DOE Contracting: Better Performance Measures and Management	 
Needed to Address Delays in Awarding Contracts (30-JUN-06,	 
GAO-06-722).							 
                                                                 
The Department of Energy (DOE), the largest civilian contracting 
agency in the federal government, spends over 90 percent of its  
annual budget on contracts to operate its facilities and carry	 
out its diverse missions. Federal law and regulations outline the
steps DOE must follow in planning and carrying out the contract  
award process and emphasize the importance of awarding contracts 
in a timely manner. Several of DOE's recent contracts have taken 
much longer than anticipated to award. GAO was asked to determine
(1) the extent to which DOE has experienced delays in awarding	 
contracts and factors contributing to delays, (2) the impacts of 
any such delays, and (3) the extent to which DOE has taken steps 
to address the delays.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-722 					        
    ACCNO:   A56207						        
  TITLE:     DOE Contracting: Better Performance Measures and	      
Management Needed to Address Delays in Awarding Contracts	 
     DATE:   06/30/2006 
  SUBJECT:   Contract administration				 
	     Contract oversight 				 
	     Procurement evaluation				 
	     Procurement planning				 
	     Procurement policy 				 
	     Procurement practices				 
	     Schedule slippages 				 
	     Internal controls					 
	     Timeliness 					 

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GAO-06-722

     

     * Report to the Chairman, Committee on Government Reform, House of
       Representatives
          * June 2006
     * DOE CONTRACTING
          * Better Performance Measures and Management Needed to Address
            Delays in Awarding Contracts
     * Contents
          * Results in Brief
          * Background
          * Delays Occurred in Most of the Contract Awards We Reviewed
               * DOE Experienced Delays of Months to Years in Awarding Its
                 Contracts
               * Delays Occurred Because DOE Had to Modify Its Approach after
                 Beginning the Contract Award Process
          * Delays in Awarding Contracts Could Increase Costs to the
            Government and Industry and Affect Future Competition
          * Efforts to Address the Causes of Delays Are in Early Stages, but
            Concerns Remain about the Potential Effectiveness of DOE's
            Planned Actions
               * DOE Was Not Addressing Delays Because Incomplete Performance
                 Data Indicated Contracts Were Awarded in a Timely Manner
               * DOE Recently Began Three Main Efforts to Improve Its Process
                 for Awarding Contracts
               * Lack of a Comprehensive Approach to Improvement Efforts and
                 Inconsistent Practices for Communicating Lessons Learned May
                 Limit the Effectiveness of DOE's Efforts
          * Conclusions
          * Recommendations for Executive Action
          * Agency Comments and Our Evaluation
     * Scope and Methodology
     * Comments from the Department of Energy
     * GAO Contact and Staff Acknowledgments

Report to the Chairman, Committee on Government Reform, House of
Representatives

June 2006

DOE CONTRACTING

Better Performance Measures and Management Needed to Address Delays in
Awarding Contracts

Contents

Table

Figure

June 30, 2006Letter

The Honorable Tom Davis Chairman Committee on Government Reform House of
Representatives

Dear Mr. Chairman:

The Department of Energy (DOE), the largest civilian contracting agency in
the federal government, spends over 90 percent of its annual budget on
contracts to operate its laboratories, production facilities, and
environmental restoration sites. In fiscal year 2005, DOE spent
approximately $22.9 billion on contracts for mission-related activities
such as maintaining the nation's nuclear weapons stockpile, cleaning up
radioactive and hazardous wastes, and conducting complex scientific
research; and for mission-support activities such as purchase of computer
equipment and maintenance and repair of buildings. Almost 90 percent of
these fiscal year 2005 contracting dollars-or about 80 percent of DOE's
entire budget-were directed to DOE's "facility management contractors"
that carry out most of the department's mission-related activities.

For over a decade, GAO, DOE's Office of Inspector General, and others have
criticized DOE's contracting practices, particularly for inadequate
management and oversight, and for failure to hold its contractors
accountable for results. The poor performance of DOE's contractors has led
to schedule delays and cost increases on many of the department's major
projects. Since 1990, such problems have led us to designate DOE contract
management-defined broadly to include both contract administration and
management of major projects-as a high-risk area for fraud, waste, abuse,
and mismanagement.

DOE's contracting activities are governed by federal law and regulations,
including the Federal Acquisition Regulation and the Department of Energy
Acquisition Regulation. These regulations and related DOE guidance outline
the steps that should be followed in planning and carrying out the process
of awarding its contracts. Furthermore, federal law generally requires
that federal agencies use full and open competition in selecting a
contractor, as part of the process for ensuring the best value to the
government. However, there are certain exceptions to this requirement,
such as an urgent need to obtain the goods or services, when DOE may award
a contract without full and open competition.

Awarding competitive contracts includes a series of required steps that
generally involve planning the contract award process, soliciting
proposals from private companies and/or public organizations, and
evaluating those proposals to select the company that will provide the
goods or services at the best value to the government. Planning the
contract award process generally involves identifying needed goods or
services and the best approach for obtaining them. DOE guidance generally
requires a formal written plan for carrying out this process for contracts
valued at $5 million or greater. The plan must describe the overall
strategy for obtaining the goods or services, including the planned
approach for soliciting and evaluating proposals. Key decisions outlined
in the plan include whether to target the solicitation to small businesses
and what factors to consider in evaluating proposals submitted by
companies.

Although federal regulations do not specify how long the contract award
process should take, the regulations state that the purpose of planning
the contract award process is to ensure that the government obtains the
needed goods or services in the most effective, economical, and timely
manner. Therefore, written plans for carrying out the award process must
include milestones for completing the steps in the process, such as when
the agency plans to solicit and evaluate proposals and make the award.
Developing and adhering to these schedules can help ensure that the
department conducts the process efficiently and can help companies make
informed business decisions regarding the allocation of their resources
and whether to compete for a contract.

In addition to specifying how the contract award process should be carried
out, the laws and regulations that govern contracting with the federal
government are designed to ensure that federal contracts are awarded
fairly. On occasion, companies that bid on government contracts may
believe that a contract has been or is about to be awarded improperly.
These companies may attempt to informally resolve concerns with the
contracting officer, file a protest with the federal agency awarding the
contract, or file a formal bid protest with the U.S. Court of Federal
Claims

or GAO.1 In deciding bid protests, the essential issue is whether the
agency making the award has complied with federal laws and regulations
that govern contracting.

Several of DOE's recent contract awards have taken much longer than
anticipated and have been subject to bid protests. In this context, you
asked us to review how DOE plans for and carries out its contract awards.
This report discusses (1) the extent to which DOE adhered to its planned
dates for awarding contracts and the factors contributing to any delays,
(2) the impacts of any delays in awarding contracts, and (3) the extent to
which DOE has taken steps to address delays in its contract award process.

To determine DOE's timeliness in awarding its contracts and the factors
contributing to delays, we analyzed file documents from a nonprobability
sample of contracts valued at $5 million or greater that DOE awarded
during fiscal years 2002 through 2005. To obtain this sample, we selected
contracts for goods and services that were awarded by DOE's three largest
component organizations-the Offices of Environmental Management and
Science and the National Nuclear Security Administration (NNSA)-and from
field locations with high levels of contracting activity. The contracts
sampled from these field locations comprised about 73 percent of total
contracting dollars for new awards of $5 million or greater during fiscal
years 2002 through 2005. To determine whether the contract awards had been
delayed, we compared the planned award date specified in DOE's schedule
for awarding the contract with the date the contract was actually awarded.
Federal regulations stress the importance of timeliness in awarding
contracts, but do not establish specific timeliness standards or measures.
Therefore, we used adherence to the milestones established in the written
plan as a consistent measure of timeliness and one indicator of how well
the contract award process was being managed. To determine the overall
length of time for a contract award, we generally compared the date the
written plan for the contract award was approved with the date that the
contract was awarded. For the contracts included in our sample for review,
we also obtained and analyzed information on bid protests filed with GAO.
To determine the extent to which DOE has taken steps to address any
delays, we interviewed officials at DOE headquarters and six of the field
locations that were involved in contract awards. In addition, we reviewed
agency policies and guidance on its contract award process, as well as
documentation on any efforts to improve the process. A more detailed
description of our scope and methodology is presented in appendix I. We
performed our work between July 2005 and June 2006 in accordance with
generally accepted government auditing standards.

