Department of Energy: Implementation and Use of Other		 
Transactions Authority Provided in the Energy Policy Act of 2005 
(06-JUN-08, GAO-08-798R).					 
                                                                 
Since the Department of Energy (DOE) was established in 1977, one
of its missions has been to promote the nation's energy security 
through research, development, and demonstration of advanced	 
technologies for meeting future energy demands and diversifying  
the nation's energy portfolio. As part of this mission, DOE's	 
Office of Energy Efficiency and Renewable Energy conducts	 
research, development, and demonstration activities in		 
partnership with industry to advance a diverse supply of clean	 
power technologies. The fiscal year 2008 budget for these	 
activities was $1.7 billion. The Energy Policy Act of 2005, the  
first comprehensive energy legislation in more than a decade,	 
includes provisions to address the nation's long-term energy	 
challenges. Key goals of the act include diversifying the	 
nation's energy supply by promoting alternative and renewable	 
sources of energy and by investing in science and technology.	 
Provisions in the act promote the use of solar and wind power,	 
establish a loan-guarantee program to encourage private 	 
investment in new energy technologies, and authorize		 
demonstration projects for producing ethanol from cellulosic	 
sources such as forest residues, agricultural residues, and scrap
wood. To provide DOE with more flexibility to enter into	 
agreements with private-sector entities, section 1007 of the	 
Energy Policy Act of 2005 gave the Secretary of Energy the	 
ability to use "other transactions authority." This authority,	 
similar to that previously authorized for the Departments of	 
Defense and Homeland Security, allows an agency to enter into	 
agreements "other than" standard contracts, grants, and 	 
cooperative agreements. Agreements under this authority would not
be subject to the Federal Acquisition Regulation or certain other
federal laws governing contracts. Therefore, the other		 
transactions authority could provide for more flexible terms and 
conditions, thereby enhancing the federal government's ability to
acquire cutting-edge science and technology by attracting	 
contractors that had not typically pursued government contracts. 
DOE may use this authority to help bring new ideas and		 
innovations to fruition, to attract nontraditional government	 
contractors, and to advance the department's energy security	 
mission. The Energy Policy Act of 2005 required DOE to issue	 
proposed guidelines for the use of this authority by November 8, 
2005 (no later than 90 days after enactment), and specified that 
the department could not use the authority until the final	 
guidelines were published. DOE's authority to enter into these	 
transactions terminates on September 30, 2010. The act further	 
required that GAO report on the department's use of other	 
transactions authority, including DOE's ability to attract	 
nontraditional government contractors (defined as those who have 
not had a contract or other agreement with the federal government
for at least 1 year before the proposed contract). This report	 
and our previous discussions and communications with your staff  
fulfill that directive, addressing (1) the steps DOE has taken to
implement other transactions authority, including the safeguards 
established, and (2) the extent to which using this authority has
enabled DOE to attract nontraditional government contractors.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-798R					        
    ACCNO:   A82280						        
  TITLE:     Department of Energy: Implementation and Use of Other    
Transactions Authority Provided in the Energy Policy Act of 2005 
     DATE:   06/06/2008 
  SUBJECT:   Agency missions					 
	     Alternative energy sources 			 
	     Contractors					 
	     Cooperative agreements				 
	     Emerging technologies				 
	     Energy demand					 
	     Energy development 				 
	     Energy legislation 				 
	     Energy management					 
	     Energy planning					 
	     Energy policy					 
	     Energy research					 
	     Energy security					 
	     Federal legislation				 
	     Federal procurement				 
	     Federal regulations				 
	     Government contracts				 
	     Internal controls					 
	     Private sector					 
	     Research and development				 
	     Technological innovations				 
	     Technology assessment				 
	     Other transactions 				 

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GAO-08-798R


This is the accessible text file for GAO report number GAO-08-798R 
entitled 'Department of Energy: Implementation and Use of Other 
Transactions Authority Provided in the Energy Policy Act of 2005' which 
was released on June 6, 2008. 

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June 6, 2008: 

Congressional Committees: 

Subject: Department of Energy: Implementation and Use of Other 
Transactions Authority Provided in the Energy Policy Act of 2005: 

Since the Department of Energy (DOE) was established in 1977, one of 
its missions has been to promote the nation's energy security through 
research, development, and demonstration of advanced technologies for 
meeting future energy demands and diversifying the nation's energy 
portfolio. As part of this mission, DOE's Office of Energy Efficiency 
and Renewable Energy conducts research, development, and demonstration 
activities in partnership with industry to advance a diverse supply of 
clean power technologies. The fiscal year 2008 budget for these 
activities was $1.7 billion. 

