NNSA Management: Progress in the Implementation of Title 32	 
(12-DEC-01, GAO-02-93R).					 
								 
GAO reviewed the National Nuclear Security Administration's	 
(NNSA) progress in implementing key components of Title 32 of the
National Defense Authorization Act for Fiscal Year 2000 including
NNSA's reorganization efforts; integrated planning, programming, 
and budgeting improvements; use of its excepted service personnel
authority; and efforts to improve its procurement practices. GAO 
found that although NNSA announced a new headquarters		 
organization in May 2001, the reorganization did not clearly	 
define the roles and responsibilities of the headquarters	 
organizational units and did not address NNSA's field		 
organization at all. More importantly, NNSA still lacks an	 
overall organizational structure that clearly addresses 	 
long-standing issues such as the division of roles and		 
responsibilities among headquarters offices and between 	 
headquarters and field staff. NNSA lost some momentum during the 
summer of 2001 as it reevaluated its efforts to develop a new	 
planning, programming, budgeting, and evaluation process. NNSA	 
now has established a conceptual process and begun to develop the
necessary implementation plans and procedures. However, because  
of the broad scope of the work needed to develop these plans and 
procedures, it will be difficult to fully implement NNSA's	 
process in time for the fiscal year 2001 budget cycle. Although  
it has developed an interim excepted service personnel policy,	 
NNSA has firm plans to use only one-third of the 300 excepted	 
service positions authorized by Title 32. Finally, NNSA believes 
that there is no need for an NNSA-specific procurement		 
regulation, and it has begun to improve contractor oversight and 
performance evaluation. 					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-93R 					        
    ACCNO:   A02444						        
  TITLE:     NNSA Management: Progress in the Implementation of Title 
32								 
     DATE:   12/12/2001 
  SUBJECT:   Federal agency reorganization			 
	     General management reviews 			 
	     Program management 				 
	     Cost overruns					 
	     Human resources utilization			 
	     Contract oversight 				 
	     Contract performance				 
	     Agency missions					 
	     Strategic planning 				 
	     DOE Nuclear Weapons Program			 
	     DOE Stockpile Stewardship Program			 

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GAO-02-93R
     
GAO- 02- 93R NNSA Progress in Implementing Title 32 United States General
Accounting Office

Washington, DC 20548

December 12, 2001 The Honorable Mac Thornberry Chairman The Honorable Ellen
O. Tauscher Ranking Minority Member Special Oversight Panel on Department of
Energy Reorganization Committee on Armed Services House of Representatives

Subject: NNSA Management: Progress in the Implementation of Title 32 Title
32 of the National Defense Authorization Act for Fiscal Year 2000 (P. L.
106- 65) established the National Nuclear Security Administration (NNSA) as
a semiautonomous agency within the Department of Energy (DOE) with
responsibility for the nation?s nuclear weapons, nonproliferation, and naval
reactors programs. The Congress created NNSA 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.

At your request, we reviewed NNSA?s progress in implementing four key
components of Title 32 intended to improve NNSA?s management, including
NNSA?s reorganization efforts; integrated planning, programming, and
budgeting improvements; use of its excepted service personnel authority; and
efforts to improve its procurement practices. In presenting the results of
our work, we agreed to identify for each of the four management areas (1)
the underlying problems to be addressed, (2) the status of NNSA?s progress,
and (3) the management issues that still remain. We recognize that the
implementation of Title 32 is an evolving and dynamic process; our
observations on NNSA?s progress are based on audit work conducted through
December 2001.

In summary, we found the following:  While NNSA announced a new
headquarters organization in May 2001, the

reorganization did not contain a clear definition of the roles and
responsibilities of the headquarters organizational units and did not
address NNSA?s field organization at all. More importantly, an overall
organizational structure that clearly addresses long- standing issues such
as the division of roles and responsibilities among headquarters offices and
between headquarters and field staff still does not exist. NNSA recognizes
the importance of these issues, and the acting Principal Deputy
Administrator is leading an effort to address them.

