Environmental Management: Impacts of Increases in DOE's Workforce (Letter
Report, 07/25/95, GAO/RCED-95-207).

In order to better manage the billions of dollars it is spending to
clean up the nation's nuclear weapons complex, the Energy Department
(DOE) has begun several productivity improvements. One such improvement
involved the hiring of up to 1,600 new employees, who are expected to
save millions of dollars by replacing contractor staff and improving the
productivity of the environmental cleanup.  This report reviews DOE's
process for hiring the new employees.  GAO (1) identifies the process
DOE used to justify the new hires, (2) determines whether DOE's
justifications support the claimed cost savings and productivity
improvements, and (3) discuses how DOE plans to ensure that the expected
cost savings and productivity improvements will be achieved.

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

 REPORTNUM:  RCED-95-207
     TITLE:  Environmental Management: Impacts of Increases in DOE's 
             Workforce
      DATE:  07/25/95
   SUBJECT:  Federal employees
             Cost analysis
             Human resources utilization
             Personnel management
             Budget cuts
             Productivity
             Hazardous substances
             Nuclear waste disposal
             Hiring policies
IDENTIFIER:  DOE Environmental Management Program
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Committee on Governmental
Affairs, U.S.  Senate

July 1995

ENVIRONMENTAL MANAGEMENT - IMPACTS
OF INCREASES IN DOE'S WORKFORCE

GAO/RCED-95-207

Increases in DOE's Workforce

(302126)


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

  DOE - Department of Energy
  FTE - full-time equivalent
  GAO - General Accounting Office
  GPRA - Government Performance and Results Act of 1993
  OMB - Office of Management and Budget

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


B-260784

July 25, 1995

The Honorable John Glenn
Ranking Minority Member
Committee on Governmental
 Affairs
United States Senate

Dear Senator Glenn: 

In order to better manage the billions of dollars it is spending to
clean up the nation's nuclear weapons complex, the Department of
Energy (DOE) has initiated several productivity improvements.  One
such improvement included the hiring of up to 1,600 new employees,
who are expected to save millions of dollars by replacing contractor
staff and improving the productivity of the environmental cleanup. 
This effort resulted from the designation of DOE's Office of
Environmental Management as a pilot project under the Government
Performance and Results Act of 1993 (GPRA).  The act requires federal
agencies, beginning in 1997, to develop strategic plans and
performance measures to improve their operations.  The act also
provides for the initiation of a series of pilot projects in fiscal
years 1994, 1995, and 1996.  The Office of Management and Budget
(OMB), which coordinates GPRA pilot projects, allowed DOE, as part of
its pilot project, to hire up to 1,200 new employees during fiscal
years 1994 and 1995, and an additional 400 in fiscal year 1996. 

This report responds to your request that we review DOE's process for
hiring the new employees.  We agreed to (1) identify the process DOE
used to justify the new hires, (2) determine whether DOE's
justifications support the claimed cost savings and productivity
improvements, and (3) identify how DOE plans to assure itself that
the expected cost savings and productivity improvements will be
achieved. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

DOE used a competitive bidding process to justify the allocation of
the initial 1,200 new positions to its field and headquarters offices
involved in environmental cleanup.  The offices were required to
submit written bids detailing staff needs, the expected productivity
improvements, and the associated cost savings.  Collectively, the
offices requested 1,575 new staff, referred to as full-time
equivalents (FTE),\1 and estimated that the new staff could help save
over $1.235 billion in fiscal years 1995 and 1996.  Savings would
occur as a result of increased federal oversight of contractors and
greater federal involvement in contract management.  DOE evaluated
the bids, allocated the FTEs to its field and headquarters offices,
and lowered the 2-year savings target to about $890 million.  The
savings target does not include the salaries and benefits for the new
staff--about $84 million annually for the initial 1,200 new staff. 

Most of the productivity improvements and cost savings that the field
offices estimated they could achieve were not adequately or
completely justified, according to our review of DOE's bid analysis. 
That analysis concluded that about 87 percent--almost $900
million--of the over $1.035 billion in savings that were to accrue
largely from productivity improvements had inadequate justifications. 
DOE management was also concerned about the justifications but
believed that the bids were sufficient for allocating the FTEs and
establishing savings goals, and planned to hold office managers
accountable for meeting those goals.  Rather than waiting to see if
productivity improvements occur, DOE is reducing Environmental
Management's budget by almost $300 million in fiscal year 1995 and
possibly by greater amounts in future years. 

