chairman Murphy, Ranking Member 
Castor and distinguished members of this subcommittee. I want 
to thank you all for the opportunity to discuss with you today 
the Department of Energy's ongoing efforts to improve its 
management and performance. In the past month, the President 
has given two major policy speeches, and the work that we do at 
the Department of Energy lies at the heart of both of these 
issues.
    On June 19th in Berlin, the President echoed the nuclear 
security vision he first laid out in his 2009 Prague speech, 
calling on the global community to secure vulnerable materials, 
combat nuclear terrorism and proliferation, and build a 
sustainable and secure nuclear energy industry. As long as 
nuclear weapons exist, it is also this Department's 
responsibility to ensure that the U.S. nuclear stockpile 
remains safe, secure, and effective.
    Less than a week later at Georgetown University, the 
President laid out a commonsense plan to reduce the effects of 
climate change by cutting dangerous carbon pollution, 
increasing the production of clean energy, and doubling down on 
energy efficiency. As the President said, and I am quoting, ``A 
low-carbon, clean energy economy can be an engine of growth for 
decades to come.'' By taking action to reduce carbon pollution, 
the United States can spark new jobs and industries building 
cleaner and more efficient energy technologies.
    These presidential priorities demand the best from us in 
terms of our performance, and so last week Secretary Moniz and 
I announced a reorganization that will better focus our efforts 
on all four mission areas of the Department: nuclear security, 
solving the Nation's energy challenges, advancing fundamental 
science, and environmental stewardship. For the Department to 
carry out our critical work in these areas, the Secretary has 
made clear that we must renew our focus on improving our 
management and performance in addressing the challenges that 
the Department has faced for its entire history. And in doing 
so, we will follow the President's direction to us earlier this 
month when he instructed his Cabinet to develop an aggressive 
management agenda for his second term, and I am quoting the 
President again, ``that delivers a smarter, more innovative and 
more accountable government for its citizens.''
    The first major component of the reorganization expands the 
portfolio of the statutory Under Secretary for Science to 
include the energy technology portfolio, establishing the 
Office of the Under Secretary for Science and energy. 
Successful innovation for implementing the President's all-of-
the-above energy strategy requires the ability closely to 
integrate basic science, applied research and technology 
demonstration. This is especially important in light of the 
urgency of addressing climate change and the need rapidly to 
develop technologies to materially alter the trajectory of 
greenhouse gas pollution.
    The second major component of the reorganization 
consolidates the primary mission and operational support 
functions of the Department within the Offices of the Under 
Secretary for Management and Performance and also includes the 
Office of Environmental Management and the Office of Legacy 
Management as part of its structure and functions. Moving the 
Office of Environmental Management under the purview of the 
Under Secretary for Management and Performance brings the 
Department's strongest project management capabilities resident 
within the Office of Acquisition and Project Management 
directly to bear on one of the Department's most vexing yet 
vital challenges: cleaning up the nuclear waste that is a 
legacy byproduct of the Cold War.
    In addition, transferring the Offices of Environmental 
Management and Legacy Management from the Under Secretary for 
Nuclear Security will allow this Under Secretary to focus 
exclusively on the NNSA's forward-looking missions while 
entrusting the environmental management mission to an 
organization devoted to solving management challenges. Aside 
from increasing the management resources available to oversee 
large projects, consolidating mission-support functions in the 
Office of the Under Secretary for Management and Performance 
will place a senior policy official dedicated to the task of 
management improvement on a full-time basis. The consolidation 
of these mission-support functions such as the Office of 
Management and Administration and the Office of the Chief Human 
Capital Officer will clarify and strengthen the lines of 
authority and accountability of these functions. The goal will 
be to institute enterprise-wide solutions to common challenges 
faced by program officers across the complex such as 
information management, acquisition and human resources. Within 
the Office of Management and Performance, we will also 
establish a new organizational unit: the National Laboratory 
Operations Board. It will have responsibility for oversight of 
administrative, mission support and infrastructure management 
of the National Laboratory System.
    The third component increases coordination across the 
Department for a number of important cross-cutting policy 
issues that affect a number of programs across the Department. 
The Secretary has established the following secretarial 
councils: an Energy Council, a National Laboratory Policy 
Council, a Revised Credit Review Board including the 
establishment of a new Risk Committee, and the Cybersecurity 
Council.
    I would like to bring to your attention two final areas in 
which we are seeking to improve coordination between program 
offices: policy formation and physical security management. 
First, we are examining opportunity for consolidating and 
upgrading the policy analysis functions of the Department. This 
capability will be needed to support the government-wide 
Quadrennial Energy Review the President called for in his June 
25th climate speech at Georgetown University. The core of our 
new systems analysis capability will be formed from the 
existing Office of Policy and International Affairs. We will 
also examine opportunities to draw from the policy expertise of 
the program offices.
    A second area under careful study is security management. I 
have previously testified before this subcommittee on the 
Department's management of security and improvements we have 
made in the last year's Y-12 incident but this a matter of such 
serious that we must always continue our efforts to improve our 
performance, and I very much take account of the wise words of 
the chairman and ranking member here on that subject this 
morning. This includes thorough examination of broad issues of 
governance as they relate to the security of our category I 
nuclear materials. In recent months, we have been engaged in a 
thorough review of our security management, not just within 
NNSA or at the labs but enterprise-wide including assignment of 
authority and responsibility, contracting, performance 
measurement and accountability.
    Finally, the Department under the leadership of Secretary 
Moniz has made management improvement a top priority, and we 
are aggressively pursuing a broad agenda of initiatives. The 
Secretary has challenged us to further elevate our performance, 
and I appreciate the opportunity to appear before this 
subcommittee to discuss our efforts to do so and of course, I 
would be pleased to answer any questions from subcommittee 
members. Thank you.
    [The prepared statement of Mr. Poneman follows:]


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    Mr. Murphy. Thank you.
    Mr. Friedman for 5 minutes.

                STATEMENT OF GREGORY H. FRIEDMAN

    Mr. Friedman. Mr. Chairman, Ms. Castor, members of the 
subcommittee, I appreciate the opportunity to testify at your 
request on the major challenges facing the Department of 
Energy.
    The Department is, as has been described, responsible for 
executing some of the Nation's most complex and technologically 
advanced missions. The Office of Inspector General provides 
independent oversight of the Department's operations to promote 
economy and efficiency and to detect and prevent fraud, waste 
and abuse.
    My office annually identifies what it considers to be the 
most significant management challenges facing the Department. 
For 2013, this list includes operational efficiency and cost 
savings, contract and financial assistance award management, 
cybersecurity, energy supply, environmental cleanup, human 
capital management, nuclear waste disposal, safeguards and 
security, and stockpile stewardship. Because of their 
complexity, these challenges are not amenable to immediate 
resolution. Therefore, they must be addressed through a 
sustained effort over time.
    In 2012 and 2013, due to what appeared to us to be obvious 
looming budget constraints, we identified operational 
efficiency and cost savings as the Department's preeminent 
management challenge. In doing so, we presented the Department 
with five suggestions to optimize operations. These include 
applying the Quadrennial Technology Review strategic planning 
concept to the Department's entire science and technology 
portfolio, eliminating costly duplicative National Nuclear 
Security Administration functions, evaluating, consolidating 
and/or rightsizing the Department's laboratory and technology 
complex, reprioritizing the Department's environmental remedial 
efforts with the goal of funding work on a risk basis, and 
realigning the current structure of the Department's physical 
security apparatus. These suggestions provide only a starting 
point for further discussion and examination. They represent 
approaches that we readily acknowledge are difficult to 
implement, highly controversial and politically challenging.
    Virtually all of our work intersects with one or more of 
the management challenges that I alluded to earlier. In my 
written statement, I have summarized three recent reports that 
are reflective of this relationship. These include first 
contract management, project management and quality assurance 
concerns with the Department's contractor-managed construction 
of the Waste Treatment and Immobilization Plant--the WTP--in 
Hanford, Washington. The current cost estimate for the WTP 
project is over $12 billion, or three times larger than its 
original budget. Second, issues relating to the implementation 
and effectiveness of contractor assurance systems by NNSA and 
its contractors, and finally, efforts by the Department to 
reduce international travel as a means of reducing Federal 
expenditures.
    In its invitation letter, the subcommittee expressed 
specific interest in the status of project management at the 
Department. Your interest reflects a concern that we share and 
one that is clearly of prime importance to the Department's 
senior leaders. The Department currently has several major 
projects including the WTP that are significantly over budget 
and face considerable delays. As I have testified previously, 
there are several common threads central to these and related 
contract and project management problems. Improvements are 
needed to ensure that project scopes and supporting cost 
estimates are realistic, manageable, recognizing the technical 
challenges facing many Department efforts. The change control 
management is adequate and project baselines are updated on a 
real-time basis to maintain their effectiveness as a primary 
tool. Contract terms are kept current to track with project 
events, contractor performances measured against established 
metrics including realistic and reliable cost estimates, 
Federal staffing is sufficient both in terms of size and 
expertise to provide effective contract and project oversight, 
and finally, the project have focused, empowered and consistent 
Federal project manager leadership throughout their lifecycle.