Results in Brief

DOE awarded most of the contracts we reviewed months to years later than
the planned award dates. In fiscal years 2002 through 2005, DOE awarded
131 contracts valued at $5 million or greater; the 31 of these contracts
we reviewed were affiliated with DOE's three largest component
organizations and represented about 73 percent of the dollars awarded.
Specifically, none of the 24 competitive contracts was awarded by the
planned date specified in DOE's schedule for carrying out the contract
award process. DOE awarded one of these contracts less than 1 month after
the planned award date but awarded the remaining 23 contracts between
several weeks and 4-1/2 years after the planned award date. In contrast,
of the 7 contracts DOE awarded without competition, 6 contracts were
awarded on time or nearly so, with the remaining contract awarded 2 months
late. DOE encountered delays throughout the contract award process for
various reasons. For example:

o DOE took over 4 years to successfully award a $1.6 billion contract for
nuclear waste cleanup services at DOE's Hanford site in Washington after
revising and reissuing a solicitation in response to a bid protest.

o DOE was 4 months behind its scheduled award date for two contracts for
the conceptual design of a waste processing facility at the Savannah River
site. The delay occurred because the department decided to enter into
discussions with companies after proposals were submitted, even though DOE
had not allowed any time for this activity in its schedule for carrying
out the contract award.

o DOE was 4 months late in awarding a contract to manage and operate the
Berkeley National Laboratory because it took longer than expected to
obtain approval of the draft solicitation from DOE headquarters officials.

It is unclear the extent to which delays in the contracts that we reviewed
could have been avoided, or were due to factors beyond DOE's control.
However, some delays were clearly avoidable, such as when DOE took
corrective action in response to bid protests because the department
failed to follow its contract award process.

Delays in awarding contracts could increase costs to both DOE and the
companies that are competing for the work and could also affect the
willingness of companies to compete for future DOE contracts. Because the
department does not track its costs for awarding individual contracts, it
was not feasible for us to quantify the impact of delays on DOE's costs.
However, DOE headquarters procurement and program officials acknowledge
that there may be additional costs associated with contract awards that
experience delays and added that companies competing for these contracts
could face increased costs as the process takes longer than expected.
Specifically, in addition to investing time and resources in developing
proposals, once a company submits a proposal to DOE, the company is
generally required to ensure that the key personnel identified in the
proposal continue to be available until the decision is made and the
contract awarded. For example, according to file documents for a contract
to provide infrastructure services at DOE's Paducah, Kentucky, site,
several of the companies competing for that contract told DOE that-in
addition to the high costs of preparing a proposal-there were costs
associated with retaining key personnel during the year-long delay that
occurred before DOE awarded the contract. Increased costs and the length
of time it takes DOE to award a contract also have the potential to affect
competition for future DOE work. Although DOE officials who oversee the
contracting process told us that they have not yet seen a decline in the
number of companies competing for contracts, they agree that this is a
potential concern.

In July 2005, when we began our work, officials overseeing DOE's contract
award process generally were not taking steps to address delays in
awarding those contracts. One of the main reasons that DOE was not
addressing the delays was that DOE's performance data measured only the
final steps in the contract award process and indicated that most of the
contracts were being awarded in a timely manner. In late 2005, partly in
response to criticisms from GAO and others, DOE began to take steps to
improve its contract award process. These efforts involved (1) an
initiative with the Office of Management and Budget to address the GAO
determination since 1990 that DOE's contract management has been at high
risk for fraud, waste, abuse, and mismanagement; (2) a restructuring of
DOE's Office of Environmental Management to increase the focus on planning
and management of contract awards; and (3) specific steps by NNSA and
DOE's Office of Procurement and Assistance Management to implement
improved measures of the timeliness of the contract award process.
Although these efforts are constructive and helpful, we have two main
concerns that could limit DOE's effectiveness in improving the timeliness
of contract awards. First, the efforts do not reflect a comprehensive
approach within the department to improve the timeliness of contract
awards. Various programs and organizations within DOE are initiating these
efforts, and we found that some of DOE's contracts were excluded from the
improvements. Second, as DOE implements more comprehensive measures of
timeliness and analyzes the resulting performance data to identify the
causes of delays, DOE currently does not have a systematic way to develop
and disseminate best practices or lessons learned, despite the fact that
federal regulations require agencies to implement knowledge-sharing
procedures. Instead, department officials who oversee contracting efforts
said that best practices and lessons learned are sometimes shared
informally during the contract award process or at conferences. However,
officials who plan and carry out contract awards said that the information
was sometimes not available to them or may have come too late in the award
process to be beneficial.

To help ensure that DOE's contract award process is efficient and
effective and that DOE is obtaining the best value for the government, we
are recommending that DOE take steps to (1) develop more accurate and
comprehensive performance measures for the timeliness of its contract
awards and (2) establish a consistent system for identifying and sharing
lessons learned and best practices on contract awards.

DOE generally agreed with our recommendations and outlined steps that the
department has taken or will take in response. However, DOE raised
concerns about (1) using a nonprobability sample to draw conclusions about
DOE's contracting practices, (2) our description of contracts awarded
later than planned as delayed, and (3) our statement that DOE's
performance measures for timeliness were incomplete. We believe our
sampling methodology was appropriate because the 31 contracts in our
nonprobability sample represented about 73 percent of the total dollars
DOE awarded during the 4-year period for contracts valued at $5 million or
greater. Furthermore, our report does not use the sample results to make
overall statements about DOE's contracting practices. Regarding our
description of contracts awarded later than planned as delayed, federal
regulations emphasize the importance of timeliness in awarding contracts,
and we believe that awarding contracts later than planned is accurately
characterized as a delay. Regarding the completeness of DOE's performance
measures for timeliness in awarding contracts, we continue to believe that
DOE's performance measures could be improved by being applied to all
contracts for which a written plan and schedule are required.

Background

DOE has numerous sites and facilities around the country where the
department carries out its missions, including developing, maintaining,
and securing the nation's nuclear weapons capability; cleaning up the
nuclear and hazardous wastes resulting from more than 50 years of weapons
production; and conducting basic energy and scientific research, such as
mapping the human genome. DOE relies on contractors to operate its
facilities and accomplish its missions. This mission work is carried out
under the direction of NNSA and DOE's program offices, including the
Offices of Environmental Management and Science.

The Federal Acquisition Regulation provides the basic guidelines that all
federal agencies must follow in planning for and carrying out the process
for awarding contracts. DOE, like most federal agencies, has supplemental
regulations that it has set forth in the Department of Energy Acquisition
Regulation to recognize requirements unique to the department, such as
maintaining nuclear safety and security. Furthermore, in the mid-1990s,
DOE's Office of Procurement and Assistance Management developed the DOE
Acquisition Guide that provides further information on contract award
planning activities, including meeting federal requirements for
competition, establishing evaluation criteria, and selecting the
appropriate contract type.

