Department of Energy: NNSA Restructuring and Progress in	 
Implementing Title 32 (26-FEB-02, GAO-02-451T). 		 
								 
The National Nuclear Security Administration (NNSA) is a	 
semiautonomous agency within the Department of Energy (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 and	 
security problems at DOE. Although NNSA has made progress genuine
change has been difficult to achieve. Although NNSA announced a  
new headquarters organization in May 2001, it did not meet the	 
Administrator's promise of implementing a new structure for the  
entire organization by October 2001. Further, NNSA lost momentum 
over the summer in its effort to implement the comprehensive	 
planning, programming, and budgeting process envisioned. Although
it has established a conceptual planning, programming, and	 
budgeting process, NNSA still must implement its new process	 
during the fiscal year 2004 budget cycle. NNSA has used only 19  
of the 300 excepted service positions authorized by Title 32 of  
the National Defense Authorization Act for Fiscal Year 2000. NNSA
expects to report to Congress on its plans for using its excepted
service authority next month. However, NNSA does not have a	 
long-term strategic approach to ensure a well-managed, properly  
sized and skilled workforce over the long run.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-451T					        
    ACCNO:   A02811						        
  TITLE:     Department of Energy: NNSA Restructuring and Progress in 
Implementing Title 32						 
     DATE:   02/26/2002 
  SUBJECT:   Internal controls					 
	     Nuclear proliferation				 
	     Nuclear weapons					 
	     Nuclear reactors					 
	     General management reviews 			 
	     Agency missions					 
	     Strategic planning 				 
	     NNSA Future Years Nuclear Security 		 
	     Program						 
								 

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GAO-02-451T
     
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 4:00 p.m.
Tuesday, February 26, 2002 DEPARTMENT OF

ENERGY

NNSA Restructuring and Progress in Implementing Title 32

Statement of (Ms.) Gary L. Jones, Director Natural Resources and Environment

GAO-02-451T

Mr. Chairman and Members of the Special Panel:

We are pleased to be here today to provide our views 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. 106-65). As the Panel is well aware, 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. NNSA was created to correct long-standing and widely
recognized management and security problems at DOE.

At the Panel's request, for over a year, we have monitored NNSA's progress
in implementing key components of Title 32. As you will recall, when we
testified before the Panel in April 2001,1 we reported that NNSA was making
progress in implementing changes to its organization; improving its
planning, programming, and budgeting functions; and using its new personnel
authority. At that time, we noted that it might be several months before we
saw tangible evidence of these changes and that it might be several years
before these changes were fully implemented and could be definitively
assessed.

More recently, in December 2001 we reported to the Panel again on NNSA's
progress in implementing Title 32. 2 Overall, we found that while NNSA had
made additional progress on some fronts, on other important fronts genuine
change had been more difficult to achieve.

* While NNSA announced a new headquarters organization in May 2001, it did
not meet the Administrator's promise of implementing a new structure for the
entire organization by October 2001. Struggles within NNSA over
long-standing issues such as the roles and responsibilities of headquarters
and field staff delayed the announcement of a new organization which was
expected February 25, 2002. Moreover, what NNSA announced represents only a
framework for its eventual reorganization. Currently, no plan with
milestones for accomplishing

1U.S. General Accounting Office, Department of Energy: Views on the Progress
of the National Nuclear Security Administration in Implementing Title 32,
GAO-01-602T (Washington, D.C.: April 2001).

2U.S. General Accounting Office, NNSA Management: Progress in the
Implementation of Title 32, GAO-02-93R (Washington, D.C.: December 2001).

the myriad of details needed to implement NNSA's new organization exists.
While we are hopeful that resolution of long-standing organizational issues
may now be within NNSA's grasp, without the discipline of an implementation
plan, reaching NNSA's goals is likely to be a long and arduous process that
could take several years. Moreover, unless the new organization's chains of
command are enforced and federal and contractor staff are truly held
accountable, this reorganization could be simply another in a long line of
missed opportunities.