GAO- 02- 93R NNSA Progress in Implementing Title 32 2  NNSA lost some
momentum over the summer of 2001 as it reevaluated its efforts

to develop a new process for planning, programming, budgeting, and
evaluation (PPBE). NNSA now has established a conceptual PPBE process and
begun to develop the necessary implementation plans and procedures. However,
because of the broad scope of work needed to develop these plans and
procedures, it will be difficult to fully implement NNSA?s PPBE process in
time for the fiscal year 2004 budget cycle. Furthermore, it is too soon to
tell whether NNSA?s proposed process, when fully implemented, will
effectively address widely recognized problems in NNSA?s existing planning,
programming, budgeting, and evaluation practices.  While it has developed
an interim excepted service personnel policy, at this time,

NNSA has firm plans to use only one- third of the 300 excepted service
positions authorized by Title 32. NNSA human resources officials told us
that they will not make decisions about using all of the available positions
until they are certain of the congressional response to their request for
expanded authority beyond the 300 positions authorized by Title 32. More
fundamentally, NNSA does not have the coherent human capital and workforce-
planning strategies it needs if it is to develop and maintain a well-
managed workforce over the long run.  Finally, NNSA has determined that
there is no need for an NNSA- specific

procurement regulation, and it has begun to address long- standing contract
management problems through efforts to improve contractor oversight and
performance evaluation.

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 worldwide
proliferation of weapons of mass destruction; and designing, building, and
maintaining naval nuclear propulsion systems. However, in conducting these
activities, DOE historically has been plagued by organizational and
managerial problems that have resulted in significant cost overruns and
schedule delays on major projects, as well as in the failure to complete
some of those projects and to operate other completed facilities. These
problems continue, as the recent cost overrun of more than $1 billion and
schedule delays with building the National Ignition Facility demonstrate.
There have also been a number of security concerns at DOE facilities.

Ultimately, the Congress concluded that DOE, as originally configured in
1977, could not correct these organizational and managerial problems alone.
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 NNSA to have three program offices,
various support offices, and a field office organization. In the view of the
Special Oversight Panel on Department of Energy Reorganization, DOE?s plan,
as originally crafted, was not in keeping with the intent of Title 32. As a
result, the National Defense Authorization Act for Fiscal Year 2001 (P. L.
106- 398) amended

GAO- 02- 93R NNSA Progress in Implementing Title 32 3 Title 32 to require,
among other things, that additional information on NNSA?s

organization and planning, programming, and budgeting processes be supplied
to the Congress.

NNSA?s first and current Administrator was sworn in on June 28, 2000. Since
that time, NNSA has undertaken a number of initiatives to comply with Title
32, including announcing the restructuring of its headquarters organization
in May 2001, with a field restructuring proposal originally promised for
October 2001; 1 undertaking the development of a formal PPBE process,
including drafting a Future Years Nuclear Security Program plan; adopting an
interim policy for the use of NNSA?s excepted service personnel authority;
and signing an agreement with DOE for support in the procurement arena.

Important NNSA Organizational Issues Remain Unresolved

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 NNSA. 2 We reported 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 about balancing competing resource priorities, such as
allocating funding between the short- term demand for production of weapons
components and the long- term need to maintain the weapons complex
infrastructure.

While Title 32 did not specify exactly how NNSA was to be organized, the act
did establish certain positions, such as a general counsel, and gave the
Administrator the flexibility to determine the best organizational structure
for the new agency. The act also 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. In our April 2001 testimony before the Special
Oversight Panel on Department of Energy Reorganization, we reported that
some progress had been made in establishing a

1 As of December 2001, NNSA had not yet issued a field restructuring
proposal. 2 Nuclear Weapons: Improved Management Needed to Implement
Stockpile Stewardship Program

Effectively (GAO- 01- 48, Dec. 14, 2000).

GAO- 02- 93R NNSA Progress in Implementing Title 32 4 better- organized
NNSA. 3 We noted that the practice of ?dual- hatting? 4 had been

virtually eliminated, enabling NNSA to manage its programs more
independently. In addition, we noted that NNSA had established a new support
structure for its headquarters office that had as it 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 support offices: one office headed by an
associate administrator for management and administration, who is
responsible for PPBE, personnel, and procurement, among other things; and
the other office headed by an associate administrator for facilities and
operations, who is responsible for managing the field structure, among other
things.

Despite these initiatives, fundamental organizational issues, such as those
we identified in our December 2000 report and April 2001 testimony, remain.
Specifically, the details regarding how the new NNSA headquarters support
offices will work with the established headquarters program offices- the
Office of Defense Programs and the Office of Defense Nuclear
Nonproliferation- remain unclear. 5 Many of the NNSA field managers we spoke
with were concerned that reporting relationships could become more complex
and confused rather than less because these various headquarters offices may
have different expectations. For example, depending on how responsibility is
divided, it is 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 between headquarters and the field that directly
affect how NNSA?s contractors are managed remain unresolved. Direction and
guidance to the NNSA contractors is 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
contractors receive multiple and sometimes conflicting guidance, NNSA?s
ability to hold its contractors accountable for performance is undermined.
NNSA recognizes that these issues need to be addressed. The acting Principal
Deputy Administrator is leading an effort to address organizational issues
remaining from the May 2001 headquarters reorganization and to clarify
confused lines of authority between headquarters and the field.