    As Deputy Secretary Poneman has discussed, Secretary Moniz 
recently unveiled a new structure for the Department, which is 
designed to focus on key programmatic priorities and agency 
performance and management. We are hopeful that the new 
initiatives, as widespread as they are, as has been described 
the Deputy Secretary, will help to address the Department's 
management challenges. We look forward to working with 
Secretary Moniz, Deputy Secretary Poneman, program officials 
and the Congress to enhance departmental operations and in so 
doing to advance the interest of the U.S. taxpayers.
    Mr. Chairman and members of the subcommittee, this 
concludes my statement. I would be pleased to answer any 
questions that you may have.
    [The prepared statement of Mr. Friedman follows:]


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    Mr. Murphy. Thank you. I apologize. I had to step out of 
the room for a second.
    Mr. Trimble.

                 STATEMENT OF DAVID C. TRIMBLE

    Mr. Trimble. Chairman Murphy, Ranking Member Castor and 
members of the subcommittee, my testimony today discusses our 
observations on the management challenges facing DOE. My 
observations are drawn from our past work, which has 
highlighted the challenges DOE faces in project and contract 
management, security and safety, and producing reliable 
enterprise-wide management information.
    Regarding project and contract management, DOE has made 
progress in managing the cost and schedule of non-major 
projects--those costing less than $750 million--and in 
recognition of this progress, we narrowed the focus of our 
high-risk designation to major contracts and projects.
    Major projects, however, continue to pose a challenge for 
EM and NNSA. All of the ongoing major projects continue to 
experience significant cost increases and schedule delays. UPF 
costs have increased seven fold, up to $6.5 billion, for a 
project with a reduced scope and 11 years after the schedule. 
MOX costs have increased five fold, up to $7.7 billion, with 15 
years added to the schedule. Notably, since 2010 alone, cost 
increases for MOX have totaled $2.8 billion for a project 
originally estimated to cost $1.4 billion. WTP has tripled in 
cost to over $12 billion with a decade added to its schedule. 
Moreover, we found that DOE prematurely rewarded the contractor 
for resolving technical issues and completing work. We are 
currently assessing DOE cost-estimating policies and practices 
and plan to issue a report later this year.
    Regarding security, over a decade after NNSA was created to 
address security issues, the Y-12 security incident has raised 
concern that NNSA has still not embraced security as an 
essential element of its missions. Multiple investigations into 
the security breach identified significant deficiencies in NNSA 
security organization, oversight and culture. DOE and NNSA have 
taken a number of actions including repairing security 
equipment, reassigning key security personnel, and firing the 
Y-12 protective force contractor. DOE and NNSA's leadership 
have also committed to additional actions such as revamping the 
security oversight model.
    DOE has a long history of security breakdowns and an 
equally long history of instituting responses and remedies to 
fix these problems. In recent testimony, the leadership of the 
NNSA security task force examining the Y-12 incident identified 
problems with NSSA's Federal security organization. Notably, in 
2003, we reported on these very same problems, problems which 
have persisted or resurfaced, notwithstanding numerous DOE 
initiatives to fix or address them. The key challenge going 
forward will not be how to implement security improvements but 
how to sustain them.
    Regarding safety, in September 2012, we testified before 
this subcommittee noting that DOE's recent safety reforms may 
have actually weakened independent oversight. Notably, since 
this testimony, reports by DOE have continued to identify 
safety concerns at Pantex and other DOE sites.
    In regard to important enterprise-level management 
information such as budgetary and cost data, in June 2010 we 
examined NNSA's program to operate and maintain weapons 
facilities and infrastructure and found that NNSA could not 
accurately identify the total costs for this congressionally 
directed program, and NNSA's budget justification understated 
these costs by over $500 million.
    In July 2012, we found deficiencies in NNSA's validation of 
budget requests for its programs and concluded that these 
weaknesses impacted the credibility and reliability of those 
budget estimates. According to NNSA's officials, the agency's 
experience and trust in its contractors minimized the need for 
such review. Without accurate cost and budget data, DOE will 
continue to be surprised by cost and schedule problems in its 
projects and programs, and Congress will not have the 
information it needs to oversee the billions provided yearly in 
appropriations.
    In closing, let me observe that the Department's most 
significant mission accomplishments such as keeping the 
stockpile safe and reliable, successfully closing nuclear 
facilities such as the old Rocky Flats plant, consolidating 
nuclear material, and energy and science breakthroughs are too 
often overshadowed by repeated project cost overruns, schedule 
delays, glaring security incidents and safety mishaps. Until 
these key management issues are addressed, such problems will 
continue to cast a shadow over DOE's mission accomplishments. A 
key step in addressing these longstanding issues will be for 
DOE to embrace sound project management, credible security and 
security programs, and reliable management information systems 
as key elements of the Department's mission instead of 
impediments to this mission.
    Thank you. I would be happy to answer any questions.
    [The prepared statement of Mr. Trimble follows:]


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    Mr. Murphy. Thank you. I will begin questioning here and 
recognize myself for 5 minutes.
    So Mr. Poneman, let me understand your role here. You are 
Deputy Secretary and therefore the Chief Operating Officer of 
the Department, and you had a direct role in managing the 
program execution and the mission-support functions of the 
agency and directly responsible to the Secretary for managing 
and implementing these organizational challenges, and you have 
been doing it for about 4 years. So lots of firsthand 
experience. So would you explain why the Under Secretary for 
Performance and Management will help improve project management 
in the Department overall?
    Mr. Poneman. Yes, sir. I am very excited about this 
opportunity precisely because, as you noted, I have been the 
chief operating officer, and all of the burden you, yourself, 
and ranking members have identified as well as those we have 
just heard from the other witnesses show you what we are up 
against. We had frankly improvised an Associate Deputy 
Secretary in the first term to try to enhance our capacity to 
tackle these problems, recognizing the full weight of the 
problems and, frankly, having the leadership of Secretary Moniz 
from his earlier experience at the Department as Under 
Secretary, including his more recent experience writing very 
thoughtfully about how to organize the Department better to 
tackle these challenges as a member of the President's Council 
of Advisors on Science and Technology.
    It was clear that the opportunity presented by taking one 
of the available Under Secretary positions in the Department 
and having that individual, an individual of authority and in 
whom the Secretary and myself could propose confidence to work 
full time on these problems was absolutely critical to getting 
our arms around this very daunting agenda.
    Mr. Murphy. I appreciate the level of what you are facing 
here too, and so how would we be able to measure progress, and 
are you setting some performance baselines?
    Mr. Poneman. So it would depend on the precise mission 
area. There are some, Mr. Chairman, across-the-board kinds of 
metrics that we can apply, and let me just start from the 
outset and responding also to the ranking member's comment, 
this aspect of metrics and cost estimation and measurement of 
performance is absolutely critical to our successful. If you 
don't measure it, you don't manage it.
    But let me just take the largest example, these very large, 
complex capital projects. We have to have a system of 
evaluation to measure continuously whether we are on or off 
budget, whether we are on or off schedule, and, at the same 
time, to measure whether we are on or off meeting the spec of 
the project itself. That is to say, it is not enough to have a 
project being on schedule and on budget if it doesn't do the 
job, and Mr. Trimble alluded to this peripherally in his 
comments. So we have to make sure that we take the orders that 
are in place in terms of cost estimation under Order 413-B and 
actually measure it and have them upload it into our business 
management systems that we put into our quarterly reviews of 
the business quarterly reviewed by the Government Performance 
and Requirements Act, and that is a start on how we are going 
to measure our performance.
    Mr. Murphy. Thank you. Two other quick questions I want to 
get into in terms of lessons learned and remanaging things. 
Other the past 3 years, this committee has dealt with a number 
of cases--Solyndra, Fiscar, A123--where the loan or grant 
assessments just turned out to be plain wrong, and we have had 
a number of people before this committee talking about this. 
You had a policy interest to push these out, but the data, as 
it turns out, just didn't add up for this. So how will the 
management changes ensure that decisions are made based on 
sound analysis moving forward?
    Mr. Poneman. Well, first, Mr. Chairman, let me note that 
the portfolio as a whole, which has been very thoroughly 
reviewed by many including by the late Mr. Herb Allison, is 
actually performing quite well. We have the largest wind farm 
in the world operating quite well, the largest photovoltaic 
plant operating quite well. Tesla has repaid its loan 9 years 
early. We do the best due diligence we can. These programs are 
intended to promote innovation, and unfortunately, not every 
case works out. That having been said, we have done a number of 
things recommended by Mr. Allison and we have brought new 
leadership and new staffing inside the Loan Program Office to 
make sure that, again, we have a very strong ability to monitor 
the existing portfolio, that we have a new risk officer set up 
to look precisely at the questions of risk that you are 
addressing, and that we have a much more open and transparent 
set of data flowing up from the program office to the Secretary 
and the Deputy Secretary.