In planning and carrying out competition and award of contracts, there are
three main phases, and each phase generally includes several steps.

o Planning. This phase involves identifying the mission need for the
contract, alternatives for obtaining the goods or services, estimated
costs, and any program or technical risks. Federal regulations state that
the agency should use an integrated team approach-involving all personnel
responsible for significant aspects of the contract award process-to
developing the plan and associated milestone schedule. The plan should
also identify the appropriate contract type for the work, considering the
alternatives and risks. In addition, a selection official is designated,
and an evaluation board is formed to carry out the contract award process.

o Developing the solicitation. Generally, the evaluation board, with input
from technical and other advisors, develops a statement of work for the
contract and criteria that will be used to evaluate proposals submitted by
companies. During this phase, DOE may also do market research to determine
if sources capable of meeting the agency's needs exist. Finally, DOE
issues the request for proposals that describes the work to be done,
provides instructions to companies on how and when to submit their
proposals, and describes the criteria that will be used to evaluate the
proposals and select a contractor.

o Evaluating proposals and awarding the contract. Once proposals are
received, the evaluation board evaluates the proposals against the
established criteria. Evaluation criteria may differ for each contract,
but generally include factors such as a company's proposed technical
approach; past performance on DOE, other federal agency, and commercial
contracts; the proposed cost; and the qualifications of the key personnel
identified in the proposal. During this phase, DOE may determine that it
is necessary to hold discussions with individual companies about issues
raised during the evaluation of their proposals. Based on a written report
of the evaluation board that outlines the strengths and weaknesses of each
proposal, the selection official should select a proposal that represents
the best value for the government. The DOE contracting officer, who has
generally provided contracting support to the evaluation team, then awards
the contract.2

The Competition in Contracting Act of 1984 provides statutory authority
for GAO to decide cases involving bid protests. GAO's bid protest
decisions address specific allegations raised by unsuccessful companies
claiming that particular contracting actions were contrary to federal laws
and regulations. A bid protest may be filed by an "interested party,"
defined as an actual or prospective bidder or offeror with a direct
economic interest in the contract. Unless the protest is dismissed at the
outset because it is procedurally or substantively defective, such as if
the protest was not filed in a timely manner, the contracting agency is
required to file a report with GAO responding to the protest. GAO will
consider the facts and legal issues raised and is required to resolve the
protest not later than 100 days from the date the protest was filed,
either by sustaining the protest and recommending that the agency take
corrective action, or by denying or dismissing the protest.3

DOE's Office of Procurement and Assistance Management and NNSA's Office of
Acquisition and Supply Management establish policies and guidance for
awarding contracts according to federal and departmental regulations.
Officials from DOE's programs, such as NNSA and the Offices of
Environmental Management and Science, usually manage the contract planning
and award process since they are most knowledgeable about the work needed
and are ultimately responsible for managing the work and overseeing the
contracts. Other organizations within DOE work with the program officials
to plan and carry out the contract award process by providing contracting,
legal, and technical advice and assistance. DOE's Offices of General
Counsel and Procurement and Assistance Management review, evaluate, and
approve key documents during the entire process, such as the initial plan
for the contract award process and the request for proposals.

Delays Occurred in Most of the Contract Awards We Reviewed

Most of DOE's 31 contract awards that we reviewed experienced delays when
comparing the planned and actual award dates for the contracts. The 24
contracts awarded with competition faced delays of months to years; of the
7 contracts awarded without competition, 6 were awarded on time or nearly
so. Delays occurred throughout the contract award process due to factors
such as time spent repeating steps of the process to resolve a company's
formal protest, or because of unanticipated complications that affected
DOE's ability to adhere to the planned schedule.

DOE Experienced Delays of Months to Years in Awarding Its Contracts

For the 31 contracts we reviewed, most were awarded months to years after
the planned award date. To determine whether contract awards were delayed,
we compared the planned award date with the date DOE actually made the
award. None of the 24 competitive contracts we reviewed was awarded
according to DOE's planned schedule, and nearly all were delayed by months
or years. Only 1 of these competitive contract awards was made within 1
month of the planned award date. The remaining awards experienced more
lengthy delays of from 2 months to over 2 years. In contrast, delays were
less prevalent among the noncompetitive contract awards included in our
sample. Six of these 7 contracts were awarded on time or within 1 month of
the planned award date. The other contract was awarded 2 months late.4
(See fig. 1.)

Figure 1: DOE's Timeliness in Awarding 31 Contracts from Fiscal Years 2002
through 2005

Noncompetitive contracts were awarded in a more timely manner, in part,
because the federal regulations for noncompetitive contract awards are
different and involve fewer steps. Thus, DOE officials could shorten or
eliminate parts of the process in which delays typically occurred on the
competitively awarded contracts we reviewed. For example, for a
noncompetitively awarded contract, DOE would not need to evaluate multiple
proposals because it had already identified a company with the
qualifications and experience necessary to perform the work. DOE generally
awarded the seven contracts we reviewed without competition because of an
urgent need to obtain the goods and services and to ensure that the
contractors could start work quickly. This is consistent with one of the
exceptions to the requirement for full and open competition allowed by
federal regulations. Nevertheless, since federal regulations generally
require that agencies use full and open competition, the contracts awarded
competitively better reflect the timeliness of DOE's overall contract
award process.

The schedules for the contract awards we reviewed showed that DOE planned
to take from about 1 month to up to 2 years to award its contracts.
Variation in the length of the planned schedule may depend on several
characteristics of the contract award process, such as whether or not the
contract was awarded competitively or noncompetitively, the dollar value
of the award, or the complexity of the work. DOE officials indicated that
facility management contracts tend to be more complex and, therefore, can
take longer and could be more prone to delay, but we found some facility
management contract awards were less delayed than some smaller dollar
value, more straightforward contract awards. For example, the $4.8 billion
facility management contract to operate the Idaho National Laboratory took
just over 1 year to award and was delayed about 4 months, while a $5
million administrative support services contract at the Savannah River
site took almost 2 years to award and was awarded 1-1/2 years later than
the planned award date.

Delays Occurred Because DOE Had to Modify Its Approach after Beginning the
Contract Award Process

Delays in awarding contracts occurred when DOE modified its approach after
the start of the contract award process. DOE frequently had to modify its
approach to take corrective action in response to bid protests, or because
DOE took more time than planned to evaluate proposals, hold discussions
with companies that had submitted proposals, or obtain headquarters
approval for key documents.

Taking corrective action due to bid protests. One cause of delay for DOE's
contract awards was the time the department spent reworking portions of

the process in response to companies that filed bid protests with GAO.5
Companies generally filed protests because they believed that DOE had
violated federal acquisition regulations in carrying out the contract
award process, most typically in evaluating or soliciting proposals.
Rework in response to a bid protest was initiated in one of two ways: (1)
GAO found fundamental flaws in the contract award process, sustained the
company's protest, and recommended that DOE take corrective action or (2)
DOE initiated corrective action after conducting an assessment of the
validity of the company's protest, without waiting for a formal GAO
decision. In either case, rework can include canceling or revising the
solicitation, reevaluating proposals, or accepting proposals from firms
that were previously excluded from the competition.

Rework resulting from corrective action can significantly delay the
contract award. For the 31 contracts we reviewed, 10 resulted in bid
protests filed with GAO. Protests on 8 of these were denied or dismissed
by GAO, or withdrawn by the protestor.6 DOE agreed to take corrective
action on the remaining 2, once as a result of a protest being sustained
by GAO, and once before GAO issued a decision. Delays due to such
corrective action added up to 2 years to the contract award process. For
example, a contract worth $1.6 billion to clean up the River Corridor area
at DOE's Hanford, Washington, site was delayed more than 1-1/2 years while
DOE took corrective action in response to a bid protest. GAO sustained a
bid protest on the initial award because DOE failed to properly apply its
criteria for evaluating the cost proposals. In response, DOE revised and
reissued the solicitation, evaluated new proposals, and selected a new
contractor about 2-1/2 years after the initial planned award date.7 In
another example, a NNSA contract award for administrative support services
was delayed almost 2 years when NNSA took corrective action in response to
a bid protest. Corrective action involved revising and reissuing the
solicitation. However, the NNSA evaluation board then had difficulties
completing cost evaluations of the revised proposals, adding more time to
the process, and finally awarded contracts to all three companies almost 2
years later than the planned award date.

