Department of Energy: Views on the Progress of the National	 
Nuclear Security Administration in Implementing Title 32	 
(04-APR-01, GAO-01-602T).					 
								 
GAO discussed its observations on the progress the National	 
Nuclear Security Administration (NNSA) has made in implementing  
title 32 of the National Defense Authorization Act for Fiscal	 
Year 2000. Title 32 established NNSA as a semiautonomous agency  
within the Department of Energy (DOE) with responsibility for the
nation's nuclear weapons, nonproliferation, and naval reactors	 
programs. GAO found that the agency is making progress in	 
implementing changes to its organization; planning, programming, 
and budgeting functions; and use of personnel authority. However,
it will be several months before real, tangible evidence of these
changes will be seen. And it may be several years before these	 
changes are fully implemented and can be definitively assessed.  
Important work remains to be done in (1) establishing an	 
organization that clearly defines the roles and responsibilities 
of headquarters and field staff; moves program management	 
officials as close to the action as possible; and establishes	 
clear lines of authority between NNSA and its contractors, (2)	 
implementing an integrated planning, programming, and budgeting  
system that can deliver information to decision makers and	 
Congress in time for the 2003 budget deliberations, and (3)	 
overcoming obstacles to using NNSA's Expected Service authority  
so that it can attract and retain the technical personnel needed 
to effectively oversee its diverse operations. NNSA's performance
in addressing these three sets of challenges will go a long way  
toward determining whether it will be successful in correcting	 
DOE's long-standing management problems.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-602T					        
    ACCNO:   A00732						        
    TITLE:   Department of Energy: Views on the Progress of the       
             National Nuclear Security Administration in
             Implementing Title 32
     DATE:   04/04/2001 
  SUBJECT:   Budgeting						 
	     Federal agency reorganization			 
	     Public administration				 
	     Personnel management				 
	     Human resources utilization			 

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GAO-01-602T

DEPARTMENT OF ENERGY

Views on the Progress of the National Nuclear Security Administration in
Implementing Title 32 Statement of Robert A. Robinson, Managing Director,
Natural Resources and Environment

United States General Accounting Office

GAO Testimony Before the Special Oversight Panel on Department of

Energy Reorganization, Armed Services Committee, House of Representatives

For Release on Delivery Expected at 2.00 p. m. Wednesday April 4, 2001

GAO- 01- 602T

1 Mr. Chairman and Members of the Special Panel:

We are pleased to be here today to provide our observations on the progress
the National Nuclear Security Administration (NNSA) has made in implementing
Title 32 of the National Defense Authorization Act for Fiscal Year 2000 (P.
L. No. 106- 65). As the Panel is well aware, Title 32 established NNSA as a
semiautonomous agency within DOE with responsibility for the nation's
nuclear weapons, nonproliferation, and naval reactors programs. NNSA was
created to correct long- standing and widely recognized management problems
at DOE, which had been underscored by significant cost overruns on major
projects and security problems at the national laboratories.

As you will recall, when we testified before the Panel last March, we were
concerned that DOE's approach to establishing NNSA had simply transferred
many of DOE's historic shortcomings to the new agency. 1 These shortcomings
included DOE officials contemporaneously serving in NNSA and DOE positions
(so called "dual- hatting”), unclear lines of authority, a confusing
field structure, and “business- as- usual” approaches to
planning, programming, and budgeting, and personnel issues. Frankly, it was
clear that NNSA had not gotten off to the best possible start. Since that
time, at the Panel's request, we have been monitoring NNSA's progress in
implementing key components of Title 32, including its reorganization
efforts; integrated planning, programming and budgeting improvements; and
use of NNSA's personnel authority.

We are pleased to report that NNSA has begun to move in the right direction.
The agency is making progress in implementing changes to its organization;
planning, programming, and budgeting functions; and use of personnel
authority. However, it may be several months before we see real, tangible
evidence of these changes. And it may be several years before these changes
are fully implemented and can be definitively assessed. In this connection,
much important work remains to be done in

Establishing an organization that clearly defines the roles and
responsibilities of headquarters and field staff; moves program management
officials as close to the action as possible, and establishes clear lines of
authority between NNSA and its contractors; Implementing an integrated
planning, programming, and budgeting system that can deliver information to
decision makers and the Congress in time for the 2003 budget deliberations;
and Overcoming obstacles to using NNSA's Excepted Service authority so that
it can attract and retain the technical personnel needed to effectively
oversee its diverse operations.

NNSA's performance in addressing these three sets of challenges will go a
long way toward determining whether it will be successful in correcting
DOE's long- standing management problems. After a brief overview of the
factors that led to the creation of

1 See Department of Energy: Views on DOE's Plan to Establish the National
Nuclear Security Administration (GAO/ T- RCED- 00- 113, Mar. 2, 2000).