The Energy Policy Act of 2005, the first comprehensive energy 
legislation in more than a decade, includes provisions to address the 
nation's long-term energy challenges. Key goals of the act include 
diversifying the nation's energy supply by promoting alternative and 
renewable sources of energy and by investing in science and technology. 
Provisions in the act promote the use of solar and wind power, 
establish a loan-guarantee program to encourage private investment in 
new energy technologies, and authorize demonstration projects for 
producing ethanol from cellulosic sources such as forest residues, 
agricultural residues, and scrap wood. 

To provide DOE with more flexibility to enter into agreements with 
private-sector entities, section 1007 of the Energy Policy Act of 2005 
gave the Secretary of Energy the ability to use "other transactions 
authority." This authority, similar to that previously authorized for 
the Departments of Defense and Homeland Security, allows an agency to 
enter into agreements "other than" standard contracts, grants, and 
cooperative agreements. Agreements under this authority would not be 
subject to the Federal Acquisition Regulation or certain other federal 
laws governing contracts.[Footnote 1] Therefore, the other transactions 
authority could provide for more flexible terms and conditions, thereby 
enhancing the federal government's ability to acquire cutting-edge 
science and technology by attracting contractors that had not typically 
pursued government contracts. DOE may use this authority to help bring 
new ideas and innovations to fruition, to attract nontraditional 
government contractors, and to advance the department's energy security 
mission. 

The Energy Policy Act of 2005 required DOE to issue proposed guidelines 
for the use of this authority by November 8, 2005 (no later than 90 
days after enactment), and specified that the department could not use 
the authority until the final guidelines were published.[Footnote 2] 
DOE's authority to enter into these transactions terminates on 
September 30, 2010. 

The act further required that GAO report on the department's use of 
other transactions authority, including DOE's ability to attract 
nontraditional government contractors (defined as those who have not 
had a contract or other agreement with the federal government for at 
least 1 year before the proposed contract). This report and our 
previous discussions and communications with your staff fulfill that 
directive, addressing (1) the steps DOE has taken to implement other 
transactions authority, including the safeguards established, and (2) 
the extent to which using this authority has enabled DOE to attract 
nontraditional government contractors. 

To determine the steps DOE has taken to implement other transactions 
authority, we reviewed the Energy Policy Act of 2005, the draft and 
final regulations issued by the department, and related guidance and 
training materials. We also interviewed officials with DOE's Office of 
Procurement and Assistance Management and Office of General Counsel. We 
obtained documentation of training sessions held in May 2006 at DOE 
headquarters and two sites where the other transactions authority could 
potentially be used. To determine the extent to which the authority has 
enabled DOE to attract nontraditional government contractors, we 
reviewed DOE's annual reports on its use of the authority, which were 
submitted to Congress for fiscal years 2006 and 2007. In addition, we 
reviewed funding announcements and award files at DOE's field office in 
Golden, Colorado. DOE's Golden Field Office is the only location where 
the department has negotiated an agreement using its other transactions 
authority. We also interviewed DOE procurement, legal, and program 
officials in DOE headquarters and at the Golden Field Office, as well 
as officials with Range Fuels, the recipient of the agreement 
negotiated under DOE's other transactions authority. We conducted this 
performance audit from January 2008 to June 2008, in accordance with 
generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. 

Results in Brief: 

As required by the Energy Policy Act of 2005, DOE developed and issued 
final regulations to implement other transactions authority before 
using the authority. Furthermore, DOE issued supplemental guidance and 
developed and presented training on how to use the other transactions 
authority to DOE legal, procurement, and program office officials. DOE 
decided to implement other transactions authority by using a special 
type of financial assistance instrument, called technology investment 
agreements. Technology investment agreements can be negotiated to 
include provisions that would encourage companies with promising new 
ideas to do business with the federal government. In both its 
regulations and supplemental guidance, DOE stressed that other 
transactions authority was to be used only if existing mechanisms, such 
as contracts or financial assistance, were not feasible or appropriate. 
Finally, DOE developed a training course on how to use this new type of 
agreement and presented the course at headquarters and field locations 
where technology investment agreements were most likely to be used. 
Overall, we believe that the controls DOE put into place over the use 
of its other transactions authority appear to be adequate, assuming 
that DOE continues to effectively implement the safeguards and to 
incorporate lessons learned as the department negotiates future 
agreements. 

