    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                         NEON WARNING SIGNS: EXAMINING
                             THE MANAGEMENT OF THE
                    NATIONAL ECOLOGICAL OBSERVATORY NETWORK

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

                                 JOINT HEARING

                                   BEFORE THE

                   SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY &
                           SUBCOMMITTEE ON OVERSIGHT

                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               September 18, 2015

                                   __________

                               Serial No. 114-39

                                   __________

     Printed for the use of the Committee on Science, Space, and Technology

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

           Available via the World Wide Web: http://science.house.gov

                                       ______

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                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                       HON. LAMAR S. SMITH, Texas, Chair
    FRANK D. LUCAS, Oklahoma             EDDIE BERNICE JOHNSON, Texas
    F. JAMES SENSENBRENNER, JR.,         ZOE LOFGREN, California
        Wisconsin                        DANIEL LIPINSKI, Illinois
    DANA ROHRABACHER, California         DONNA F. EDWARDS, Maryland
    RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
    MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
    MO BROOKS, Alabama                   ALAN GRAYSON, Florida
    RANDY HULTGREN, Illinois             AMI BERA, California
    BILL POSEY, Florida                  ELIZABETH H. ESTY, Connecticut
    THOMAS MASSIE, Kentucky              MARC A. VEASEY, Texas
    JIM BRIDENSTINE, Oklahoma            KATHERINE M. CLARK, Massachusetts
    RANDY K. WEBER, Texas                DON S. BEYER, JR., Virginia
    BILL JOHNSON, Ohio                   ED PERLMUTTER, Colorado
    JOHN R. MOOLENAAR, Michigan          PAUL TONKO, New York
    STEVE KNIGHT, California             MARK TAKANO, California
    BRIAN BABIN, Texas                   BILL FOSTER, Illinois
    BRUCE WESTERMAN, Arkansas
    BARBARA COMSTOCK, Virginia
    DAN NEWHOUSE, Washington
    GARY PALMER, Alabama
    BARRY LOUDERMILK, Georgia
    RALPH LEE ABRAHAM, Louisiana
                                     ------

                    Subcommittee on Research and Technology

                     HON. BARBARA COMSTOCK, Virginia, Chair
    FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
    MICHAEL T. MCCAUL, Texas             ELIZABETH H. ESTY, Connecticut
    RANDY HULTGREN, Illinois             KATHERINE M. CLARK, Massachusetts
    JOHN R. MOOLENAAR, Michigan          PAUL TONKO, New York
    BRUCE WESTERMAN, Arkansas            SUZANNE BONAMICI, Oregon
    DAN NEWHOUSE, Washington             ERIC SWALWELL, California
    GARY PALMER, Alabama                 EDDIE BERNICE JOHNSON, Texas
    RALPH LEE ABRAHAM, Louisiana
    LAMAR S. SMITH, Texas
                                     ------

                           Subcommittee on Oversight

                     HON. BARRY LOUDERMILK, Georgia, Chair
    F. JAMES SENSENBRENNER, JR.,         DON BEYER, Virginia
        Wisconsin                        ALAN GRAYSON, Florida
    BILL POSEY, Florida                  ZOE LOFGREN, California
    THOMAS MASSIE, Kentucky              EDDIE BERNICE JOHNSON, Texas
    BILL JOHNSON, Ohio
    DAN NEWHOUSE, Washington
    LAMAR S. SMITH, Texas

                                C O N T E N T S

                               September 18, 2015

                                                                       Page
    Witness List.....................................................     2

    Hearing Charter..................................................     3

                               Opening Statements

    Statement by Representative Barbara Comstock, Chairwoman,
      Subcommittee on Research and Technology, Committee on Science,
      Space, and Technology, U.S. House of Representatives...........     7
        Written Statement............................................     7

    Statement by Representative Daniel Lipinski, Ranking Minority
      Member, Subcommittee on Research and Technology, Committee on
      Science, Space, and Technology, U.S. House of Representatives..     8
        Written Statement............................................     9

    Statement by Representative Barry Loudermilk, Chairman,
      Subcommittee on Oversight, Committee on Science, Space, and
      Technology, U.S. House of Representatives......................    10
        Written Statement............................................    11

    Statement by Representative Donald S. Beyer, Jr., Ranking
      Minority Member, Subcommittee on Oversight, Committee on
      Science, Space, and Technology, U.S. House of Representatives..    12
        Written Statement............................................    13

    Statement by Representative Lamar S. Smith, Chairman, Committee
      on Science, Space, and Technology, U.S. House of
      Representatives................................................    14
        Written Statement............................................    15

                                   Witnesses:

    Dr. James L. Olds, Assistant Director, Directorate for Biological
      Sciences, National Science Foundation
        Oral Statement...............................................    17
        Written Statement............................................    19

    Dr. James P. Collins, Chairman of the Board, National Ecological
      Observatory Network, Inc.
        Oral Statement...............................................    25
        Written Statement............................................    27
    Discussion.......................................................    35

                 Appendix I: Answers to Post-Hearing Questions

    Dr. James L. Olds, Assistant Director, Directorate for Biological
      Sciences, National Science Foundation..........................    52

                Appendix II: Additional Material for the Record

    Document submitted by Barry Loudermilk, Chairman, Subcommittee on
      Oversight, Committee on Science, Space, and Technology, U.S.
      House of Representatives.......................................    76

    Doument submitted by Daniel Lipinski, Ranking Minority Member,
      Subcommittee on Research and Technology, Committee on Science,
      Space, and Technology, U.S. House of Representatives...........    84

    Addittional responses submitted by Dr. James L. Olds, Assistant
      Director, Directorate for Biological Sciences, National Science
      Foundation.....................................................    87

                              NEON WARNING SIGNS:
                        EXAMINING THE MANAGEMENT OF THE
                    NATIONAL ECOLOGICAL OBSERVATORY NETWORK

                                  ----------

                           FRIDAY, SEPTEMBER 18, 2015

                      House of Representatives,
      Subcommittee on Research and Technology &
                             Subcommittee on Oversight,
                   Committee on Science, Space, and Technology,
                                                       Washington, D.C.

        The Subcommittees met, pursuant to call, at 9:04 a.m., in
    Room 2318 of the Rayburn House Office Building, Hon. Barbara
    Comstock [Chairwoman of the Subcommittee on Research and
    Technology] presiding.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Comstock. The Subcommittees on Research and
    Technology and Oversight will come to order.
        Without objection, the Chair is authorized to declare
    recesses of the Committee at any time.
        Welcome to today's hearing titled ``NEON Warning Signs:
    Examining the Management of the National Ecological Observatory
    Network.'' I now recognize myself for five minutes for an
    opening statement.
        In August, the National Science Foundation informed the
    Committee that the National Ecological Observatory Network
    project, known as NEON, was on trajectory to be $80 million
    over budget and 18 months behind schedule. NSF also notified
    the Committee that it was taking immediate action to de-scope
    the project and institute other corrective actions to keep it
    on time and on budget, in accordance with the no-cost-overrun
    policy that the Foundation has had in place since 2009. To put
    this in perspective, the $80 million is about 20 percent of the
    project's $433 million construction budget, a project that is
    supposed to be in its final year of construction in the
    upcoming fiscal year 2016.
        In today's hearing, we want to learn more about how NEON
    has gotten so far off track, why the overrun was not caught
    sooner, and look at what corrective actions both NSF and NEON
    intend to take to complete the project, or actions that they've
    already undertaken to correct this issue. I also want to review
    NSF's proposed plans for scaling back the project and
    understand what impact it will have on the scientific value of
    the network.
        We have an obligation and responsibility to ensure every
    dollar intended for scientific research is spent as effectively
    and efficiently as possible. Any dollars that are wasted on
    mismanagement is a dollar that could have been spent on
    groundbreaking basic research or training future scientists.
        This is not the first time the Committee has looked at the
    serious problems which seem to have plagued NEON. We need to
    better understand what went wrong so we can determine what
    steps, including new legislation or guidelines, must be taken
    to ensure these problems never happen again.
        [The prepared statement of Chairwoman Comstock follows:]

          Prepared Statement of Subcommittee on Research & Technology
                          Chairwoman Barbara Comstock

        In August, the National Science Foundation informed the Committee
    that the National Ecological Observatory Network project, known as
    NEON, was on trajectory to be $80 million over budget and 18 months
    behind schedule.
        NSF also notified the Committee that it was taking immediate action
    to de-scope the project and institute other corrective actions to keep
    it on time and on budget, in accordance with the no-cost overrun policy
    that the Foundation has had in place since 2009.
        To put this in perspective, $80 million is about 20% of the
    project's $433 million construction budget--a project that is supposed
    to be in its final year of construction in the upcoming Fiscal Year
    2016.
        In today's hearing, I want to learn more about how NEON has gotten
    so far off track, why the overrun was not caught sooner, and look at
    what corrective actions both NSF and NEON intend to take to complete
    the project. I also want to review NSF's proposed plans for scaling
    back the project and understand what impact it will have on the
    scientific value of the network.
        We have a constitutional obligation and responsibility to ensure
    every dollar intended for scientific research is spent as effectively
    and efficiently as possible. Every dollar wasted on mismanagement, is a
    dollar that could be spent on groundbreaking basic research or training
    future scientists.
        This is not the first time the Committee has looked at the serious
    problems, which seem to have plagued NEON. We need to better understand
    what went wrong so we can determine what steps, including new
    legislation or regulations, must be taken to ensure these problems
    never happen again.