Although budgets are being reduced, it is currently unknown whether
productivity improvements will occur.  To measure productivity
improvements, DOE is developing procedures to collect, validate, and
report the productivity improvements and resulting dollar savings the
new staff are expected to achieve.  These procedures are expected to
be completed by the fourth quarter of fiscal year 1995. 


--------------------
\1 Each FTE represents one full-time staff person. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Since 1989, DOE has spent about $23 billion cleaning up the
environmental contamination resulting from over 50 years of nuclear
weapons production.  During this time, the agency has completed the
restoration of less than 20 percent of the total number of
contaminated sites.  One reason DOE cites for the slow progress is
that it has an insufficient workforce to manage and oversee what it
calls "the largest environmental cleanup program in the world." In
1993, the Environmental Management Program had a contractor-to-
federal-worker ratio of 21 to 1--one of the highest ratios in the
federal government--and the highest funding per FTE in the federal
government, $3.3 million per FTE. 

In September 1993, DOE requested that OMB designate the Environmental
Management Program as a pilot project under GPRA and authorize
additional employees as part of that project.  The agency asserted
that it did not have sufficient staff with the skills needed to
oversee contractors and review their cost estimates.  To support its
position, DOE cited our reports and reports by the Congressional
Budget Office,\2 which supported the need for additional federal
staff to manage the cleanup program.  The reports noted the impact of
FTE ceilings that restricted the agency from hiring enough federal
employees to manage the cleanup program, the use of support service
contractors at substantially greater cost, limitations in staff
skills for adequate contract management, and the lack of federal
expertise.  In addition, a study conducted for DOE in 1993 concluded
that federal staff have minimal supervision of agency cleanup
projects, and as a result, the cleanup is costing significantly more
than comparable private sector and government projects.  DOE said
that it wanted to increase its oversight of contractors and involve
federal employees more in contract management. 

DOE proposed to hire 1,600 new employees by (1) converting 1,050
support service contractor positions to federal positions and (2)
adding 550 federal employees to help manage the environmental
program.  The agency estimated that the new staff would save $188
million through fiscal year 1996 by better managing contractors'
operations and would produce more tangible environmental results. 
OMB authorized DOE to hire 1,200 of the 1,600 additional staff
requested during fiscal years 1994 and 1995 and the additional 400 in
fiscal year 1996.  As of May 31, 1995, the agency had hired about 700
new employees.  Those hired to date have included project engineers,
cost analysts, estimators, and environmental safety and health
specialists.  However, DOE is considering not hiring all of the
approved FTEs because of budget constraints, according to the leader
of the Office of Environmental Management's evaluation team. 


--------------------
\2 Energy Management:  Using DOE Employees Can Reduce Costs for Some
Support Services (GAO/RCED-91-186, Aug.  16, 1991); Department of
Energy:  Project Management at the Rocky Flats Plant Needs
Improvement (GAO/RCED-93-32, Oct.  16, 1992); and Cleaning Up the
Department of Energy's Nuclear Weapons Complex, Congressional Budget
Office (May 1994). 


   DOE JUSTIFIED THE NEW STAFF
   THROUGH COMPETITIVE BIDS
------------------------------------------------------------ Letter :3

DOE required field and headquarters offices to include justifications
for the initial 1,200 FTEs as part of a competitive bidding process. 
The offices were required to submit bids containing detailed
information on their additional personnel needs and on the savings
they anticipate will be achieved from the new staff.  DOE evaluated
the bids and allocated all 1,200 positions that OMB had approved. 
The additional 400 FTEs were approved by OMB in May 1995 but had not
been allocated at the conclusion of our review. 

Both field and headquarters offices competed for the 1,200 positions,
but DOE used a different process to allocate the new positions to the
offices.  A team of DOE analysts reviewed the bids submitted by the
field offices and then submitted their recommendations to management
for review.  The team reviewed the bids for compliance with
requirements and for the adequacy of the justifications supporting
the savings.  Senior Environmental Management and other headquarters
officials reviewed the bids submitted by the headquarters offices and
then made the determinations.  The DOE senior management officials
included the Assistant Secretary for Environmental Management, the
Assistant Secretary for Human Resources and Administration, and the
Associate Deputy Secretary for Field Management. 