    Mr. Murphy. I appreciate that. It is something we will be 
watching. A lot of data was there before. We just thought a lot 
of it was also ignored. Multiple departments are saying the 
Solyndra loan wasn't a good idea. So it isn't just a matter of 
having the data but making sure you have a system in place to 
have honest reassessments of that.
    One other quick question in my time. In your testimony you 
said that President laid out a commonsense plan to reduce the 
effects of climate change by cutting dangerous carbon 
pollution, as you put it, increasing the production of clean 
energy and doubling down on energy efficiency. I noticed the 
Department released a new rule for microwave oven efficiencies 
and included a calculation for the social cost of carbon, and I 
would like to know if the agency considered doing a formal 
notice and comment to the microwave rule before using this 
figure. Did anyone in your office participate in any 
discussions about this social cost of carbon before using it in 
the DOE microwave rule, and can you please submit to us emails 
and documents to help us understand why that was done.
    Mr. Poneman. Mr. Chairman, I was present for some 
discussion of social costs of carbon. I was not--I would have 
to get back to you with details on how it related to that 
particular rule.
    Mr. Murphy. That is something this committee is going to 
want to review in an open and scientific way.
    Mr. Poneman. We would be very happy to supply that.
    Mr. Murphy. I see my time is expired. Now we will go to Ms. 
Castor for 5 minutes.
    Ms. Castor. Thank you, Chairman Murphy.
    It is very important and a positive sign that the 
Department of Energy has taken action where with the 
reorganization to address the persistent flaws in management 
and oversight of the Department of Energy. We have seen that in 
many cases there is duplicative activity and unnecessary 
expenditures because of lack of coordination effective 
oversight of contractors, and DOE has been facing these 
problems for years, and your predecessors in multiple 
Administrations from both political parties have made little 
headway. So is this new Under Secretary of Management and 
Performance a sign that the Department of Energy has learned 
the lessons of the past?
    Mr. Poneman. Congresswoman, we are always seeking to learn 
lessons from the past. I personally am learning lessons every 
single day, and our management principles require us to do 
that.
    Ms. Castor. What makes it different this time after 
decades?
    Mr. Poneman. Well, if I may suggest a couple of things, 
Congresswoman. Number one, both Secretary Moniz and, as the 
chairman alluded, I have been working on this for some period 
of time so we understand from having witnessed firsthand some 
of the very problems that you all have describe, what has 
caused some of those problems. We believe that the structure 
the Secretary has designed here is well suited to given us the 
capacity to do better in achieving these results, and I would 
actually echo Mr. Trimble's comments. The test here isn't, can 
we impose a new bureaucrat structure on the building. The 
question, can we sustain it? The results, in our judgment, will 
be the proof in the pudding. If we can in this reorganization, 
which we think suits the problems well, start to deliver those 
kinds of results this committee and our Department want to see, 
that will take root in the Department and the people, the 
professionals will----
    Ms. Castor. Give us a specific example, something the IG or 
GAO has highlighted that you think or you can show early signs 
in progress.
    Mr. Poneman. I will give you one very specific example. 
Many of you have alluded to the fact that since 1990 we have 
been on a high-risk list. The GAO has given us five specific 
taskings on what it takes to get out from under the high-risk 
list. The Office of Science got out in 2009. I will tell you, 
Congresswoman, we were very gratified that the projects up to 
$750 million came out from under? Why did that happen? Because 
they at GAO said what you need to do is break down very big 
projects to chunkable sizes that can be managed more 
effectively. That is simply one example of many I could cite of 
where we have taken the advice from the GAO, applied it and 
actually obtained a much better result in terms of projects 
coming in on budget and on time.
    Ms. Castor. And Mr. Friedman, I know you agree that the 
contractor workforce needs more vigorous oversight at the 
Department of Energy, correct?
    Mr. Friedman. I do.
    Ms. Castor. You have stated that again and again. What 
recommendations--highlight your most important recommendations 
from the IG's office to ensure that DOE contractors are meeting 
their performance standards.
    Mr. Friedman. Well, I think the Deputy Secretary referred 
to it and others have as well, and that is the question of 
sustainability. I think it is an excellent point. I have been 
around long enough, Ms. Castor, unfortunately in a sense to 
have seen the Department through valleys and mountaintops for 
years, and invariably a fix is imposed or attempted but it 
loses power after a period of time. We get lethargic, or the 
Department gets lethargic. So sustainability, it seems to me, 
in that process is key. So if the reforms the Deputy Secretary 
has described, if they address the problem, if we sustain them 
going forward, we really will have moved the Department 
forward.
    Ms. Castor. In your testimony, you noted that contractor 
weaknesses were not effectively communicated to senior 
management officials. Do you believe that the new Under 
Secretary for Management and Performance could help strengthen 
the lines of communication?
    Mr. Friedman. I hope that is the case, and it is more than 
just the mere establishment of the Under Secretary's position, 
which I think is an interesting concept and I think has great 
possibilities. It has to permeate the entire organization, that 
people at all levels in the field, in headquarters feel that 
they can surface problems to the Department's leadership in a 
way that, number one, of course, they won't feel they will be 
subjected to retaliation, but more importantly, that they can 
see meaningful steps taken in response to that information to 
try to address the underlying root causes of the problems.
    Ms. Castor. Thank you.
    Mr. Trimble, GAO has reported that DOE's contractor 
assurance systems are producing inconsistent results across the 
agency. Can you elaborate on this finding, and what are the 
ramifications of these inconsistencies and how can DOE improve?
    Mr. Trimble. Well, I think the cost overruns and schedule 
delays are indicative of that. I think what we have seen in our 
ongoing work looking at MOX and UPF is, some concerns where 
there are--the information system being reported to the 
government, there are red lights on the dashboard indicating 
problems, and the key question we are getting at is, what is 
being done when those lights go off and are people recognizing 
them and are they taking action and is the action effective. 
And so again, it is sort of the proof-in-the-pudding argument. 
It is, you can establish systems but then do you have processes 
to act on the information you get and does the organization 
support that. There is a parallel here between, I think, 
between the problems we have seen on the security side where 
the culture has been highlighted where you can have rules, but 
if the organization and culture is not to abide by the rules, 
things don't happen. There is that same challenge here on cost 
and schedule management. You can have processes and 
organizations but everyone has to walk the talk for it to work, 
and that is sort of where the, you know, again a part of the 
challenge facing the Department is going to lie.
    Mr. Murphy. Thank you. The gentlelady's time is expired. I 
will recognize the vice chairman, Dr. Burgess, for 5 minutes.
    Mr. Burgess. Mr. Trimble and Inspector Friedman, let us 
follow up on that about walking the talk a little bit. How do 
you know, Inspector Friedman, that stuff is going to get 
reported in the management plan you are proposing that now 
there is greater flexibility and freedom for people to report 
problems that are identified?
    Mr. Friedman. Dr. Burgess, I am not instituting--I don't 
manage the Department obviously, and I am not instituting the 
new process; the Deputy Secretary and the Secretary are. But I 
think I understand your question. I think the test will be if 
the very core issues that we are talking about here and the 
reason that you are holding--one of the reasons that you are 
holding this hearing, if those issues are addressed through an 
open line of communication and we can demonstrate that the 
communications are working, we reduce the number of complaints 
we get from employees who say that their concerns are not being 
addressed. We can gauge that quite effectively as to whether 
the process is working.
    Mr. Burgess. And so from that, do you have confidence that 
the process is working?
    Mr. Friedman. At this point, I don't have that confidence. 
If we reconvene at some point in the future, if we have time to 
see the new system in place and take a look at it and evaluate 
it, I will be more than happy to come back and give you my 
review.
    Mr. Burgess. Well, I suspect we will. You know, you have 
been kind to be with us every times and I suspect that we will 
have an opportunity to talk.
    Secretary Poneman, can you address that?
    Mr. Poneman. Yes, sir. It is a work in progress. We 
actually measure it quite regularly. We have self-evaluations. 
We have third parties come in, and they evaluate. I personally 
have spent hours and hours speaking to 4,000 people out at 
Hanford making sure people understand there can be no 
retaliation for people coming forward expressing their 
concerns. We had an--I put out quarterly a notice saying anyone 
who has a differing professional opinion can be heard, and we 
actually had the experience of a differing professional opinion 
be sustained as we reviewed it. There is never grounds for 
complacency. As others have said, it is a cultural issue. We 
have to keep working at it. We will never be perfect but we are 
trying to improve it at a cultural level, at an institutional 
level, and we are trying to measure it on a periodic basis. You 
made the very good point in your opening statement, we have to 
measure these things or we are not going to know if we are 
doing better.
    Mr. Burgess. Yes. A chance to measure is a chance to cure.
    Mr. Poneman. Your point about the diagnosis is critical, 
by.