DOE's use of other transactions authority to date has been limited: the 
department has negotiated one technology investment agreement to 
construct and operate a facility (an integrated biorefinery) that will 
convert wood wastes to ethanol. This project is part of DOE's efforts 
to demonstrate the commercial viability of producing ethanol from 
sources other than corn or similar food crops. The company that will be 
constructing this facility, Range Fuels, has not previously done work 
for the federal government and therefore meets the definition of a 
nontraditional government contractor. DOE's limited use of other 
transactions authority is consistent with the language in the Energy 
Policy Act of 2005 specifying that the authority is to be used only if 
contracts or other financial assistance mechanisms are not feasible or 
appropriate. 

Background: 

To support its energy security mission, DOE generally conducts basic 
energy research at its national laboratories using contracts with 
educational institutions, nonprofit organizations, and other private 
entities. Research and development of new technologies, on the other 
hand, is carried out either by the national laboratories under contract 
or by universities, nonprofit organizations, and private companies 
using financial assistance mechanisms such as grants or cooperative 
agreements. 

Consistent with the Federal Grant and Cooperative Agreement Act of 
1977,[Footnote 3] DOE guidance states that the decision on whether to 
use contracts or financial assistance should be based on the principal 
purpose of the award, including its intended primary beneficiary. 

* Contracts. The primary beneficiary of contracts is the federal 
government. Contracts are used for the purchase of goods and services 
for the direct benefit of the government, and establish arrangements 
that are clear and certain regarding the relationship and performance 
requirements. Contracts are governed by the Federal Acquisition 
Regulation, and recipients of contracts generally must have financial 
and accounting systems that comply with government cost accounting 
standards. 

* Financial assistance. The primary beneficiary of financial assistance 
is the general public, and the principal purpose of this assistance is 
to transfer money or property to accomplish support of a program or 
effort authorized by federal law. Financial assistance mechanisms 
include grants and cooperative agreements, which differ in the amount 
of federal involvement in the project. For grants, the agency's 
involvement is essentially administrative, which includes normal 
federal stewardship responsibilities, such as reviewing performance to 
ensure that the objectives, terms, and conditions of the grant are 
accomplished. Under cooperative agreements, the agency expects to be 
substantially involved in the project, such as reviewing and approving 
one stage of a project before work can begin on a subsequent stage. 
Under financial assistance mechanisms, payments may be made in advance 
or to reimburse allowed costs. Under DOE regulations, however, these 
mechanisms generally do not allow for reimbursement of costs on the 
basis of demonstrating progress or completing milestones in a project, 
such as construction of a facility. 

To address situations where neither contracts nor financial assistance 
would be appropriate, Congress established "other transactions 
authority" (for transactions other than contracts or financial 
assistance). Federal agencies could use other transactions authority to 
reduce barriers--such as having to comply with federal cost accounting 
standards--that discourage some for-profit firms from doing business 
with the federal government and to enhance the federal government's 
ability to acquire cutting-edge science and technology. This authority 
originated in 1958 when Congress gave the National Aeronautics and 
Space Administration the authority to enter into contracts, leases, 
cooperative agreements, or "other transactions as may be necessary in 
the conduct of its work and on such terms as it may deem 
appropriate."[Footnote 4] Congress granted the Department of Defense's 
Defense Advanced Research Projects Agency this authority for research 
projects in 1989, extended the authority to include prototype 
development projects in 1993, and has since extended the ability to use 
this authority to the Department of Defense more generally.[Footnote 5] 
The Homeland Security Act of 2002 created the Department of Homeland 
Security and granted the agency the authority to establish a pilot 
program using other transactions authority to carry out both research 
and development and prototype projects.[Footnote 6] The Services 
Acquisition Reform Act of 2003 authorized all federal agencies to use 
other transactions to carry out basic, applied, and advanced research, 
and development projects that are otherwise authorized and may 
facilitate defense against or recovery from terrorism or nuclear, 
biological, chemical, or radiological attack.[Footnote 7] 

DOE Developed Regulations as Required, as Well as Guidance and 
Training, Before Using Other Transactions Authority: 

As required by the Energy Policy Act of 2005, DOE developed proposed 
guidelines or regulations for its use of other transactions authority 
and issued final regulations before using the authority. The department 
also issued supplemental guidance and developed and presented training 
on how to use the new mechanism. Overall, these steps appear to 
establish adequate safeguards over the use of other transactions 
authority. 