* NNSA lost some momentum over the summer in its effort to implement the
comprehensive planning, programming, and budgeting process envisioned by the
Administrator. Although it has now established a conceptual planning,
programming, and budgeting process, NNSA still has an enormous amount of
work to do as it tries to implement its new process during the fiscal year
2004 budget cycle. Furthermore, it is too soon to tell whether the proposed
process, when fully implemented, will effectively address widely recognized
problems in NNSA's existing planning, programming, and budgeting practices
and will establish an effective evaluation phase.

* While it has developed an overall excepted service personnel policy, NNSA
has used only 19 of the 300 excepted service positions authorized by Title
32. NNSA expects to report to the Congress on its plans for using its
excepted service authority next month. However, NNSA does not yet have a
long-term strategic approach to ensure a well-managed, properly sized and
skilled workforce over the long run. Such a plan is vital to effective
implementation of NNSA's new organization.

We recognize that NNSA's implementation of Title 32 is an evolving process.
However, we believe the best time to address long-standing problems is when
the new organization and systems are first being laid out and the momentum
for change is at its highest. NNSA needs to move forward aggressively so
that this opportunity does not slip away and old ways reemerge and harden.
For NNSA to be ultimately successful in correcting the long-standing
management problems it inherited from DOE, we believe it will need to
jumpstart its efforts to implement its proposed reorganization; regain
momentum for implementing its revised planning, programming, and budgeting
process; and ensure a well-managed workforce. After a brief overview of the
factors that led to the creation of NNSA, we will discuss each major
management area in more detail,

Background

including the underlying problems to be addressed, the status of NNSA's
progress, and the challenges that still lie ahead.

Since its creation in 1977, DOE has been responsible for developing,
producing, and maintaining nuclear weapons; preventing the proliferation of
weapons of mass destruction; and designing, building, and maintaining naval
nuclear propulsion systems. However, DOE historically has been plagued by
organizational and managerial problems that have resulted in significant
cost overruns and schedule delays on major projects, such as the National
Ignition Facility. There have also been a number of security concerns at DOE
facilities. In response to these problems, the Congress, in Title 32 of the
National Defense Authorization Act for Fiscal Year 2000, created a new
semiautonomous agency within DOE-the National Nuclear Security
Administration. Reflecting initial concerns about how DOE was planning to
implement Title 32, the Congress amended Title 32 in the National Defense
Authorization Act for Fiscal Year 2001 (P.L. 106-398) to require, among
other things, additional information on NNSA's organization, planning,
programming, and budgeting be supplied to the Congress.

As of October 2000, NNSA's basic organizational structure consisted of three
program offices-Defense Programs, Defense Nuclear Nonproliferation, and
Naval Reactors; three operations offices- Albuquerque, Nevada, and
Oakland-that oversaw the operations of area offices located at NNSA's eight
field sites and numerous area offices. All but two of the area offices
reported to an operations office. The other two area offices-Oak Ridge Y-12
and Savannah River Tritium Operations- reported directly to NNSA
headquarters. In May 2001, NNSA restructured its headquarters operations and
created two support offices-the Office of Management and Administration and
the Office of Facilities and Infrastructure. However, the field structure
remained the same.

NNSA Has Taken Steps Toward Resolving Important Organizational Issues, but
Areas of Concern Remain

The Congress established NNSA, in part, to correct the confused lines of
authority and responsibility within DOE's nuclear weapons complex that had
contributed to a wide variety of problems-such as cost overruns and schedule
slippage on large projects, like the National Ignition Facility-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 reported on our comprehensive study of the
management of the Office of Defense Programs, which constitutes over 70
percent of NNSA.3 We found that the Office of Defense Programs suffered from
organizational problems, such as a lack of clear roles and responsibilities,
at three levels: within its headquarters organization, between headquarters
and the field, and between contractor-operated sites and their federal
overseers. This situation made it difficult for the program to be managed as
an integrated whole and for managers to make sound decisions.