        Chairwoman Comstock. I now recognize the Ranking Member,
    the gentleman from Illinois, Mr. Lipinski, for an opening
    statement.
        Mr. Lipinski. Thank you, Chairwoman Comstock and Chairman
    Loudermilk, and thank you for holding this hearing, and I thank
    Dr. Olds and Dr. Collins for being here this morning.
        About six weeks ago, NSF informed the Committee that NEON
    was on a projected path, if not corrected, to go $80 million
    over budget, clearly a significant problem. While I hope that
    all of my colleagues join me in supporting the scientific goals
    of the NEON project and are interested in seeing it put on a
    better path going forward, I know we share the goal of being
    good stewards of taxpayer money. And I also believe we agree
    that, in a situation like this, more information sharing with
    the Committee at an earlier date would have helped us do better
    by these goals.
        On the other hand, it seems a crisis may have been averted
    by swift action on the part of NSF and the NEON governing
    board, and this hearing is an opportunity to learn some lessons
    for the future. Today we will examine what went wrong,
    including whether NSF could have taken more aggressive steps
    sooner, and whether NSF has since taken all necessary
    corrective actions.
        As we all know, this is not the first time this Committee
    is holding hearings about the NEON project. Our most recent
    hearings addressed NEON Inc.'s use of management fees under
    their cooperative agreement. In those hearings, we also
    addressed larger risk management policies, including policies
    for cost estimates and contingency funds. In fact, those
    broader topics have come up at a number of hearings over the
    last few years.
        As we take a close look at what went wrong with NEON, we
    should also be considering what broader reforms may still be
    necessary. The NSF Inspector General, Ms. Lerner, is not on
    today's panel, but she has weighed in for several years on her
    broader facility management and policy concerns, and earlier
    this week on NEON specifically with an Alert Memo on NEON's
    potential $80 million cost overrun. As we discuss what reforms
    NSF has implemented and what reforms may still be necessary, it
    will be valuable for us to have that discussion in the context
    of the Inspector General's recommendations.
        Finally, I want to address what happens now to ensure that
    NEON remains a valuable scientific asset for the research
    community and for the nation. We do not have a representative
    from the ecological sciences research community on today's
    panel. However, a group of leaders from that research community
    did publish a statement supporting the NEON project, while also
    expressing concerns about the level of engagement between NSF
    and the user community in determining the scientific priorities
    for NEON. I ask unanimous consent to include that letter with
    my opening remarks.
        Chairwoman Comstock. Without objection.
        [The information appears in Appendix II]
        Chairwoman Comstock. Thank you----
        Mr. Lipinski. I'm not done yet.
        Chairwoman Comstock. Sorry.
        Mr. Lipinski. I don't believe anyone is interested in
    delaying NEON construction by another year. However, we are in
    effect at a temporary pause in the project. Given how much the
    scientific opportunities, the technological options, and the
    environment itself have changed since the NEON scope and design
    were approved five years ago, it might be worth taking
    advantage of this unplanned pause to ensure that we truly are
    getting the best science out of this facility.
        I look forward to today's discussion. I believe the
    Committee can work productively with NSF to ensure NEON's
    success going forward and avert similar challenges for future
    NSF projects.
        With that, I yield back.
        [The prepared statement of Mr. Lipinski follows:]

                       Prepared Statement of Subcommittee
                    Minority Ranking Member Daniel Lipinski

        Thank you Chairwoman Comstock and Chairman Loudermilk for holding
    this hearing, and thank you Dr. Olds and Dr. Collins for being here
    this morning.
        About six weeks ago, NSF informed the Committee that NEON was on a
    projected path, if not corrected, to go $80 million over budget.
    Clearly a significant problem. While I hope that all of my colleagues
    join me in supporting the scientific goals of the NEON project and are
    interested in seeing it put on a better path going forward, I know we
    share the goal of being good stewards of taxpayer money. And I also
    believe we agree that, in a situation like this, more information
    sharing with the Committee at an earlier date would have helped us do
    better by these goals.
        On the other hand, it seems a crisis may have been averted by swift
    action on the part of NSF and the NEON governing board, and this
    hearing is an opportunity to learn some lessons for the future. Today
    we will examine what went wrong, including whether NSF could have taken
    more aggressive steps sooner, and whether NSF has since taken all
    necessary corrective actions.
        As we all know, this is not the first time this Committee is
    holding hearings about the NEON project. Our most recent hearings
    addressed NEON Inc.'s use of management fees under their cooperative
    agreement. In those hearings we also addressed larger risk management
    policies, including policies for cost estimates and contingency funds.
    In fact, those broader topics have come up at a number of hearings over
    the last few years. As we take a close look at what went wrong with
    NEON, we should also be considering what broader reforms may still be
    necessary. The NSF Inspector General, Ms. Lerner, is not on today's
    panel, but she has weighed in for several years on her broader facility
    management and policy concerns, and earlier this week on NEON
    specifically with an ``Alert Memo'' on NEON's potential $80 million
    cost overrun. As we discuss what reforms NSF has implemented and what
    reforms may still be necessary, it will be valuable for us to have that
    discussion in the context of the Inspector General's recommendations.
        Finally, I want to address what happens now to ensure that NEON
    remains a valuable scientific asset for the research community and for
    the nation. We do not have a representative from the ecological
    sciences research community on today's panel. However, a group of
    leaders from that research community did publish a statement supporting
    the NEON project, while also expressing concerns about the level of
    engagement between NSF and the user community in determining the
    scientific priorities for NEON. I am attaching that statement to my
    opening remarks.
        I don't believe anyone is interested in delaying NEON construction
    by another year. However, we are in effect at a temporary pause in the
    project. Given how much the scientific opportunities, the technological
    options, and the environment itself have changed since the NEON scope
    and design were approved five years ago, it might be worth taking
    advantage of this unplanned pause to ensure that we truly are getting
    the best science out of this facility.
        I look forward to today's discussion. I believe the Committee can
    work productively with NSF to ensure NEON's success going forward and
    avert similar challenges for future NSF projects.
        I yield back.

        Chairwoman Comstock. Thank you, Mr. Lipinski, and I now
    recognize the Chair of the Oversight Subcommittee, the
    gentleman from Georgia, Mr. Loudermilk, for his opening
    statement.
        Mr. Loudermilk. Good morning. Thank you, Chairwoman
    Comstock. I would also like to thank our witnesses for being
    here today.
        As indicated, we are here today to discuss the $80 million
    in projected cost overruns to the National Science Foundation's
    cooperative agreement regarding the NEON Project. The fact that
    we are also here to discuss how this project is 18 months
    behind schedule is frankly unbelievable and is unfortunately
    what the American taxpayer has come to think of as business as
    usual.
        Well, I'm here to say that at some point this most stop. In
    fact, I think that's exactly what the NSF Inspector General has
    been saying for years about this project. Just this week the IG
    released an Alert Memo on the subject of today's hearing.
    Striking is the fact that the NSF did not become aware of the
    $80 million budget overrun until August of this year, despite
    first having concerns about the budget and timeline in January
    of 2013. Given the multiple warning signs we'll hear about this
    morning, was the NSF asleep at the wheel?
        This hearing is as much a reflection of the lack of
    oversight conducted by NSF as it is for the complete
    incompetence of NEON Incorporated to adequately handle a
    cooperative agreement of this size. However, I'm not sure
    anyone should be surprised of this outcome given that the NSF
    awarded NEON the $432 million cooperative agreement before an
    ongoing audit of their proposal was even completed. Frankly,
    exposing this kind of mismanagement in the federal government
    is one of the reasons my constituents sent me to Congress.
        According to the IG's memo, although NEON plans to address
    the $80 million overrun, that number is only their best
    estimate and the IG indicates that based on their
    investigation, there is no certainty that the overrun will not
    increase. I am very troubled that NSF can provide our
    subcommittee with only its best estimate of an $80 million
    overrun. NSF needs an independent, expert analysis of the
    financial damage, or we may be in this hearing room again in
    another month to talk about how to de-scope another $10 to $20
    million from the NEON project to make up for an even worse
    overrun.
        To illustrate how fluid the $80 million NSF estimate is, I
    understand NSF is still unable to determine whether it gave
    NEON approval to spend any of the $35 million in project
    contingency funds. There is no accounting going on at the NSF
    for this almost half-a-billion-dollar project?
        As one looks further at the IG memo and reviews the IG's
    previous audits of the NEON project, it is clear there has been
    a complete lack of proper oversight for this project. The memo
    indicates that the IG's auditors issued three inadequacy memos
    and an adverse opinion since 2011 regarding NEON's accounting,
    and the NSF has still not required NEON to provide adequate
    support for their spending. It also appears that multiple
    external audits were attempted before and during construction
    but were delayed because of an inability or unwillingness to
    provide the needed information. How do you get almost a half-a-
    billion-dollar federal cooperative agreement and not have to
    cooperate when the government demands an accounting?
        As if it couldn't get worse, we then learn that NEON has
    spent over a quarter of a million dollars on lobbyists and the
    NSF still hasn't determined if those expenses were legal. Are
    these lobbyists being used to conceal the true cost of this
    project from the American people while ensuring that more and
    more money is spent on it? In addition to the lobbyists, the
    top executives at NEON are making more than $200,000 a year,
    and as we have already discovered from previous hearings,
    thousands of dollars are being spent on lavish Christmas
    parties, gourmet coffee, happy hours, and unnecessary travel.
        As a small business owner and former director of a
    nonprofit, I wholeheartedly understand the importance of
    accountability. However, what is inexcusable is that NSF has
    received warnings about this kind of irresponsible spending
    over the past four years, and it has not taken adequate
    measures to resolve the matter.
        At today's hearing, I am not only interested in learning
    about how the federal government can and needs to do a better
    job with transparency and accountability, but also how we can
    ensure that this kind of abuse is not occurring with other
    cooperative agreements. Taxpayer money should be spent in a
    responsible way with the help of efficient management and
    oversight. In the end, I hope that this hearing will inform us
    on how to provide better oversight and management of federally
    funded research projects to ensure that taxpayers can trust us
    with their money and know that it will be spent in the manner
    intended.
        I have a copy of the September 15, 2015, IG Alert Memo that
    I would like to add to the record.
        [The prepared statement of Mr. Loudermilk follows:]

                  Prepared Statement of Oversight Subcommittee
                           Chairman Barry Loudermilk