An additional organizational issue that has become apparent at NNSA?s new
area offices in Savannah River and Y- 12 also needs attention. Specifically,
at those sites, the DOE operations office managers must formally approve
certain activities before NNSA area office officials can act, even though
the operations office managers are

3 Department of Energy: Views on the Progress of the National Nuclear
Security Administration in Implementing Title 32 (GAO- 01- 602T, Apr. 4,
2001). 4 Initially, 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 the Special
Oversight Panel on Department of Energy Reorganization and with others,
including GAO, that NNSA might not be able to function with the independence
envisioned when NNSA was created. 5 The Office of Naval Reactors continues
to be managed as a separate entity within NNSA.

GAO- 02- 93R NNSA Progress in Implementing Title 32 5 not NNSA employees.
For example, operations office approval is required for foreign

travel as well as for some procurement actions, such as approving a waiver
of certified cost and pricing data for the Office of Defense Nuclear
Nonproliferation work being done in Russia. While the NNSA managers at the
Y- 12 and Savannah River area offices told us that their respective DOE
operations office managers have been careful not to interfere with their
decision- making, NNSA officials need to be empowered to execute such duties
to eliminate the last vestiges of dual- hatting.

Complementing the need for organizational clarity is the need for consistent
leadership. As we noted in our December 2000 report, a significant number of
management positions in the Office of Defense Programs were vacant or filled
with acting managers. We expressed concern that this situation could affect
the programs? ability to provide a long- term focus and consistent
leadership. Throughout NNSA, this issue continues to be a concern, as many
management slots within NNSA headquarters are still vacant or held on an
acting basis. In addition, NNSA established a new area office in Savannah
River almost a year ago, but no manager for that area office has yet been
designated. Although a formal memorandum of agreement between DOE?s Savannah
River Operations Office and the NNSA area office has been developed, without
an NNSA area office manager it will not be signed.

In our December 2000 report, we recommended that NNSA take action to clarify
roles and responsibilities at all levels in the organization, clarify the
lines of authority between headquarters and the field, and provide greater
management consistency and stability for the nuclear weapons program.
However, the problems that prompted our recommendations remain. As NNSA
moves forward, it needs to employ the organizational principles that we
cited in our April 2001 testimony before the Special Oversight Panel on
Department of Energy Reorganization: focusing a small headquarters staff on
strategic management, policy, and external relationships; 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. Only by applying
these principles can NNSA effectively organize to manage its national
security programs, to identify opportunities to reduce duplication and
achieve efficiencies both in headquarters and in the field, to ensure that
the right people are in the right places to manage the contractors who
perform its work, and to hold both federal managers and the contractors
accountable for meeting mission goals.

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

Numerous studies- including the 1997 ?120- Day Study? by the Institute for
Defense Analyses, 6 the 1999 report by the Chiles Commission, 7 the 1999
report by the Foster

6 The Organization and Management of the Nuclear Weapons Program, Institute
for Defense Analyses, Mar. 1997. 7 Report of the Commission on Maintaining
United States Nuclear Weapons Expertise to Congress

and the Secretary of Energy, Commission on Maintaining United States Nuclear
Weapons Expertise, Mar. 1999.

GAO- 02- 93R NNSA Progress in Implementing Title 32 6 Panel, 8 a report by
the DOE Inspector General, 9 and our 2000 report on the

management of the Stockpile Stewardship Program, 10 -have identified
problems in DOE?s planning, programming, and budgeting. These problems
include 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 a
Future Years Nuclear Security Program plan that details NNSA?s planned
expenditures for the next 5 years. Very early in his tenure, the NNSA
Administrator indicated that he intended to comply with Title 32 by
instituting a programming, planning, 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 NNSA?s version of DOD?s programming, planning, and budgeting process-
now referred to as the PPBE process- fully established 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.

NNSA?s initial attempts to develop its own PPBE process consisted of several
important activities, as follows:

 NNSA contracted with the Institute for Defense Analyses, a federally
funded research and development center with many years of experience in PPBE
development, to assist in strategic planning and PPBE development.

 NNSA brought in an experienced chief financial officer on detail from
DOE?s Oak Ridge Operations Office to lead the PPBE effort.