While it did not specify exactly how NNSA was to be organized, Title 32 did
establish certain NNSA positions, such as a general counsel, and gave the
Administrator the flexibility to determine the best organizational structure
for the new agency. Title 32 also laid out chains of command in both DOE and
NNSA intended to insulate NNSA from DOE decision-making, except at the level
of the NNSA Administrator. In our April 2001 testimony, we reported that
some progress had been made in establishing a better-organized NNSA. We
noted that the practice of "dual-hatting" had been virtually eliminated,
enabling NNSA to manage its programs more independently.4 In addition, we
noted that NNSA had established a new support structure in its headquarters
office that had as its goals establishing clear and direct lines of
communication, clarifying the roles and responsibilities of NNSA's
headquarters and field offices, and integrating and balancing priorities
across NNSA's missions and infrastructure. Specifically, NNSA established
two headquarters support offices: one headed by an associate administrator
for management and administration, who is responsible for the planning,
programming, and

3U.S. General Accounting Office, Nuclear Weapons: Improved Management Needed
to Implement Stockpile Stewardship Program Effectively, GAO-01-48
(Washington, D.C.: Dec. 14, 2000).

4Initially, the then-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 when NNSA was
created.

budgeting; personnel; and procurement areas, and the other headed by an
associate administrator for facilities and operations, who is responsible
for managing NNSA's infrastructure revitalization initiative and security
functions.

As we noted in our December 2001 report to the Panel, despite these
initiatives, fundamental organizational issues remained. Specifically, the
details on how the new NNSA headquarters support offices would work with the
established headquarters program offices-the Office of Defense Programs and
the Office of Defense Nuclear Nonproliferation-were unclear.5 Many of the
field managers we spoke with while developing our 2001 report were concerned
that reporting relationships could become more complex and confused rather
than less because these various headquarters offices could have different
expectations. For example, depending on how responsibility was divided, it
was possible for field offices to receive direction from multiple
headquarters offices on such areas as infrastructure and major construction
projects. More importantly, long-standing, fundamental issues regarding
confused lines of authority within NNSA's headquarters organization, between
headquarters and the field, and between contractor-operated sites and their
federal overseers that directly affect how NNSA's contractors are managed
remained unresolved. Direction and guidance to the NNSA contractors was
still being provided from multiple sources: NNSA local area office managers,
DOE and NNSA operations office managers, and NNSA headquarters managers. As
we have found in the past, when its contractors receive multiple and
sometimes conflicting guidance, NNSA's ability to hold them accountable for
performance is undermined. As it attempted to address these organizational
issues, we urged NNSA to employ the organizational principles cited in our
April 2001 testimony before this Panel: focusing a small headquarters staff
on strategic management, policy, and relationships with other federal
agencies; 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.

While the Administrator promised a solution to these problems by October
2001, NNSA's report to the Congress on the organization and operations of
the NNSA was not expected until February 25, 2002. Our preliminary analysis
of NNSA's proposal leads us to conclude that it contains some

5The Office of Naval Reactors continues to be managed as a separate entity
within NNSA.

positive features as well as some important weaknesses. Most fundamentally,
NNSA's proposal represents only an overall plan of action, and ironing out
the details and implementing the proposed new structure is likely to be a
long and arduous process.

On the positive side, NNSA's proposal has outlined some potentially
significant steps toward solving important long-standing organizational
issues by employing some of the principles cited above. Specifically, NNSA's
proposal:

* Clarifies the relationship between the headquarters program offices and
the headquarters support offices by establishing that program direction will
come exclusively from the program offices-the Office of Defense Programs and
the Office of Defense Nuclear Nonproliferation-and by reducing the role of
the Office of Facilities and Operations to focus on the infrastructure
revitalization initiative and support functions such as security.