        Good morning. Thank you Chairwoman Comstock. I would also like to
    thank our witnesses for being here today.
        As indicated, we are here today to discuss the $80 million in
    projected overrun to the National Science Foundation's (NSF)
    cooperative agreement regarding the NEON Project. The fact that we are
    also here to discuss how this project is 18 months behind schedule is
    frankly unbelievable and is unfortunately what the American taxpayer
    has come to think of as business as usual. Well, I'm here to say that
    at some point this most stop. In fact, I think that's exactly what the
    NSF Inspector General has been saying for years about this project.
        Just this week the IG released an alert memo on the subject of
    today's hearing. Striking is the fact that the NSF did not become aware
    of the $80 million budget overrun until August of this year, despite
    first having concerns about the budget and timeline in January 2013.
    Given the multiple warning signs we'll hear about this morning, was NSF
    asleep at the wheel? This hearing is as much a reflection of the lack
    of oversight conducted by NSF as it is for the complete incompetence of
    NEON Inc. to adequately handle a cooperative agreement of this size.
    However, I'm not sure anyone should be surprised of this outcome given
    that the NSF awarded NEON the $432 million cooperative agreement before
    an ongoing audit of their proposal was even completed. Frankly,
    exposing this kind of mismanagement in the federal government is one of
    the reasons my constituents sent me to Congress.
        According to the IG's memo, although NEON plans to address the $80
    million overrun, that number is only their ``best estimate'' and the IG
    indicates that based on their investigation, there is ``no certainty
    that the overrun will not increase.'' I am very troubled that NSF can
    provide our subcommittee with only its ``best estimate'' of an $80
    million overrun. NSF needs an independent, expert analysis of the
    financial damage, or we may be in this hearing room again in another
    month to talk about how to de- scope another $10-20 million from the
    NEON project to make up for an even worse overrun. To illustrate how
    fluid the $80 million NSF estimate is, I understand NSF is still unable
    to determine whether it gave NEON approval to spend any of the $35
    million in project contingency funds. Is there no accounting going on
    at the NSF for this almost half a billion project?
        As one looks further at the IG memo and reviews the IG's previous
    audits of the NEON project, it is clear there has been a complete lack
    of proper oversight for this project. The memo indicates that the IG's
    auditors issued three inadequacy memos and an ``adverse opinion'' since
    2011 regarding NEON's accounting, and the NSF has still not required
    NEON to provide adequate support for their spending. It also appears
    that multiple external audits were attempted before and during
    construction but were delayed because of an inability or unwillingness
    to provide needed information. How do you get almost a half a billion
    federal cooperative agreement and not have to cooperate when the
    government demands an accounting?
        As if it couldn't get worse, we then learn that NEON has spent over
    a quarter of a million dollars on lobbyists and the NSF still hasn't
    determined if those expenses were legal. Are these lobbyists being used
    to conceal the true cost of this project from the American people while
    ensuring that more and more money is spent on it? In addition to the
    lobbyists, the top executives at NEON are making more than $200,000 a
    year, and as we have already discovered from previous hearings,
    thousands of dollars are being spent on lavish Christmas parties,
    gourmet coffee, happy hours, and unnecessary travel.
        As a small business owner and former director of a non-profit, I
    wholeheartedly understand the importance of accountability. However,
    what is inexcusable is that NSF has received warnings about this kind
    of irresponsible spending over the past four years, and it has not
    taken adequate measures to resolve the matter.
        At today's hearing, I am not only interested in learning about how
    the federal government can--and needs to--do a better job with
    transparency and accountability, but also how we can ensure that this
    kind of abuse is not occurring with other cooperative agreements.
    Taxpayer money should be spent in a responsible way with the help of
    efficient management and oversight.
        In the end, though, I hope that this hearing will inform us on how
    to provide better oversight and management of federally-funded research
    projects to ensure that taxpayers can trust us with their money and
    know that it will be spent in the manner intended.
        I have a copy of the September 15, 2015 IG Alert Memo that I would
    like added to the record.

        Chairwoman Comstock. Thank you, Chairman Loudermilk.
        I now recognize the Ranking Member of the Subcommittee on
    Oversight, the gentleman from Virginia, Mr. Beyer, for an
    opening statement.
        Mr. Beyer. Thank you, Madam Chairman.
        I believe--and thank you both, Dr. Olds and Dr. Collins for
    being with us.
        I believe the National Ecological Observatory Network is a
    valuable and innovative scientific project. Its mission, to
    create a nationwide observatory to detect, study and forecast
    ecological change, is a major challenge with the potential for
    great scientific benefits. I am concerned, with my colleagues,
    about the management and budget challenges NEON has recently
    confronted, and possibly they may have been avoided.
        It appears that the National Science Foundation (NSF) may
    not have been adequately informed by NEON project management of
    cost and schedule challenges when they originally emerged, and
    the potential cost overrun also raises legitimate questions
    about NSF's oversight of the NEON project. It troubles me that
    NEON was on a projected path that would have placed it $80
    million over budget and potentially 18 months behind schedule,
    although I am thankful that you are moving forward with
    aggressive actions to put it back on track. Later in the
    questions, I am eager to explore, Dr. Olds, whether we can
    apply the no-cost-overrun policy to the rest of government and
    maybe the rest of the private sector, because I think it's very
    important as we talk about abuse and irresponsibility and all
    that, that these are hardly--that this is the first project
    hardly to have a cost overrun. Let me point out that the NOAA
    satellites were billions of dollars overrun back during the
    Bush Administration. Let me point out that the Joint Strike
    Fighter, the F-35, is again billions and billions of dollars
    overrun. The wars in Afghanistan and Iraq cost a little more
    than we had projected. And I will also say, this is not limited
    to the public sector. I have had the opportunity to build a
    number of buildings in Virginia over the last couple years and
    have yet to have one that met the original budget or the
    original timeline. We are constantly adapting and adjusting
    based on what we're actually learning.
        Now, that doesn't relieve you guys, our witnesses today, of
    trying to explain why the $80 million is over there, why the 18
    months is behind, what we're going to lose as we adapt to it,
    and how we take steps to make sure that we move forward. But we
    can't let the mistakes of the past relieve us of our
    responsibility to make NEON come true in a good and meaningful
    way in the short run.
        This is--we can overcome the budget challenges to look to
    the incredible technological and environmental benefits that
    NEON will yield when we get past this. It is wise and important
    to understand the interaction among organisms in our
    environment and the impact the environment has on these
    organisms, specifically how land-use changes and climate change
    are driving ecological change, and how these changing systems
    in turn affect human health and wellbeing, and the economy, and
    this is NEON's fundamental purpose.
        The environmental data that NEON collects will--and their
    analyses that will be conducted on the basis of this will help
    us understand the spread of invasive diseases, invasive
    species. It will help us gain potential insights into the
    biological and agricultural impact of increasing droughts
    across the country. It will help us explore responsible
    measures regarding land use, and aid scientists in deciphering
    the challenges we face from climate change.
        So I'm looking forward to a good discussion on what
    happened and how we can prevent it in the future, but we also
    want to make sure that this doesn't get to be highly political
    because history would suggest that that would be pretty ugly.
        Thank you. I yield back to the Chair.
        [The prepared statement of Mr. Beyer follows:]

                Prepared Statement of Subcommittee on Oversight
                  Minority Ranking Member Donald S. Beyer, Jr.

        Thank you Chair Comstock and Loudermilk.
        I believe the National Ecological Observatory Network or NEON is a
    valuable and innovative scientific project. Its mission, to create a
    nationwide observatory to detect, study and forecast ecological change,
    is a major challenge with the potential for great scientific benefits.
        I am, however, concerned that some of the management and budget
    challenges NEON has recently confronted may have been avoided. It
    appears that the National Science Foundation (NSF) may not have been
    adequately informed by NEON project management of cost and schedule
    challenges when they originally emerged. The potential cost overrun
    also raises legitimate questions about NSF's oversight of the NEON
    project. It troubles me that NEON was on a projected path that would
    have placed it $80 million over budget and potentially 18 months behind
    schedule, although I am thankful that NSF and NEON Inc. are now taking
    aggressive actions to put NEON on a better path forward.
        I hope that our two witnesses, Dr. Olds from NSF and Dr. Collins
    from the NEON Inc. governing board, can help us better understand what
    led to this situation and what corrective actions they have put in
    place to prevent these issues from emerging in the future. I have other
    questions regarding how NEON Inc. and NSF are communicating with the
    ecological sciences community about their needs and what steps they are
    each taking to ensure that these needs are being appropriately examined
    and addressed.
        We cannot step back to prevent past mistakes or missteps. But we
    can and should learn from these past events. We can implement
    corrective actions now to ensure greater oversight of NEON by NSF in
    the future. NEON is a unique and important scientific endeavor. I
    believe NEON Inc. and NSF can rise to the challenge and build a cutting
    edge scientific facility. There may be bumps on the road ahead and new
    scientific and management challenges. That is not uncommon to
    innovative technological projects. But I believe the benefits we will
    draw from NEON's future are indispensable and worthy of our continued
    investment and support.
        I believe it is both wise and important to understand the
    interaction among organisms in our environment and the impact the
    environment has on these organisms, specifically how land use changes
    and climate change are driving ecological change, and how these
    changing systems in turn affect human health and wellbeing, and the
    economy. Fundamentally, this is NEON's purpose. Everyone benefits from
    this challenging scientific endeavor.
        The environmental data NEON will help collect and the scientific
    analyses that will be conducted will help us all better understand the
    spread of infectious diseases and invasive species. It will help us
    gain potential insights into the biological and agricultural impact of
    increasing droughts across our country. It will help us explore
    responsible measures regarding land use, and aid scientists in
    deciphering the challenges we face from a changing climate.
        I believe these are deeply important issues, regardless of
    political convictions. I believe there are legitimate management
    concerns about NEON that needs to be aggressively addressed and quickly
    corrected. But I hope those issues are not used as a political excuse
    to undermine the unique scientific benefits we can all gain from this
    project.
        Thank you. I yield back.

        Chairwoman Comstock. Thank you, Beyer.
        I now recognize the Chairman of the full Committee, Mr.
    Smith.
        Chairman Smith. Thank you, Madam Chair.
        This morning's hearing will focus on one of the National
    Science Foundation's most ambitious major research facility
    projects, the National Ecological Observatory Network, or NEON.
    This hearing should help answer why the NSF and NEON Inc.
    failed to heed the warning signs that the $433 million project
    was seriously off track. We now have a better estimate of just
    how far off track---$80 million over budget and 18 months
    behind schedule--and there is no guarantee that the figure is
    not even higher, as I understand NSF has increased this
    estimate several times since June.
        For over a year, this Committee has raised concerns about
    the financial mismanagement of NEON. We have pushed the NSF to
    exert greater oversight controls of the construction project,
    which seemed to be plagued with problems. In the first NEON
    hearing the Committee held in December 2014, we learned that
    the Inspector General's independent audit of NEON's cost
    proposal identified more than $150 million in unsupported or
    questionable costs, yet NSF went ahead and made the award and
    did not resolve these issues.
        A second audit of NEON's accounting system revealed a
    number of inappropriate NEON expenditures, which include
    lobbying, parties, and travel. All of these activities were
    financed by the management fee NSF agreed to pay NEON for
    ordinary and essential business expenses, and, of course, all
    these dollars came from taxpayers. The IG issued an Alert
    Memorandum this week that details further inappropriate
    expenditures by NEON discovered by the National Science
    Foundation. These include liability insurance for the CEO,
    excessive legal fees, and salaries for multiple executives in
    excess of $200,000. It also appears NEON wasted a half a
    million dollars when it broke a rental lease to move into a
    larger office space.
        NSF discovered these inappropriate costs when they finally
    started to require NEON to provide more detail about its
    spending in May 2015. My understanding is that NEON still has
    not provided the NSF with adequate documentation to review all
    taxpayer-charged expenses.
        In the Committee's second hearing in February, the chairman
    of NEON testified that NEON had made mistakes, but pledged to
    redouble their efforts to be ``good stewards of the taxpayer
    funds we receive.'' It appears that the leadership of NEON Inc.
    has not fulfilled that promise. I understand that the Board of
    Directors is transitioning out the current CEO and is in the
    process of hiring a replacement. But I am frankly not sure that
    change is enough to regain the confidence of this Committee or
    the American people.
        For its part, the NSF finally seems to be taking steps to
    more closely manage and take control over the costs of NEON. I
    am pleased that at the Committee's urging, the Foundation also
    has begun to evaluate how it can better manage major research
    facilities in the future. But the NSF must now scale back the
    scope of NEON to keep it under budget, which means less science
    for the same price tag. This week the IG recommended some
    additional steps that the NSF could take immediately to ensure
    it has the financial and project information it needs to
    oversee NEON. I hope the Foundation will take a close look at
    those recommendations.
        The NSF, as well as its grantees and contractors, need to
    be held accountable for how they spend taxpayers' hard-earned
    dollars. I hope today's hearing will give the Committee a
    better understanding of the missteps that have lead NEON to
    this point, and I hope it will lead to a solution, which
    includes the possibility of legislative action, so that the
    mismanagement of taxpayer funds will not continue.
        Madam Chair, also let me acknowledge that most of the
    problems with NEON occurred before the current Director of the
    National Science Foundation, Dr. Cordova, assumed her
    responsibilities, but there is still much that needs to be
    done, and I realize that Dr. Cordova is aware of that too.
        I'll yield back.
        [The prepared statement of Chairman Smith follows:]