2 NNSA, we will discuss each major management area in more detail, including
the

underlying problems to be addressed, the changes NNSA has made, and the
challenges ahead.

Background

Since its creation in 1977, DOE has conducted technically complex activities
at its facilities across the country. These activities include developing,
producing, and maintaining nuclear weapons; preventing the proliferation of
weapons of mass destruction, and designing, building and maintaining naval
nuclear propulsion systems. However, in conducting these activities, DOE has
historically been plagued by organizational and managerial problems that
have resulted in significant cost overruns and schedule delays on major
projects, as well as the failure to complete and operate some of those
projects. These problems continue, as the recent cost overrun of over $1
billion and schedule delays with the National Ignition Facility demonstrate.
There have also been a number of security concerns at DOE facilities.

Ultimately, the Congress concluded that DOE, as configured at the time,
could not be counted on to correct these organizational and managerial
problems. Accordingly, in Title 32 of the National Defense Authorization Act
for Fiscal Year 2000, the Congress created a new semiautonomous agency
within DOE- the National Nuclear Security Administration. As required by the
act, DOE issued an Implementation Plan for the creation of NNSA in January
2000. The Implementation Plan called for three program offices within NNSA,
support offices, and a field office organization. In the Panel's view, DOE's
plan, as originally crafted, was not in keeping with the intent of Title 32.
As a result, the fiscal year 2001 National Defense Authorization Act (P. L.
No. 106- 398) amended Title 32 to require, among other things, additional
information on NNSA's organization, planning, programming, and budgeting.

NNSA's first Administrator, General John A. Gordon, was sworn in on June 28,
2000. Since the Administrator's appointment, NNSA has undertaken a number of
actions to comply with Title 32, including announcing a proposed
headquarters restructuring effort, with a field restructuring proposal to be
announced in May 2001; undertaking the development of a formal Planning,
Programming, and Budgeting System (PPBS), including developing a Future
Years Nuclear Security Program plan; and drafting a proposal to use NNSA's
Excepted Service personnel authority.

NNSA's Reorganization Holds Promise, but Important Challenges Remain

NNSA was established, in part, to correct the confused lines of authority
and responsibility within DOE's nuclear weapons complex that contributed to
a wide variety of problems, such as cost overruns and schedule slippage on
large projects, as well as security lapses. Past advisory groups, internal
DOE studies and GAO have reported over the years on DOE's dysfunctional
organizational structure. In particular, in December 2000, we concluded a
comprehensive study of the management of the Office of Defense Programs,
which makes up over 70 percent of the NNSA. We found that the Office of

3 Defense Programs did not have a clear organizational structure or, until
recently, formal

control over all of the sites performing its work. In addition, we found
that the Office was fragmented at the headquarters level and, more
importantly, that the division of roles and responsibilities between
headquarters and the field was unclear. This situation made it difficult for
the program to be managed as an integrated whole and for managers to make
decisions about balancing competing resource priorities.

As I noted earlier, to bring a fresher, more independent approach to these
kinds of issues, the Congress established NNSA as a semiautonomous agency
within, although distinct from, DOE. While it did not specify exactly how
NNSA was to be organized, the act did establish certain positions, including
the Administrator; Deputy Administrators for Defense Programs, Nuclear
Nonproliferation, and Naval Reactors; and a General Counsel. It also
established certain offices, including counterintelligence and nuclear
security. The act laid out chains of command in both DOE and NNSA that would
insulate NNSA from DOE decision making, except at the level of the NNSA
Administrator. This is because the Administrator is under the immediate
authority of the Secretary. Initially, however, the previous Secretary of
Energy chose to fill numerous key NNSA positions with DOE officials- thus,
these officials had both DOE and NNSA responsibilities and were dubbed
"dual- hatted." This practice caused considerable concern on this Panel and
with others, including GAO, that NNSA might not be able to function with the
independence envisioned in the NNSA Act.

Following this rocky start, I am pleased to report that progress is being
made in the area of establishing a better- organized NNSA. The practice of
dual- hatting has been eliminated, providing NNSA with the opportunity to
exercise a more independent role in managing its programs. Just as
importantly, NNSA has recently proposed reorganizing its headquarters
operations. In announcing the reorganization, NNSA set as its goals
establishing clear and direct lines of communications for laboratory
directors and plant managers, clarifying the roles and responsibilities of
NNSA headquarters and field offices, and integrating and balancing
priorities across NNSA's missions and infrastructure. To achieve these
goals, the Administrator is proposing to establish an Associate
Administrator for Management and Administration and an Associate
Administrator for Facilities and Operations. He is also proposing to
establish, through legislative change, the position of Principal Deputy
Administrator to assist him. The Principal Deputy Administrator; Associate
Administrators; and the Deputy Administrators for Defense Programs,
Nonproliferation, and Naval Reactors would serve on a management council
with the Administrator and his staff to make integrated decisions for the
entire NNSA. The reorganization also established the other offices required
by Title 32, such as the Office of Defense Nuclear Counterintelligence.
Currently, only a broad outline of the major functions of these new offices
have been defined.