 NNSA created a draft Concept of Operations Report that laid out the high-
level processes and requirements that NNSA would need to implement to
develop its PPBE process.

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

9 Management of the Nuclear Weapons Production Infrastructure, DOE Inspector
General, Audit Report DOE/ IG- 0484, Sept. 22, 2000. 10 GAO- 01- 48, Dec.
14, 2000.

GAO- 02- 93R NNSA Progress in Implementing Title 32 7  Finally, NNSA
established seven implementation teams, staffed by representatives

from throughout the nuclear weapons complex, to document current processes
and to develop the detailed implementation plan needed to implement the

Concept of Operations Report.

In our testimony before the Special Oversight Panel on Department of Energy
Reorganization in April 2001, we concluded that NNSA?s PPBE process, as it
appeared to be developing, 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.

Since June 2001, the acting associate administrator of the Office of
Management and Administration and the acting director, Office of Planning,
Programming, Budgeting, and Evaluation, have reevaluated NNSA?s initial
efforts. These officials believe that the initial approach, described above,
was oriented too much to the program structure of the DOD 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 stopped working with the Institute for Defense Analyses, discontinued
most of its implementation teams, and moved away from the original Concept
of Operations Report in favor of a proposed process that would use existing
NNSA plans, practices, and processes as much as possible. In addition, NNSA
pulled virtually all of its planning, programming, and budgeting work back
into headquarters, where it is being staffed by a small, part- time team.

This shift in direction slowed NNSA?s momentum in establishing a PPBE
process and caused some confusion in NNSA field offices, but NNSA recently
has undertaken a number of activities aimed at implementing a PPBE process
for the fiscal year 2004 budget cycle. Examples of some of these activities
follow:

 NNSA is developing a revised PPBE process, as mentioned above. NNSA
communicated this revised process to all NNSA program, support, and field
offices on September 12, 2001. 11

 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. As the first
step in its revised PPBE process, NNSA believes that the draft strategic
guidance will establish a basis for the development of 5- year program plans
for the individual programs within NNSA.

11 Program offices include Defense Programs, Defense Nuclear
Nonproliferation, and Naval Reactors. Support offices include the Office of
Facilities and Operations and the Office of Management and Administration.
Field offices include the Albuquerque Operations Office, the Chicago
Operations Office, the Nevada Operations Office, the Oakland Operations
Office, the Savannah River Area Office, and the Y- 12 Area Office.

GAO- 02- 93R NNSA Progress in Implementing Title 32 8  NNSA has also issued
guidance to its program and support offices for developing

an integrated plan and a summary 5- year plan for each major program-
Defense Programs, Defense Nuclear Nonproliferation, and Naval Reactors- and
each of the support offices. The integrated plans, known as program
integrated plans, will be annual documents that delineate the
responsibilities, priorities, and performance commitments for an entire
program. Each summary 5- year plan will lay out an array of program
performance measures and estimated resources to carry out mission- specific
programs within each NNSA office.

 NNSA is currently in the process of reestablishing implementation teams to
help create workable processes for two other phases of its PPBE process. One
of these teams will be working on the programming process, 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 will be working on the evaluation phase,
which will establish performance measures, indicators, and metrics to
evaluate progress in meeting programmatic goals. Both teams are to develop
recommendations and report to the NNSA senior leadership in December 2001.

While this recent activity is a positive sign, NNSA still has an enormous
amount of work to do before its PPBE process can be fully implemented during
the fiscal year 2004 budget cycle, which began in September 2001 for NNSA.
Examples of the work remaining follow:

 Planning, programming, budgeting, and evaluation processes: As we have
said, NNSA has made some progress in starting high- level activities
associated with the various phases of planning, programming, budgeting, and
evaluation. However, NNSA?s proposed process primarily exists as a schematic
drawing; NNSA does not have a complete, detailed implementation plan. For
example, important details of the programming phase and evaluation phase
will not be determined for some months.

 Decision and information systems: Because these systems are key components
in a modern PPBE process, a critical issue will be the interface of NNSA?s
systems with both the existing DOE planning, financial, and budgeting
systems and DOE?s planned changes to these systems. For example, NNSA must
provide budgetary information to DOE for incorporation into the Department?s
budget submission. In addition, NNSA?s systems have to continue to comply
with the financial reporting requirements set by the Department?s Chief
Financial Officer. NNSA and DOE officials report that they are cooperating
on these issues. However, NNSA officials report that coordinating with the
Chief Financial Officer is causing some delays in implementing NNSA?s PPBE
process.