            Prepared Statement of Committee Chairman Lamar S. Smith

        This morning's hearing will focus on one of the National Science
    Foundation's (NSF's) most ambitious major research facility projects,
    the National Ecological Observatory Network, or NEON.
        This hearing should help answer why the NSF and NEON Inc. failed to
    heed the warning signs that the $433 million project was seriously off
    track. We now have a better estimate of just how far off track--$80
    million over budget and 18 months behind schedule.
        And there is no guarantee that the figure is not even higher, as I
    understand NSF has increased this estimate several times since June.
        For over a year this Committee has raised concerns about the
    financial mismanagement of NEON. We have pushed the NSF to exert
    greater oversight controls of the construction project, which seemed to
    be plagued with problems.
        In the first NEON hearing the Committee held in December 2014, we
    learned that the Inspector General's (IG's) independent audit of NEON's
    cost proposal identified more than $150 million in unsupported or
    questionable costs. Yet NSF went ahead and made the award and did not
    resolve these issues.
        A second audit of NEON's accounting system revealed a number of
    inappropriate NEON expenditures, which include lobbying, parties, and
    travel. All of these activities were financed by the management fee NSF
    agreed to pay NEON for ordinary and essential business expenses. And,
    of course, all these dollars came from taxpayers.
        The IG issued an alert memorandum this week that details further
    inappropriate expenditures by NEON discovered by the NSF. These include
    liability insurance for the CEO, excessive legal fees, and salaries for
    multiple executives in excess of $200,000. It also appears NEON wasted
    $500,000 when it broke a rental lease to move into a larger office
    space.
        NSF only discovered these inappropriate costs when they finally
    started to require NEON to provide more detail about its spending in
    May 2015. My understanding is that NEON still has not provided the NSF
    with adequate documentation to review all taxpayer charged expenses.
        In the Committee's second hearing in February, the chairman of NEON
    testified that NEON had made mistakes, but pledged to redouble their
    efforts to be ``good stewards of the taxpayer funds we receive.'' It
    appears that the leadership of NEON Inc. has not fulfilled that
    promise.
        I understand that the Board of Directors is transitioning out the
    current CEO and is in the process of hiring a replacement. But I am
    frankly not sure that change is enough to regain the confidence of this
    Committee or the American people.
        For its part, the NSF finally seems to be taking steps to more
    closely manage and take control over the costs of NEON. I am pleased
    that at the Committee's urging, the Foundation also has begun to
    evaluate how it can better manage major research facilities in the
    future.But the NSF must now scale back the scope of NEON to keep it
    under budget, which means less science for the same price tag.
        This week the IG recommended some additional steps that the NSF
    could take immediately to ensure it has the financial and project
    information it needs to oversee NEON. I hope the Foundation will take a
    close look at those recommendations.
        The NSF, as well as its grantees and contractors, need to be held
    accountable for how they spend taxpayers' hard-earned dollars.
        I hope today's hearing will give the Committee a better
    understanding of the missteps that have lead NEON to this point. And I
    hope it will lead to a solution, which includes the possibility of
    legislative action, so that the mismanagement of taxpayer funds will
    not continue.

        Chairwoman Comstock. Thank you, Mr. Chairman.
        At this time I would now like to introduce our witnesses.
    Our first witness is Dr. James Olds. He is the Assistant
    Director of the Directorate for Biological Sciences, or BIO, at
    the National Science Foundation. Before joining NSF, Dr. Olds
    was Director of the Krasnow Institute for Advanced Study at
    George Mason University in Virginia. Dr. Olds received his
    undergraduate degree in Chemistry from Amherst College and his
    doctorate from the University of Michigan in Neuroscience.
        Our second and final witness today is Dr. James Collins,
    Chairman of the Board for NEON. Prior to his work with NEON,
    Dr. Collins was NSF's Assistant Director for Biological
    Sciences. Dr. Collins has a long history at NSF, having served
    in various positions there from 1985 to 2009. Dr. Collins is
    also the Virginia M. Ullman Professor of Natural History and
    Environment in the School of Life Sciences at Arizona State
    University. Dr. Collins earned his bachelor of science degree
    from Manhattan College and his Ph.D. from the University of
    Michigan.
        I now recognize Dr. Olds for five minutes to present his
    testimony.

                    TESTIMONY OF DR. JAMES L. OLDS,

                          ASSISTANT DIRECTOR,

                  DIRECTORATE FOR BIOLOGICAL SCIENCES,

                      NATIONAL SCIENCE FOUNDATION

        Dr. Olds. Madam Chairwoman, Mr. Chairman, and Members of
    the Committee, thank you for this opportunity to testify about
    the National Science Foundation's oversight of the National
    Ecological Observatory Network project. I will confine my
    remarks to the steps NSF took to strengthen its oversight of
    NEON Inc. in light of recent schedule slippages and potential
    cost overruns. My written testimony provides a more complete
    explanation of the NEON project and its management history.
        NEON is a one-of-a-kind continental-scale research
    observatory with a potential to transform environmental
    science. NEON construction and operation are funded through a
    cooperative agreement with NEON Inc., a private nonprofit
    corporation responsible for building and operating the NEON
    project. An integrated NSF project team currently tracks NEON
    Inc.'s progress and costs against deliverables in the
    cooperative agreement and the organization's expenditures.
    NEON's civil construction has been completed in 48 of 82 site
    locations with expenditures to date of approximately $285
    million.
        In spite of NSF oversight of NEON Inc., a cost sufficiency
    review and attempts at corrective guidance, it was clear to NSF
    in June of 2015 that NEON Inc. was at risk of a potential $80
    million cost overrun and an 18-month schedule delay.
        NSF takes its responsibility for stewardship of taxpayer
    resources extremely seriously and strong oversight of our large
    facilities is a top priority for NSF. That is why major
    research projects are subject to NSF's no-cost-overrun policy,
    which requires the project to maintain its cost and schedule
    profile within budget and timeline approved by the National
    Science Board and approved and appropriated by Congress.
        When a project encounters potential cost overruns, NSF
    conducts a Scope Management Analysis to determine if the
    project should be de-scoped or canceled. A de-scoping can be
    achieved while still preserving the plan's transformational
    science and the project is allowed to continue within the
    bounds of the original budget.
        Consistent with NSF policy, in July 2015, the NSF Biology
    Directorate convened a Scope Management Analysis of NEON by a
    panel of experts drawn from NSF, NEON Inc., the Neon Board of
    Directors, and scientific experts from the community involved
    in the original design. This panel developed a plan to reduce
    NEON Inc. corporate and project management costs, accelerate
    transition to operations, and selectively reduce non-essential
    capabilities. Importantly, this plan will still allow NEON Inc.
    to deliver a continental-scale observatory that accomplishes
    the planned science goals. NSF formally notified NEON Inc. of
    this de-scoping plan including a detailed series of benchmarks
    and deadlines that must be met for the project to stay on
    track. Key community and government stakeholders were informed
    when the Scope Management Plan was finalized.
        In response, I'm pleased that past and present presidents
    of the Ecological Society of America published a letter
    expressing their enthusiastic support of the NEON project in
    its new de-scoped form.
        As described in my written testimony, NSF has carefully
    examined and strengthened its oversight of the project
    including implementing oversight recommendations by the NSF
    Inspector General. Organizing a review of the de-scoped project
    science by an independent subcommittee, the Biology Directorate
    Advisory Committee and establishing a National Science Board
    Task Force to monitor overall progress.
        By December 1, 2015, NSF expects to have enough information
    to determine if NEON Inc. has improved sufficiently to complete
    construction of the NEON project within budget and on time. If
    NEON Inc. is not capable of completing construction, NSF will
    take action to pursue an alternative management process capable
    of completing construction.
        Madam Chairwoman and Mr. Chairman, I hope I have reassured
    you that NSF has greatly increased its oversight of this
    important project and that we are following up with specific
    and appropriate actions. We remain ready to take additional
    actions if needed, but we are hopeful that the NEON Observatory
    will fulfill the goal of being a continental-scale research
    platform that supports transformative science.
        Thank you again for the opportunity to testify. I would be
    pleased to answer your questions.
        [The prepared statement of Dr. Olds follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Comstock. Thank you, Dr. Olds.
        And I now recognize Dr. Collins for five minutes to present
    his testimony.

                   TESTIMONY OF DR. JAMES P. COLLINS,

                         CHAIRMAN OF THE BOARD,

             NATIONAL ECOLOGICAL OBSERVATORY NETWORK, INC.