This structure holds significant promise for addressing the long- standing
deficiencies we and others have identified, in particular because it can
reduce the fragmentation at the headquarters level and can allow for
integrated decision making across NNSA's disparate parts. However, the new
structure does not yet realize all of NNSA's goals because it leaves several
major organizational deficiencies unaddressed. Specifically, the

4 reorganization does not address clearly define the roles and
responsibilities of each of

the headquarters offices. It also does not address the critical issue of the
relationship between NNSA headquarters and its field offices and whether
headquarters or field officials will direct and oversee NNSA's contractors.
Finally, it does not directly address the relationships between NNSA and
DOE, in such areas as whether final decisions on NNSA personnel appointments
will be made by the Administrator or the Secretary. NNSA officials recognize
these weaknesses. They have promised to resolve these issues in an
implementation plan they will submit to the Congress by May 1, 2001, and to
complete the reorganization by October 1, 2001. However, NNSA officials have
told us that they are concerned about their ability to address all of the
difficult issues that will need resolution before these deadlines- a concern
we share.

Creating a new organization will constitute a major cultural change for all
of the components of NNSA- a change that has occurred very infrequently. For
example, the headquarters/ field relationships for much of the Office of
Defense Programs were last officially defined in 1968. Numerous attempts to
update these relationships have been unsuccessful. Moreover, the Office of
Naval Reactors is a unique joint Department of Defense (DOD)- DOE operation
that has enjoyed an independence of operation within DOE since its creation
by Admiral Rickover. In order to effectively reorganize and achieve the
goals the Administrator has set for the organization, NNSA will have to (1)
clearly understand the existing roles of its disparate program offices, (2)
identify opportunities to reduce duplication and achieve efficiencies both
in headquarters and in the field, and (3) ensure that the right people are
in the right places by hiring or moving them to their new organizational
unit. This process will take time to "get it right."

As NNSA moves forward, we believe that it needs to employ the organizational
principles endorsed in the Institute for Defense Analyses' 120- Day Study,
the Chiles Commission report, and our review of the management of the Office
of Defense Programs. 2 These principles include

establishing a small headquarters staff focused on top- level management
tasks, such as strategic management and working with external customers;
moving program management officials as close to the action as possible;
establishing clear lines of authority between NNSA and its contractors; and
holding federal and contractor employees accountable for meeting mission
goals.

NNSA Is Taking Steps to Improve Its Planning, Programming, and Budgeting,
but Much Remains to Be Done

Numerous studies, including the 120- Day Study, the Chiles Commission, our
report on the management of the Stockpile Stewardship Program, and the
Foster Panel have

2 See The Organization and Management of the Nuclear Weapons Program,
Institute for Defense Analyses (known as the 120- Day study) (Mar. 1997) and
Report of the Commission on Maintaining United States Nuclear Weapons
Expertise to the Congress and the Secretary of Energy, Commission on
Maintaining United States Nuclear Weapons Expertise (known as the Chiles
Commission) (Nov. 1999).

5 identified problems in DOE's planning, programming, and budgeting. 3 These
problems

have included the lack of a unified planning and programming process, the
absence of integrated long- range program plans, and plans that were not
fully linked to budgets and management controls. Without sound planning,
programming, and budgeting, it has been difficult for officials to ensure
that decisions with resource implications are weighed against one other in a
complete and consistent fashion.

Title 32 mandates the use of sound planning, programming, budgeting, and
financial activities. However, in its original implementation plan for NNSA,
DOE said that existing DOE planning, programming, and budgeting processes
would fulfill Title 32 requirements. Needless to say, given the history of
management problems at DOE, we, as well as others, did not believe this
response was adequate. To his credit, neither did the Administrator. He made
a commitment to prepare a multiyear budget and program plan, as required by
Title 32, by establishing a programming, planning, and budgeting system-
generally referred to as PPBS- similar to the system used by DOD for 40
years. While the use of PPBS has not been without problems in DOD, it is
generally recognized as a system that, when properly led and staffed, is
capable of making cost- effectiveness comparisons and of developing the
detailed program and budget plans called for in Title 32. In DOD, PPBS has
served generally to increase the visibility of the budget process, provide a
“roadmap” for future priorities, and facilitate congressional
oversight. The Administrator set a goal of having NNSA's PPBS fully
established by the fiscal year 2003 budget cycle.