 Personnel: NNSA currently has only a small part- time staff on hand to
lead its PPBE effort. Over the past couple of months, this staff has focused
most of its attention on the pressing issues of the fiscal year 2002 and
2003 budgets, though it

GAO- 02- 93R NNSA Progress in Implementing Title 32 9 now reports it is able
to focus more attention on the development of NNSA?s

PPBE process. NNSA was unsuccessful in attracting an outside candidate to
lead its PPBE efforts. As a result, except for budgeting, NNSA does not
appear to have many personnel on hand with the right skill mix to conduct
the analytical functions typically associated with a PPBE process.

 Future Years Nuclear Security Program plan: Although required to do so by
Title 32, NNSA has yet to submit a Future Years Nuclear Security Program
plan to the Congress. NNSA was required to submit its first plan for the
fiscal year 2001- 2005 period but failed to do so because the NNSA
Administrator said he did not have reliable data on planned expenditures
that reflected recent congressional direction and the new executive branch
priorities. NNSA did produce a plan for the fiscal year 2002- 2006 period
and submitted it to the Office of Management and Budget in March 2001. The
Office of Management and Budget is reviewing the plan, pending the soon- to-
be- completed high- level reviews of the nation?s national security
programs, but it is unclear if the plan will ever be released to the
Congress. NNSA officials concede that they developed the plan without the
benefit of a PPBE process and that the plan represents only a first step in
developing a true multiyear program plan as required by Title 32. NNSA is
committed to developing a fiscal year 2003- 2007 plan, but it will do so,
again, without a fully implemented PPBE process.

With its shift in direction, NNSA lost momentum over the summer of 2001
toward its goal of making real changes to its planning, programming,
budgeting, and evaluation processes. While NNSA has established a conceptual
PPBE process, it will be difficult to fully implement such a 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 process.

NNSA Must Take Additional Steps to Make Effective Use of 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.
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.

GAO- 02- 93R NNSA Progress in Implementing Title 32 10 In response to this
situation, the Congress provided NNSA in Title 32 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. This system establishes the
evaluation criteria to be used in filling the excepted positions.
Specifically, NNSA may now hire staff through a noncompetitive selection
process and has greater flexibility in setting salaries.

NNSA Managers See Pros and Cons of the Excepted Service Authority NNSA
managers and human resource officials with whom we spoke have 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. 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 employees not in the excepted service.
(NNSA currently employs about 2, 300 people, including more than 800 in
scientific, engineering, and technical job series.) Specifically, these
managers were concerned that staff morale could be jeopardized if
scientific, engineering, and technical employees doing similar work were
covered by different compensation systems. Moreover, managers responsible
for business operations- such as budgeting, procurement, and human
resources- were worried that their staff- who believe they contribute
important skills to the agency?s mission- would resent being treated
differently from scientists and engineers.

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 has pursued congressional authorization to
expand the excepted service authority granted in Title 32. NNSA also created
a task force in September 2000- co- chaired by experienced human resources
officials- to examine other agencies? excepted service systems and to
develop a framework for an NNSA- wide service. The agency has received some
congressional support for increasing the number of excepted service
positions, although not to the level necessary to cover all of its
workforce. Specifically, the Senate Committee on Armed Services has
recommended that Title 32 be modified to increase the number of authorized
excepted service positions to 500. 12

12 See Report 107- 62, to accompany S. 1416, the National Defense
Authorization Act for Fiscal Year 2002. NNSA Has Made Limited Use of the
Authority to Date

In the meantime, NNSA has made limited progress toward using its new
authority. The Administrator has developed an interim excepted service
policy that covers new

GAO- 02- 93R NNSA Progress in Implementing Title 32 11 staff, and NNSA
employees who were 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.

NNSA has made an initial allocation of about one- third of the 300 excepted
service positions provided by Title 32. In October 2001, the agency
allocated 97 positions throughout the field units and headquarters to be
used in the first phase of implementation. According to the acting deputy
director for workforce planning and management systems implementation, 46 of
those 97 positions will be used to convert employees currently in DOE
excepted service systems. An additional 29 of the 97 positions will be used
to hire new employees. On October 1, 2001, however, NNSA imposed a hiring
freeze through December 31, 2001, because of uncertainty over the amount of
the agency?s fiscal year 2002 appropriation. NNSA plans to use the remaining
22 positions of this initial allocation to convert current civil service
employees. According to agency human resources managers, however, the NNSA
is not prepared to make those conversions because it has not developed all
of the policies needed to cover employees who might consider making the
conversion from civil service to excepted service.