Regulations Established Technology Investment Agreements: 

In its proposed and final regulations, DOE stated that it would 
implement other transactions authority through the award and 
administration of technology investment agreements. A technology 
investment agreement is a special type of financial assistance 
instrument meant to increase the involvement of commercial firms in the 
department's research, development, and demonstration programs. 
According to DOE regulations, the structure of these agreements may 
vary, depending on such factors as the intellectual property provisions 
required.[Footnote 8] The regulations established minimum requirements 
for proper stewardship of federal funds, including audits, reporting 
requirements, and systems to control project funds effectively. 

Under a technology investment agreement, DOE has greater latitude to 
negotiate provisions that vary from traditional government contracts or 
financial assistance agreements. For example, federal regulations 
generally require that a government contractor have a financial system 
in place that complies with federal cost-accounting standards. 
Companies that do not traditionally contract with the federal 
government generally would not have a financial system that meets 
government-unique accounting requirements. Under a technology 
investment agreement, DOE can accept a company's financial system as 
long as it complies with generally accepted accounting principles, 
which reduces the administrative burden on the company. 

DOE officials in the Office of Procurement and Assistance Policy and 
the Office of General Counsel worked together to develop the proposed 
and final regulations. To meet the deadline specified in the act for 
issuing proposed regulations by November 8, 2005, DOE used the 
Department of Defense's regulations for technology investment 
agreements as a starting point for developing its own regulations. 
Adapting these existing regulations allowed DOE to develop its proposed 
regulations in 3 months. 

DOE Issued Supplemental Guidance Concurrent with Final Regulations: 

At the same time as it issued its final regulations, the department 
also issued supplemental guidance on how to implement the other 
transactions authority. For example, DOE issued a new financial 
assistance letter covering such topics as documenting the justification 
for using a technology investment agreement, satisfying the requirement 
for substantial involvement by the department, and outlining the review 
and approval process.[Footnote 9] 

To demonstrate that a technology investment agreement is warranted, the 
DOE contracting officer, along with the program office requesting the 
agreement, must prepare a justification memorandum for review and 
approval by senior DOE officials. The memorandum must provide 
information about (1) the nature of the project; (2) the recipient, 
which may be an individual entity or a group but must include at least 
one for-profit firm; (3) the recipient's commitment to the project and 
the ratio of DOE-to-recipient cost sharing for the project; (4) the 
degree of involvement of the government program official; and (5) the 
benefits of using a technology investment agreement. 

Because using a technology investment agreement provides a contracting 
officer considerable latitude in negotiating the provisions of the 
agreement, DOE also took steps to ensure that contracting officers have 
the necessary level of expertise to make such judgments. Specifically, 
to award a technology investment agreement, a contracting officer must 
have (1) obtained DOE's highest level (level III) of contracting 
certification based on training and experience, (2) obtained separate 
financial assistance certification, and (3) completed the DOE training 
on using technology investment agreements. Furthermore, a contracting 
officer may award a technology investment agreement only if the 
officer's warrant (or authority) specifically authorizes the award and 
administration of a technology investment agreement. 

DOE Developed and Delivered Training to Communicate New Authority: 

In addition to regulations and supplemental guidance, DOE developed a 
training curriculum for technology investment agreements. This 
curriculum covers topics such as the definition of other transactions; 
the review and approval process; and the various phases of an award, 
from preparing the announcement to negotiating the terms of the 
agreement. DOE presented this training course in May 2006 at three 
locations: DOE headquarters, the Golden Field Office in Colorado, and 
the National Energy Technology Laboratory in Pennsylvania. Program 
officials, contracting officers, and Office of General Counsel 
officials attended the training. DOE selected these locations as the 
ones most likely to use technology investment agreements in the near 
term. 