    Mr. Burgess. Well, just as far as developing that culture 
of accountability within the Department, how do you feel that 
that is going? I don't get the impression from Mr. Trimble that 
is quite where it needs to be but where do you think?
    Mr. Poneman. I think, Congressman, there too it is a work 
in process. Actually, the sunshine of some of the things the 
President has required in terms of disclosure of our results on 
the Internet I think is a very powerful tool. As has been noted 
by many members of this committee, much of work is performed by 
contractors. They are indeed sensitive to how their work is 
evaluated and how that is disclosed. Again, I think we have 
improved.
    One critical thing I would like to note, Congressman, is, 
we have made it a policy of the Department to align the 
taxpayer incentives and interest with those of the contractors 
so we cannot get into a situation in which a contractor can do 
well and the taxpayer do poorly.
    Mr. Burgess. Let me ask you a question about that, because 
obviously there is a lapse. They involve scientists, and you 
want your scientists to do your best work, and how do you 
ensure that that is deliverable for the President and the 
Congress and the taxpayer does not get in the way of delivering 
on the scientific product required?
    Mr. Poneman. You have just put your finger on an absolutely 
critical factor. People sometimes lose sight of the fact that 
these labs have produced the most awesome intellectual property 
in history beginning with the weapon that won World War II. The 
last thing we want to do is to stifle that creativity. So what 
we need to do is give these people the tools and the authority 
to get their work done, but we have to have in exchange 
transparency into what they are doing because we are the owners 
on behalf of the taxpayer to have the transparency to hold them 
accountable to the results that we expect from them.
    Mr. Burgess. And since you brought up Los Alamos, I took a 
visit out there in 2005. It was a long time ago. And their 
security detail, they apparently have been tested and found 
wanting at some point in the past. They were fairly sensitive 
about it and demonstrated that sensitivity to me with what they 
were able to do, which is why we had the hearing on Y-12, I 
didn't understand how those people could be in the audience 
that day. I thought they should be interred in someplace 
because of the response of the security team when you wander 
into the kill zone. You don't ask questions; you take them out. 
So what am I missing on that?
    Mr. Poneman. Congressman, you are not missing a thing. We 
discussed this before. That was an unforgivable breach. The 
cameras were out. The guards were not responding properly. We 
have taken all of the immediate steps that we could including 
aligning the security force subcontract under the management 
and operations contract including removing the responsible 
individuals, but we are continuing, as I said earlier, to look 
at the broader systemic changes that we need to do to make 
sure, per Mr. Trimble, that these changes that we have started 
are sustained.
    Mr. Burgess. Would you give advice to the protesting public 
to not try this again?
    Mr. Poneman. Yes, I surely would, because what was a very 
terrible, terrible episode could have been tragic with loss-of-
life consequences.
    Mr. Burgess. Yes, it could. Thank you, Mr. Chairman. I will 
yield back.
    Mr. Murphy. Thank you. Mr. Lujan for 5 minutes.
    Mr. Lujan. Mr. Chairman, thank you very much, and thank you 
and to the ranking member for calling this important hearing.
    Mr. Poneman, could you help me understand how the 
reorganization is going to help with management of the national 
labs? There are a number of new entities concerning the labs 
that have different responsibilities and reporting chains. 
These include the National Lab Operations Board, which reports 
to the new Under Secretary of Management and Performance, the 
National Lab Policy Council reporting to the Secretary, in 
addition to the Under Secretary for Science and Energy has 
primary responsibility for many labs while the Under Secretary 
for Nuclear Security has responsibility for the rest. Is this 
going to result in more inspections and transactional oversight 
at the labs or less but more effective inspections and 
oversight, as a number of experts have called for?
    Mr. Poneman. Congressman, I don't think we will--the metric 
won't be number of inspections per se but rather the results 
which will endeavor to measure, but let me try to make sense of 
what sounded a bit intensive in terms of the kind of oversight 
from your comment.
    The National Laboratory Council is absolutely critical to 
the point Dr. Burgess just raised. We need to make sure that we 
get together with all the lab directors, the fountainhead of 
our innovation, and think through what are we trying to do as a 
Nation in support of the President. The very first meeting that 
Secretary Moniz had out of town in a rare time we traveled 
together was to Oak Ridge to meet with all of them. That is a 
big thing, what we are trying to do. The lab operations board 
that will report to this new Under Secretary will deal with all 
of those issues like real estate and IT purchases and 
cybersecurity that will enable the smart scientists to do the 
innovative work. So actually, it is a much more operational 
hands-on thing. I don't think you are going to find it a 
cluttered system in practice, but we would be very happy to 
stay in touch with you as we roll it forward.
    Mr. Lujan. That is what I am hoping, that we don't have a 
cluttered system, that there is not just layers and layers that 
are put on top of each other but that we do follow many of the 
suggestions that have been put forth. That way is effective, 
that the time that is used to be able to go in and look is 
effective and we are able to identify things. Do you foresee 
any structural changes to NNSA besides moving Environmental 
Management from NNSA to the Under Secretary for Management and 
Performance?
    Mr. Poneman. Congressman, I will make two comments. Number 
one, as I have alluded to, we have received further thoughtful 
input from a number of wise people including some of whom I 
think have visited with this committee on structural changes to 
enhance our security, our physical security, especially for 
category I nuclear materials, and we are actually, even as we 
speak, having people look deeply at that so Secretary Moniz can 
make some decisions in the near term. That said, as you well 
know, there is a congressional mandated panel that has been 
empowered to look at these governance issues, and as they 
continue their work, we will of course be in touch with them 
and look forward to hearing what their results are and seeing 
what further actions, if any, are required.
    Mr. Lujan. Under the reorganization, the technology 
transfer coordinator would be put within the Office of the 
Under Secretary for Science and Energy. While this Under 
Secretary does have responsibility for most of the labs and 
basic and applied science programs at the Department, it does 
not include the NNSA laboratories. What will be done to ensure 
that tech transfer coordinator will be able to coordinate 
technology transfer activities across the entire Department, 
which spans two Under Secretaries and will not prevent the NNSA 
laboratories from participating?
    Mr. Poneman. Congressman, the entire thrust of the 
reorganization has been to put stronger leadership at the top, 
precisely so that we can enhance our ability to catch these 
cross-cutting issues. I can tell you because we have already 
been doing it, this is the practice that we have already 
engaged in, and one example which would apply equally when we 
get the new tech transfer coordinator is cybersecurity. We have 
cybersecurity all across all portfolios of the Department, and 
we have now constituted the Cybersecurity Council to make sure 
that we get that kind of cross cut, that we don't miss a bet in 
terms of getting the tech transfer. Some of the innovation out 
of the national labs could be very, very important in the 
science and energy portfolio.
    Mr. Lujan. I am certainly hopeful that there won't be more 
burdensome restrictions put on the NNSA laboratories versus the 
other labs when it comes to tech transfer, so I am encouraged 
by that, Mr. Poneman.
    Mr. Friedman, there was an incident in which in New Mexico 
you identified a contractor that was overpaid. You brought it 
to the attention, based on a request from NNSA, where minimum 
requirements have to be met by contractors in order for these 
contractors to get paid. Can you talk about that and what we 
can do to prevent that from happening in the future?
    Mr. Friedman. Well, one of the problems we have, Mr. Lujan, 
DOE has an incredible structure of prime contracts and a 
significant subtext of that is the subcontractors and secondary 
and tertiary subcontractors that it has. One of the 
responsibilities of the prime contractors is in fact to make 
sure that the subcontractors are responding appropriately, that 
are paid appropriately, and the taxpayers are treated fairly in 
this process. One of the promising things that we have seen is 
a number of referrals from prime contractors including those in 
New Mexico, if I might, of cases where they believe the 
subcontractors have not acted appropriately in one way or 
other. So we take those cases very seriously, and a lot of our 
work is done with the subcontractors to the prime contractors, 
that is the national labs in the case of New Mexico.
    Mr. Lujan. I appreciate that. And Mr. Chairman, this may be 
an area where the committee as a whole, that we can try to get 
all of the additional information or whatever has not been 
released thus far in regards to this instance and maybe some 
others so that we can see if there is going to be any 
additional information released on this matter or whatever has 
not been public. So I appreciate that, Mr. Chairman, and look 
forward to working with you and the committee on this.
    Thank you again for the responses.
    Mr. Burgess [presiding]. I acknowledge the gentleman's 
comments and now recognize the gentleman from Virginia, Mr. 
Griffith, 5 minutes for questions, please.
    Mr. Griffith. Thank you very much, Mr. Chairman.
    The other chairman asked some questions that raised some 
issues for me that I hadn't really planned on getting into 
today, but I guess this is as good time as any.
    When you talk about trying to, you know, reorganize and 
make things more efficient, are you just rearranging the deck 
chairs or are we actually having some personnel changes? And 
let me tell you what I am referencing in specifics. I have 
always been bothered by the Solyndra situation, and the 
response, as yours was today, is, you know, we try to do what 
we can and our due diligence, etc. And I accept that 
notwithstanding the fact, as the permanent chairman said of 
this subcommittee, but there were warning signs out there. I 
have always been concerned with the subordination issue and the 
fact that to me, in my opinion, it was horrendous legal advice. 