        Dr. Collins. My name is Dr. James Collins, and I serve as
    chairman of the Board of Directors of NEON Inc., a 501(c)(3)
    corporation established to implement NEON, or the National
    Ecological Observatory Network.
        At the outset, I want to thank you for your commitment to
    NEON. I can't say I relish the time I spend before you on this
    project--you ask hard questions but your diligent oversight is
    welcomed, and there is no doubt that it has made NEON a better
    project.
        I also want to thank NSF for its vision and tireless
    support of NEON and for being a terrific partner in this path-
    breaking project.
        Finally, let me say that I share your concerns about the
    construction budget gap and regret that the project required
    re-scoping. We're taking dramatic steps to place NEON back on
    the right path, and I commit to you that we will do what we can
    to keep it there.
        NEON is an advanced research infrastructure for the study
    and analysis of the biosphere. Across the continent, we are
    creating a network of instruments and sensors so that we can
    better understand our changing environment at an unprecedented
    level of detail and successfully forecast and respond to these
    changes.
        Despite recent changes to the project, NEON's high-level
    science requirements have not and will not be compromised. We
    are working aggressively to re-scope NEON based on the
    recommendations of NSF, NEON Inc., and community experts
    convened in July 2015. But the discussion did not start then.
    Five months earlier, in February 2015, NEON Inc. staff members
    initiated the discussions to explore strategies for cost
    savings through improved efficiencies and restructured
    processes. During these discussions, NEON Inc. staff proposed
    recommendations that ultimately formed the backbone of the
    current re-scoping. Under the re-scoped configuration, NEON
    will continue to build and then collect data at 81 of its
    original 96 sites. The essential core NEON terrestrial and
    aquatic sites all remain part of the national site
    constellation.
        Your opening statements made clear your interest in
    discussing NEON's construction budget and specifically you cite
    $80 million gap between the construction budget approved in
    2011 and NEON's current construction budget. To be clear, the
    gap is the result of costs that were underestimated, and NEON
    Inc. bears its share of blame.
        While I go into greater detail in my written statement, let
    me list three categories of such underestimated costs. First,
    production costs and technology development. This accounts for
    about 50 percent of the gap. Challenges obtaining permits, this
    accounts for about 25 percent of the gap. And transitioning of
    observatory elements to operations, and that's about 25 percent
    of the gap.
        The gap necessitated the re-scoping completed this past
    July. It's important to note that NEON has not requested nor
    received any additional construction funds. I would also note
    that at least five other NSF MREFC projects have undergone
    scope revisions, management adjustments, and/or instrument
    configuration changes during construction. So in this respect,
    NEON is not unique.
        NEON Inc. is committed to ensuring that further re-scoping
    will not be necessary in the future. Together with NSF and
    independently, we are taking steps not only to develop and
    share better information in a more timely manner but also to
    fundamentally change the processes we undertake in order to
    ensure that NEON is on track and within budget. Let me briefly
    discuss some of these steps.
        First, NEON has addressed the issues that led to the re-
    scoping by, among other things, reorganizing its complete
    supply chain to better facilitate the production process and
    imposing new control measures on permitting activities. Second,
    NEON is working closely with NSF as well as independent cost
    and schedule consultants to revise cost estimates and to ensure
    that adequate systems and estimating methodologies are
    implemented.
        Third, NEON is now providing a comprehensive monthly
    financial report to the NSF that includes detailed
    expenditures, explanations of expenditures by budget line item,
    and functional areas with the sources of funding clearly
    identified. In addition, NEON is providing the NSF with
    complete general ledger detail of all transactions. Fourth,
    NEON Inc. is under the guidance of a new interim CEO. We will
    be searching for a new CEO. NEON is developing a comprehensive
    strategy for improving project management and identifying
    potential cost reductions.
        NEON Inc. understands that in its pursuit of scientific
    goals, it must not sacrifice responsible stewardship of
    taxpayer dollars. That is a lesson to which we will strictly
    abide as we continue to monitor our construction schedule and
    budgeting work towards completing the observatory.
        Thank you, and I welcome your questions.
        [The prepared statement of Dr. Collins follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Comstock. Thank you.
        I thank the witnesses for their testimony, and the Chairman
    recognizes herself for five minutes of questioning.
        Okay. Dr. Olds, we understand that NSF was originally
    informed by NEON that the cost overrun would be $27 million and
    then at that point NSF has further questions in light of that,
    and then the estimates went up to $40 million, then 60, then
    80. How confident are you that we're at the right figure now,
    and that in looking back because the IG has looked at this and
    sort of a lot of this was predicted in this manner, what was
    ignored in the previous analysis and why the process of how we
    can prevent that, given we sort of had the warnings and they
    came true to a large extent? How do we and how can you going
    forward avoid this kind of situation?
        Dr. Olds. Madam Chairwoman, when the February hearing took
    place about NEON, I was deeply troubled, and it wasn't the
    scale of the dollars and the management fee, it was the fact
    that that issue had been raised at all, and so I sent in the
    early spring after that hearing a number of members of my team
    including folks who are expert in finances, and they basically
    sat in a rolling review of what was going on with NEON's
    dollars that lasted from the middle of spring through June 15.
    When it became clear to that NSF team in collaboration with
    NEON folks, that this problem was much larger that had been
    anticipated, that forensics was led by NSF folks. You know, I'm
    a molecular neuroscientist so my expertise is not in financial
    forensics, but we are determined to actually make sure that we
    are sure about the dollars. We accept the NSF Inspector
    General's recommendations, and we plan to in December when we
    finish up looking at the numbers, to get an independent cost
    estimate on those NEON numbers also just to make sure that
    there are other eyes looking at this. But I think this was a
    result of hard work on the part of NSF and NEON during the
    spring to actually elucidate the right number.
        Chairwoman Comstock. And Dr. Collins, could you kind of
    basically answer the same question on how you see--and I know
    you're in a position where you're still looking for somebody to
    run the project here, so we keep inviting you back. Thank you
    for being here. But can you offer us your thoughts on the same
    issue?
        Dr. Collins. I can. So for purposes of perspective, it's
    useful if we start in August 2014 actually. So in August of
    2014, as a result of a series of reviews, NEON was given a
    clear bill of health. It was scheduled to be on time and on
    budget as of August of 2014. In November, the period of
    November-December of 2014, as a result of regular financial
    reviews at NEON itself, it was recognized that in fact there
    was an expense of about $11-1/2 million that was not included
    as far as the August review is concerned. So at that point we
    were looking at about $11-1/2 million, and there was another
    expense of about $4.5 million to bring to a total of about $16
    million at that point that should have been accounted for in
    that August 2016--I am sorry--August 2014 review.
        In January of 2015, then, another internal review at NEON
    uncovers that there looks to be a gap developing as far as
    production costs are concerned in the project. So this is
    important to note, that it was a result of internal forensics,
    to use Dr. Olds's words, which is a good thing. The corporation
    itself is reviewing itself, and at that point in January 2015
    informs NSF that it looks like there's this gap that's
    developing within the corporation.
        In February of 2015, then, the board gets notified that
    this gap is developing in terms of something that needs to be
    corrected, and this was at a regularly scheduled board meeting
    that we were informed. The board then took upon itself to call
    a special meeting in March of 2015 to get a better handle on
    what was going on as far as the finances are concerned and to
    make it clear to the corporation that they had to take this
    absolutely seriously and we had to understand what was
    happening. So that was a special board meeting in March. In
    April, then, there's a much better handle on the production
    expense, and that's about $20 million. Put that together with
    the $16 million and now we have about $36 million that's
    developing as a gap, and that's in April of '15.
        NSF then comes in and asks for a directive assistance
    review, which is a good thing to do because at that point now
    you have a whole other set of eyes to begin to look at the
    project and say all right, where are we at on this in order to
    get a better handle on it. In order to do that review, NSF
    asked the project to not go back to August 2014 but to rather
    go back to 2011, February of 2011, and re-baseline the project
    from February of 2011, and it was in the course of re-
    baselining the project from February 2011 that you sweep up a
    bunch of additional expenses because you're essentially taking
    costs from 2015 and you're projecting them back over multiple
    years and then you're bringing them forward to project what the
    cost is going to be. So at that point you run it up to $80
    million.
        Chairwoman Comstock. Okay. And those kind of situations,
    are there areas you're able to identify that those costs don't
    have to be? There are, things like you said, with permitting.
    That's a problem there that you just didn't know what the
    permits were going to be and now those are fixed costs that you
    can't adjust in any way?
        Dr. Collins. That's right, and they fall into this category
    of areas where you start out, you expect some difficulties when
    it comes to permitting. Just as when you go into remodel a
    home, you expect some difficulties, but yet there are things
    that still pop up, and in the case of permitting in particular,
    there are things like endangered species that show up on a
    review and you have to deal with that, for example, and with
    permitting when you're doing something across the entire
    country and you have 20 sites, it's prudent and it makes a lot
    of sense to take the easiest sites first so that you can keep
    the construction moving along. But then as you take care of the
    easier sites, it becomes harder to take care of those at the
    end, and especially those where you begin to run into ``not in
    my backyard.''
        Chairwoman Comstock. You know, I'm sorry, I know we're over
    time, but will you continue to highlight for us some of those
    things because I know we often deal with all those things. It
    might be informative for us to know where there are these local
    regulations where they're causing particular problems that we
    might want to know about because we are often doing things in
    other areas to alleviate those problems. So thank you.
        And I now recognize Mr. Lipinski for five minutes.
        Mr. Lipinski. Thank you.
        I want to focus on not only NEON but also more general
    lessons learned. I want to start out with Dr. Olds and the IG
    recommendations. The NSF IG made a series of recommendations
    since 2011 for strengthening cost controls and general
    management oversight of MREFC projects, not just limited to
    NEON. The IG and NSF senior officials have testified on these
    issues in earlier hearings. The NSF had implemented a number of
    the IG's recommendations but continues to disagree with others.
    The IG's Alert Memo issued earlier this week restated all of
    these earlier recommendations and faulted NSF for continuing to
    resist some of them.
        So Dr. Olds, can you please update us as to which IG
    recommendations you have fully complied with and which you
    continue to have some disagreements over, and why--what's the
    nature of the disagreements?
        Dr. Olds. Congressman, the NSF accepts all of the
    recommendations of the IG in the Alert Memo that you just
    received, and the only one that we're delaying is the
    independent cost estimate because we need to get the data to
    have such an independent cost estimate, which we will have in
    December.
        Mr. Lipinski. Okay. So--but you are saying that you agree