Safeguards over Use of Other Transactions Authority Appear Adequate:  

Taken as a whole, the safeguards or controls that DOE put into place 
over the use of its other transactions authority appear to be adequate, 
assuming that DOE continues to effectively implement them. The 
regulations, supplemental guidance, and training materials all stress 
that technology investment agreements are to be used only when no other 
type of contract or financial assistance instrument is feasible or 
appropriate. Through training and certification, DOE has taken steps to 
ensure that contracting officers who award and administer technology 
investment agreements have the requisite skills. In addition, the 
authority or contracting officer's warrant to award a technology 
investment agreement is not continuous but valid only for negotiating a 
specific agreement. Furthermore, both the justification for using a 
technology investment agreement and the actual agreement require 
approval by senior DOE headquarters officials. 

DOE's Use of Other Transactions Authority to Date Has Been Limited: 

Since the final regulations on other transactions authority were 
issued, the only DOE program office that has used the authority is the 
Office of Energy Efficiency and Renewable Energy. To date, DOE has 
issued only one technology investment agreement.[Footnote 10] This 
limited use of the other transactions authority is consistent with the 
language in the Energy Policy Act of 2005, and with DOE regulations and 
guidance, specifying that the authority is to be used only if contracts 
or other financial assistance mechanisms are not feasible or 
appropriate. 

Two of DOE's largest component organizations--the National Nuclear 
Security Administration and the Office of Science--rely primarily on 
their national laboratories for research and development activities. 
Officials with these two organizations said that, as a result, existing 
contract and financial assistance mechanisms generally provide adequate 
flexibility to meet their research and development needs.[Footnote 11] 
According to an official in DOE's Office of Procurement and Assistance 
Management, two other program offices--the Offices of Nuclear Energy 
and Fossil Energy--had considered using other transactions authority 
for a specific project but determined that cooperative agreements would 
work instead. 

Thus, the only DOE program office to use other transactions authority 
to date is the Office of Energy Efficiency and Renewable Energy, which 
used the authority in support of its biomass program.[Footnote 12] The 
first, and so far only, technology investment agreement was finalized 
in November 2007 for funding to design, construct, and operate an 
integrated biorefinery to produce primarily ethanol from trees and 
forest residues (lignocellulosic feedstock). DOE's cost-share funding 
of the project was established at $76 million, or about 21 percent of 
the total project cost of approximately $356 million. 

The biorefinery project originated in response to a funding opportunity 
announcement issued in February 2006 by DOE's Golden Field Office to 
implement section 932 of the Energy Policy Act of 2005. Section 932, 
which deals with bioenergy programs, requires that DOE solicit 
proposals for projects to demonstrate the commercial application of 
integrated biorefineries. According to the act, the department should 
select only proposals that demonstrate that the project will be able to 
operate profitably without direct federal subsidy after initial 
construction costs are paid and that enable the biorefinery to be 
easily replicated. 

In February 2007, DOE announced the selection of six projects in 
response to the funding opportunity announcement; the planned approach 
was to make awards for these projects in two phases. The first phase 
would cover preliminary design, testing, and efforts to comply with 
environmental regulations for the projects; the second phase would 
cover final design and actual construction of the facilities. Of the 
six projects selected, the application by Range Fuels to construct a 
full-scale biorefinery plant in Georgia to demonstrate its process was 
closest to actually starting construction. DOE and Range Fuels, a 
nontraditional government contractor, negotiated a technology 
investment agreement for the construction of the plant. For the other 
selected projects, those that have been awarded have involved 
cooperative agreements for the first phase. 

To negotiate the terms of the technology investment agreement, DOE used 
a team consisting of headquarters and Golden Field Office legal counsel 
(including intellectual property attorneys), contracting and financial 
assistance officers, and representatives of the biomass program office. 
The agreement was structured as a cost-reimbursement rather than a 
fixed-cost instrument, with payments to be made to Range Fuels on 
completion of specified milestones or performance measures associated 
with the construction and operation of its biorefinery. Although DOE 
obligated $50 million in funds to this project for fiscal year 2008, 
provisions negotiated in the technology investment agreement restricted 
Range Fuels from seeking cost reimbursements until it had raised a 
specified amount of private financing. In early April 2008, Range Fuels 
announced that it had raised the required amount of private financing 
to satisfy this provision. As of the end of April 2008, however, Range 
Fuels had not requested reimbursement for any expenses under the 
agreement, and DOE had not paid out any of the obligated funds. 