Evaluating proposals. DOE generally estimated between 1 and 6 months to
review and evaluate proposals for its competitive contract awards.
However, for the 24 competitively awarded contracts we reviewed, it took
on average 5 months longer than planned for this part of the process,
accounting for over half of the overall delay in carrying out the process.
For example, DOE was planning to award multiple contracts to provide
environmental remediation and deactivation of facilities across the DOE
complex. DOE estimated that it would receive about 20 proposals and
allowed about 3 months for evaluating the proposals and selecting the
contractors. The department actually received more than 100 proposals and
was delayed over 9 months, in part, due to the amount of additional time
required to review the larger than expected number of proposals. In
another example, the Savannah River Operations Office allowed about 8
weeks to evaluate proposals for an administrative support services
contract at the site. However, the evaluation board encountered several
difficulties during the evaluation process, including concerns about the
wide range of the cost estimates in the proposals. These concerns
necessitated a more detailed cost evaluation, resulting in the evaluation
taking 5 months longer than planned.8

Holding discussions with companies submitting proposals. For eight of the
contracts we reviewed, DOE had to modify its approach to holding
discussions. In some cases, the planned schedule did not include any time
for discussions and, in other cases, the time DOE took to discuss
proposals with the companies submitting them exceeded the time estimated
in the plan. For these contracts, actual time to discuss proposals
exceeded the planned time by an average of 3 months. For example, two
contracts for conceptual design of a waste processing facility at the
Savannah River site were awarded 4 months late because DOE initially
intended to make the contract awards without discussions and, therefore,
did not plan time in the original schedule for this part of the process.
However, after the contracting process was under way, the department
decided it was necessary to conduct discussions on the proposals because
none of the companies had provided all of the cost and pricing data
necessary to fully evaluate the proposals. Similarly, a contract for
medical services for the Hanford site was delayed more than 5 months, in
part because the department held discussions with companies concerning
their cost proposals and technical approach but did not plan for this
activity in the schedule.

Obtaining headquarters approval of key documents. Awarding of DOE
contracts was also delayed due to obtaining headquarters approval of key
documents. In five contract awards we reviewed,9 delays in obtaining the
required review and approval from DOE headquarters officials caused an
average 5-month delay in contract award. For example, for a contract to
manage and operate DOE's Berkeley National Laboratory, DOE allowed 1 month
for headquarters review and approval of the draft solicitation. However,
headquarters review and approval took 5 months, partly due to the
complexities of competing a contract that had been in place for decades.
As a result, the contract award was 4 months late. In another example, the
Oak Ridge Operations Office allowed 1 month for headquarters review and
approval of a solicitation for a contract for medical isotope production.
However, headquarters review and concurrence took about 1 year longer than
anticipated because of additional requests for information from the
Congress on DOE's strategy for going forward with the work under this
contract. Overall, the contract award was delayed nearly 2 years due to
this lengthy review and the need for extensive discussions during the
evaluation phase with companies that had submitted proposals.

It is unclear the extent to which these delays in awarding contracts were
avoidable. At times, delays in the process appeared to be outside DOE's
control and, therefore, more difficult to anticipate and manage, such as
difficulty obtaining funding or to address concerns raised by the Congress
or other stakeholders. For example, a $562 million contract for facilities
and services to stabilize the department's depleted uranium hexafluoride
inventory at Portsmouth and Paducah was delayed after the Office of
Management and Budget, late in the process, raised concerns about the need
to build facilities at both locations. Dealing with this issue contributed
to the delay of the contract award.10 While external factors such as this
can impact the planned schedule, some delays are clearly avoidable, such
as when DOE had to take corrective action in response to bid protests
because the department failed to follow its contract award process. In
such cases, better management and oversight of the contract award process
would provide opportunities for improvement. According to the Director of
DOE's Office of Procurement and Assistance Management, DOE cannot plan for
all possible events when developing a schedule for a contract award
process and must respond to changing circumstances and incorporate
additional steps into the award process when necessary.

Delays in Awarding Contracts Could Increase Costs to the Government and
Industry and Affect Future Competition

Delays in awarding contracts could increase costs both to DOE and the
companies that are competing for the potential contracts and could also
affect whether companies are willing to compete for DOE contracts in the
future. Specifically, awarding a contract months or years after the date
anticipated in the contract award schedule could increase the overall
costs to the government. DOE staff involved in a contract award may
include officials from the program offices, such as the Offices of
Environmental Management or Science; contracting and legal specialists;
and nuclear safety and regulatory experts. Both salary and travel costs
associated with keeping these integrated teams together for the duration
of the contract award process can be significant. However, these costs
cannot be readily quantified since the department does not accumulate or
track the costs associated with individual contract awards. Nevertheless,
DOE officials acknowledge that there may be additional costs associated
with contract awards that are delayed. The added time and resources spent
on delayed contract awards may impact the department's ability to meet its
management and oversight responsibilities, including planning for and
carrying out other contract awards.

According to DOE officials, prolonged delays in awarding contracts could
also increase costs for companies that are submitting proposals. Companies
competing for DOE contracts invest considerable time and resources in
developing their proposals. However, since companies generally consider
their proposal costs to be proprietary information, we could not quantify
those costs. For DOE's contracts, once companies submit proposals, DOE
generally requires the companies to ensure that key personnel identified
in the proposals continue to be available until the award decision has
been made. If a contract award is delayed, companies may have to keep key
personnel available for months or even years, which could increase their
costs and/or represent a possible lost opportunity to the companies since
those key personnel may not be available for other work. For example, our
review of file documents found that several small businesses competing for
a contract to provide infrastructure services at DOE's Paducah, Kentucky,
site expressed frustration over the costs of keeping key personnel
available while DOE took nearly 1 year after the planned award date to
complete the process and award the contract.

The length of time and increased costs to carry out a contract award may
also discourage some companies from competing for DOE work, thus
potentially affecting the extent of competition in the future. Ensuring
adequate competition for contracts can help obtain the best value for the
government. According to DOE officials who oversee the contracting
process, they have not seen a decline in the number of companies willing
to compete for DOE's contracts, but the officials agree that this is a
potential concern, and it has been a concern in the past. For example, a
January 2001 report that analyzed the contractor base for DOE's
environmental cleanup work stated that the number of companies that were
both willing and able to compete for major remediation contracts had
declined over the past several years.11 The report concluded, among other
things, that promoting competition among a large number of qualified
companies was crucial to getting the best value for the government and
accomplishing the environmental cleanup mission. Therefore, anything that
could reduce the pool of potential companies competing for DOE's work,
such as an inefficient contract award process, would not be in the
department's best interest of fostering full and open competition for its
work.

Efforts to Address the Causes of Delays Are in Early Stages, but Concerns
Remain about the Potential Effectiveness of DOE's Planned Actions

When we began our review in July 2005, DOE officials generally were not
addressing delays in awarding contracts because DOE's data was showing
that its contracts were being awarded in a timely manner. However, since
late 2005, DOE has been implementing three main efforts to improve its
contracting, partly in response to criticism by GAO and others. These
efforts include (1) an initiative to address the DOE contracting
weaknesses that led GAO to designate the area as high risk for fraud,
waste, abuse, or mismanagement; (2) a plan to restructure DOE's Office of
Environmental Management to focus more attention on the contract award
process; and (3) steps by NNSA and DOE's Office of Procurement and
Assistance Management to improve performance measures on the timeliness of
contract awards. While these improvement efforts appear to be constructive
and may also help to address delays in awarding contracts, we have two
remaining concerns related to the timeliness of DOE's contract awards.
First, the efforts do not reflect a comprehensive approach within the
department to improve the timeliness of contract awards. Second, even if
DOE uses improved performance data to identify the causes of delays in
awarding its contracts, the department does not have a systematic method
to develop and disseminate best practices and lessons learned.

DOE Was Not Addressing Delays Because Incomplete Performance Data
Indicated Contracts Were Awarded in a Timely Manner

When we began our work in July 2005, DOE officials generally were not
taking steps to address the causes of delays in awarding contracts. One of
the main reasons for this was that DOE's performance data was generally
showing its contracts were being awarded in a timely manner. Although our
analysis uncovered delays in most of the 31 contract awards valued at $5
million or greater from fiscal years 2002 through 2005 that we reviewed,
DOE's performance data for the same period showed that most of its
contract awards were timely. For example, the data for fiscal years 2003
and 2004 showed that, respectively, 88 and 86 percent of the contract
awards were timely. According to DOE's performance measures, a timely
award meant that DOE had awarded the contracts within 150 days after
receiving proposals from companies. An official from the Office of
Procurement and Assistance Management who manages the performance

data said that the department used 150 days as a timeliness standard
because it represented a realistic yet challenging time frame for awarding
the contracts.12

However, DOE's performance data did not provide a complete picture of the
department's timeliness in awarding its contracts for two reasons. First,
the data for those years did not include all of the contract award
process. Instead, the performance data DOE used measured only the
timeliness in carrying out the final stage of the process (the evaluation
phase), from the point at which DOE received the proposals through
contract award. Consequently, the performance data excluded the earlier
steps of the process, from planning the contract award through the process
of soliciting proposals from interested companies. For the 24
competitively awarded contracts valued at $5 million or greater we
reviewed, the excluded steps accounted for over half of the total time
that DOE typically spent awarding its contracts. As a result, some of
DOE's contract awards may appear timely, when, in fact, DOE awarded the
contracts weeks or months after the planned award date. For example, in
fiscal year 2003, DOE awarded a contract for laundry services at the
Hanford site in Washington about 2 months after its planned award date.
However, DOE considered the contract award to have been timely because the
department was able to award the contract within 150 days of receiving
proposals.