I really don't think it was well done, and I am wondering if 
that department is also being reorganized in any way to try to 
make sure that when Congress says that money is not to be 
subordinated, that that doesn't mean you can do a loan at 11 
and subordinate at 12 because you didn't do it at the time of 
the closing, and that was basically what we heard in that 
investigation. Can you answer that for me?
    Mr. Poneman. Let me offer a couple of comments, 
Congressman. First of all, in terms of your appropriate 
question of the structural changes, we didn't start with this 
reorganization; we started, of course, with the Allison report. 
As you saw, he said the health of the portfolio was strong. 
That said, he had a number of very important practical 
suggestions in terms of transparency, accountability, customer 
service, portfolio management, and many of those have been 
implemented, point one. Point two, that included making sure we 
had very highly capable people in the positions. Point three, a 
lot of those people are very much focused on portfolio 
management, and there is a brand-new leader of the Loan Program 
Office, and finally, in this reorganization, Secretary Moniz 
wants to make sure that the Credit Review Board itself, which 
sits above the Credit Committee, is strengthened so that we 
will have the ability in the normal kind of boardroom fashion 
of doing due diligence on transactions to make sure we bring 
those kinds of disciplines to bear.
    Mr. Griffith. One of my concerns there was, it appeared 
that the legal counsel that was being given was seeing--and 
this is my interpretation, nobody ever said this--saw itself as 
trying to come up with a legal opinion to justify what the 
Department of Energy wanted to do as opposed to protecting the 
American taxpayers, and I would hope that the legal department 
would see as a part of their duty at the very least is to make 
sure that what they are doing is lawful because the laws that 
Congress pass are intended to protect American taxpayers, and 
the decision to subordinate cost $170 million to the American 
taxpayers.
    Mr. Poneman. Congressman, I would have to dig back into the 
details. I would just say my recollection of the legal advice 
received at the time was there was a higher chance of a higher 
recovery from a going concern than from a fire sale, and the 
question at the time that it was presented was whether 
subordination would meet the statutory requirement that the 
Secretary was obliged to seek the maximum recovery for the 
taxpayer. But we can obviously follow up on that.
    Mr. Griffith. And I would like you to follow up on what has 
happened because while I think that may have been the party 
line, so to speak, when you looked it, the rules that were 
required to follow and make that decision, even though 
subordination was not lawful, the following rules in other 
situations to do that were also not followed, so it was just a 
big mess and it cost the taxpayers a lot of money.
    Inspector General, in that same regard, at the time I asked 
some questions that you were unable to answer for me because 
the investigation had not yet been completed. I am not asking 
you to answer questions that you can't and probably use another 
day to get into that, but has that investigation been completed 
on the internal workings at the Department of Energy in regard 
to the subordination issue?
    Mr. Freidman. Mr. Griffith, both the Justice Department and 
our office are prepared to say that there is an active 
investigation, criminal investigation ongoing, and as much as I 
would love to be able to answer your question, and I truly 
would----
    Mr. Griffith. I just wanted to know if it was still 
ongoing. I appreciate that. Thank you very much.
    Back to you, Deputy Secretary. As a part of this, another 
issue has been brought to my attention, and I am not going to 
tell you I am well versed in it, but it does concern me, and 
that relates to the National Nuclear Security Administration 
and the National Security Complex and Pantex plant management 
contracts, and in that process, GAO has said that there was an 
upheld--they upheld a procurement protest. My concern on that 
is, is that apparently, according to a press report that has 
been brought to me, in three instances, the source selection 
authority at the 11th hour changed some of the criteria, and I 
know there are all these big companies jockeying for position, 
but at the 11th hour three matters were changed, and that 
changed who got the contract. On its face, that doesn't smell 
right to me. Are you all looking into that matter and trying to 
make sure those things don't happen?
    Mr. Poneman. Congressman, precisely because if I understand 
which procurement you are talking about, it is still open and 
we are still working on it. I cannot comment on what we are 
doing, but obviously we do everything possible to make sure 
that we hew to all of the requirements, statutory, regulatory 
and ethical, that apply.
    Mr. Griffith. Well, you can understand my concern. When 
rules are changed at the last minute, it is hard for people to 
honestly compete.
    Mr. Burgess. The gentleman's time has expired. We will go 
to the gentleman from Texas, Mr. Green, 5 minutes for your 
questions, please.
    Mr. Green. Thank you, Mr. Chairman.
    In today's testimony from the GAO and the Inspector 
General, we have heard how many instances of significant cost 
increases for major environmental management and nuclear 
programs, cases where actual contract costs far exceeded the 
original cost estimates. This is a problem we need to solve in 
order for the DOE and Congress to make informed decisions about 
allocating resources. We must have accurate and reliable 
information.
    Mr. Trimble, can you give us some examples of how 
inaccurate cost estimates impact the agency's ability to 
function efficiently and effectively?
    Mr. Trimble. Sure. Aside from the examples I gave in my 
testimony, you know, the obvious ones--MOX, WTP, UPF--you have 
other issues involving, say, projects, for example, the Pit 
disassembly building, which entered design. It was supposed to 
be an adjunct to the MOX facility, $730 million spent before it 
was canceled. I think what is interesting about these cases is 
that in all of them, at the very beginning, the critical 
decision point one, there is no requirement currently for an 
independent cost estimate. So DOE can start a project and go a 
long time before it hits the decision point two requirement 
where you actually have an independent cost estimate 
requirement. But we have already spent tens if not hundreds of 
millions of dollars on these projects. So you start on a path. 
The control weakness hits you early. You spent a lot of money 
and it takes a long time before you are in a position to 
rectify that.
    Mr. Green. What are the reasons we have seen so many cost 
increases in the past, and how can DOE do a better job of 
producing cost estimates that are accurate?
    Mr. Trimble. Well, in the past we have recommended that at 
CD-1, the decision point early in the process, that there an 
independent cost estimate. We have had past recommendations, 
for example, to have a cost estimating policy. Right there is 
guidance but there is not a policy. The Department had 
guidance. We first reported on this issue in 1983. In the mid-
1980s, they instituted a policy. They rescinded the policy 
around 1995. They put guidance into their processes but there 
is no cost policy which would then tell contractors, hey, you 
are coming up with an estimate for this project, these are--
this is how you are going to do the estimate or these are the 
rules I want to see, what are the marks you have to hit to give 
me a quality estimate. Right now we don't have that. There is 
guidance that creates looseness in the system and problems.
    Mr. Green. Deputy Secretary, obviously DOE is not the only 
Federal agency that has trouble with cost estimates. What steps 
has DOE taken to improve the reliability and uniformity of its 
cost estimates?
    Mr. Poneman. A couple things, Mr. Chairman. I think it is 
very important to point out a clarification here. Under our 
directive 413-B, which applies to the big capital projects, for 
the first time we insisted that each of these main gates of 
identifying the mission, picking the main technology and so 
forth that we do have cost estimation. There are different 
terms of art of what you call it, but one of the reasons, 
frankly, sir, why we have gotten in trouble is because people 
have said, oh, this is too early in the project, you can't tell 
anything at this point, to which I say, you know, if you are 
going to St. Louis or Mars, you should be able to give me the 
right number of zeros, OK. So we actually have tried, and I 
invite you to look at 413-B and we will have your staff briefed 
on it. That tries to get at exactly the problem that Mr. 
Trimble has identified in response to your question.
    Also, it is not only a question of having the requirements 
in there but a question of having the metrics, and so instead 
of requiring a constant manual uploading of data from the 
contractor to the Federal oversight and so on, we are trying 
to, through what we call the PARS software system, make sure 
that the very same data that is entered by the contractor is 
transparent from, as we say, from stem to stern and that we 
have got real-time accurate data on what is happening on the 
ground because the real problem enters into it, sir, when we 
get a gap in the reporting of what is happening on the ground 
and when it comes to our attention.
    Mr. Green. Mr. Trimble, do you think that is progress, and 
is it the solution to the issue identified?
    Mr. Trimble. Well, I think we may disagree a little bit on 
how robust the 413 requirements are at CD-1, and I think that 
that would be a great question for the record, and we can give 
you a more robust answer on that.
    Mr. Green. I appreciate that. Thank you, Mr. Chairman. I 
yield back.
    Mr. Burgess. The gentleman yields back his time. The chair 
recognizes the gentleman from Texas, Mr. Olson, 5 minutes for 
questions, please.
    Mr. Olson. I thank the chair, and good morning to our 
witnesses. This is not news, gentlemen, but one of my 
responsibilities under the Constitution of the United States is 
to provide oversight on behalf of the people of Texas 22 of the 
Executive Branch agencies and oversight of the Department of 
Energy. The Department's budget remains in the tens of billions 
of dollars. It covers topics as diverse as financial support 
for emerging solar power technologies to safeguarding 
technology responsible for the most potent weapons mankind has 
ever created. Guaranteeing commonsense execution of DOE's 
mission is not just needed to protect taxpayer dollars, it is 
needed for national security. There have been problems in the 
past but with the new Secretary and a new organizational 
structure, I see this hearing as the first step to prevent 
problems in the future.
