Department of Energy: Status of DOE's Property Management Program (Fact
Sheet, 04/07/94, GAO/RCED-94-154FS).

This fact sheet provides information on the management of Energy
Department (DOE) property by the 20 major contractors involved in
defense-related activities.  GAO focuses on (1) the amount of missing
property being reported to DOE by these contractors in their most recent
property inventory reports, (2) the extent to which DOE has approved
contractors' property management systems, and (3) examples of weaknesses
reported in the most recent DOE review of the contractors' property
management systems.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-94-154FS
     TITLE:  Department of Energy: Status of DOE's Property Management 
             Program
      DATE:  04/07/94
   SUBJECT:  Federal property management
             Property losses
             Government owned equipment
             Contract monitoring
             Research and development facilities
             Inventory control systems
             Accountability
             Contractor responsibility
             Contractor performance
             GOCO

             
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Cover
================================================================ COVER


Report to the Chairman, Environment, Energy, and Natural Resources
Subcommittee, Committee on Government Operations, House of
Representatives

April 1994

DEPARTMENT OF ENERGY - STATUS OF
DOE'S PROPERTY MANAGEMENT PROGRAM

GAO/RCED-94-154FS

Status of DOE's Property Management Program


Abbreviations
=============================================================== ABBREV

  DOE - Department of Energy
  GAO - General Accounting Office

Letter
=============================================================== LETTER


B-256705

April 7, 1994

The Honorable Mike Synar
Chairman, Environment, Energy, and
 Natural Resources Subcommittee
Committee on Government Operations
House of Representatives

Dear Mr.  Chairman: 

In response to your request, this fact sheet provides information on
the management of Department of Energy (DOE)-owned property by the 20
major contractors involved in defense-related activities.\1 As agreed
with your office, we focused our review on identifying (1) the amount
of missing property being reported to DOE by these contractors in
their most recent property inventory reports, (2) the extent to which
contractors' property management systems have been approved by DOE,
and (3) examples of weaknesses reported in the most recent DOE review
of the contractors' property management systems. 

In summary, these 20 contractors reported missing property totaling
about $74.2 million in their most recent property inventory reports
to DOE.  This amount, however, is probably understated for two
reasons.  First, reviews conducted by us and DOE's Inspector General
on certain of these contractors' property management systems
concluded that a higher amount of property may be missing than
reported by the contractors.  Specifically, in our report on the
Rocky Flats Plant, we found that in addition to the $12.8 million in
missing property reported by the contractor, the contractor could not
physically locate another $16.5 million in property.\2 As pointed out
in that report, some of this latter property may have to be
classified as missing.  In another report on the Los Alamos National
Laboratory, DOE's Inspector General concluded that millions of
dollars more in property may be missing than reported in the latest
inventory.\3 Second, at least two of the contractors included in this
review conducted only partial inventories.  Therefore, the missing
property totals reported by those contractors represent only what is
missing from the property they inventoried. 

Of the 20 contractors we reviewed, only 7 had property management
systems that were approved by DOE as of January 31, 1994.\4 Of the
remaining contractors' systems, seven systems were conditionally
approved (i.e., deficiencies exist that must be corrected within an
established time frame), five remained unapproved, and one was
disapproved.  DOE's approval represents a determination that the
contractor's system will adequately protect, maintain, utilize, and
dispose of government property in accordance with federal and DOE
property management regulations. 

The Department, in reviewing the 20 contractors' property management
systems, made over 400 recommendations.  Some of these
recommendations were aimed at fixing significant problems.  For
instance, in reviewing one contractor, DOE found that items such as
copy paper, fluorescent light bulbs, truck mufflers, among others,
were being scheduled for surplus sale while the contractor was buying
new similar items from vendors.  In a review of another contractor,
DOE found that significant errors existed in the property inventory
reports to DOE and that the value and volume of property in the
possession of the contractor were significantly overstated.  We
further noted that for 10 of the 20 contractors included in our
review, DOE had not completed its review on schedule. 

This fact sheet contains three sections.  Section 1 lists the missing
property totals shown in the contractors' most recent property
inventory reports.  Section 2 lists the extent to which DOE had
approved the contractors' property management systems as of January
31, 1994.  Section 3 lists examples of weaknesses reported in the
latest DOE review of the contractors' property management systems. 