Officials from the Office of Procurement and Assistance Management said
DOE's timeliness data are intended to measure the performance of
contracting staff. Therefore, the officials said that the timeliness
measure includes only the evaluation phase of the contract award process
because that is the aspect of the process that would more likely be under
the direct control of the contracting staff. Prior to the evaluation
phase, officials said that contracting staff generally rely on program
staff to develop key information, such as a description of the work to be
carried out under the contract. Furthermore, according to DOE's guidance,
program office staff are generally responsible for planning the contract
award process. However, we found that DOE's contracting staff were
generally involved throughout the entire contract award process as part of
an integrated team approach. Furthermore, it is unclear to what extent
contracting staff have direct control over any phase of the process.

Second, DOE's performance data were incomplete because data on DOE's
facility management contracts were excluded. For example, in fiscal year
2005, DOE competitively awarded seven facility management contracts valued
at a total of about $10.4 billion. However, DOE excluded the data on these
facility management contracts from its performance measures for
timeliness. DOE officials from the Office of Procurement and Assistance
Management said they excluded the facility management contracts from the
department's performance data because those contracts are particularly
complicated to award. Unlike the contracts included in the performance
measures for timeliness, the department could not determine an appropriate
timeliness standard for the facility management contracts. As a result of
excluding the facility management contracts, the performance data for
fiscal year 2005 did not reflect the department's timeliness in awarding
about 97 percent of the nearly $11 billion in contracts that the
department awarded that year.

In contrast to DOE's approach, we measured the department's timeliness in
awarding its contracts by comparing the planned award dates with the dates
DOE actually awarded the contracts. We used the planned award date as the
standard for determining whether contracts were awarded in a timely
manner, rather than comparing the time it took DOE to award the contract
after proposals were received with a fixed standard, such as 150 days. A
fixed standard is arbitrary because the actual time needed to carry out a
contract award process can differ greatly for legitimate reasons,
depending on the circumstances of each individual contract award.
Furthermore, in doing so, we included the facility management contracts
because those contracts can represent a significant portion of the total
value of DOE's contract awards.

DOE Recently Began Three Main Efforts to Improve Its Process for Awarding
Contracts

Since late 2005, DOE has initiated three new efforts to improve its
contracting processes. DOE is implementing these actions as part of its
continuing efforts to improve its contracting processes and, in part,
because of long-standing criticisms by GAO and others. Since 1990, GAO has
designated DOE's contract management, including project management, as an
area at high risk for fraud, waste, abuse, and mismanagement. Our reviews
have uncovered weaknesses in DOE's management and oversight of its
contracts which, in some cases, have undermined DOE's ability to carry out
its missions or dramatically

increased its costs.13 More recently, criticisms have included the
frequency of delays in awarding contracts and the need for reforms. For
example, in congressional testimony in November 2005 and March 2006, the
Assistant Secretary for Environmental Management cited the need for
improvements in the department's contract award practices. Furthermore,
conferences on DOE environmental cleanup issues held in February and
October 2005 and attended by DOE and contractor officials included
presentations calling for a reevaluation of DOE's contract award process.

DOE's recent efforts to improve its contracting include the following:

o Initiative to address DOE's high-risk contracting practices. In November
2005, DOE drafted a plan aimed at improving the department's contract and
project management, including management of the contract award process.
DOE developed the plan in response to an effort by the Office of
Management and Budget that requires agencies to address areas identified
by GAO as high risk for fraud, waste, abuse, or mismanagement. Actions
included in the plan to improve the contract award process include
conducting better oversight of the planning process, maximizing
competition for contracts, and ensuring that contracts allow DOE to
properly hold contractors accountable for their performance. To date, DOE
has developed performance measures and targets for the focus areas in its
action plan, as well as target dates for implementing the plan. As part of
this initiative, in February 2006, DOE began to increase the frequency of
training for new evaluation boards and selection officials and to provide
this training at the beginning of the planning process. Although this plan
does not specifically address the timeliness of contract awards, the
overall effort to improve contracting and project management could help
identify and address underlying causes for delays in awarding contracts.

o Initiative to restructure DOE's Office of Environmental Management. Also
in late 2005, the Assistant Secretary for Environmental Management
announced plans to restructure the headquarters-based administrative
functions within his program office. According to officials in the Office
of Environmental Management, the reorganization is aimed, in part, at
improving contract and project management by bringing these functions
together under a new Deputy Assistant Secretary for Acquisition and
Project Management. As the reorganization is implemented, the Office of
Environmental Management, at the request of a congressional subcommittee,
has also commissioned the National Academy of Public Administration to
undertake a general management review of the program, including reviewing
the program office's policies and processes for awarding contracts and
providing advice on improving their effectiveness. As the study
progresses, DOE will receive interim reports and recommendations on how to
implement the reorganization and increase its effectiveness, which may
also result in improving the timeliness of contract awards.

o Initiative to improve performance data on contract timeliness. NNSA and
DOE are implementing separate efforts to help them track contract awards
against the planned dates for carrying out the process. NNSA's effort is
focused on a recently implemented data system that will help its
contracting staff track ongoing contract awards against a detailed
schedule of milestones. The requirement to input a detailed milestone
schedule at the beginning of the contract award process applies to all of
NNSA's contracts, regardless of their dollar value. As staff carry out the
process, the system will record the dates on which key steps were
completed and document any delays from the schedule. The system also
allows the contracting officials to generate reports on the status of
ongoing contract awards, as well as analyze data on existing contract
awards for evidence of systemic delays or other problems. As of April
2006, the data system was operational, and NNSA contracting officials have
started using this milestone information to manage ongoing contract
awards.

Similarly, in March 2006, DOE's Office of Procurement and Assistance
Management began implementing plans to track the timeliness of DOE's
facility management or other high-visibility contracts against a detailed
milestone schedule. According to the Director of the Office of Procurement
and Assistance Management, representatives from his office, as well as
other department officials responsible for awarding facility management
contracts, will work to develop a realistic, but challenging, milestone
schedule for carrying out the award process. According to the Director,
revised DOE guidance will recommend that planning for a new facility
management contract should begin no later than 2 years prior to the
expiration of an existing contract. Once the milestone schedule has been
established, his office will then track the contract award process to
compare planned and actual key dates and provide monthly updates to the
Deputy Secretary. As of April 2006, DOE had established schedules for the
current and upcoming facility management contract awards, began monitoring
the progress against those schedules, and began submitting monthly status
reports to the Deputy Secretary.

DOE's efforts to improve its contracting are generally in the early stages
of being planned or implemented, and not all of the efforts specifically
address the timeliness of contract awards. Nevertheless, we believe these
initiatives are a constructive step towards addressing long-standing
weaknesses in the department's contracting and improving its contract
awards. As the department addresses the weaknesses and takes steps to
improve its contracting, improved efficiency and effectiveness could also
result in fewer delays in awarding contracts. However, as discussed below,
we are concerned that the efforts may fall short in two main respects,
which could limit the department's effectiveness in improving the
timeliness of contract awards.