* Establishes a framework for resolving the so-called "two headquarters"
problem of duplicative roles between the Office of Defense Programs and the
Albuquerque Operations Office by placing program direction for weapons
production-a traditional function of the Albuquerque Operations Office-under
the Office of Defense Programs.

* Establishes clear lines of authority between NNSA and its contractors by
making the manager of each site office (formerly called an area office) the
contracting officer for that site and by providing that direction to the
contractor can only come from the contracting officer or a formally
appointed representative. In addition, all of the site office managers will
report to the Administrator through the Principal Deputy rather than the
current practice of some reporting through operations offices and others
reporting directly to headquarters.

* Removes a management layer by making existing operations offices into
so-called "Centers of Excellence" that will provide support functions such
as financial management and security clearance processing for all of NNSA.

* Promises to streamline federal staff and to hold federal staff and
contractors more accountable for performing NNSA's mission.

Despite these potential improvements, important areas of concern remain.

* NNSA's proposal does not address the fact that the weapons science
function and the weapons production function within the Office of Defense
Programs are managed separately, although their work must be coordinated to
achieve mission goals. As we noted in our December 2000 report, officials in
DOE's headquarters, field offices, labs, and production plants repeatedly
told us of numerous ways that the split between the weapons science and
weapons production portions of the Stockpile Stewardship Program at the
headquarters level negatively affects coordination within the nuclear
weapons complex.

* NNSA's proposal does not consistently apply the principles of streamlining
headquarters staff and moving federal program management officials as close
to the action as possible. While NNSA expects the weapons production work to
be managed by experts in the field, NNSA continues the pattern of having the
weapons science work managed out of headquarters. This is problematic
because, as we noted in our report on the National Ignition Facility,
inadequate oversight by headquarters managers contributed to the cost and
schedule problems experienced at this facility.6

* Finally, many important documents will need to be created and refined
before the changes proposed in NNSA's report can become truly operational.
This is no small task. For example, the report notes that one document that
will need revision is a May 1968 memorandum that defines the roles and
responsibilities of the Office of Defense Programs and the Albuquerque
Operations Office. As we noted in our December 2000 report on the management
of the Office of Defense Programs, there have been several attempts to
revise this relationship over the years, none of them successful. Moreover,
some of the proposals, such as the Centers of Excellence, are merely
concepts that need to be further defined. In addition, streamlining the
federal workforce is a difficult undertaking that will take a significant
amount of time to fully implement. Currently, no plan with milestones exists
for refining these concepts and accomplishing the myriad of details needed
to implement them.

6U.S. General Accounting Office, National Ignition Facility: Management and
Oversight Failures Caused Major Cost Overruns and Schedule Delays,
GAO/RCED-00-141 (Washington, D.C.: Aug. 8, 2000).

Significant Effort Still Required to Develop an Effective Planning,
Programming, and Budgeting Process

While we are hopeful that resolution of such long-standing issues may now be
within NNSA's grasp, without the discipline of an implementation plan,
reaching NNSA's organizational goals is likely to be a long and arduous
process that could take several years. Moreover, unless the new chains of
command are enforced and federal and contractor staff are truly held
accountable, this reorganization could be simply another in a long line of
missed opportunities.

Numerous studies have identified problems in DOE's planning, programming,
and budgeting, including the lack of a unified planning and programming
process, the absence of integrated long-range program plans, and the failure
to fully link existing plans to budgets and management controls. Without
sound, integrated planning, programming, and budgeting, it has been
difficult for officials to ensure that decisions with resource implications
are weighed against one another in a complete and consistent fashion and
that mission outcomes are linked to management controls. In our December
2000 report, we recommended that NNSA take action to improve and integrate
its planning processes and to improve its budgetary data to provide needed
management information.