--------------------
\1 DOE-owned property, as discussed in this fact sheet, is property
of any kind or type that is DOE-owned or -rented or -leased in the
custody of DOE's contractors, excluding real property such as land or
buildings; special source material, such as tritium; and petroleum. 

\2 See Department Of Energy:  The Property Management System at the
Rocky Flats Plant Is Inadequate (GAO/RCED-94-77, Mar.  1, 1994). 

\3 See Audit of Personal Property Management at Los Alamos National
Laboratory (DOE/IG-0338, Dec.  1993). 

\4 DOE regulations require DOE to review and approve or disapprove a
contractor's property management system within the first year of the
contract and every 3 years thereafter. 


   AGENCY COMMENTS AND ACTIONS
------------------------------------------------------------ Letter :1

As you requested, we did not obtain written agency comments on a
draft of this fact sheet.  However, we discussed the facts presented
with the director and staff of DOE's Office of Contractor Management
and Administration and have included their comments where
appropriate.  In their comments, these officials stressed that the
Department is committed to improving its controls over contractors'
property management systems by increasing headquarters oversight of
this function.  The officials pointed out that evidence of that
commitment can be seen in the establishment of their office in June
1992 to tighten DOE's stewardship over contractors' property
management systems and the numerous initiatives the Department has
undertaken. 

Those initiatives include (1) headquarters independent validation of
DOE field offices' oversight activities, (2) a strengthened DOE
surveillance program of contractors, (3) a centralized personal
property tracking system to catalog the findings from each review and
track corrective actions, and (4) the requirement for a "root cause"
analysis to be performed for each deficiency found during a property
review.  According to DOE officials, the increased emphasis the
Department has placed on property management and the need for its
contractors to establish reliable property data bases may have
contributed to the significant amount of lost or missing property
shown by this fact sheet. 

We recognize that DOE is taking action to improve contractors'
property management activities.  However, we also believe that much
needs to be done, as evidenced by the over 400 recommendations made
from DOE's reviews of contractors.  Furthermore, in our recent report
on Rocky Flats' property management, we pointed out that serious
problems with the plant's property tracking data base and management
system continue to exist. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :2

We conducted this review during the period January through March
1994.  To develop this fact sheet, we obtained property inventory
reports for the 20 major contractors involved in defense-related
activities from the DOE field offices having responsibility for those
contractors.  We did not independently verify the missing property
amounts shown in those reports.  However, we did compare some of the
data with data in other DOE sources of information, including
property amounts shown on DOE's Financial Information System.  We
also examined DOE property management regulations and DOE
headquarters' reviews of DOE field offices' property management
activities.  We obtained data on the status of and the latest DOE
review of each contractor's property management system from DOE's
Office of Contractor Management and Administration.  We verified the
accuracy of these data with selected DOE field offices.  Furthermore,
we reviewed DOE Office of Inspector General reports issued on
contractors' property management activities. 


---------------------------------------------------------- Letter :2.1

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this fact sheet
until 30 days from the date of this letter.  At that time, we will
send copies of this fact sheet to the Secretary of Energy,
appropriate congressional committees, and other interested parties. 

If you have any additional questions or if we can be of further
assistance, please contact me at (202) 512-3841.  Major contributors
to this fact sheet are listed in appendix I. 

Sincerely yours,

Victor S.  Rezendes
Director, Energy and Science Issues


MISSING PROPERTY AMOUNTS SHOWN IN
THE MOST RECENT PROPERTY INVENTORY
REPORTS
============================================================ Chapter 1