Lack of a Comprehensive Approach to Improvement Efforts and Inconsistent
Practices for Communicating Lessons Learned May Limit the Effectiveness of
DOE's Efforts

Standards for a well-functioning contract award process come from federal
acquisition regulations and GAO's framework for assessing the process at
federal agencies. The framework integrates the views of federal government
and industry experts on the characteristics and practices of a
well-functioning contract award and management process, and it draws upon
decades of experience within GAO in analyzing contracts and contracting
organizations.14 Among the standards for a well-functioning contract award
process set forth by the framework and regulations are that federal
agencies should use knowledge from prior contract awards to assess the
effectiveness of the contracting process and, in the interest of
continuous improvement, have a systematic means for instituting best
practices and lessons learned. DOE's improvement initiatives, as they
apply to the timeliness of contract awards, appear to fall short in both
respects.

First, DOE has not ensured that the efforts to develop better data on the
timeliness of contract awards will include all of the department's
contract awards that require a written plan and schedule. While DOE and
NNSA's efforts to develop better timeliness data will include all of the
department's facility management contracts, as well as NNSA's other
contract awards, the rest of DOE's contracts may not be included. This
could be a considerable portion of DOE's contracts valued at $5 million or
greater. For example, of the contracts that the department awarded in
fiscal years 2002 through 2005, nearly one-quarter of the total contract
value, or $3.9 billion, may not have been included in DOE's improvement
efforts. These contracts may be excluded because they were neither
facility management contracts, other DOE high-visibility contracts, nor
contracts awarded by NNSA. The Director of DOE's Office of Procurement and
Assistance Management said that the tracking against milestone schedules
includes only contracts that represent significant risk or are critical to
carrying out DOE's programs or missions. For example, the contracts that
are currently being tracked include facility management contracts, other
large cleanup contracts, and contracts that may also be of particular
interest to headquarters, such as those for guard services. The Director
added that it is not the intent of this effort to monitor the progress of
all ongoing contract awards of $5 million or greater, and that he would
expect contracting officers in the field locations to be accountable for
contracts within their approval authority. Nevertheless, we believe that
efforts to develop better timeliness data should include all contracts
valued at $5 million or greater because DOE guidance generally requires
written plans and schedules for these contracts.

Second, the department has neither had a systematic approach for
instituting best practices or lessons learned in its contract award
process, nor is it clear that the department's efforts will result in a
more systematic approach in the future. As DOE develops better data on the
timeliness of its contract awards and analyzes the data to identify and
address systemic problems or underlying causes of delays, the department
will be developing useful information that could help ensure that future
contract awards benefit from the best practices or lessons learned.
Moreover, federal regulations require agencies to have a process for
ensuring that lessons learned are developed and used in planning future
contract awards.15

Based on federal regulations and GAO's framework, standards for a
well-functioning contract award process would include a systematic
approach for identifying and communicating lessons learned and best
practices. Such an approach would include activities such as routinely
evaluating performance data across a broad range of contracts to identify
the extent to which the contract award process went well or encountered
problems. In doing so, DOE would then look for trends or systemic problems
and investigate the underlying causes. A systematic approach would also
include a mechanism to ensure this information is readily available, in
order to help officials who plan and carry out contract awards do so more
efficiently.

We did find some examples in which best practices and lessons learned were
identified and in some cases shared within the department, but we did not
find a systematic approach for doing so. For example, in a recent DOE
evaluation of the problems that occurred in awarding contracts for
environmental cleanup and infrastructure services at its facilities in
Portsmouth, Ohio, and Paducah, Kentucky, DOE's review confirmed that poor
planning and management of the process caused delays of 6 months to 1 year
in awarding the contracts. Some of the factors mentioned were lack of
timely management direction in key areas, a lengthy headquarters review
and approval process, and unrealistic schedules for the awards. However,
DOE concluded that the factors leading to the delays were not typical for
DOE's contracts and did not represent a systemic problem. Therefore, DOE
did not communicate the information as a systemic problem. In contrast,
our analysis of 31 contracts valued at $5 million or greater indicated
that these types of causes for delays were commonplace.

In addition, best practices or lessons learned have been communicated at
training sessions and presentations to staff carrying out contract awards,
such as those offered by DOE's Office of General Counsel. According to the
DOE attorney who has led a number of them, the sessions are generally
aimed at helping staff carry out the contract award process effectively
and in accordance with federal regulations and DOE guidance. This may
increase the department's ability to avoid successful bid protests. Best
practices or lessons learned have also been shared at annual procurement
directors' conferences held for officials who oversee the contract award
process, with the most recent conference in October 2005 covering topics
such as proper documentation of decisions made during the contract award
process.

However, several DOE officials that were responsible for contract awards
said that these best practices or lessons learned were not consistently
available or may have come too late in the planning for the contract award
to be very beneficial. The officials added that there was no centralized
source within DOE for best practices, but they could obtain lessons
learned by contacting others within the department who had recently
awarded contracts. For example, an official from the Office of
Environmental Management said that, in planning the contract award process
for DOE's Savannah River site near Aiken, South Carolina, she traveled to
DOE's offices in Idaho Falls to meet with officials there who had just
awarded contracts for environmental cleanup at the site, and management
and operation of the Idaho National Laboratory. While she said the
meetings were beneficial and she obtained lessons learned documents, she
saw this process as the only way to obtain best practices or lessons
learned from those contract awards. As another example, this same DOE
official conducted a recent contract award process, and said she would
have benefited from early training on how to properly document decisions
made while evaluating the proposals that were submitted. She added that
the training was not made readily available, and it was not mandatory.
After submitting draft documents for headquarters review, she eventually
received helpful information on how to improve the documentation, but this
would have been more beneficial earlier in the process.

Conclusions

DOE relies on contractors to carry out its environmental cleanup,
scientific research, nuclear weapons management, and other missions vital
to national health, safety, and security. Our analysis of the contracts we
reviewed showed that DOE experienced delays in awarding many of these
contracts to carry out its critical missions. It is unclear the extent to
which these delays may have been avoidable with better oversight or
management, but at least some of the delays were avoidable, such as when
DOE had to rework parts of the contract award process to correct errors.
While DOE eventually awarded these contracts, a contract award process
that takes too long runs the risk of undermining the department's efforts
to obtain needed goods or services at the best value for the government.
As DOE goes forward with its efforts to improve its contract award
process, it will be important to ensure that performance measures address
the timeliness of all of the department's contract awards that require
written plans and schedules, and that lessons learned and best practices
are consistently shared with DOE staff that will plan for and carry out
future contract awards. Improving the department's performance in awarding
contracts is an important part of ensuring that DOE's contracts provide
the best value to the government.

Recommendations for Executive Action

To help ensure that DOE's contract award process for contracts that
require a written plan and schedule is efficient and effective and that
DOE is obtaining the best value for the government, we recommend that the
Secretary of Energy take the following two actions:

o Ensure that performance measures for the timeliness of the department's
contract awards include the entire contract award process from planning to
contract award and include all of the department's contracts that require
a written plan and schedule.

o Establish a more systematic way of identifying lessons learned from past
and current contract awards and sharing those lessons and best practices
with the staff involved in planning and managing the department's efforts
to award its contracts.

Agency Comments and Our Evaluation

We provided a draft of the report to DOE for review and comment. In
written comments, the Director of the Office of Management generally
agreed with our recommendations, but questioned whether we intended the
recommendations to apply to all of the department's contracts. We modified
the wording to clarify that our recommendations apply only to those
contracts that require a written plan and schedule. In addition, DOE
raised concerns about our nonprobability sample, our characterization of
contract awards as delayed, and our view that DOE's existing performance
measures were incomplete.

Regarding our sampling methodology, DOE said that the results of our
nonprobability sample should not be used to reach overall conclusions
about DOE's contracting practices because the 31 contracts we reviewed
represented less than 1 percent of the 5,000 contracts DOE awarded during
fiscal years 2002 through 2005 and were not representative of the entire
group of contracts. However, we believe DOE has mischaracterized our scope
and methodology. First, we did not derive the sample of 31 contracts from
the 5,000 total contracts that DOE awarded during the period. Instead, we
focused our efforts on the 131 contracts awarded by DOE that were valued
at $5 million or greater because such contracts generally required a
written plan, including estimated dates. The 31 contracts we reviewed
represented about 73 percent of the total dollar value of those 131
contract awards valued at $5 million or greater during the period and
about 24 percent of the total number of these larger contract awards.
Furthermore, our report clearly states that the results of a
nonprobability sample cannot be used to make inferences about a
population, and we did not draw conclusions about DOE's overall
contracting processes based on the sample results.