NNSA human resources officials told us that they will not make decisions
about using all of the available positions until they are certain of the
congressional response to their request for expanded authority. While they
continue to be concerned about the morale problems that a fragmentary
excepted service system might create, they told us that if they learn that
the Congress will not grant the request, they will proceed to quickly
allocate the 300 positions throughout the agency. The allocation would be
made on the basis of requests for positions that the field units submitted
to headquarters in August 2001. There is no specific timetable, however, for
filling the remaining positions.

Use of the Limited Excepted Service Authority Needs to Be Grounded in
Workforce Analysis Linked to Agency Mission and Structure

A more fundamental obstacle to full use of the excepted service authority is
that NNSA does not have a long- term strategic approach that can ensure a
well- managed workforce. We have reported in the past that agencies need to
create a coherent human capital strategy- that is, a framework of human
capital policies, programs, and practices specifically designed to steer the
agency toward achieving its vision. 13

We have also reported that agencies should have an agencywide workforce
planning strategy. Such a 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

13 Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/ OCG-
00- 14G, Sept. 2000).

GAO- 02- 93R NNSA Progress in Implementing Title 32 12 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 acting deputy director for workforce planning and
management systems implementation, NNSA plans to develop a human capital
strategic plan and a workforce analysis, but a specific timetable for doing
so does not yet exist. Both of these efforts will be affected by decisions
that NNSA is now considering concerning organizational structure, lines of
authority, and roles and responsibilities. Reorganization decisions will
affect human capital issues by determining what skills are needed, how many
employees are necessary, and where they should be located. These decisions
are key to developing a human capital strategy that steers NNSA toward
achieving its vision and a workforce planning strategy that is linked to
strategic program planning efforts and identifies the agency?s current and
future personnel needs. These strategies are important precursors to
effective use of the excepted service authority, particularly because (1)
the number of excepted service positions is limited and (2) decisions about
which positions are in the excepted service cannot be easily undone.

An additional step that must be taken prior to full use of the excepted
service authority is developing all of the policies and procedures necessary
for the employees who might be placed into the excepted service. According
to agency human resources managers, policies and procedures are in place to
convert employees who were hired under DOE excepted service authorities to
NNSA?s excepted service authority. Policies also exist to hire new
employees. However, according to agency human resources managers, NNSA is
not ready to convert current employees who are in the civil service to the
NNSA excepted service authority. Specifically, NNSA has not developed
policies that define how a converted civil service employee would be
affected in the event of a reduction in force or what rights a converted
employee would have in personnel interactions with other civil service
agencies. In short, NNSA is not in a position to inform current civil
service employees of the pros and cons of converting to the excepted
service. According to NNSA human resources managers, the agency may not be
prepared to make these conversions until the spring of 2002.

NNSA Has Focused Procurement Efforts on Contract Management Changes

As noted earlier, 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 the lack of an
organizational structure that can effectively hold managers accountable for
program performance. Reflecting concerns that DOE?s procurement practices
could be contributing to these problems, Title 32 gave NNSA?s Administrator
procurement authority and designated him as the senior procurement executive
for NNSA. In addition, while it required NNSA to comply with the Federal
Acquisition Regulation, Title 32 gave NNSA the flexibility to institute
procurement policies and regulations that differed from DOE?s, unless
disapproved by the Secretary.

GAO- 02- 93R NNSA Progress in Implementing Title 32 13 Under NNSA?s new
organizational structure, the Office of Procurement and

Assistance Management, part of the Office of Management and Administration,
is expected to concentrate on providing guidance on and pursuing NNSA- wide
improvements in contract administration. Routine procurement tasks will
continue to be performed by DOE?s Office of Procurement and Assistance
Management under a formal memorandum of agreement that ensures that NNSA
officials retain final decision- making authority over NNSA procurements.
The agreement permits NNSA to maintain a smaller procurement office than it
would otherwise need, minimizes additional costs to NNSA, and minimizes
duplication of services. NNSA plans to publish guidance on the agreement to
ensure that field personnel are aware of what services DOE is providing and
how and when to access those services.

NNSA has determined that there is no need to pursue a separate NNSA-
specific procurement regulation at this time. Consequently, in addition to
complying with the Federal Acquisition Regulation, NNSA continues to operate
using the Department of Energy Acquisition Regulation. The director of
NNSA?s Office of Procurement and Assistance Management believes that the
Department of Energy Acquisition Regulation, as it now stands, allows NNSA
the flexibility it needs to enter into effective contracts. Many of the NNSA
officials we spoke with agree that DOE?s and NNSA?s formal procurement
processes- manifested in the formal contract documents- are not the root
cause of problems with contractor performance. Rather, these officials
believe it is the federal role that needs improvement, both in ensuring that
clear, consistent, and unified direction is provided to contractors and in
overseeing the contractors and holding them accountable at the field level.