    with all of them, and is there anything more that you want to
    tell us about what NSF has done in terms of complying with the
    recommendations?
        Dr. Olds. Sure. Over the past 15 years, NSF has spent
    tremendous effort developing and implementing and detailing
    requirements related to its oversight of large facilities
    projects. These requirements are published in the NSF's Large
    Facilities Manual, which was just recently revised and
    published in June of this year. It's a much tougher document.
    And it must be noted that NSF's primary role is oversight while
    our recipients like NEON Inc. are responsible for the day-to-
    day management of construction, operation facilities. So NEON
    is an excellent example of how NSF is implementing its latest
    policy and process improvements in accordance with the IG's
    advice.
        Mr. Lipinski. Okay. Let me use the rest of my time. I want
    to go over to Dr. Collins in regard to lessons learned.
        You started going into some of those, I think, in your
    testimony and then in the--some of your answers to the
    Chairwoman's questions. Is there anything else that you could
    tell us that you think--mistakes that were made by NEON Inc. or
    mistakes by NSF in the whole process of what kind of lessons we
    might be able to learn from these going forward with other
    projects.
        Dr. Collins. Sure. One of the lessons--and to echo
    something that Dr. Olds said, is to bring more outside
    expertise in, and in particular, outside expertise on the
    accounting side as far as these projects are concerned as
    opposed to the performance side. So the reviews often emphasize
    performance as far as the science is concerned relative to
    outcomes, relative to the goals that you're looking for, and is
    the project proceeding towards those goals. What we could use
    is a deeper analysis of the accounting side, the expense side,
    individuals who are really familiar with the ins and outs of
    the accounting on these large projects. That would be one point
    in terms of something that would be very, very helpful.
        The other thing is to--just to expand on that in terms of
    estimates where you really get to the ground truth of what
    those estimates are. So the estimates are made early on using
    the best information that's available, inflation indicators,
    for example. But you have to be willing to go in and reach into
    the project and keep adjusting those on really an adaptive
    management basis in order to keep constant track of what those
    expenses are on an ongoing basis. That's really the biggest
    lesson it seems to come out of this as far as I'm concerned as
    I watch all these reviews that are taking place, and yet in
    some ways there are details that are slipping through the
    fingers of the referees in these cases, and we need to do a
    better job and understand probably on the accounting side
    what's going on.
        Mr. Lipinski. Thank you. My time's up, so I yield back.
        Chairwoman Comstock. Thank you, and the Chair now
    recognizes Mr. Loudermilk.
        Mr. Loudermilk. Thank you, Madam Chair.
        Before I get into my questions, I'd like to make a
    statement and have something entered into the record.
        According to a September 2015 Cato Institute report on
    federal government cost overrun, the statement is: ``Cost
    overruns on large government projects are pervasive. The
    problem appears to stem from a mixture of deception and
    mismanagement. It has not diminished over time. One of the many
    consequences is that taxpayers are likely footing the bill for
    many projects that cost more than the benefits delivered.'' And
    I ask that a copy of the Cato report be entered into the
    record.
        Chairwoman Comstock. No objection.
        [The information appears in Appendix II]
        Mr. Loudermilk. Dr. Olds, thank you for being here today.
    I've got a couple of questions, and I appreciate your
    commitment that you and I have met about and you have stated
    here today to make sure that this project comes in within the
    budget level or we move on, and I think that's what the
    taxpayers are expecting.
        First question. Before this cooperative agreement was
    signed, there was an ongoing audit of NEON's initial cost
    proposal. However, the NSF didn't wait for the audit to be
    completed before awarding the contract. The first question is,
    why did we not wait, and if we would have waited, would that
    audit of the initial cost proposal uncovered some of the
    potential cost overruns?
        Dr. Olds. Congressman, NSF has worked to resolve the OIG
    recommendations. Based on our review of the audits conducted,
    only approximately five percent, or $19.8 million, of the costs
    questioned in the audits were ultimately determined by NSF to
    not be properly documented and justified. It is important to
    note that this amount is associated with differences in the
    estimated costs necessary to complete the project and not
    actual expenditures. NSF has required that NEON provide
    additional justification for these costs. The bottom line is,
    we need to pay really careful attention to the cost estimates
    that are the basis for these large projects. It's something
    that's essential so that we deliver to the taxpayer what they
    deserve, and I think that's really where our eyes need to be on
    the ball in the future.
        Mr. Loudermilk. But in the initial cost estimate of the
    project, you know, the audit of the project estimate, if we
    would've waited for that audit to be done, would that have
    uncovered some of the overruns we have now?
        Dr. Olds. Congressman, I think that the key aspect is,
    these audits as a result as a rule are really important lest we
    go off course. I think it's always possible to look back in
    time and say could we have done something different or better.
    What I am prepared to say is, we have to redouble our efforts,
    redouble our efforts to actually take numbers, get them looked
    at not only by us but independent auditors so that the basis
    for these cost estimates is as solid as possible for the
    American people. That's the goal going forward. And what I can
    promise you is that in the months leading up to the December
    decision point, we're going to be doing just that. We're going
    to be putting as many eyes as possible on these cost estimates
    so that those dollar figures are not fuzzy.
        Mr. Loudermilk. Dr. Collins, can you answer the question?
    Would an audit of the cost proposal have uncovered some of
    these cost overruns?
        Dr. Collins. I'll go back to the example that you used
    yourself in terms of when you put up a building, you do wind up
    with these costs that are just unexpected. So part of the
    answer is, sure, we could have, and indeed, the project, as I
    suggested earlier in response to Mr. Lipinski, by having
    additional external eyes, especially when it comes to folks
    really skilled in accounting. Yes, you probably could have
    taken care of some of the variance there. There's going to be
    some of the variance, though, that's going to be left over that
    it's the nature of doing larger construction projects that you
    still have to be able to pick up and be able to deal with.
        Mr. Loudermilk. But isn't that what the $60 million in
    contingency was for, those unintended, unexpected----
        Dr. Collins. Those $60 million in contingency, that is what
    it's for as far as unexpected is concerned, and that takes care
    of that level of unexpected costs that in a way you expect to
    have, you expect to be showing up. But in a project like this
    where you're developing new technology, you're of necessity
    going to have new costs added on top.
        Mr. Loudermilk. So the $60 million is for expected
    unexpected costs is what you're saying?
        Dr. Collins. You can put it that way.
        Mr. Loudermilk. Okay. Okay. I'm running out of time, but
    one other question. Is this standard operating procedure for
    NSF to award these agreements without first completing an audit
    of the cost proposal?
        Dr. Olds. I think NSF has to strive for all projects going
    forward to audit the cost estimates multiple times so that we
    are really sure of those numbers. That's our obligation to the
    American people.
        Mr. Loudermilk. I yield back the balance of my time.
        Chairwoman Comstock. Thank you, and I now recognize Mr.
    Beyer.
        Mr. Beyer. Thank you, Madam Chair.
        I want to begin, Dr. Olds, by thanking you for at least
    four things. First, for the many, many steps taken both in your
    oral testimony and your written to get the project back on
    track, both in time and in costs, and you're very committed to
    that and you've done lots of things to do that.
        Second, I want to congratulate you on the accountability.
    We had a very painful hearing yesterday with EPA Administrator
    Gina McCarthy in Natural Resources and the Oversight and
    Government Reform Committees in which mirroring an earlier
    hearing that we had here on accountability on the same spill on
    August 5 out in Colorado, three million gallons of acid mine
    wastewater, and they kept coming back to say who was fired, who
    was fired, who was fired. Well, I can tell them the head of
    NEON was fired for these cost overruns.
        The third thing I'd like to thank you for is for adopting
    all of the IG recommendations, even those that you weren't
    exactly excited about, and three of them implemented already.
        And finally, to match up with Chairman Loudermilk's
    comments on Cato, I wonder if we could send a no-cost-overrun
    policy to Cato and they could figure out how we could apply
    this to the rest of the federal government, and also I'm
    thinking about our own household budget, and how we could apply
    that.
        And Dr. Collins, in your written testimony also, you talked
    about the $80 million broken and $40 million of it was the
    establishment of sustainable supply chain for procurement
    production. It seems that that was largely you didn't realize
    the contractors there to build the sensors, the quality needed
    at the time just weren't there.
        Dr. Collins. That's right.
        Mr. Beyer. And the second $20 million was permits. I was
    fascinated by the fact that you needed ten times as many
    permits as you'd anticipated originally, and even the Inspector
    General pointed out that the permitting was something that was
    factors outside your control.
        Dr. Collins. Exactly.
        Mr. Beyer. The third $20 million, the last 25 percent, was
    transition of observatory elements to operations. Could you
    explain that to us? That's the one thing I don't understand.
        Dr. Collins. Sure. So the observatory, the NEON
    observatory, basically has two pieces to it in the sense that
    first you have to build it. You're going to put up the towers,
    you're going to build the sensors and so on, put them on the
    towers, and you're going to develop the sampling regimes, and
    that's largely what's going on now and has been going on for
    the past 18 months, two years. And now the observatory is in a
    position of transitioning away from the construction part so
    the towers will be up, the sensors will be hung, and you're
    moving into individuals that will be now operating the system,
    will be collecting data. Now, there are already individuals in
    place to do that, and it's in the bringing the transition
    through that gets hard because you have to switch personnel.
    The same individuals who are doing the construction--engineers,
    technicians and so on--are not necessarily the same individuals
    who are going to be doing the operating part of the
    observatory. So there are whole new hirings that have to be
    done. Some individuals may transition but others will not.
        Mr. Beyer. Were the operating costs ever intended to be in
    the original $430 million budget, though?
        Dr. Collins. No, the operating costs are handled separately
    from the original construction budget.
        Mr. Beyer. Thank you, Dr. Collins, very much.
        Dr. Olds, much has been made of the $257,000 in lobbying
    costs, the Christmas party, the entertainment, visas and meals.
    How much of the--when you put all that together, how much of
    the $80 million is represented by these controversial costs?
        Dr. Olds. The controversial costs are not represented at
    all in the dollars that were uncovered looking at the
    trajectory to a cost overrun. Those are, as Dr. Collins said,
    related to these really substantive scientific and engineering
    issues, permitting and the like.
        Mr. Beyer. Thank you.
        Dr. Olds, one of the things in the IG's letter, she talked
    about the NSF hadn't required the incurred cost submissions
    from NEON nor has it conducted an incurred-cost audit of NEON,
    and if NSF had taken either action, NSF could have been able to
    identify unallowable or poor spending mby on NEON, and yet I
    think what we've just heard is, the $80 million wasn't
    unallowable or poor spending, that it was permitting, it was
    the shift to operations, and it was the absence of a secure
    supply chain. Am I reading that correctly, and does that make
    this particular IG recommendation less meaningful?
        Dr. Olds. Congressman Beyer, so I want to make sure that I
    give you a very full and accurate answer to that question so