Title 32 mandates the use of sound planning, programming, budgeting, and
financial activities. It also requires that NNSA submit to the Congress each
year a Future Years Nuclear Security Program plan that details NNSA's
planned expenditures for the next 5 years. Very early in his tenure, the
current NNSA Administrator indicated that he intended to comply with Title
32 by instituting a planning, programming, and budgeting process similar to
that in use at the Department of Defense (DOD). While DOD's approach has not
been without problems over the past 40 years, 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. The Administrator originally set a goal
of having fully established NNSA's version of DOD's planning, programming,
and budgeting process-now referred to as the planning, programming,
budgeting, and evaluation (PPBE) process-by the fiscal year 2003 budget
cycle. Subsequently, this date was pushed back to the fiscal year 2004
budget cycle because development was taking longer than expected.

In our April 2001 testimony before the Panel, we reported that despite the
delays NNSA was encountering, its initial attempts to develop its own PPBE
process offered the potential to help bring NNSA into compliance with Title
32. It appeared that both NNSA headquarters and field units

appreciated the discipline that such a process could offer. We noted,
however, that an enormous amount of work would have to be completed before
NNSA had even a minimally functional PPBE process.

As we reported to the Panel in December 2001, beginning in the summer of
2001, the acting associate administrator of the Office of Management and
Administration and the acting director of the Office of Planning,
Programming, Budgeting, and Evaluation, began reevaluating NNSA's initial
efforts. This shift in direction temporarily slowed NNSA's momentum in
establishing a PPBE process and caused some confusion in NNSA field offices.
These officials began the reevaluation because they believed that the
initial approach was oriented too much toward DOD's program structure and
that this approach failed to take into account the uniqueness of NNSA's
programs and the type of contracting approaches NNSA uses to do its work. As
a result, NNSA proposed a PPBE process that would use existing NNSA plans,
practices, and processes as much as possible.

Nevertheless, NNSA continued to refine its PPBE process and communicated it
to all NNSA program, support, and field offices on September 12, 2001.
Later, NNSA began to implement some of the planning elements of the process
for the fiscal year 2004 budget cycle. Examples of some of these activities
follow:

* NNSA released draft strategic guidance developed by its Office of Policy
Planning on September 27, 2001. This long-range guidance focuses on the key
issues NNSA faces, such as the projected security environment and size of
the stockpile, and is intended to guide the planning process. According to
NNSA, the first step in its revised PPBE process, the draft strategic
guidance, will establish a basis for the development of 5-year program plans
for the individual programs within NNSA.

* NNSA's major programs-Defense Programs, Defense Nuclear Nonproliferation,
and Naval Reactors-and each of NNSA's headquarters support offices have
drafted program integrated plans. These plans are annual documents that
delineate the responsibilities, priorities, and performance commitments for
an entire program.

Despite this progress, NNSA did not complete all the goals it set for its
PPBE planning phase for the fiscal year 2004 cycle. For example, NNSA did
not issue draft 5-year program and fiscal guidance or its strategic plan

in September 2001 as it had originally envisioned. These documents will
probably be issued in late February 2002. NNSA officials cited the
far-reaching impact of the September 11, 2001, terrorist attacks; delays in
the fiscal year 2002 appropriations process; and the then-ongoing national
security program review as reasons for the delay in issuing both documents.
Nevertheless, both the draft program and fiscal guidance and the strategic
plan are important early components of the "cascade" of NNSA planning
documents that were to be used to shape the program integrated plans
mentioned earlier.

While NNSA did make some progress in implementing elements of its fiscal
year 2004 planning phase, NNSA still has an enormous amount of work to do
for the programming, budgeting, and evaluation phases of the fiscal year
2004 budget cycle. Examples of the implementation activities remaining
follow:

* NNSA has not finalized significant portions of the PPBE process, such as
the programming and evaluation phases. NNSA established implementation teams
to help create workable processes for those two phases of its PPBE process.
One of the teams has focused on the programming phase, in which competing
priorities and mission needs will be evaluated, alternatives and trade-offs
will be analyzed, and resources will be allocated to meet the highest
priorities. The other team is working on an enhanced evaluation phase, which
will establish performance measures, indicators, and metrics to evaluate
progress in meeting programmatic goals. Both teams were scheduled to develop
recommendations and report to the NNSA senior leadership in December 2001;
however, these reports now have been delayed until late February 2002. The
initiation of the programming phase has slipped from February to March 2002.