                                   Date of         Amount of
                                      most  missing property
                                    recent      (acquisition
DOE office/plant (contractor)    inventory             cost)
------------------------------  ----------  ----------------
Albuquerque
------------------------------------------------------------
Kansas City Plant
 (Allied Signal)
Sensitive                             1993             $ 446
Capital                               1991           714,632
============================================================
Subtotal                                             715,078
Los Alamos National
 Laboratory
 (University of California)
Sensitive                             1993         1,076,085
Capital                               1993         7,951,459
Noncapital                            1993         3,406,953
============================================================
Subtotal                                        12,434,497\a
Mound Facility
 (EG&G Mound Applied
 Technologies)
Sensitive                             1993               836
Capital                               1993           155,118
============================================================
Subtotal                                             155,954
Pantex Plant
 (Mason & Hanger-Silas Mason
 Company)
Sensitive                             1992            14,980
Capital                               1991            18,713
Noncapital                            1991            13,028
============================================================
Subtotal                                              46,721
Pinellas Plant
 (Martin Marietta Specialty
 Components)
Sensitive                             1993               150
Capital                               1993            40,434
Noncapital                            1991           587,175
============================================================
Subtotal                                             627,759
Sandia National Laboratories
 (Martin Marietta Corporation)
Sensitive                             1992         1,085,989
Capital                               1992         3,926,364
Noncapital                            1990           613,301
============================================================
Subtotal                                           5,625,654

Idaho
------------------------------------------------------------
Idaho Chemical Processing
 Plant
 (Westinghouse Idaho Nuclear
 Company)
Sensitive                             1993             3,373
Capital                               1992            52,380
============================================================
Subtotal                                              55,753
Idaho National Engineering
 Laboratory
 (EG&G Idaho, Inc.)
Sensitive                             1993         767,495\b
Capital                               1993           408,682
============================================================
Subtotal                                           1,176,177

Nevada
------------------------------------------------------------
Timing, Firing, and Scientific
 Support
 (EG&G Energy Measurements,
 Inc.)
Sensitive                             1993          29,069\b
Capital                               1993           133,581
Noncapital                            1993            51,544
============================================================
Subtotal                                             214,194
Weapons Test Support Services
 (Reynolds Electrical and
 Engineering Co., Inc.)
Sensitive                             1993  (included below)
Noncapital                            1993         6,143,906
Capital                               1993        11,986,002
============================================================
Subtotal                                        18,129,908\c

Oak Ridge
------------------------------------------------------------
Construction Services
 (M-K Ferguson Company)
Sensitive                             1993            45,480
Capital                               1993           180,676
============================================================
Subtotal                                             226,156
Fernald
 (FERMCO)
Sensitive                             1993           432,787
Capital                               1993         1,949,195
Noncapital                            1993            14,828
============================================================
Subtotal                                           2,396,810
K-25 Plant
 (Martin Marietta Energy
 Systems, Inc.)
Sensitive                             1993            74,194
Capital                               1993             2,840
============================================================
Subtotal                                              77,034
Y-12 Plant
 (Martin Marietta Energy
 Systems, Inc.)
Sensitive                             1993           306,258
Capital                               1993           283,226
============================================================
Subtotal                                             589,484

Richland
------------------------------------------------------------
Hanford Site
 (Westinghouse Hanford
 Company)
Sensitive                             1993            19,296
Capital                               1993           131,397
Noncapital                            1993                 0
============================================================
Subtotal                                             150,693
Pacific Northwest
 Laboratories
 (Battelle Memorial Institute)
Sensitive                             1993            77,072
Capital                               1993           198,999
============================================================
Subtotal                                             276,071

Rocky Flats
------------------------------------------------------------
Rocky Flats Plant
 (EG&G -Rocky Flats, Inc.)
Sensitive                             1993         3,125,749
Capital                               1993         5,283,654
Noncapital                            1993         4,384,844
============================================================
Subtotal                                        12,794,247\d

San Francisco
------------------------------------------------------------
Lawrence Berkeley Laboratory
 (University of California)
Sensitive                             1992  (included below)
Capital                               1992         1,690,875
============================================================
Subtotal                                           1,690,875
Lawrence Livermore National
 Laboratory
 (University of California)
Sensitive                             1992           182,961
Capital                               1992         5,433,482
============================================================
Subtotal                                           5,616,443