    I'm going to ask to get back to you on that one for the record.
        Mr. Beyer. You're a thoughtful, careful person.
        One last thought. None of the proposed cost elements for
    labor, overhead, equipment and other costs reconciled to the
    supporting data in the proposed budget. Again, a direct quote
    from the IG's report. I'm just about out of time, but it
    concerns me greatly that the budget didn't match up with the
    underlying data.
        Dr. Olds. I think it's always a challenge to get these
    things right on really complicated projects where you're
    building a distributed instrument that extends from Barrow,
    Alaska, to Puerto Rico, and you're using bleeding-edge state-
    of-the-art technology and trying to network it all together. So
    that's always a challenge, and it's very--it's qualitatively
    very different from building something like a ship or an
    airplane that we've had a lot of experience with, so I think
    that relates to those challenges.
        Mr. Beyer. Thank you.
        Thank you, Madam Chair.
        Chairwoman Comstock. Thank you, and the Chair now
    recognizes Mr. Johnson.
        Mr. Johnson. Thank you, Madam Chairman.
        Dr. Olds, you testified that NSF started having concerns
    with the NEON project's budget and timeline management as early
    as January 2013. The NSF Inspector General first noted concerns
    about NEON's cost proposal in 2011 and recommended that NSF
    require annual incurred cost submissions and conduct annual
    incurred cost audits. NSF did not follow this recommendation.
    So in hindsight, could annual audits have caught NEON's cost
    issues earlier and helped preserve more of the budget as
    designed?
        Dr. Olds. Congressman, I'll freely admit that we could have
    done a better job, and what I'm determined to do is make sure
    that going forward we are as rigorous as we can possibly be in
    terms of auditing, getting cost estimates and getting
    independent eyes on on those so that we don't have these issues
    in the future.
        Mr. Johnson. Hindsight's always 20/20, isn't it?
        Dr. Olds. Yes, sir.
        Mr. Johnson. Again, Dr. Olds, the NSF Inspector General has
    previously recommended that NSF should retain contingency funds
    for projects like NEON and pay the contractor as those expenses
    are approved as appropriate contingency costs. The NSF has not
    agreed with this recommendation. Would retaining contingency
    funds for NEON have helped NSF notice the cost overrun at NEON
    sooner?
        Dr. Olds. Congressman, once again, that's an issue which is
    outside my area of molecular neuroscience, so I want to make
    sure I get you an accurate and full answer to that, so I'd like
    to get back to you on that one.
        Mr. Johnson. Take that one for the record. Okay.
        Let's see. Dr. Olds, in dealing with management and
    oversight, what alternative options does NSF have with respect
    to the existing NEON cooperative agreement? If you determine
    that you're not capable of delivering the project on budget and
    on time, is relieving NEON as the managing entity one of those
    options that would be considered?
        Dr. Olds. Congressman, I don't want to presuppose what the
    answer is going to be to the answer that we will receive in----
        Mr. Johnson. I'm not asking you for the answer. I'm asking
    you what options you might consider.
        Dr. Olds. I think that there are a variety of options that
    would quite substantive in terms of getting this project
    through to completion in a way that deals with the management
    issues that you put forward. I don't want to lock on to any one
    in particular at this time.
        Mr. Johnson. I'm not asking you to do that. I'm asking
    you----
        Dr. Olds. But I----
        Mr. Johnson. --is relieving NEON is the managing entity one
    of the options that would be considered?
        Dr. Olds. That's certainly an option.
        Mr. Johnson. Okay. All right. That's fair enough.
        Dr. Olds, it appears that NEON has moved $35 million of
    contingency funds into the base construction budget. The
    cooperative agreement requires approval by NSF for NEON to use
    contingency funds. Did NSF approve the transfer of contingency
    funds?
        Dr. Olds. That issue has been previously identified and
    addressed with NEON Inc. with regard to the process.
        Mr. Johnson. So did NSF approve?
        Dr. Olds. The organization had incorrectly concluded that a
    prior initial approval of their contingency estimate had
    provided authorization of contingency expenditures. That
    situation has been corrected. We do plan to do a full
    accounting of the documentation to ensure contingency
    allocations were not actually spent in advance of approvals.
        Mr. Johnson. Okay. So let me make sure I understood. You're
    telling me that NSF, the finding is that NSF did approve the
    transfer of contingency funds?
        Dr. Olds. I want to make sure that I get that exactly
    accurate so I'm going to have to get back to you on that
    answer.
        Mr. Johnson. I'm very interested in the answer to that
    because obviously there would be a violation of the cooperative
    agreement if that approval is not there.
        Dr. Olds. Understood.
        Mr. Johnson. Okay. Mr. Chairman, I yield--Madam Chairman, I
    yield back.
        Chairwoman Comstock. Thank you, and the Chair now
    recognizes Mr. Tonko.
        Mr. Tonko. Thank you, Madam Chair.
        While I have concerns regarding NEON's budget and
    management challenges, I also want to take this time to express
    my gratitude to the many people who had the vision for this
    type and scale of research and coordination. I recognize that
    NEON will have real implications for our understanding of
    climate science, of agriculture and infectious diseases, water
    use, and so many other areas that affect all of our lives.
    Improving our understanding of our world and how it's changing
    and how we effect that change will allow us to better evaluate
    our actions and priorities. For instance, the scale of this
    project will allow us to have a baseline of data that will
    inform us long before catastrophic events occur so that we can
    better prevent and prepare for these occurrences. So can you
    further describe why it is significant that this research is
    happening on such a large scale? Dr. Collins?
        Dr. Collins. Well, you said it very well in terms of the
    implications of the sort of research that's being done. It has
    the expectation to affect our understanding of the dispersal of
    infectious disease, emerging infectious diseases, exotic
    species. It has--it's designed to help understand the way in
    which various sorts of gases will move across the continent.
    So, as you've said, it really has these much larger
    implications in terms of grand challenge questions in the
    ecological sciences.
        Mr. Tonko. Now, we know that with the will and necessary
    resources, America will lead the way in continued exploration
    in research and development. When our Nation leads by investing
    and innovating, we also inspire our next generation of
    scientists and engineers. We must retain the will to learn
    about our world as well as the human infrastructure needed to
    make the proposed research a reality.
        I recently learned that Rensselaer Polytechnic Institute,
    which is in New York's 20th Congressional District, was one of
    19 academic institutions selected to receive a grant to do
    research that will leverage data from NEON. Can you further
    describe how these awards and NEON's efforts will ensure that
    our Nation's research pipeline, so to speak, will remain
    vibrant for the decades to come?
        Dr. Collins. Sure, sure. So NEON employs some 320
    individuals at the Boulder site, but then there are another 120
    individuals dispersed throughout the system in the United
    States in terms of gathering data and sampling various sorts of
    biological material across the country.
        Relative to your pipeline point, though, it's especially
    notable that in the summer, NEON brings on as many as 100 and
    even more summer interns, students, who work in the system and
    are learning the basic biological sciences, and therefore can
    go on to careers in the sciences themselves or basically are
    STEM-capable students. They know what science is about. They're
    dealing with leading-edge questions and they're dealing with
    leading-edge technology. Your example from RPI is really a good
    one in that one of my colleagues at RPI, who just moved there
    recently, is working with IBM to monitor a lake system in that
    area, and they're using comparable leading-edge technology to
    begin to understand what these ecological processes are looking
    like on a 24/7 basis and involving young people in doing this
    sort of work right from the very beginning.
        Mr. Tonko. What other types of data or research
    capabilities is NEON already providing to the larger scientific
    community, and who can access these resources?
        Dr. Collins. NEON is providing data from the airborne
    observing platform. This is a series of sophisticated
    instruments that are flown on airplanes over the NEON system.
    They'll eventually be flown over the entire NEON system. The
    planes are flying over eight domains, and those data are freely
    available to the entire community.
        Likewise, as far as the NEON system is concerned, when
    those data come online, and they're already coming online--they
    will be freely available on a 24/7 basis to the entire research
    community to use as they see fit.
        Mr. Tonko. Okay. I thank you very much, and with that,
    yield back, Madam Chair.
        Chairwoman Comstock. The Chair now recognizes Mr. Posey for
    five minutes.
        Mr. Posey. Thank you, Madam Chairman.
        Dr. Collins, since we last met, has NEON Inc. paid back the
    federal government any of the thousands of dollars spent on
    liquor and parties for the unintended benefit of the employees
    who enjoyed the endeavors?
        Dr. Collins. NEON has not used any management fee dollars
    since the last time I was here.
        Mr. Posey. Okay, but they haven't paid the government back?
    They haven't reimbursed the government for the unintended
    squandering of the tax dollars on parties and liquor?
        Dr. Collins. Well, as we discussed last time, there is this
    issue in terms of how management fees can be used, and we could
    not use management fees to pay back the federal government at
    this point. That's my understanding. I'm not an accountant when
    it comes to these details.
        Mr. Posey. Have there been any fears of repercussions from
    the IRS for the misuse of that money?
        Dr. Collins. Not that I'm aware of.
        Mr. Posey. You're a 501(c)(3) nonprofit corporation?
        Dr. Collins. That's correct.
        Mr. Posey. Who are the principals of the corporation, just
    out of curiosity?
        Dr. Collins. Well, the principals of the corporation would
    be--well, the board of directors has fiduciary responsibility,
    if that's what you mean.
        Mr. Posey. Yeah. Whose name is--who's the president of the
    company?
        Dr. Collins. Well, there's a chief executive officer of the
    company----
        Mr. Posey. Who's that?
        Dr. Collins. --who at the moment, the interim, is Gene
    Kelly, Dr. Eugene Kelly from Colorado State University.
        Mr. Posey. What state is it incorporated in?
        Dr. Collins. Colorado.
        Mr. Posey. Colorado? Given the total mismanagement by NEON
    Inc. of this project to date, why should it continue to manage
    the project? You know, wouldn't taxpayers and the research
    community be better served by another qualified organization
    taking over the management of the project?
        Dr. Collins. So we've--I've explained to you some of the
    details in terms of where the discrepancies occurred, and it's
    important, I believe, at a moment like this to appreciate the
    degree to which there is learning going on within the
    corporation and learning by the individuals. So we admit
    mistakes were made. We admit we could do a better job. I
    admitted that the last time. And therefore I believe the key is
    to look forward, and as Dr. Olds has suggested, put in place
    those kinds of things----
        Mr. Posey. Well, you know, when you were here in February,
    you testified ``We pledge going forward to redouble our efforts
    to be good stewards of the taxpayers' funds we receive.'' Yet,
    according to the National Science Foundation Inspector General,
    since that time they continue to discover inappropriate charges
    by NEON and its leadership.
        Dr. Collins. Well, inappropriate charges in----
        Mr. Posey. I think those they referred to as legal fees and
    lobbyist expenses.
        Dr. Collins. I'll have to get back to you on that because,
    as I said, there are no management fees that have been used
    since the last time I was here.
        Mr. Posey. Not a dime spent for lobbyists or legal fees,
    not one penny?
        Dr. Collins. Again, I would have to get back to you, but in
    terms of my understanding, that's true.
        Mr. Posey. Okay. Mr. Olds, do you care to comment?
        Dr. Olds. Well, I think it's extremely important that any
    federal monies that were misspent needs to be made right to the
    American people.