While NNSA is not planning to issue new procurement regulations, it has
begun to make changes designed to improve contractor oversight. For example,
the contracts for NNSA?s three weapons production plants have been
recompeted, new performance- based contracts have been awarded, and new
contractors have been selected for two of the plants where significant
problems have occurred- Pantex and Y- 12. 14 For fiscal year 2001, the
process for setting performance expectations and measures and determining
fee awards is also being changed to make it more consistent across all of
NNSA?s contractors. While field managers will continue to assess the
contractors? performance, final fee determinations will be made at NNSA
headquarters.

These and other actions represent progress in improving the consistency of
the oversight function so that contractors can be held more accountable for
meeting mission goals. However, these changes are too recent for us to tell
whether they will be sufficient to improve NNSA?s contract results. As NNSA
moves forward, studying the operation of the Office of Naval Reactors can
provide many important lessons on effective contract management. The Office
of Naval Reactors, which is a part of NNSA, has long been recognized as
having a focused mission, strong leadership, clear

14 After competition, the contract at the Kansas City Plant remained with
the same contractor. The contracts at the Lawrence Livermore National
Laboratory and the Los Alamos National Laboratory were not recompeted but
were renewed with the University of California.

GAO- 02- 93R NNSA Progress in Implementing Title 32 14 lines of authority,
long- serving employees, and a strong set of internal controls, as

well as a culture that enhances accountability and good control over its
costs and contractor performance. As we noted in our December 2000 report,
the lack of clear lines of authority and accountability and confusion over
roles and responsibilities have contributed to NNSA?s difficulties in
keeping major projects on track and holding managers accountable for project
and program performance. 15 Therefore, studying and adopting the approaches
employed by the Office of Naval Reactors, where appropriate, can be
beneficial in improving NNSA?s ability to hold both contractors and federal
managers more accountable for meeting mission goals and controlling costs.

Conclusions

We recognize that NNSA?s implementation of Title 32 is an evolving process.
On some fronts NNSA has made progress since we testified in April 2001.
However, other important, fundamental, and long- standing issues- such as
organizational roles and responsibilities, where we have previously made
recommendations- remain unaddressed. We believe the best time to address
such problems is when the new organization and systems are first being laid
out and the momentum for change is at its highest. NNSA?s ability to
recapture and build momentum in areas such as planning, programming, and
budgeting will be critical to whether it will be successful in correcting
the long- standing management problems it inherited from DOE.

To ensure that all issues pertaining to NNSA?s independence are addressed,
NNSA needs to eliminate the last vestiges of dual- hatting under which DOE
officials could exercise NNSA responsibilities or direct NNSA employees such
as could potentially happen at the Savannah River and Y- 12 Area Offices.
Because NNSA?s current excepted service authority is limited to a relatively
small number of positions in specific occupations and because decisions made
about which positions are in the excepted service cannot be easily undone,
it is critical that NNSA have the necessary human capital and workforce
planning strategies in place in order to integrate the excepted service
positions with the agency?s mission needs. Until NNSA?s organizational
structure and the division of roles and responsibilities among the units of
the organization are completed, further allocation of excepted service
positions may not result in the best use of the limited number of positions
available.

Recommendations for Executive Action

To ensure that any remaining vestiges of dual- hatting are eliminated, the
Secretary of Energy and the Administrator, NNSA, need to develop formal
relationships so that the managers of the DOE Savannah River and Oak Ridge
Operations Offices do not have to continue providing formal approval for
NNSA actions, as they have had to do since the Savannah River and Y- 12 Area
Offices were established in October 2000.

15 GAO- 01- 48, Dec. 14, 2000.

GAO- 02- 93R NNSA Progress in Implementing Title 32 15 To ensure effective
use of the excepted service positions created by Title 32, we

recommend that the Administrator not allocate any additional positions until
thorough human capital and workforce planning strategies have been developed
that reflect NNSA?s final organizational alignment.