    And my first question is for you, Mr. Friedman--I am sorry. 
This is for you, Secretary Poneman. In Inspector General 
Friedman's testimony, he laid out a number of suggestions that 
he recommends as solutions to some of DOE's problems, specific 
ideas from reducing duplication at NNSA to reevaluating 
security. And many of these sound like excellent suggestions 
but they are similar to suggestions from 2012. My question, 
sir, is, what is the process at DOE for considering suggestions 
that the Inspector General makes? What keeps them from being 
heard but ignored?
    Mr. Poneman. Congressman, with all due respect, they are 
heard but they are very, very closely heeded to, and under the 
Inspector General Act, if my memory serves me, of 1978. This is 
an absolutely critical function in the Department. I would be 
the first to tell you that in an organization, as you say, 
about a $25 billion budget, 115,000, 110,000 people working, we 
have a lot, a lot of problems, and one of our critical tools is 
the Inspector General reports. They come in, they get seen at 
the highest levels by the Secretary and myself, and we take 
them very, very seriously. We have not, and I suspect we never 
will, hit 100 percent in terms of executing against all of the 
ideas that come in, and in fact, sometimes we have responses 
and we have different approaches and so forth. But I cannot 
exaggerate--it is an invaluable tool, and we will continue to 
use it to enhance our performance.
    Mr. Olson. Thank you, sir. And I am a Texan, so I am not 
looking to provoke a little battle here, but Mr. Friedman, I 
would appreciate your comments on the issue as well.
    Mr. Friedman. I couldn't have posed the question better if 
I had been sitting where you are sitting and you were sitting 
where I was sitting, Mr. Olson.
    Mr. Olson. You don't want my seat, trust me.
    Mr. Friedman. The Deputy Secretary, I have known him for a 
number of years, and he has been extremely responsive to our 
reports, and the way he has described it is absolutely 
accurate. I said in my testimony that the five recommendations 
for cost savings that we have enunciated in 2 years 
sequentially are politically challenging, they are highly 
controversial and very difficult for anyone to grasp, get their 
hands around and really implement. So I am a realist, and I 
understand that while I hope they're considered and I hope they 
receive serious thought, I anticipate that implementation if it 
ever is to happen is going to take some time.
    Mr. Olson. Well, we need to correct these problems, as I 
mentioned. Some of these issues are very important to our 
national security and our country.
    One further question for you, Secretary Poneman. You and 
Secretary Moniz held a DOE town hall, a forum that showcased 
some of your new organizational changes. There are two points 
that were discussed that were better communication and 
improving DOE's ``tooth to tail ratio.'' Reducing redundancy 
and streamlining your work are both noble goals. However, it 
seems to me that there have been long questions about this 
broader philosophical approach that has been taken in running 
this Department. How far will this reorganization move DOE 
forward in improving mission execution? What are some of the 
next steps that are being considered?
    Mr. Poneman. Well, Congressman, it was just announced here 
a week or so ago, so it is still in early stages. The first 
thing we have to do is to make sure that we have got the people 
encumbering these new positions that will have the capacity to 
achieve these outcomes--point one. Point two, some of the 
things we have already started, and the first thing I will just 
note because we haven't had the meeting, I chair the 
Cybersecurity Council, which is crossing cutting. Secretary 
Moniz himself just attended ex officio to show his commitment 
to this cross-cutting effort. We have got to get better in 
terms of various IT systems that they can talk to each other so 
that they can be robust in making sure that our most secret 
secrets that have you said are our sacred obligation to protect 
are fully protected. It is going to be a work in progress, and 
we welcome--I sincerely mean this--we warmly welcome the 
oversight of this committee to make sure that we stay on track.
    Mr. Olson. Thank you. I have run out of time, but what a 
great comment about the Secretary. Being a military officer, 
one thing the leader can do is get involved with the troops and 
show them he cares, and it sounds like he is doing that.
    I yield back the balance of my time.
    Mr. Murphy. Thank you. I now recognize the gentleman from 
New York, Mr. Tonko, for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair.
    For the first time, GAO earlier this included climate 
change in its high-risk list. GAO recognized the reality of 
climate change and found that the Federal Government is not 
well positioned to address the fiscal exposures presented by 
climate change. I would like to hear from GAO about the risk of 
inaction and how the Federal Government can respond to this 
given threat.
    Mr. Trimble, why did GAO decide to include better 
management of climate risk on its high-risk list this year?
    Mr. Trimble. The addition of climate change, it is really--
the way we phrased that is the adaptation of response to 
climate change from a Federal perspective, and the rationale on 
that is really just looking at the potential Federal exposure 
to the potential liabilities that are associated with extreme 
climate events. Those changes run from sort of being the 
insurer of last resort. They involve being a significant 
landlord of large Federal assets such as NASA facilities, DOE 
facilities, and they also involve sort of agricultural and 
Federal lands issues. So when you look at sort of the 
portfolio, sort of chits or pieces that we have in the game, 
all of those areas have potential implications. Changing 
climate has a potential implication for all those in terms of 
the Federal Government's exposure to liabilities.
    Mr. Tonko. And you noted in the high-risk report that 
climate change adaptation is a risk mitigation strategy to help 
protect vulnerable communities. If we fail to do things like 
raise a river or coastal dykes or build higher bridges, what 
kind of adverse impacts might be experienced?
    Mr. Trimble. Well, absolutely, and I think that is what is 
interesting about this. If you look at some of the experiences 
with the recent extreme weather events, there are some very 
simple engineering changes that could have been built in. A lot 
of the associated costs and economic repercussions of those 
events would have been mitigated. So for example, how you 
attach a bridge to its moorings, the height of the bridge, in 
terms of insurance exposure of homes, do you have a backflow 
check valve. There are many, many simple things that are sort 
of low cost that can help mitigate that exposure. So that is 
part of the adaptation focus.
    Mr. Tonko. You know, I had witnessed in my district a 
couple of years ago Irene and Lee, and the exponentially 
increased volume of water flowing through some of the creek 
beds, and so as we displace this infrastructure with the 
ravages of Mother Nature, it became imperative, I believe, for 
government to build back intelligently, effectively, and to 
build the same stretch, same span or same height on a bridge 
would just be wasted money. So it is interesting to hear you 
say that.
    What recommendations do you have for us to address the high 
risk of climate change?
    Mr. Trimble. With that, I may have exhausted my knowledge. 
I know we have several reports dealing with adaptation to 
climate change, and I know we have made recommendations to the 
Administration on coordinating Federal response to climate 
change sort of at the Executive Office of the President level, 
to coordinate policies for each agency. I know there has been a 
lot of action in that regard.
    Mr. Murphy. Is your mic on?
    Mr. Tonko. Under Secretary, growing threats of climate 
change, critical government infrastructure could be at risk. 
What is DOE doing or what does it hope to do to protect 
critical infrastructure and more generally to mitigate the 
effects of climate change?
    Mr. Poneman. This is a huge challenge, Congressman. We are 
working on it not only in terms of our own enterprise, but we 
are, as you know, responsible as the sector-specific agency for 
homeland protection for protecting the electric grid, the 
natural gas pipeline system and so forth. We have been from the 
first day of--actually from before Hurricane Sandy striking at 
the center of the Federal effort working very closely with FEMA 
and with the President to make sure that we are taking those 
steps first on the mitigation side so that we can reduce the 
risks of these raging storms and floods the President has 
alluded to, but also we are working in terms of the area of New 
York and New Jersey reconstruction, smart grid, distributed 
generation, micro grids so that you can have a self-healing 
grid in the case of a devastating storm so that the critical 
places like hospitals and gas stations and places like that 
actually are able to respond better.
    It would be hard for me to exaggerate, sir, the amount of 
time and effort that this is taking. It is a much larger chunk 
of our effort in the Department that in the past, precisely 
because the problem has become so much greater.
    Mr. Tonko. All right. The ounce of prevention here could be 
a pound of cure when you look at the comeback and disaster aid 
monies that are required not only to restore and rebuild but to 
do it effectively and intelligently.
    Mr. Poneman. Absolutely.
    Mr. Tonko. I thank you very much.
    Mr. Murphy. I thank the gentleman. The gentleman yields 
back. Now Mr. Scalise is recognized for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman. I appreciate you 
having the hearing, and I appreciate our witnesses coming to 
testify.