DOE also took exception to our characterization of contract awards as
delayed and our use of the department's originally planned award date as
an indication of timeliness. DOE said that the milestone schedule
developed in the written plan is an internal planning tool that may change
over time, and the department cannot factor in a schedule contingency for
every possible event. However, as we reported, federal regulations state
that the purpose of planning the contract award process is to ensure that
the government obtains the needed goods and services in the most
effective, economical, and timely manner. The regulations stress the
importance of timeliness in awarding contracts and require that written
plans for carrying out the contract award process include milestones for
completing the steps in the process. Adherence to the milestones
established in the written plan provides a consistent measure of
timeliness and is one indicator of how well the contract award process is
being managed. In addition, our report clearly states that some of the
contracts DOE awarded later than planned were subject to external events
and complications beyond DOE's immediate control and recognizes that DOE's
milestone schedule cannot anticipate all possible events. Even so, we
continue to believe that better management and oversight of the contract
award process, including tracking actual against planned dates in the
milestone schedule, could have prevented lengthy delays in awarding some
of the contracts we reviewed.

In an attachment to its letter, DOE also disagreed with our conclusions
that the department's performance measures for timeliness in awarding
contracts were incomplete and, as a result, the department was not
addressing delays in awarding contracts. As we reported, DOE has stated
that its timeliness measures were intended to evaluate the performance of
contracting staff and thus included only the parts of the contract award
process under their direct control. DOE also said the department had been
addressing delays in awarding contracts through its lessons learned
process. We continue to believe that DOE's performance measures for
timeliness in awarding contracts could be improved by being more
comprehensive. DOE's performance measures included only the evaluation
phase of the contract award process and excluded the facility management
contracts, which represent a significant percentage of DOE's overall
contracting dollars. We also believe that DOE was generally not addressing
these delays before our review began. The three initiatives DOE started in
late 2005-to address GAO's high-risk designation for DOE's contract
management, to restructure the Office of Environmental Management, and to
improve performance data on contract timeliness-were the main efforts the
department identified as steps to address delays in awarding contracts.

DOE also provided technical comments in an attachment to the letter, which
we have incorporated and summarized as appropriate. DOE's comments on our
draft report are included in appendix II.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time, we will send copies of this report to the
Secretary of Energy. We will also make copies available to others on
request. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov .

If you or your staff have any questions on this report, please contact me
at (202) 512-3841 or [email protected] . Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made major contributions to this report are
listed in appendix III.

Sincerely yours,

Gene Aloise Director, Natural Resources and Environment

Appendix I:  Scope and Methodology

In response to a congressional request, we determined (1) the extent to
which the Department of Energy (DOE) adhered to its planned dates for
awarding contracts and the factors contributing to any delays, (2) the
impacts of any delays in awarding contracts, and (3) the extent to which
DOE has taken steps to address delays in its contract award process. To
conduct our work, we analyzed contracts valued at $5 million or greater
from multiple DOE locations and interviewed contracting and program
officials at DOE headquarters and field locations. We also reviewed
federal laws and regulations on contracting, agency policies and guidance,
GAO guidance on bid protests, and standards for assessing DOE's management
and oversight of its contract award process.

To determine the extent to which DOE adhered to its planned dates for
awarding contracts, we analyzed 31 contracts from seven DOE locations that
(1) were affiliated with the department's three largest component
organizations-the Office of Environmental Management, Office of Science,
and the National Nuclear Security Administration-and (2) had awarded a
large share of the department's contracts valued at $5 million or greater
in fiscal years 2002 through 2005, including facility management
contracts.1 We focused on the three largest component organizations
because they comprised over 80 percent of DOE's annual budget and because
they were affiliated with about two-thirds of the locations departmentwide
that had awarded contracts in the four fiscal years we reviewed. We
considered the four most recent fiscal years, 2002 through 2005, in the
scope of our study to help ensure that the results reflected DOE's recent
activity, while increasing the number of contracts that could potentially
be selected for analysis.

In fiscal years 2002 through 2005, the department awarded over 130
contracts valued at $5 million or greater, for a total value of about
$16.3 billion. From seven DOE locations, we selected a nonprobability
sample of 31 of these contracts, accounting for about $11.9 billion, or 73
percent, of the $16.3 billion (see table 1).2 Contracts in our sample
ranged in value from about $5.5 million to $4.8 billion, and they included
7 of the 8 facility management contracts that the department competitively
awarded during the four fiscal years we studied.3 In selecting our sample,
we analyzed DOE contract award data to identify locations that had awarded
a large share of the department's contracts in fiscal years 2002 through
2005. To verify the completeness and accuracy of contract award data, we
interviewed knowledgeable DOE officials at the locations we visited (six
of the seven field locations from which we selected contracts). On the
basis of our checks, we determined that these data were sufficiently
reliable for identifying DOE locations with a large share of contracts.

Table 1: Value of DOE Contracts Selected in the Nonprobability Sample, by
Location

                                        

       Location                     Affiliation      Value of        Value of 
      providing                                 contracts, $5 contracts, as a 
       contract                                    million or   percentage of 
     information                                      greater the total value 
                                                               for all of the 
                                                                 department's 
                                                                contracts, $5 
                                                                   million or 
                                                                      greater 
Albuquerque                      NNSA         $282,094,471             1.7 
Service Center,                                            
N. Mex.                                                    
Chicago Service                  Science       826,878,347             5.1 
Center, Ill.                                               
Idaho Operations                 EM and      7,798,881,546            48.0 
Office, Idaho                    Nuclear                   
                                    Energy                    
Oak Ridge                        EM, NNSA,     121,239,623             0.7 
Operations                       Science                   
Office, Tenn.                                              
Portsmouth &                     EM            792,227,652             4.9 
Paducah Project                                            
Office,                                                    
Lexington, Ky.                                             
Richland                         EM          1,606,499,515             9.9 
Operations                                                 
Office, Wash.                                              
Savannah River                   EM and NNSA   460,033,679             2.8 
Operations                                                 
Office, S.C.                                               
Total for        $11,887,854,833        73.1 
contracts                                    
selected in the                              
nonprobability                               
sample                                       
Total for         $4,371,971,440        26.9 
contracts not                                
selected in the                              
nonprobability                               
sample                                       
Total for all of $16,259,826,273       100.0 
the department's                             
contracts                                    

Source: GAO analysis of DOE data.

Notes: Affiliation refers to the department's component organizations-such
as the Office of Environmental Management (EM), the Office of Science, or
the National Nuclear Security Administration (NNSA)-overseeing work at the
locations we contacted.

Contracting data in the table reflects contracts that were awarded in
fiscal years 2002 through 2005 through a competitive or noncompetitive
process. It does not include contracts awarded prior to fiscal year 2002
that the department took action to renew or extend in fiscal years 2002
through 2005, beyond the initial period of performance, because extending
an existing contract eliminates the opportunity for such a process to
occur.

To determine whether DOE adhered to its planned dates for awarding the
contracts in our nonprobability sample, we used contract file documents,
obtained from the seven locations, to identify and then compare the
planned and actual contract award dates. We considered contracts to be
delayed if the actual award date was later than the planned award date. In
most cases, we identified the planned award date in DOE's schedule for
completing key steps of the contract award process that DOE included in
its formal written plan for awarding the contract. Because DOE guidance
generally requires a plan and schedule when awarding contracts valued at
$5 million or greater, the schedules in the written plan generally
provided a consistent source for the planned award date. However, for 9 of
the 31 contracts in our sample, we had to obtain the planned award date
from another source because the associated plan and/or schedule was
missing from the contract file. In these cases, we obtained the planned
award date from references in other required file documents, such as the
document used to justify noncompetitive awards or presentations by
officials involved in awarding the contract. Similarly, for nearly all of
the 31

contracts in our sample, we identified the actual award date from the
award date written on the signed contract.4 However, for 2 of the 31
contracts, the signed contract was not available in the contract file, and
we instead obtained the award date from the data system DOE uses to track
its contract awards.