* NNSA has begun to work on an automated system for the budget execution
phase of the PPBE process, but other decision and information systems will
still need to be revised to handle the new process. In addition, NNSA's
systems will have to interface with both DOE's existing planning, financial,
and budgeting systems and DOE's planned changes to these systems. NNSA and
DOE officials report that they are cooperating on these issues. However,
NNSA officials report that coordinating with the DOE Chief Financial Officer
is causing some delays in implementing NNSA's PPBE process.

* Except for budgeting, NNSA does not appear to have many personnel on hand
with the skills to conduct the analytical functions typically associated
with multiple phases of a PPBE process. These skills, which were the
trademark of DOD's system when it was implemented 40 years ago, are
especially important in the upcoming programming phase where program
alternatives and trade-offs are considered and cost-effectiveness
comparisons are made. NNSA officials report that such factors as their
recent hiring freeze have prevented them from recruiting these kinds of
analysts.

* It is unclear if NNSA will submit a comprehensive Future Years Nuclear
Security Program plan to the Congress as required by Title 32. Although NNSA
previously had developed such plans, NNSA failed to submit these plans to
the Congress in 2000 and 2001. NNSA did include a table containing the 5
years of budget data required for a Future Years Nuclear Security Program
plan in its fiscal year 2003 budget request, and some NNSA officials have
told us that a broad plan has been prepared and may be released by the end
of February 2002. All the plans to date have been developed without the
benefit of a functional PPBE.

In summary, NNSA has experienced difficulty in fully implementing all the
activities it had envisioned for the planning phase of its PPBE process. The
need to implement the new programming phase, establish a more highly
automated budget execution phase, and upgrade evaluation activities suggest
that NNSA probably will face additional hurdles as it implements its PPBE
process for the fiscal year 2004 budget cycle. Rather than the fully
implemented system for the fiscal year 2004 cycle envisioned by the
Administrator, it is probably better to think of NNSA's PPBE as a prototype
that will have to be more extensively refined and developed in future years.
Furthermore, it is too soon to tell whether the proposed process, when fully
implemented, will effectively address widely recognized problems in NNSA's
existing planning, programming, and budgeting practices and will establish
an effective evaluation process.

NNSA Has Made Limited Progress in Implementing Its Excepted Service
Authority

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. NNSA, in
particular NNSA's Office of Defense Programs, has had difficulty meeting
this challenge. According to NNSA officials, specific obstacles to
recruiting and retaining staff include the downsizing and resulting program
instability of the past decade, the high cost of living near some NNSA field
sites or their remote locations, a shortage of people trained in the
relevant scientific and engineering disciplines, relatively low federal
salaries compared with those offered by private high-technology companies,
and the lengthy process required to hire people into the federal workforce.
Moreover, we and others have concluded that the lack of technically
competent personnel has contributed to weak contract management and to
poorly managed projects that are often late or over budget.

In response to this situation, in Title 32 the Congress provided NNSA the
authority to create up to 300 excepted service positions specifically for
scientific, engineering, and technical staff. For excepted service
positions, each agency-in this case NNSA-develops, within basic requirements
prescribed by law or regulation, its own hiring system. NNSA's system
establishes the evaluation criteria NNSA will use in filling the excepted
service positions. Specifically, NNSA may now hire staff through a
noncompetitive selection process and has greater flexibility in setting
salaries.

NNSA managers and human resource officials with whom we spoke had mixed
reactions to the excepted service authority granted by Title 32. In general,
NNSA officials were optimistic that the excepted service authority would
help make the agency more attractive to prospective employees. NNSA
currently employs about 2,500 people, including more than 800 in scientific,
engineering, and technical job series. Several managers told us that
additional pay flexibility would allow them to be competitive in their
efforts to hire new employees and to retain current employees. However,
managers also cautioned that the limited authority might create morale
problems for those NNSA employees not included in the excepted service.