Savannah River
------------------------------------------------------------
Savannah River Laboratory and
 Plant
 (Westinghouse Savannah River
 Company)
Sensitive                             1992  (included below)
Noncapital                            1992         6,452,864
Capital                               1992         7,516,356
============================================================
Subtotal                                        13,969,220\e
============================================================
Total                                            $74,218,770
------------------------------------------------------------
Note:  Department of Energy (DOE) property is placed in basically
three categories.  Sensitive property means those items of property
that are susceptible to being appropriated for personal use or that
can be readily converted to cash.  Examples are firearms,
photographic equipment, binoculars, tape recorders, calculators, and
power tools.  DOE regulations require that a sensitive-item inventory
be conducted annually.  Capital property means property items that
have a unit acquisition cost of $5,000 or more and an anticipated
service life in excess of 2 years and have the potential for
maintaining their integrity as capital items, i.e., not expendable
due to use.  Examples are lathes and vehicles.  DOE regulations
require that a capital-item inventory be conducted every 2 years. 
Noncapital property means those items of property with an acquisition
cost of less than $5,000 that do not meet the definition of sensitive
property.  DOE regulations do not require that a noncapital inventory
be conducted although some DOE contractors have conducted them
anyway. 

\a The Inspector General's December 1993 report determined that Los
Alamos may not be able to account for $100 million in property. 

\b The contractor conducted only a partial inventory of property for
that fiscal year. 

\c The missing property amounts also include amounts for property
that was excessed, buried, or cannibalized. 

\d Our March 1994 report determined that the contractor could also
not physically locate another $16.5 million in property and may have
to classify some of this property as missing. 

\e As we were processing this fact sheet, DOE Savannah River
officials told us that they recently conducted a partial review of
the plant's 1992 inventory and believe that, based on this review,
the plant's missing property total included some property that was
excessed, buried, or cannibalized. 


EXTENT TO WHICH DOE HAS APPROVED
THE CONTRACTORS' PROPERTY
MANAGEMENT SYSTEMS (AS OF JANUARY
31, 1994)
============================================================ Chapter 2

                                          DOE system
DOE office/plant (contractor)             approval status\
----------------------------------------  ------------------
Albuquerque
------------------------------------------------------------
Kansas City Plant                         Conditionally
(Allied Signal)                           approved\a

Los Alamos National Laboratory            Disapproved
(University of California)

Mound Facility                            Unapproved\b
(EG&G Mound Applied
Technologies)

Pantex Plant                              Unapproved\b
(Mason & Hanger-Silas Mason
Company)

Pinellas Plant                            Unapproved\b
(Martin Marietta Specialty
Components)

Sandia National Laboratories              Unapproved\c
(Martin Marietta
Corporation)


Idaho
------------------------------------------------------------
Idaho Chemical Processing Plant           Approved
(Westinghouse Idaho Nuclear
Company)

Idaho National Engineering Laboratory     Approved
(EG&G Idaho, Inc.)


Nevada
------------------------------------------------------------
Timing, Firing, and Scientific Support    Conditionally
(EG&G Energy Measurements,                approved\a
Inc.)

Weapons Test Support Services             Conditionally
(Reynolds Electrical and                  approved\a
Engineering Co., Inc.)


Oak Ridge
------------------------------------------------------------
Construction Services                     Conditionally
(M-K Ferguson Company)                    approved\a

Fernald                                   Approved
(FERMCO)

K-25 Plant                                Approved
(Martin Marietta Energy
Systems, Inc.)

Y-12 Plant                                Conditionally
(Martin Marietta Energy                   approved\a
Systems, Inc.)


Richland
------------------------------------------------------------
Hanford Site                              Approved
(Westinghouse Hanford
Company)

Pacific Northwest Laboratories            Conditionally
(Battelle Memorial                        approved\a
Institute)


Rocky Flats
------------------------------------------------------------
Rocky Flats Plant                         Unapproved\d
(EG&G-Rocky Flats, Inc.)


San Francisco
------------------------------------------------------------
Lawrence Berkeley Laboratory              Approved
(University of California)

Lawrence Livermore National               Approved
Laboratory
(University of California)


Savannah River
------------------------------------------------------------
Savannah River Laboratory                 Conditionally
and Plant                                 approved\a
(Westinghouse Savannah
River Company)
------------------------------------------------------------
\a Conditionally approved--The contractor's property management
system has been reviewed by DOE and determined to have deficiencies
that must be corrected within an established time frame. 

\b A DOE review has been completed, but a DOE system
approval/disapproval determination is overdue. 