By early March 1994, 11 field and 15 headquarters offices had
submitted bids for new staff.  Collectively, the offices requested
1,575 new FTEs and proposed a total of $1.235 billion in savings.  In
mid-March 1994, the field offices presented their bids orally to DOE
management, the review team, and an OMB representative.  In their
presentations, field office managers explained their bids and
responded to management's questions.  Following the presentations,
management asked the field offices to revise and resubmit their bids
for final consideration.  The revised bids were to respond to
numerous questions raised during the presentations. 

In May 1994, DOE informed the field offices of their FTE allocations
and the savings targets they were to achieve.  The field offices were
allocated 831 FTEs, with a total savings target of almost $876
million for fiscal years 1995 and 1996.  The headquarters offices
were provided with 369 FTEs and a savings target totaling $14.5
million.  These savings do not include the FTEs' salary and benefit
costs, about $70,000 per employee--$84 million annually if all 1,200
new employees are hired.\3 Although DOE's agreement with OMB
stipulated that contractor positions would be reduced in conjunction
with the new hires, the offices that were allocated new positions
have not received the funds that were previously paid to contractors. 
Instead, DOE required those offices to absorb the additional costs in
existing budgets.  Appendix I summarizes the initial and revised
bids, the allocation of FTEs, and the decisions on the savings
targets for the field and headquarters offices. 


--------------------
\3 If all 1,600 new employees are hired, the annual salary and
benefit cost would be about $112 million. 


   MOST OF THE PROPOSED SAVINGS
   WERE NOT ADEQUATELY JUSTIFIED,
   BUT BUDGETS WERE REDUCED
   NONETHELESS
------------------------------------------------------------ Letter :4

Most of the cost savings and productivity improvements proposed in
the field offices' bids were not adequately justified, according to
DOE's evaluation team.  The evaluation team concluded that the field
offices had not adequately justified 87 percent of the savings that
they said could be achieved.  Despite finding these weaknesses in the
justifications, in May 1994 DOE approved most of the savings proposed
in the field offices' bids.  In two separate reviews of the field
offices' bids, the evaluation team expressed concerns about the
quality of the supporting justifications and the likelihood of
achieving the savings through improved productivity.  The team
concluded that most of the justifications of the savings were
inadequate.  As a result of the first review in March 1994, the field
offices were required to revise their bids.  Consequently, the
overall 2-year savings target proposed in the initial bids was
reduced from $1.221 billion to $1.035 billion.  In its review of the
field offices' revised bids, the evaluation team concluded that the
justifications were not adequate for almost $900 million--87
percent--of the $1.035\4 billion in savings targeted for the 2 years. 
Despite this finding, most of the savings targets were approved. 

For example, DOE's Savannah River Site first proposed that it could
save $121 million in fiscal years 1995 and 1996.  However, $56
million of that amount--46 percent--was due to a reduction in
contractor positions that had occurred in a prior year and was
unrelated to the savings that would result from the new positions. 
DOE questioned the $56 million during its review of Savannah River's
first bid but did not subtract that amount from the site's expected
savings.  In a similar example, about 48 percent of the Oak Ridge
Site's overall proposed savings was to come from the elimination of
about 500 contractor positions.  The evaluation team commented that
Oak Ridge had not adequately explained the proposed cuts in
contractors, and in its second review, the team classified these
savings as inadequately justified.  However, DOE later approved the
productivity savings that were to accrue from the cuts in Oak Ridge's
contractor personnel. 

In another example, the evaluation team considered almost all of the
$549 million in savings contained in the Hanford Site's first
proposal to be unjustified.  The team commented that most of
Hanford's proposed savings were unrealistic or apparently based on
productivity initiatives unrelated to the new FTEs.  Hanford reduced
its proposed savings in a revised bid, but the evaluation team's
subsequent review concluded that only 4 percent of Hanford's revised
proposed savings was fully justified.  Nonetheless, according to
members of the evaluation team, DOE approved almost all of Hanford's
proposed savings because the bids were considered an adequate basis
for allocating the FTEs and imposing budget cuts at the field
offices. 