DOE used a technology investment agreement for several reasons: 

* The technology investment agreement allowed DOE to include milestones 
or performance measures for progress payments. Under DOE regulations, 
progress payments generally cannot be done under cooperative 
agreements. 

* DOE could include a provision that required Range Fuels to raise a 
specified amount of private funding before DOE would reimburse any 
costs. 

* The agreement allowed DOE to accept Range Fuels' current accounting 
system and the use of Range Fuels' independent public accountant for 
audits. 

* DOE was also able to tailor the intellectual property provisions to 
ensure that a successful demonstration project could be replicated, 
thereby complying with the requirement in section 932 of the Energy 
Policy Act. 

DOE is taking steps to incorporate lessons learned from its first 
technology investment agreement. Specifically, one of the issues that 
arose during the negotiations with Range Fuels was the treatment of 
rights to real property and equipment. Under existing regulations for 
cost sharing agreements, the recipient obtains title to the property 
and equipment acquired under the agreement. DOE, conversely, retains an 
interest in that property based on the proportion of the government's 
cost share under which it has pro rata rights in the property 
disposition matters upon project completion. According to DOE 
officials, in many instances, the existence of this government interest 
makes the project less attractive to the private financing market, 
whose participation is typically needed for project completion. 

For the Range Fuels agreement, DOE contracting, legal, and program 
officials in the Golden Field Office requested and obtained a 
permission to deviate from standard property rights provisions. 
According to DOE, providing unconditional title to Range Fuels for the 
real property and equipment obtained during the project allowed the 
company to be in a better position to obtain additional private-sector 
financing. Nevertheless, the department recognized that this issue 
could continue to be a concern. Therefore, DOE formed a working group 
to study the issue and determine how best to address these concerns, if 
necessary. 

While DOE has made only limited use of the authority to date, officials 
from several DOE offices, including the Office of General Counsel, the 
Office of Procurement and Assistance Management Policy, and the Office 
of Energy Efficiency and Renewable Energy, expressed concerns over the 
September 30, 2010, termination date for the department's use of other 
transactions authority. According to these officials, the potential of 
having the authority expire in about 2 years may inhibit program 
offices from using this valuable addition to the department's tool kit. 
Agency Comments We provided a draft of this report to the Secretary of 
Energy for review and comment. The Director of the Office of 
Procurement and Assistance Management provided written technical 
comments, which we have incorporated as appropriate. DOE's comments on 
our draft report are included in enclosure I. 

We are sending copies of this report to the Secretary of Energy, 
appropriate congressional committees, and other interested parties. We 
are also making copies available to others upon request. This report 
will be available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about 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. Key contributors to this report include 
Janet E. Frisch, Assistant Director; Carole J. Blackwell; Ellen W. Chu; 
Karen Keegan; Tim DiNapoli; and Omari Norman. 

Signed by: 

Gene Aloise: 

Director, Natural Resources and Environment Enclosure: 

List of Committees: 

The Honorable Jeff Bingaman: 
Chairman: 
The Honorable Pete V. Domenici: 
Ranking Member: 
Committee on Energy and Natural Resources: 
United States Senate: 

The Honorable John D. Dingell: 
Chairman: 
The Honorable Joe L. Barton: 
Ranking Member: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable Henry A. Waxman: 
Chairman: 
The Honorable Thomas M. Davis: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

Enclosure I: Comments from the Department of Energy: 

Department of Energy: 
Washington, DC 20585: 

May 30, 2008: 

Gene Aloise: 
Director: 
Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, N.W.: 
Washington, D.C. 20548: 

Dear Mr. Aloise: 

Thank you for the opportunity to comment on the Draft Report entitled 
Implementation and Use of Other Transactions Authority Provided in the 
Energy Policy Act of 2005 (GAO-08-798R). 

In addition to the comments previously provided by the Offices of 
Procurement and Assistance Management, Energy Efficiency and Renewable 
Energy and General Counsel, the Department of Energy (DOE) has two 
comments on the Draft Report. 