\c A DOE system approval/disapproval determination is not yet
overdue.  The contractor (Martin Marietta) is within the first year
of the start of the contract.  DOE regulations require DOE to review
and approve or disapprove the contractor's property management system
within the first year of the contract and every 3 years thereafter. 
Prior to Martin Marietta, AT&T was the contractor at the Sandia
National Laboratories, and, as of September 1993, AT&T had an
unapproved property management system. 

\d A DOE review has not been done, and a DOE system
approval/disapproval determination is overdue. 


RESULTS OF DOE REVIEWS OF
CONTRACTORS' PROPERTY MANAGEMENT
SYSTEMS
============================================================ Chapter 3

                         Date of DOE's
                                  last
                     review--number of
DOE office/plant       recommendations  Examples of weaknesses identified in
(contractor)                      made  review report
------------------  ------------------  ----------------------------------------
Albuquerque
--------------------------------------------------------------------------------
Kansas City Plant           2/91--31\a  A tremendous backlog of property has
 (Allied Signal)                         been received but had not been tagged.
                                         Using a check off list to perform
                                         physical inventories, rather than bar
                                         code scanners, was determined to be
                                         unacceptable.
Los Alamos                    5/93--10  The significant losses of sensitive
 National                                items appears to indicate a lack of
 Laboratory                              adequate physical protection or
 (University of                          responsible oversight. The office
 California)                             responsible for performing physical
                                         inventories was not providing other
                                         affected organizations with the results
                                         of inventory findings to enable them to
                                         perform trend analyses and/or initiate
                                         corrective actions.
Mound                        1/92--9\a  During inventory verification, DOE noted
 (EG&G Mound                             that many property items were not tag-
 Applied                                 identified. The system for tracking
 Technologies)                           property on loan to others did not
                                         properly reflect the actual location of
                                         the property.
Pantex                      9/92--17\a  Numerous items of equipment were
 (Mason & Hanger-                        untagged during physical inventory.
 Silas Mason                             Several items of property have more
 Company)                                than one property control tag.
Pinellas                      7/92--18  Numerous property management procedures
 (Martin Marietta                        needed updating. A formal internal
 Specialty                               training program has not been
 Components)                             established for the property management
                                         staff.
Sandia National              3/91--5\a  According to DOE, it is currently
 Laboratories                            impossible to determine with any
 (AT&T when the                          accuracy how many property items are on
 review was done)                        loan. It could not be determined for
                                         completed subcontracts if the
                                         subcontractors still had residual DOE
                                         property that had not been returned or
                                         officially disposed of.

Idaho
--------------------------------------------------------------------------------
Idaho Chemical                 4/92--9  The contractor is not including DOE in
 Processing Plant                        the distribution of its reports on
 (Westinghouse                           lost, damaged, or destroyed property.
 Idaho Nuclear                           The plant's policy and procedure that
 Company)                                provide guidance for physical
                                         inventories do not require that
                                         inventories be conducted or tested by
                                         independent parties.
Idaho National                4/92--15  Subcontract administrators are not
 Engineering                             requiring that subcontractors submit
 Laboratory                              annual reports of government property
 (EG&G Idaho,                            in their possession. The contractor's
 Inc.)                                   property management manual does not
                                         include requirements for tagging
                                         sensitive property.



Nevada
--------------------------------------------------------------------------------
Timing, Firing,               2/93--10  Physical inventory reports for outlying
 and Scientific                          locations indicate that items were not
 Support                                 being inventoried according to the
 (EG&G Energy                            schedule set forth in DOE regulations.
 Measurements,                           Property management personnel were
 Inc.)                                   receiving little or no relevant
                                         training in personal property
                                         management other than internally
                                         conducted property management
                                         workshops.

Weapons Test                 10/92--28  DOE has not been provided with a
 Support Services                        schedule for the implementation of a
 (Reynolds                               viable bar code property control
 Electrical and                          system. A review of the training
 Engineering Co.,                        records for selected property
 Inc.)                                   management personnel showed that none
                                         of the individuals had ever attended
                                         formal, documented, inventory
                                         management training.