While NNSA has made progress over the past several months, key components of
a fully operational PPBS have yet to be finalized or, in some cases, even
initiated. Specifically, program elements- the building blocks of PPBS- are
still in the “brainstorming” phase. The necessary guidance and
documentation needed to describe and explain the PPBS to the NNSA staff have
not been finalized. Decision and information systems, which are key
components of a modern PPBS, will not even be discussed until the summer.
Moreover, these systems will have to interface with existing DOE financial
and budget systems. Few PPBS- trained personnel are available to staff the
central NNSA PPBS office, although NNSA estimated that it might need as many
as 15 analysts. While NNSA advertised for a senior person to head its PPBS
office earlier in the year, it did not attract any qualified candidates and
NNSA will probably have to re- advertise the position. Finally, NNSA will
have to take action to make sure that its PPBS helps satisfy the
requirements for performance measures called for in Title 32 and in the
Government Performance and Results Act.

PPBS offers the potential to help bring NNSA into compliance with some
aspects of Title 32. Nevertheless, the fiscal year 2003 budget cycle is just
around the corner and, given the enormous amount of work that will need to
be completed before NNSA has even a minimally functional PPBS, it seems
likely that NNSA's fiscal year 2003 budget, as well as the fiscal year 2003-
08 Future Years Nuclear Security Program plan, will not be able to make full
use of PPBS. Some NNSA officials have conceded that, without the use of

3 FY 1999 Report of the Panel to Assess the Reliability, Safety, and
Security of the United States Nuclear Stockpile, Foster Panel (Nov. 1999).

6 PPBS tools, the value of the current Future Years Nuclear Security Program
plan, now

with the Office of Management and Budget for review, may be limited.

NNSA Is Developing Plans to Use the Personnel Authority Granted Under Title
32

Retaining and recruiting the highly skilled scientific and technical
personnel needed to make our government run efficiently and effectively
challenges virtually every federal department and agency. DOE, and in
particular the Office of Defense Programs, has had difficulty meeting this
challenge because of downsizing and program instability over the past
decade. We and others have concluded that the lack of technically competent
DOE personnel has contributed to weak contract management and to poorly
managed projects that are often late or over budget.

In response to this situation, Title 32 provided NNSA with hiring and salary
flexibility under Excepted Service rules for 300 positions for scientific,
engineering, and technical staff. To date, NNSA has not used this personnel
authority. While NNSA has hired only a small number of staff (less than 20),
it has done so under pre- existing DOE authorities for General Schedule,
Excepted Service, and Senior Executive Service personnel. NNSA also
continues to utilize personnel services provided by DOE's Human Resources
office, and senior NNSA hires must be approved by DOE's Executive Resources
Board, which is chaired by the Secretary of Energy. While this arrangement
has been satisfactory at present, NNSA officials are concerned that the DOE
system will probably not be capable, flexible, or timely enough to handle
NNSA's hiring needs in the future.

NNSA has drafted a proposal that will allow it to use the personnel
authority established under Title 32. This proposal includes features such
as pay- for- performance criteria and pay banding for the 300 positions
specified by the law. In contrast, the rest of NNSA's approximately 1700
federal employees would remain in the standard federal General Schedule
system, except for those in the Senior Executive Service. It also requests
that the Secretary of Energy delegate the authority to NNSA for its own
Executive Resources Board, which would allow the NNSA Administrator to
select his own senior- level staff. In addition, NNSA's proposed
headquarters reorganization includes a human resource office as part of the
Management and Administration organization.

NNSA faces a number of challenges in implementing its personnel proposal.
For example, DOE's analysis shows that as many as 800 NNSA positions may
qualify for the type of scientific, technical, or engineering personnel
specified in the law, but Title 32 provides for only 300 positions. As a
result, if only some NNSA positions are converted to Excepted Service, with
its pay- banding, pay- for- performance, and bonus provisions, NNSA federal
employees doing the same work could receive significantly different levels
of compensation. This could be especially troublesome for the Office of
Naval Reactors, which is currently staffed from three sources- NNSA civilian
employees, Navy civilian employees, and Navy military employees. NNSA
officials are cognizant of these problems, and believe that eventually NNSA
may need to move to the model used by organizations like the Nuclear
Regulatory Commission, which is almost all Excepted Service, to fully
address these issues. Also, according to NNSA officials, the use of

7 Excepted Service flexibilities may be opposed by labor unions. While less
than 10

percent of NNSA's workforce is unionized, NNSA officials and Office of
Personnel Management officials have told us that they believe organized
labor generally opposes Excepted Service. NNSA officials noted that the
unions have already requested massive amounts of data on NNSA's
reorganization and that union opposition has delayed the reorganization of
DOE's Office of Environmental Management for over 18 months.

- - - - Our work was performed during March and April 2001 in accordance
with generally accepted government auditing standards. Mr. Chairman, this
concludes my testimony. I would be happy to respond to any questions you or
Members of the Special Panel may have.
*** End of document ***