On the basis of the evaluation team's findings, DOE further reduced
the field offices' total savings targets from $1.035 billion to about
$876 million,\5 which still included a substantial amount of savings
that was not adequately justified.  DOE then set savings targets for
both field and headquarters offices of $442 million for fiscal year
1995 and $448 million for fiscal year 1996.  DOE believed that the
bids were adequate for allocating the FTEs and planned to hold office
managers accountable for meeting those goals. 

Despite the fact that the savings targets were not fully justified,
budget reductions are occurring.  As shown in figure 1, DOE expects
to cut the Office of Environmental Management's budget by $913
million over fiscal years 1995 and 1996, even though it considered
only $136 million of that amount fully justified through the bid
process. 

   Figure 1:  Projected Savings
   From Environmental Management's
   New Hires, Fiscal Years 1995
   and 1996

   (See figure in printed
   edition.)


--------------------
\4 Figures do not add because of rounding. 

\5 The $876 million figure does not include the $14.51 million in
savings proposed by the headquarters offices. 


   DOE IS DEVELOPING A REPORTING
   SYSTEM TO TRACK COST SAVINGS
   AND PRODUCTIVITY IMPROVEMENTS
------------------------------------------------------------ Letter :5

DOE is assured of lower costs because the agency is incurring major
reductions in its cleanup budget--about $913 million in fiscal years
1995 and 1996.  Even though these cost savings will occur, DOE has
not developed a reporting system that would track and validate
whether productivity improvements were a result of the new employees. 
DOE has developed some of the monitoring and evaluating tools
required by GPRA, such as annual plans and reports that will yield
broad information about the entire pilot project.  By the fourth
quarter of fiscal year 1995, procedures to collect, report, and
validate the productivity improvements and resulting dollar savings
related to the new staff are expected to be in place.  DOE then plans
to include these productivity improvements in its overall GPRA
Environmental Management pilot project reports. 

GPRA requires agencies with pilot projects to prepare a strategic
plan for the program, annual plans for each year of a pilot project,
and an annual report that assesses the project's performance.  As of
March 1995, DOE had completed the strategic plan and performance
plans for fiscal years 1994 and 1995 and was preparing a performance
plan for fiscal year 1996.  Additionally, the agency was preparing
its first performance report, which will cover fiscal year 1994.  The
agency is reviewing the performance plan for fiscal year 1995 through
a series of quarterly management reviews and is tracking field
offices' savings against their savings goals. 

While the GPRA reports will provide an overall picture of the
Environmental Management Program's performance, additional
information is required to track the cost savings and productivity
improvements that have resulted from the new staff.  Therefore,
offices are developing monitoring and evaluation systems intended to
determine the success of projects that use the new staff. 

Some projects are easily tracked, while others are more difficult. 
For example, some of Oak Ridge's 77 new employees will manage three
specific projects--the removal of cooling towers on the site,
demolition of a power house, and cleanup of selected burial grounds. 
According to DOE, it will save about $16 million from these three
projects during fiscal years 1995 and 1996.  Since these three
projects are specifically identified, measuring the savings will be
straightforward.  Oak Ridge is also developing baseline cost data for
other environmental restoration projects and waste management
activities that will use new hires--a more difficult task, according
to Oak Ridge staff. 

The Savannah River Site is putting systems into place to track the
progress of the productivity improvements and savings realized by its
128 new staff in the high-level waste program, environmental
restoration program, and waste minimization program, among others. 
These systems were not in place at the conclusion of our review. 
Other sites are also developing program performance baselines to
measure performance against goals. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

DOE provided written comments on a draft of this report.  (App.  III
contains the full text of DOE's comments.) The agency said that our
draft report fairly represented the process the Office of
Environmental Management used in allocating the new positions for the
Environmental Management Program.  However, the agency pointed out
that we emphasized the inadequacy of the justifications supporting
the savings projections but did not give credit to the process that
made field office managers accountable for achieving the projected
savings.  We believe that our report adequately addresses managers'
accountability for the projected savings.  Specifically, we note in
our report that DOE plans to hold office managers accountable for
meeting the productivity achievements tied to these savings. 