    When we got the reports back, and you all have addressed a 
number of the items and the problems that were identified, but 
when you look at the overall DOE budget, you see that 90 
percent of the budget is, in essence, contractors. You know, 
when you look at the agencies that have addressed some of the 
problems, the two agencies that were still remaining within DOE 
that were still considered high risk have over 64 percent of 
the budget, so there is still a lot of the budget that is still 
out there, and one of the points I want to bring up, and I will 
start with Mr. Friedman, is going back to 2007, DOE and NNSA 
have required contractors to implement a self-assessment 
strategy to identify deficiencies. I want to ask you how you 
feel that process is working where you are in essence allowing 
the contractors to assess themselves to identify deficiencies, 
considering there is such a large percentage of the overall DOE 
budget that is going towards contractors. How does this process 
work? Is that the best method to get us the efficiencies that 
we are looking for?
    Mr. Friedman. Well, we issued a report on that, Mr. 
Scalise, several months ago on the contractor assurance 
process, and frankly, we think it is not ripe and it is not 
mature and therefore it is not as effective as it needs to be 
to satisfy basic requirements to protect the interest of the 
U.S. taxpayers. There was a disconnect, for example, between 
contractor metrics and the pay-for-performance mechanism that 
was in place. There were a number of other weaknesses that we 
identified in that report. So does it have promise? I guess it 
has potential, but at this point we don't think the Department 
nor NNSA are there.
    Mr. Scalise. I want Mr. Poneman to be able to address this 
as well. How do you plan on addressing those deficiencies that 
were outlined in that report?
    Mr. Poneman. Congressman, I take a very old-fashioned view 
of this. It is true, and you know, one should note, this 
committee has noted several times, our national security 
imperative, this structure goes literally back to the Manhattan 
Project. This is how it was set up because President Roosevelt 
understood that he didn't know how to have the chemistry and 
physics and so forth. So it started a long time ago. But my 
view is still the same one that you would have if you are 
building a house: the contractor has got the expertise but you 
are the owner. That is what GOCO means: government owned, 
contractor operated. What we need to do, Congressman, in my 
judgment is to make sure that as an owner, just like any owner 
would in a house situation, you have got the expertise to hold 
the contractor accountable, and the mechanisms that we are 
talking about in this set of reforms in addition to the things 
we have been trying to do in terms of contract management, in 
terms of transparency of metrics that come out of their 
performance are intended to put us in that position to be a 
smart owner.
    Mr. Scalise. And Mr. Trimble, do you have any follow-up on 
what this says about the DOE's ability to rely on contractors 
for self-assessment?
    Mr. Trimble. Well, we have ongoing work on the contractor 
assurance model. Right now we also have an ongoing review 
looking at the security reforms. Both those are in process, so 
we will have more to add later. I think as the Inspector 
General notes, we have observed some of the problems, and I 
think in addition to the Y-12 incident, there was a case at 
Livermore where in 2009 the DOE found--gave the security force 
there one of its lowest ratings, and this was 6 months earlier 
then that inspection the local site office had given a 100 
percent rating. So again, it is a matter of how do you execute 
this and can the system be made to work, and I think notably 
since Y-12, you know, the DOE has backed off from that and has 
taken a new approach, and that is part of what we are looking 
at in our new review.
    Mr. Scalise. Thanks. My last----
    Mr. Friedman. Mr. Scalise, could I just amplify on my 
comment earlier?
    Mr. Scalise. Yes, if you can do it real quickly.
    Mr. Friedman. I will. And the answer, it seems to me, is 
there nothing wrong with contractor self-assessment as long as 
there is adequate government validation.
    Mr. Scalise. Yes, there has got to be some kind of extra 
layer of somebody looking over the shoulder, and two eyes are 
better than one, especially when one of those sets of eyes is 
the person looking at themselves in the mirror. I want to make 
sure there is another set of eyes checking that.
    I want to talk about cost estimates because that has been a 
problem, getting cost estimates right, and both Mr. Friedman 
and Mr. Trimble, you have indicated the need to develop 
realistic timetables and baselines to try to address that, but 
you have also talked about trying to break up these larger 
projects into smaller chunks, you know, whatever the 
terminology you are using is. Can you do that, and can you 
still get reliable baselines and cost estimates as you are 
going forward? How do you plan on doing that? I would ask Mr. 
Poneman or Mr. Trimble.
    Mr. Poneman. Well, yes, sir, Congressman, that precise GAO 
recommendation we followed, and because we followed it, I think 
that is one of things that led to better performance that led 
us to get out from under the high-risk list for our projects 
less than $750 million. Yes, you can sir. Under Order 413, you 
can have cost estimates at each of our gates of our capital 
construction projects, mission identification, selection of 
technology and so on, and that is what we have got to do.
    Mr. Burgess [presiding]. The gentleman's time is expired.
    Mr. Scalise. Thank you. I am out of time. I yield back the 
balance.
    Mr. Burgess. I recognize the gentlelady from North 
Carolina, 5 minutes for your questions, please.
    Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to our 
panel for being here today.
    Mr. Trimble, you indicated in your opening statement that 
even in recent work concerning the DOE's management of projects 
smaller than $750 million, about 30 or so projects did not 
provide sufficient information and documentation for an 
assessment of their performance. Can you explain why this is 
significant and what your feelings are on that?
    Mr. Trimble. I think this is an issue we have discussed 
with the Department and they have acknowledged and agreed to 
work on this, but it goes back to the justification and the 
paper behind the decisions, and I think this issue has come up 
in another context, but if you don't have the information and 
the file on which the decisions are based, it is hard to 
imagine from an outsider's perspective how the decision was 
made in the first place and was it made for the right reasons, 
but it is also impossible to validate the decisions that were 
made.
    Mrs. Ellmers. So it really seems like there is really not a 
process of full evaluation?
    Mr. Trimble. Or there is a process but it is not being 
followed.
    Mrs. Ellmers. I see. So you believe the tools are there, it 
just isn't necessarily----
    Mr. Trimble. Not necessarily followed in all cases.
    Mrs. Ellmers. OK. Do you see any other area where lack of 
information is a hindrance in information gathering in regard 
to contractors?
    Mr. Trimble. Well, I mean, there is lots of--this could go 
in a lot of different directions. I think one of the questions 
that comes up quite often is, DOE uses an earned value 
management system to track the performance of contractors. 
Every time we go through where there is a re-baselining, it is 
sort of all your road signs from tracking the progress until 
the project gets suspended because you have to re-baseline it, 
and so your milestones for tracking the performance of that 
contractor sort of get put on hold. But since this process can 
take a year, two years, 18 months----
    Mrs. Ellmers. That time----
    Mr. Trimble [continuing]. You are sort of flying blind for 
a little while. Now, they take measures to address that, but 
that is a significant----
    Mrs. Ellmers. And time is money. I have used that recently 
so many times.
    Now, does this also relate to contractor assurance 
programs? I mean, is this all related?
    Mr. Trimble. It is not directly related. It is an enabling 
issue in terms of more information and the quality and the 
robustness of your information would support any system.
    Mrs. Ellmers. Thank you, Mr. Trimble.
    Mr. Deputy Secretary, it looks like you want to make a 
comment about that.
    Mr. Poneman. No. I have not heard Mr. Trimble speak to this 
fact before but he has identified a very important problem, 
which is exactly that. When your project goes off its baseline, 
this system that is set up to clock it, it basically comes 
useless to you, and that is the point of maximum danger to have 
unrestricted cost growth and losing control over projects. So 
we to a first order have got to put a tourniquet on that 
particular problem and then we need to have a systemic fix.
    Mrs. Ellmers. Suggestions on a systemic fix?
    Mr. Poneman. Well, look, to me, it all comes down to real-
time from-the-ground data with the minimum amount of human 
intervention in uploading from system to system to system. We 
need to know how much pipe is getting laid per day. We have to 
know what valves are going on, and to keep track where the big 
subcontracted components are coming in, where is that on 
schedule, even if we are between two baselines, and we just 
have got to get a set of metrics and a way to measure that we 
can monitor real time.
    Mrs. Ellmers. Mr. Friedman, would you like to expand on 
that?
    Mr. Friedman. No, but I think the issue with regard to 
getting off baseline and that interregnum before you get back 
on baseline is what we have found to be a very, very dangerous 
period, and it sometimes lasts far too long. So compressing 
that period would be ideal as far as we were concerned. In 
other words, once you find you are off baseline, re-baseline 
the entire package, have a changed control system that makes 
sense, so that you have made the whole system rational going 
forward. Otherwise we lose the progress that we have made in 
terms of controlling the project.
    Mrs. Ellmers. Great. Well, thank you.
    Mr. Chairman, I yield back the remainder of my time. I 
think that was an excellent discussion.
    Mr. Murphy. The gentlelady yields back. Thank you. I now 
recognize Mr. Johnson of Ohio.
    Mr. Johnson. Thank you, Mr. Chairman, and I too want to 
thank our panelists for being here this morning.
    Mr. Poneman, can you please explain the difference between 
the Department-wide mission support offices and program 
offices?
    Mr. Poneman. Yes, sir. The program offices are the ones 
that are dedicated to the nameplate mission, so maintaining a 
safe, secure and effective arsenal, making scientific 
breakthroughs, transforming our energy economy, cleaning up 
legacy waste. The support functions are all the things that you 
need to make that stuff work so that you do it legally, 
financially responsibly with adequate attention to safety and 
security. Those are enabling elements that support the mission.