        Mr. Posey. You know, I think we can't spend the management
    fees to reimburse the federal government for wasting their
    money. Maybe you could just divide it among the participants
    that enjoyed the liquor and the parties and have them ante up
    and just repay the government for a party that wasn't intended,
    was authorized, certainly wasn't ethical, useful or in any way
    positive for the taxpayers who funded it. Does it sound like a
    good idea to you?
        Dr. Collins. And so your question is whether there should
    be some retroactive effort to gather in the individuals who
    were at the party and have them contribute?
        Mr. Posey. I know it's a foreign concept to some, but it's
    called justice. You know, you take something that doesn't
    belong to you, and as a minimum, you pay it back. Like the
    lawyers behind you today--are they lawyers for you? Are they
    your lawyers?
        Dr. Collins. There is one--I have one counsel representing
    me, yes.
        Mr. Posey. Okay. Do they get paid?
        Dr. Collins. Yes.
        Mr. Posey. Okay. Who pays them?
        Dr. Collins. NEON.
        Mr. Posey. And from what funds does NEON pay them?
        Dr. Collins. We have fees within the corporation to be used
    in order to ensure that the corporation is acting in ways that
    are consistent with the laws of the United States, and so we do
    have legal counsel.
        Mr. Posey. But you haven't used any since you told me since
    the last time we met here on lobbyists or legal fees, correct?
        Dr. Collins. I said that I--that we have not used any
    management fee money for lobbyists since the last time I was
    here.
        Mr. Posey. Okay.
        Dr. Collins. And we haven't spent any management fees at
    all.
        Mr. Posey. Okay. And the lawyers behind you, they prepared
    your testimony for today?
        Dr. Collins. I had help as far as the testimony and
    preparation from a variety of individuals, not just legal
    counsel, but individuals at NEON as well. It was a real team
    effort.
        Mr. Posey. Just to come in and tell us what's going on?
        Dr. Collins. Well, I guess I wouldn't say just to come in.
    I believe that the issues that you're raising are indeed
    important and serious issues, and so we put in a good deal of
    preparation in order to be ready to help you out----
        Mr. Posey. Tell me that you don't know the answer?
        Dr. Collins. --to help you understand.
        Mr. Posey. I understand. All right. Sorry I went over,
    Madam Chair.
        Chairwoman Comstock. Okay. Thank you, and the Chair now
    recognizes Ms. Bonamici.
        Ms. Bonamici. Thank you very much, Chair Comstock.
        Dr. Olds, large construction projects often run into some
    unanticipated challenges. The NEON project in particular is
    unprecedented in size and scope for the ecological sciences
    community, and it required, of course, significant technology
    development. I share the concerns raised today about the
    troubles with NEON but also that they were allowed to progress
    to the point that we find ourselves today. So in your
    testimony, you described for us the series of increasingly
    aggressive oversight steps that NSF took in an effort to keep
    NEON on track. I know there's been some talk about hindsight
    and retrospect, but could you talk a little bit about what
    might you have done even sooner or more aggressively to avert
    such a significant re-scope of the project? And I also want to
    hear about what the lessons are that have been learned for
    future projects.
        Dr. Olds. Well, I think you raise a really good question,
    Congresswoman, and I would say what we've learned really comes
    down to this. If you think about the large projects
    scientifically that NSF does, they're over a spectrum.
    Oceanographic research vessels, we've done those before. Things
    like NEON, that's at the other end of the spectrum. We've never
    built anything like NEON before. So I would say in terms of
    lessons learned going forward, projects like NEON that involve
    technologies and instrumentation and distribution that we have
    not done before deserve a much greater level of scrutiny from
    the very beginning going forward so that we have a better
    handle on how the project's doing and when it starts to get off
    the rails.
        When we're looking at something that we've done before,
    that's a different story, but NEON and projects in the future
    that may be like NEON I think deserve a much higher level of
    scrutiny.
        Ms. Bonamici. Thank you. I was among the group of Committee
    Members who went to the South Pole this last year and saw the
    IceCube Neutrino project. That one went pretty well, didn't it?
        Dr. Olds. It certainly did. That's a terrific example of a
    large project that is delivering to the American people as we
    hoped it would.
        Ms. Bonamici. So, Dr. Olds, a group of former Ecological
    Society of America presidents published an open letter strongly
    supporting the NEON project. I believe Mr. Lipinski already has
    entered that into the record. They support the project even as
    re-scoped but they express some concern that NSF has not
    sufficiently engaged the community in decision-making for NEON
    since construction began. So I fully appreciate the tension
    between keeping a large construction project on time and on
    budget and wanting to be responsive to the evolving scientific
    and technological opportunities that come from that.
        I don't think anyone wants to delay the project for a
    length of time or increase its budget but we're at a sort of
    unplanned pause here as NEON develops a new cost proposal. So
    the scientific and technological opportunities have changed
    since 2010 when the project design was approved. So is there an
    opportunity here to more directly engage the community in the
    final re-scoping decisions so that the science meets the needs
    of the user community? And I'll get Dr. Collins in on this as
    well and ask him about that.
        Dr. Olds. Congresswoman, that's a terrific idea. Just weeks
    ago, I personally went to the Ecological Society meeting in
    Baltimore. A little bit after that, I went out to Estes Park,
    Colorado, to meet with a long-term ecological network of
    scientists community so I believe that actually that engagement
    needs to start from the very top of the Biological Sciences
    Directorate and permeate everything that we do. Really, the
    community needs to be fully engaged scientifically in this
    project so that the data that is delivered back is as valuable
    to them as possible.
        Ms. Bonamici. And Dr. Collins, what role are you playing or
    is NEON playing in making sure that the community is engaged in
    the re-scoping?
        Dr. Collins. I agree entirely with Dr. Olds. I was also
    there in Baltimore with him. It is a moment to bring along even
    greater engagement by the scientific community. You put your
    finger on exactly the issue early on. You're balancing this
    tension between getting the facility built and therefore
    controlling a scope creep as far as the construction is
    concerned. But now at this moment, and it is just right as you
    transition from construction to operations, that you want to
    bring the community in even more deeply and take advantage in
    the course of doing the re-scope to look at new instrumentation
    that's available, new potential that you have in order to make
    it an even better facility than you thought it could be at the
    beginning.
        Ms. Bonamici. Thank you.
        My time is expired. I yield back. Thank you, Madam Chair.
        Chairwoman Comstock. Thank you, and I now recognize Dr.
    Abraham for five minutes.
        Mr. Abraham. Thank you, Madam Chairman.
        Dr. Collins, I'll certainly agree with your suggestion that
    we bring more private accountants in to monitor these projects.
    I'm looking at some notes I have, and it's my understanding
    that since 2011, the NSF has had at least seven expert--I'll
    use that tongue in cheek with the word ``expert''--reviews of
    these projects, and in August 2014, they're telling us that you
    guys are on target, on time, on budget, and then 3 months later
    we're $16 million in the hole and it has just escalated since
    then. So I think it's an excellent idea.
        Dr. Collins, on NEON Inc., I understand it's a private
    enterprise. Is that a correct statement?
        Dr. Collins. Well, it's a 501(c)(3).
        Mr. Abraham. Okay. How many employees does Neon Inc. have?
        Dr. Collins. There are approximately 320 individuals in
    Boulder and about another 120 individuals throughout the United
    States.
        Mr. Abraham. And to your knowledge, were there any
    employment bonuses given in 2014 and 2015?
        Dr. Collins. That's a detail that would be left to the
    financial individuals in the corporation, and I can get you
    that information.
        Mr. Abraham. I would appreciate that.
        Dr. Olds, hearing the testimony that you and Dr. Collins
    both gave, and we appreciate your presence here, at least I do,
    I hear this term over and over, we're learning, we're learning.
    But we're learning on the taxpayers' dollars here, guys, and
    you need to learn somewhere else, not on the taxpayers'
    dollars. I mean, you guys should be past the learning into the
    doing stage.
        Of these projects that have been--or this entire project
    that has been de-scoped--I'll use that term--we use a different
    term, a more direct term in private business. We're down to 60
    or 80 sites. How many of those sites are projected to be in the
    United States?
        Dr. Olds. All of them are in the United States,
    Congressman.
        Mr. Abraham. And with--Dr. Olds, I'll go to you. The CEO,
    it's my understanding, of NEON Inc. was just relieved of duty,
    and that's a pretty big strike when you take out a CEO of a
    300- to 450-employee company. That shows that there some basic
    large mismanagement. Do you have confidence that NEON Inc. can
    do the job?
        Dr. Olds. Well, we are going to be sitting on NEON Inc.
    over the next three months and putting them through some pretty
    difficult hoops, and we will know very quickly whether this
    organization is going to be successful under new leadership in
    changing its course, and if they aren't, we'll act.
        Mr. Abraham. Have you guys got a timeline that says hey,
    you've got to be at this point at this time or----
        Dr. Olds. Yes, sir.
        Mr. Abraham. --game over? Okay.
        Dr. Olds. Yes, sir.
        Mr. Abraham. Fair enough.
        Dr. Collins, the CEO that was just relieved of his duties,
    how much--and I know it's an opinion but I'm asking it--in your
    opinion, how much of the mismanagement was attributed directly
    to him?
        Dr. Collins. Well, the issue is a personnel issue, of
    course, so I'm only going to go into certain kinds of details,
    but let's put it this way. We have a corporation that is
    changing. It is dynamic. And it was the judgment of the board
    that at this time we needed to bring on, to go back to some
    points that we made earlier--an individual who could deal with
    this transition from construction to operations.
        Mr. Abraham. But come on, Doc. I mean, you know, this guy
    should have already been vetted to--he should have been--if
    he's a CEO of a company of this size, he should have known from
    A to Z how this project was going. I mean, he is the CEO.
        Dr. Collins. Yes.
        Mr. Abraham. And I guess that's my frustration is that
    maybe he didn't know all the particulars, but the board
    should've done a better job of vetting this guy before he was
    hired. I think that's just basic business acumen there.
        Dr. Collins. So it was a previous board that hired the CEO,
    but the important thing is that I'm confident that they did the
    best job that they could at the time. Then you work with the
    individual in order to bring the individual along. Now we're at
    a point where we're going to look for a new individual.
        Mr. Abraham. I would probably respectfully disagree that
    they did the best job at that time in hiring this guy.
        Madam Chairman, I yield back.
        Chairwoman Comstock. Thank you.
        I thank the witnesses for their testimony today and the
    Members for their questions. We very much appreciate your
    diligence in looking at this and responding to us and
    appreciating the concerns here.
        And the record will remain open for two weeks for
    additional written comments and written questions from Members.
        So the hearing is now adjourned.
        [Whereupon, at 10:26 a.m., the Subcommittees were
    adjourned.]

                                   Appendix I

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                       Answers to Post-Hearing Questions
    Responses by Dr. James Old

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  Appendix II

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                       Additional Material for the Record

                Document submitted by Representative Loudermilk

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 Document submitted by Representative Lipinski

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Additional responses submitted by Dr. James Old

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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