In light of these concerns, NNSA managers told us that they would prefer to
have the entire agency in the excepted service, or at least enough positions
for all of the organization's scientific, engineering, and technical
employees. Accordingly, NNSA pursued congressional authorization to expand
the excepted service authority granted in Title 32; however, the Congress
has not granted this authorization. At the same time, NNSA made

an initial allocation of about one-third of the 300 excepted service
positions provided by Title 32 to the field and headquarters units in
October 2001. At that time, NNSA had plans to use 68 positions to convert
employees in DOE's excepted service and NNSA civil service to NNSA's
excepted service and to use the other 29 positions to hire new staff. In the
interim, NNSA's human resource officials had been reluctant to use the
limited authority and decided to use it only to hire critical new staff.
Subsequently, NNSA imposed a hiring freeze starting in October 2001 that
will remain in effect for the foreseeable future.

As we noted in our December 2001 report to the Panel, NNSA has made limited
progress toward using its new authority. The Administrator has developed an
interim excepted service policy that covers new staff and NNSA employees
originally hired into DOE's excepted service systems who will be converted
to NNSA's system. The Administrator has also delegated the authority to
implement the policy to headquarters and field organizations. In addition,
the Administrator created an NNSA Executive Resources Board and appointed
its members. The Board is responsible for making hiring and promotion
decisions affecting NNSA employees assigned to the two highest levels of the
excepted service, as well as to the Senior Executive Service, Scientific and
Professional, and Senior Level pay systems.

According to NNSA's deputy for workforce planning and management, NNSA has
also prepared the policies needed to cover civil service employees who might
consider making the conversion to excepted service. Those policies are
awaiting final approval from the Administrator and DOE. In addition, in
response to congressional direction, NNSA is preparing a plan for using the
remainder of the 300 authorized excepted service positions. Because of the
hiring freeze, the excepted service positions will be used primarily to
offer existing eligible employees the opportunity to convert to the excepted
service. Thus, NNSA expects that most of the 300 positions will be filled
within 90 days of the Administrator's final approval of the policies and
plan by converting existing employees.

A more fundamental obstacle to full use of the excepted service authority is
that NNSA does not have a long-term strategic approach to ensure a
well-managed workforce. We have reported in the past that agencies need to
create a coherent agencywide human capital strategy-that is, a

framework of human capital policies, programs, and practices specifically
designed to steer the agency toward achieving its vision.7 Such a workforce
planning strategy needs to be linked to the agency's strategic and program
planning efforts and should identify the agency's current and future human
capital needs, including the size of the workforce; its deployment across
the organization; and the knowledge, skills, and abilities needed for the
agency to pursue its vision.

According to the deputy for workforce planning and management, NNSA plans to
develop a comprehensive workforce strategy, the timing of which depends on
the implementation of NNSA's reorganization and streamlining plans. NNSA's
recent decisions concerning organizational structure, lines of authority,
and roles and responsibilities will affect the agency's human resource needs
by determining what skills are needed, how many employees are necessary, and
where they should be located in the newly restructured headquarters and
field offices. These decisions are key to developing a comprehensive
strategy that steers NNSA toward achieving its vision, is linked to
strategic program planning efforts, and identifies the agency's current and
future personnel needs.

Mr. Chairman, this concludes my testimony. I would be happy to respond to
any questions you or Members of the Special Panel may have.

GAO Contact and Staff Acknowledgements

For further information on this testimony, please call Ms. Gary L. Jones at
(202)512-3841. James Noel, Jonathan Gill, Ross Campbell, Andrea Riba, and
Delores Parrett also made key contributions to this testimony.

7U.S. General Accounting Office, Human Capital: A Self-Assessment Checklist
for Agency Leaders, GAO/OCG-00-14G (Washington, D.C.: Sept. 2000).
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