Oak Ridge
--------------------------------------------------------------------------------
Construction                   2/92--9  A majority of accountable property items
 Services                                received within the last year are not
 (M-K Ferguson                           in the inventory data base. Three of 20
 Company)                                sensitive items randomly selected to
                                         verify location were missing, which
                                         represents a potential loss ratio of 15
                                         percent.
Fernald                      7/90--8\a  The contractor has not provided copies
 (Westinghouse                           of inventory write-offs, i.e., lost,
 when the review                         damaged, or destroyed property, to DOE
 was done)                               on a regular basis. A spot inspection
                                         of sensitive property, such as hand
                                         tools, noted that the tools had no
                                         government identification.
K-25                         3/93--9\a  Eight of 20 sensitive items randomly
 (Martin Marietta                        selected to verify location could not
 Energy Systems,                         be found, which represents a potential
 Inc.)                                   loss ratio of 40 percent. Items such as
                                         copy paper, fluorescent light bulbs,
                                         truck mufflers, etc., are being
                                         scheduled for surplus sale while the
                                         contractor was buying new, similar
                                         items from vendors.
Y-12                        8/93--21\a  Heavy equipment, office furnishings,
 (Martin Marietta                        materials, and machines not designed
 Energy Systems,                         for outside use are being left outside
 Inc.)                                   unprotected. Property management
                                         personnel are receiving little or no
                                         relevant training in property
                                         management.

Richland
--------------------------------------------------------------------------------
Hanford Site                  2/91--49  There are significant errors in the
 (Westinghouse                           property inventory reports to DOE and a
 Hanford Company)                        significant overstatement of the value
                                         and volume of personal property in the
                                         possession of the contractor. Over 40
                                         percent of all capital-and sensitive-
                                         tagged property has not been
                                         inventoried within the time frames
                                         required by DOE regulations.
Pacific Northwest            12/92--16  An inventory of special equipment, such
 Laboratories                            as office equipment, photographic
 (Battelle                               equipment, radio equipment, and
 Memorial                                automotive equipment, has not been
 Institute)                              conducted since FY 1989. A review of a
                                         sample of capital item records revealed
                                         that there are errors in certain data
                                         fields indicating that some
                                         organizations are still not reporting
                                         or updating changes in key data
                                         elements.

Rocky Flats
--------------------------------------------------------------------------------
Rocky Flats Plant           4/89--30\a  The contractor has an antiquated
 (Rockwell                               property control system that is
 International                           approximately 30 years old. It lacks
 when the review                         sufficient data and capability to
 was done)                               provide for an effective property
                                         management program. Plant policies and
                                         procedures do not address the
                                         individual responsibility of employees
                                         to ensure the proper control, use, and
                                         protection of government property,
                                         including the prompt reporting of lost
                                         or stolen property.

San Francisco
--------------------------------------------------------------------------------
Lawrence Berkeley             5/93--20  In most cases, it did not appear that
 Laboratory                              subcontractors were being monitored to
 (University of                          ensure that government property was
 California)                             being properly controlled. Property
                                         management policies and procedures
                                         needed improvements to ensure
                                         compliance with the contract terms and
                                         DOE property management regulations.
Lawrence Livermore          8/92--34\a  Property items were in storage for more
 National                                than 3 years without adequate
 Laboratory                              justification or correct level of
 (University of                          approval authority. Items that are not
 California)                             tagged are not being investigated.

Savannah River
--------------------------------------------------------------------------------
Savannah River              9/93--73\a  Of the property items sampled for
 Laboratory and                          inventory, 34 percent either were
 Plant                                   physically unlocated or lacking
 (Westinghouse                           disposition documentation. Reports of
 Savannah River                          lost, damaged, or destroyed property
 Company)                                are not being submitted to DOE in all
                                         instances.
--------------------------------------------------------------------------------
\a The last DOE review listed in this section was not completed on
schedule. 


MAJOR CONTRIBUTORS TO THIS FACT
SHEET
=========================================================== Appendix I


   RESOURCES, COMMUNITY, AND
   ECONOMIC DEVELOPMENT DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix I:1

Jim Wells, Associate Director
William F.  Fenzel, Assistant Director
Robert J.  Baney, Evaluator-in-Charge