    Mr. Johnson. OK. How do these mission support offices work 
to ensure that management practices and especially cost 
estimating are consistent and effective across the Department?
    Mr. Poneman. Well, two points, Congressman. So far, we took 
some of the elements that were in our earlier organization 
where we had a procurement office separate from the contract 
management office because those were sources of expertise on 
this very point of cost estimation, and we have merged those in 
a unified office under a very strong leader. But secondly, 
Congressman, the reorganization that we have described here 
today is intended to give that office the kind of support at 
the senior executive level of Under Secretary to make sure that 
those disciplines can apply enterprise-wide.
    Mr. Johnson. OK. What authority do mission support offices 
or the new Under Secretary managing the offices, for that 
matter, what authority do they have to tell program offices 
what to do when those offices operate under the authority of 
another Under Secretary?
    Mr. Poneman. Well, of course, all of these authorities flow 
out of our statute, and under the authority that goes to the 
Secretary, all roads lead up to the Secretary and to the Deputy 
Secretary. So I can assure you, Congressman, that when I hear 
from my health and safety people that a program office has a 
problem, the program office may not disregard that. We are one 
enterprise, and I have often said in our team, the mission 
elements have got to own support, they have to feel that they 
own the security, fiscal responsibility, but the support 
offices have to feel that they own the mission as well and so 
we try to get that kind of a cross cut.
    Mr. Johnson. I certainly understand that that is how it 
should work in principle, but my 26 \1/2\ years in the Air 
Force and working with major program offices and being a 
program manager myself, yes, all roads may lead to the top but 
if they're not going down the same street with responsibility 
and accountability aligned, that creates dysfunction, and it 
basically then becomes a personality-driven organization rather 
than a process-driven organization.
    Mr. Poneman. Congressman, that is a very important insight 
there. One of my early lessons in this is when I was assisting 
Mr. Lee Hamilton and Senator Baker when we were asked by 
Secretary Richardson to look at the hard drive lost at Los 
Alamos back in 1999, that is what we found. We found that the 
organizations that were committed to the missions did not 
really feel that personal responsibility for safety and 
security that was essential to avoid exactly the problem you 
described.
    Mr. Johnson. Sure. Do you think that this might create more 
problems by stovepiping mission support?
    Mr. Poneman. Oh, to the contrary, Congressman. I think what 
we are fighting against, in other words, we believe that this 
reorganization is going to synthesize and bring together 
mission and support in a much better way than has been done 
before. We wouldn't do this reorganization otherwise.
    Mr. Johnson. It doesn't appear that the Chief Financial 
Officer is in this new structure. Is the CFO an important 
mission support office, and does the CFO have more mission 
support authority than the management office or the CIO, for 
example?
    Mr. Poneman. Well, the CFO, Congressman, is under the Under 
Secretary for Performance and Management so that would be right 
alongside the other mission support offices such as Management 
and Administration, so that is--obviously the CFO has huge 
enterprise-wide responsibilities and it is very, very important 
but in terms of the structure, it is embedded inside that Under 
Secretary office.
    Mr. Johnson. I associate my same concerns that I previously 
mentioned. You know, at least in the corporate world, if all 
money decisions don't flow through the CFO, and you have those 
stovepiped organizations, that makes it difficult as well.
    Mr. Friedman, you indicated that Federal staffing must be 
sufficient in terms of size and expertise to provide effective 
control and project oversight so that projects have focused, 
empowered and consistent Federal project management leadership 
throughout their lifecycle. Regarding expertise--and I have run 
out of time--what deficiencies have you observed in expertise 
over the years?
    Mr. Friedman. Well, as a general point, Congressman 
Johnson, we have found that the Federal managers did not feel 
they could exercise the necessary oversight over the 
contractors because they felt the contractors were so far 
better prepared for the job and the task that they faced. So 
certainly they need to be recognized professions. They need to 
get recognition within the Department and outside the 
Department, and the contractors need to understand that they're 
dealing with people on par who are prepared to take necessary 
actions to ensure the government's interest is protected. In 
terms of personal expertise, I don't believe we have found that 
people were inadequately trained on a personal basis.
    Mr. Johnson. All right. Thank you, Mr. Chairman. I yield 
back.
    Mr. Murphy. The gentleman's time is expired. Now to the 
gentlelady from Tennessee, home to many Energy projects, Ms. 
Blackburn.
    Mrs. Blackburn. That is exactly right, and I welcome you 
all, and Secretary Poneman, I want to come to you and talk a 
little bit about Y-12, and we all know that April 29th, the GAO 
upheld a procurement protest regarding the combined contract, 
therefore, the National Security Complex and Pantex plan, and 
it was a $22 billion over 10 years contract. You are familiar 
with that?
    Mr. Poneman. Yes, Congresswoman, but as I testified a 
little earlier today, since that contract action is still under 
review, we will not be able to in this session comment in 
detail about the workings of that.
    Mrs. Blackburn. All right. Well, I appreciate that, and I 
appreciate that there was a desire to get a $3.27 billion 
savings in that contract. I think that what I would like to 
know is, how can our committee be assured that NNSA's nuclear 
production mission can be safety and effectively carried out 
under the big cost savings requirement of that type of 
procurement? What is the guarantee that you can give us?
    Mr. Poneman. Well, I can tell you, Congresswoman, that we 
are operating under presidential direction in terms of what we 
need to do modernize and recapitalize the complex. We have an 
extraordinarily detailed stockpile stewardship management plan, 
and of course, given the limitations under the Budget Control 
Act and the sequestration, we need to make sure that we make 
every dollar count towards that mission, and you have the full 
attention of the Secretary and myself and the NNSA to that end, 
and of course, this has to be carried out through these 
contracts that you are talking about.
    Mrs. Blackburn. Let me ask you this. As you look at what 
has transpired in this process, has there been any thought 
given to revisiting the premise of the RFP when you are looking 
at some of these contracts? Have you all, or Mr. Friedman, have 
you all given any thought to that? Mr. Poneman first.
    Mr. Poneman. Well, again, Congresswoman, I don't think that 
I am permitted to speak to the ins and outs of the RFP since it 
is still under consideration, but what I can tell you is that 
we are always looking at those things that we can do to do the 
mission of the Department for the President and the Nation 
safely and securely and in a manner that is cost-effective, and 
that would always inform any RFP that we have.
    Mrs. Blackburn. Mr. Friedman?
    Mr. Friedman. Congresswoman, I don't really think we have 
anything to add. I don't think we have looked at that with any 
specificity.
    Mrs. Blackburn. OK. I appreciate that. I think that it is 
fair to say, it is an issue that is tremendously important to 
us. We have a lot of concerns about sacrificing the mission for 
the cost savings. We have a problem with the possibility of the 
Department having failed to verify the validity of the cost 
savings. We think that that as something that when you look at 
an item that is a critical mission, that it does raise concern 
for us, so those of us in Tennessee will continue to keep a 
close eye on this.
    And Mr. Poneman, I will just say, I appreciated your 
comment about needing a systemic fix to how we approach some of 
this, and being able to work through real-time data. As you 
look at a complex like the Y-12 complex, we can see where 
something of that nature might be helpful, and what we would 
like to do is to yield a better outcome from the work that is 
done, and then be able to quantify and achieve some savings 
through that process, through efficiencies, through technology 
transfer, things of that nature, that will allow a little bit 
more efficiency.
    I appreciate that, and Mr. Chairman, I will yield my time 
back.
    Mr. Murphy. I thank the gentlelady. We were hoping that the 
chairman of the full committee would be here because he found 
his documents from the 1990s when he asked Department of Energy 
a number of questions before about some reorganization, and I 
think he wanted to come and get an update of what has happened 
in the last 20 years or so. But unfortunately, he got tied up, 
but he will submit those. Mr. Poneman?
    Mr. Poneman. Mr. Murphy, if I might, I would like to make a 
slight, before we all break, amendment. In discussing with Mr. 
Johnson, who I know is not here now, the CFO's office, I 
thought it was in the Under Secretaryship but it is of such 
breadth along with GC and others that that one actually is 
above the fray, so to speak, so I just want to--we will get 
more a detailed answer for the record but I didn't want to 
leave you all with the wrong impression here, so I just wanted 
to make that clarification of my earlier comment.
    Mr. Murphy. I appreciate that. Overall, then, we will be 
submitting other questions to you. We ask for a timely 
response. Members are asked to get questions to us within 10 
days.
    And also, I ask unanimous consent that the written opening 
statements of other members be introduced into the record. So 
without objection, we will do that.
    So I would like to thank the witnesses today, and again, as 
members get more questions to you, we would all appreciate a 
proper response. Thank you so much for being here today, and I 
wish you all the best in getting things working over at the 
Department of Energy, and with that, this hearing is adjourned.
    [Whereupon, at 11:45 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]


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