DOE also said that tracking the results from the additional positions
will be especially difficult because the agency is now streamlining
its organization and will be unable to fill all 1,600 positions. 
Additionally, the agency said that further budget reductions are
expected to cause delays in accomplishing needed work and may result
in increased life-cycle costs. 

To perform our work, we met with and obtained data from Environmental
Management officials at DOE headquarters and at four of its field
offices--the Savannah River Operations Office, Oak Ridge Operations
Office, Albuquerque Operations Office, and the Ohio Field Office.  We
performed our work between July 1994 and June 1995 in accordance with
generally accepted government auditing standards.  (App.  II
discusses our objectives, scope, and methodology in more detail.)


---------------------------------------------------------- Letter :6.1

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter.  At that time, we will
send copies to the Secretary of Energy and other interested parties. 
We will also make copies available to others upon request. 

Please contact me at (202) 512-3841 if you have any questions.  Major
contributors to this report are listed in appendix IV. 

Sincerely yours,

Victor S.  Rezendes
Director, Energy and
 Science Issues


ENVIRONMENTAL MANAGEMENT'S BID
FTES AND SAVINGS, BY OFFICE
=========================================================== Appendix I

                              (Dollars in millions)


Field           FTEs     Savings        FTEs     Savings        FTEs     Savings
office     requested    proposed   requested    proposed     awarded    expected
--------  ----------  ----------  ----------  ----------  ----------  ----------
Albuquer         168      $81.26         158      $81.39         108      $62.04
 que
Chicago           48       13.70          48       13.70          33       12.00
Idaho             58       53.40          58       41.01          34       39.98
Morganto          29       57.40          29       57.40          11       26.00
 wn
Nevada            61        4.93          61        8.63          36        6.61
Oakland           67       21.54          68       20.61          40       19.43
Oak               88       77.30          99       77.45          77       77.45
 Ridge
Ohio             133      108.50         129      108.70         106       83.90
Hanford          268      548.95         200      382.00         158      379.20
Rocky            212      132.70         212      120.70         100       56.93
 Flats
Savannah         199      121.00         199      124.21         128      112.36
 River
================================================================================
Subtotal       1,331    1,220.68       1,261    1,035.80         831      875.90
Headquar         244       14.51         244       14.51         369       14.51
 ters
 offices
================================================================================
Total--        1,575   $1,235.19       1,505   $1,050.31       1,200     $890.41
 field
 and
 headqua
 rters
 offices
--------------------------------------------------------------------------------

OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix II

In June 1994, the then Chairman, Senate Committee on Governmental
Affairs, asked to us evaluate the portion of a pilot project of the
Department of Energy's (DOE) Office of Environmental Management that
involves the hiring of additional federal employees (full-time
equivalents, or FTEs).  Our review focused on the following three
major questions: 

  -- What process did DOE use to justify the new hires? 

  -- Did DOE's justifications support the claimed cost savings and
     productivity improvements? 

  -- How is DOE assuring itself that the established cost savings and
     productivity improvements will be achieved? 

We selected four of the largest DOE facilities with major
environmental cleanup under way:  the Savannah River Site, South
Carolina; Oak Ridge Operations Office, Tennessee; Ohio Field Office,
Ohio; and Albuquerque Operations Office, New Mexico.  At each
facility, we reviewed the competitive bid proposals and discussed the
proposed savings with program officials.  Additionally, we reviewed
the four facilities' implementation plans and performance reports
that were submitted to DOE.  For DOE's other seven offices, we
reviewed their bid proposals, implementation plans, and performance
reports. 

We interviewed key officials at DOE headquarters who were responsible
for developing, managing, and evaluating the pilot project, including
the new FTEs.  We obtained evaluations of the facilities' bids and
discussed them with agency officials.  We also interviewed the Office
of Management and Budget officials responsible for approving and
overseeing the agency's pilot project. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
ENERGY
========================================================== Appendix II



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Bernice Steinhardt, Associate Director
Richard E.  Iager, Senior Evaluator

OFFICE OF THE GENERAL COUNSEL

Doreen Stolzenberg Feldman, Assistant General Counsel

ATLANTA REGIONAL OFFICE

John P.  Hunt, Jr., Assistant Director
John M.  Gates, Evaluator-in-Charge
Marion S.  Chastain, Site Senior
Sara Bingham, Communications Analyst

*** End of document. ***