In addition to determining whether the 31 contracts in our nonprobability
sample were awarded by the planned date, we used contract file documents
to calculate how long it took DOE to make the awards. We did so by
calculating the elapsed time from the date DOE initiated the contract
award process to the date it awarded the contract. For 23 contracts, we
used the date of the formal written plan for carrying out the contract
award process as the date DOE initiated the process.5 Although some
planning steps typically preceded the preparation of the written plan,
documentation of the steps was generally not consistently available in the
contract files we reviewed. In contrast, the formal written plan was a
required and more consistently available source. However, for 8 of the 31
contracts in our sample, we had to obtain the initiation date of the
contract award process from a source other than the date of the written
plan because the plan was undated or missing from the contract file. In
these cases, we used contract file documents prepared during the early
steps of the contract award process, such as correspondence from DOE
officials approving the start of the process.

Furthermore, we identified some of the reasons for delays DOE experienced
in awarding contracts in our sample, in part, by contacting DOE officials
involved in awarding the contract. We also reviewed contract file
documents, such as meeting records and the descriptions of the contract
award process included in key documents generated during the contract
award process. When contract file documents were used to determine the
causes of delays, two analysts involved in this study independently
reviewed the documents to verify that the causes were reasonably
identified.

To further identify causes for delays, we analyzed documentation from bid
protests filed with GAO in fiscal years 2002 through 2005, in addition to
the bid protest guidance issued by GAO's Office of General Counsel. We
analyzed this documentation because it could potentially describe problems
encountered by DOE during the contract award process. In correcting any
problems, DOE may have repeated steps in the process, eventually delaying
the contract award. When bid protest documents were used to determine
whether (1) the contract award being protested was also in our sample of
contracts that we analyzed for delays or (2) corrective action was agreed
to by DOE or recommended by GAO as a result of the protest, two analysts
involved in this study independently reviewed the documents to verify that
the causes were reasonably identified.

To determine overall impacts of any delays in awarding DOE's contracts, as
well as the extent to which the department has taken steps to address the
delays, we interviewed headquarters contracting officials from the Office
of Procurement and Assistance Management, as well as contracting and
program officials from the department's three largest DOE component
organizations, and officials from the Office of Engineering and
Construction Management, who oversee planning and management of capital
projects. Also, we interviewed contracting and program officials at six of
the seven field locations from which we selected contracts for our
nonprobability sample as follows:6

o Albuquerque Service Center (NNSA), New Mexico;

o Idaho Operations Office (EM and Nuclear Energy), Idaho;

o Oak Ridge Operations Office (EM, Science, NNSA), Tennessee;

o Portsmouth and Paducah Project Office (EM), Lexington, Kentucky;

o Richland Operations Office (EM), Washington; and

o Savannah River Operations Office (EM and NNSA), South Carolina.

Furthermore, for contracts in our sample, we analyzed file documents for
evidence of adverse impacts upon companies competing for the work
resulting from any delays in carrying out the contract award process. We
examined transcripts from some debriefing sessions that DOE held with
companies after awarding the contract, as well as other documents, such as
correspondence from companies or their representatives. To further
understand the impacts of delays, we also examined documents related to
DOE's contract award for environmental cleanup of its Paducah, Kentucky,
site, even though this contract was not part of our sample. DOE's Office
of Procurement and Assistance Management provided us with its analysis of
lessons learned and the factors that delayed this contract award. We
reviewed the contract file documents to better understand the context of
this analysis. However, we excluded the contract from our sample because
DOE awarded it in fiscal year 2006 and, therefore, it did not fit our
selection criteria. As a result, we did not include the contract in
calculations or figures showing the extent of delays in awarding DOE
contracts.

In addition, we reviewed federal and DOE regulations that govern
contracting, DOE policy and guidance on contracting, and documents on the
department's assessment of its performance in carrying out its contract
awards. We also reviewed GAO's Framework for Assessing the Acquisition
Function at Federal Agencies for determining the effectiveness of DOE's
management and oversight of the contract award process.

We conducted our work from July 2005 to June 2006 in accordance with
generally accepted government auditing standards.

Appendix II:  Comments from the Department of Energy

Appendix III:  GAO Contact and Staff Acknowledgments

GAO Contact

Gene Aloise (202) 512-3841 or [email protected]

Staff Acknowledgments

In addition to the individual named above, Bill Swick, Assistant Director;
Carole Blackwell, Nora Boretti, Kevin Jackson, Greg Marchand, Alison
O'Neill, Jeff Rueckhaus, and Gretchen Snoey made key contributions to this
report.

(360606)

www.gao.gov/cgi-bin/getrpt? GAO-06-722 .

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact Gene Aloise, 202-512-3841, [email protected].

Highlights of GAO-06-722 , a report to the Chairman, Committee on
Government Reform, House of Representatives

June 2006

DOE CONTRACTING

Better Performance Measures and Management Needed to Address Delays in
Awarding Contracts

The Department of Energy (DOE), the largest civilian contracting agency in
the federal government, spends over 90 percent of its annual budget on
contracts to operate its facilities and carry out its diverse missions.
Federal law and regulations outline the steps DOE must follow in planning
and carrying out the contract award process and emphasize the importance
of awarding contracts in a timely manner. Several of DOE's recent
contracts have taken much longer than anticipated to award. GAO was asked
to determine (1) the extent to which DOE has experienced delays in
awarding contracts and factors contributing to delays, (2) the impacts of
any such delays, and (3) the extent to which DOE has taken steps to
address the delays.

What GAO Recommends

GAO recommends that DOE (1) develop more accurate and comprehensive
performance measures for the timeliness of its contract awards and (2)
establish a consistent system for identifying and sharing lessons learned
and best practices on contract awards.

In commenting on the report, DOE generally agreed with the recommendations
but raised concerns about GAO's sampling methodology, as well as GAO's
characterization of late contract awards as delayed and DOE's performance
measures as incomplete. GAO believes that the methodology and conclusions
are correct.

Delays in awarding DOE contracts occurred in most of the 31 contracts that
GAO reviewed. In fiscal years 2002 through 2005, DOE awarded 131 contracts
valued at $5 million or greater; the 31 of these contracts GAO reviewed
were affiliated with DOE's three largest component organizations and
represented about 73 percent of the dollars awarded. None of the 24
contracts awarded competitively was awarded by the date planned in DOE's
schedule, with 23 of the contracts awarded between several weeks and 4-1/2
years later than the planned date. Of the 7 contracts awarded without
competition, 6 were awarded on time or nearly so, with the remaining
contract awarded 2 months late. Delays in awarding contracts occurred, in
part, because DOE had to modify its approach after beginning the contract
award process. At least some of the delays were avoidable, such as when
DOE reworked contract awards to correct errors.

Delays in awarding contracts could increase costs both to DOE and
companies competing for DOE work. Because the department does not track
its costs for awarding contracts, it was not feasible to quantify the
impact of these delays. Companies competing for DOE's work may also face
increased costs when contract awards are delayed, such as the costs
associated with ensuring that key personnel identified in proposals
continue to be available. Increased costs and delays may affect the
willingness of companies to compete for future DOE work, although the
actual impact is unknown.

Until recently, DOE had not been addressing delays in awarding contracts
because incomplete performance data indicated that most of the contracts
were awarded in a timely manner. In late 2005, DOE began several efforts
to improve its contract award process, including implementing improved
measures of contract award timeliness and restructuring the Office of
Environmental Management to strengthen management of the contracting
process. However, two concerns could limit the effectiveness of these
efforts: (1) the efforts do not encompass all of DOE's contract awards and
(2) DOE does not have a systematic method of identifying and disseminating
lessons learned and best practices from past or current contract awards.

Timeliness of 31 DOE Contract Awards, Fiscal Years 2002 through 2005
*** End of document. ***