Agency Comments

We provided NNSA with a draft of this report for its review and comment, and
NNSA?s comments are included in their entirety in the enclosure. NNSA
acknowledged the report?s findings in each of the four management areas
related to Title 32 that we reviewed. However, NNSA cited a variety of
factors to explain its lack of momentum in implementing Title 32, including
the events and aftermath of the September 11, 2001, terrorist attacks;
ongoing operations; a slow fiscal year 2002 budget process; delays in the
confirmation process for presidential appointees; and significant
institutional barriers such as the need to coordinate with other federal
agencies and other DOE and NNSA offices. In addition, NNSA stated that it
failed to ?see the value added by (GAO?s) latest effort.? While we
appreciate NNSA?s difficulties in implementing key aspects of Title 32, the
intent of our work, as requested, is to provide the Special Oversight Panel
on Department of Energy Reorganization of the House Armed Services Committee
with an objective, fact- based assessment of NNSA?s progress at the end of
fiscal year 2001. Although NNSA has produced two reports for the Panel on
Title 32 implementation, these reports have either not been responsive to
the Panel?s needs, according to the Panel?s October 2000 assessment report,
16 or have not addressed long- standing and widely recognized issues, such
as defining roles and responsibilities among NNSA headquarters offices and
between headquarters and field offices. Moreover, an October 2001 report
that NNSA promised would address these issues has been delayed until at
least December 2001. In the absence of comprehensive NNSA reports on the
implementation of Title 32, we believe our work provides the most recent,
documented assessment of NNSA?s progress in implementing Title 32.

NNSA concurred with our recommendation to formalize relationships between
the Savannah River and Y- 12 Area Offices and their local operations
offices, citing ?broad guidelines? it had developed to describe working
relationships between the area and operations offices. We recognize that
NNSA managers in both area offices have worked with the local operations
offices to establish practical working relationships that allow them to
maintain continuity in mission functions. However, these agreements do not
solve the broader issue of NNSA area office managers needing approvals or
signatures from DOE operations office managers for specific actions, such as
those we outlined in the report. We continue to believe that NNSA needs to
finalize formal agreements that remove these last vestiges of dual- hatting
as quickly as possible.

16 Establishing the National Nuclear Security Administration: A Year of
Obstacles and Opportunities, An Assessment by the House Armed Services
Committee Special Panel on Department of Energy Reorganization, Oct. 2000.

GAO- 02- 93R NNSA Progress in Implementing Title 32 16 NNSA did not agree
with our recommendation regarding the use of its excepted

service authority. While the agency agreed that thorough human capital and
workforce planning is important, it did not believe that such planning was a
necessary precursor to using the excepted service positions. Instead, NNSA
stated that it is making judicious, case- by- case decisions on excepted
service allocations to meet the needs of the organization. While we do not
mean to imply that NNSA should not fill specific excepted service positions
for which it has a critical need, we continue to maintain that thorough
workforce planning would help to ensure effective long- term use of the
excepted service authority, particularly given the limited number of
positions available and the continuing uncertainty over organizational
changes that could affect the structure of NNSA?s workforce. Sound workforce
planning becomes even more critical if NNSA, as it suggests in its comments,
plans to shape and size its workforce to achieve significant reductions in
the need for federal employees.

Scope and Methodology

We performed our review from November 2000 through December 2001 in
accordance with generally accepted government auditing standards. To
determine the status of NNSA?s implementation of Title 32, we interviewed
officials in NNSA?s headquarters and program offices. We also spoke with
officials in the Albuquerque, Nevada, Oak Ridge, and Oakland operations
offices; officials in the Livermore site office; officials in the Kansas
City, Savannah River, and Y- 12 area offices; and officials at the
Pittsburgh Naval Reactors Office. In addition, we collected and reviewed
appropriate documentation for all of these locations. To provide some basis
of comparison for NNSA?s ongoing and planned management initiatives, we
spoke with officials from other government agencies, including the Federal
Aviation Administration, the Office of Personnel Management, and the Defense
Nuclear Facilities Safety Board.

We plan to provide copies of this letter to the Secretary of Energy and the
Administrator of NNSA. This letter will also be available on GAO?s home page
at http:// www. gao. gov.

If you have any questions regarding this letter, please contact James Noel
or me at 202- 512- 3841. Major contributors to this letter were Ross
Campbell, Jonathan Gill, Irvin McMasters, Delores Parrett, and Barbara
Timmerman.

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

Environment Enclosure

GAO- 02- 93R NNSA Progress in Implementing Title 32 17

Enclosure Comments From the National Nuclear Security Administration

GAO- 02- 93R NNSA Progress in Implementing Title 32 18

GAO- 02- 93R NNSA Progress in Implementing Title 32 19

GAO- 02- 93R NNSA Progress in Implementing Title 32 20 (360021)
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