In two places (the carry over sentence at the top of page 4 and the 
last sentence on page 9), the draft states that DOE guidance and 
supplemental guidance indicates that DOE will use Other Transactions 
Authority (OTA) "only if" existing mechanisms (contracts and financial 
assistance) will not work. In fact, the statute states, "...instead 
this is the case only if the other vehicles are not "feasible or 
appropriate." As part of justifying why other vehicles are not feasible 
or appropriate, the regulations (10 CFR 600.110, and 603.225) and 
Financial Assistance Letter 2006-03 require the documentation to 
describe the goals and benefits (reducing barriers, promote new 
relationships among performers in the technology base, benefit RD&D 
results) of using OTA. 

In addition, on page 7, in the third paragraph, third sentence, the 
word "that" should be inserted between "financial system" and "meets." 

Questions on the Department's comments should be directed to Miss 
Jacqueline Kniskern at 202-287-1342 or [email protected].

Sincerely,

Signed by: 

Edward R. Simpson: 
Director: 
Office of Procurement and Assistance Management: 

[End of section] 

Footnotes: 

[1] For a discussion of the laws that do not generally apply to 
agreements under other transactions authority, see GAO, Homeland 
Security: Further Action Needed to Promote Successful Use of Special 
DHS Acquisition Authority, GAO-05-136 (Washington, D.C.: Dec. 15, 
2004), 4-6. 

[2] DOE issued its proposed regulations in the Federal Register on 
November 15, 2005, and the final regulations on May 9, 2006, with an 
effective date of July 10, 2006. 

[3] The Federal Grant and Cooperative Agreement Act of 1977 established 
criteria for determining whether a transaction is financial assistance. 
DOE's Financial Assistance Rules (10 C.F.R. pt. 600) establish uniform 
policies and procedures for the award and administration of financial 
assistance. 

[4] 42 U.S.C. 2473(c)(5). 

[5] GAO has reported on the Department of Defense's use of this 
authority. For example, see DOD Research: Acquiring Research by 
Nontraditional Means, GAO/NSIAD-96-11 (Washington, D.C.: Mar. 29, 
1996); Acquisition Reform: DOD's Guidance on Using Section 845 
Agreements Could Be Improved, GAO/NSIAD-00-33 (Washington, D.C.: Apr. 
7, 2000); and Defense Acquisitions: DOD Has Implemented Section 845 
Recommendations but Reporting Can Be Enhanced, GAO-03-150 (Washington, 
D.C.: Oct. 9, 2002). 

[6] GAO has reported on the Department of Homeland Security's use of 
this special acquisition authority. See GAO-05-136 and Department of 
Homeland Security: Status and Accountability Challenges Associated with 
the Use of Special DHS Acquisition Authority, GAO-08-471T (Washington, 
D.C.: Feb. 7, 2008.) 

[7] P.L. 108-136, sec. 1441. 

[8] Intellectual property includes, among other things, patents, 
copyrights, and technical data. For example, intellectual property 
provisions will apply to the development of a new process or 
technology. 

[9] Department of Energy, Implementation Guidance for Awarding 
Technology Investment Agreements, Financial Assistance Letter No. 2006- 
03 (Washington, D.C., May 10, 2006). 

[10] The Energy Policy Act of 2005 required DOE to submit an annual 
report to Congress on the department's use of other transactions 
authority, including the technical objectives for each agreement, the 
extent to which the other transaction has contributed to a broadening 
of the technology and industrial base available for meeting DOE's 
mission needs, and the extent to which the other transaction has 
fostered new relationships and practices. In its first two reports 
submitted to Congress, covering activity in fiscal years 2006 and 2007, 
DOE reported that it had the framework in place for using other 
transactions authority, but there had been no agreements to date. 

[11] During 2007, the Office of Science established three DOE Bioenergy 
Research Centers to accelerate basic research in the development of 
cellulosic ethanol and other biofuels. According to an Office of 
Science official, DOE had at one point considered using technology 
investment agreements. Two of the research centers were established at 
existing DOE national laboratories, however, and the third was 
established under a cooperative agreement. 

[12] The biomass program focuses on developing biofuel, bioproduct, and 
biopower technologies in partnership with other government agencies, 
industry, and academia. This program supports four key priorities of 
the Office of Energy Efficiency and Renewable Energy's strategic plan: 
(1) dramatically reducing dependence on foreign oil; (2) promoting the 
use of diverse, domestic, and sustainable energy resources; (3) 
reducing carbon emissions from energy production and consumption; and 
(4) establishing a domestic bioindustry. 

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