Nuclear Waste: DOE's Management and Organization of the Nevada Repository
Project (Letter Report, 12/23/94, GAO/RCED-95-27).

The Energy Department (DOE) in 1991 hired a contractor---at an estimated
cost of $1 billion over 10 years--to engineer, develop, and manage a
system for permanently disposing of highly radioactive waste. The
centerpiece of this disposal system is a geological repository for
disposing of waste. One of DOE's original objectives for hiring this
contractor was to reduce the number of participants working on the
disposal program, including consolidating under the contractor much of
the program work and the investigation of the suitability of Yucca
Mountain, Nevada, as a repository site. This report examines whether DOE
is effectively using the contractor--TRW Environmental Safety Systems,
Inc., a subsidiary of TRW, Inc.--to manage the project. Specifically,
GAO reviews DOE's efforts to consolidate participants' activities,
streamline decision-making, and cut costs at the repository project. GAO
also assesses DOE's recent initiative to reorganize project management.

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

 REPORTNUM:  RCED-95-27
     TITLE:  Nuclear Waste: DOE's Management and Organization of the 
             Nevada Repository Project
      DATE:  12/23/94
   SUBJECT:  Nuclear waste disposal
             Nuclear waste storage
             Contract administration
             Nuclear facilities
             Radioactive wastes
             Cost control
             Contractors
             Contractor performance
IDENTIFIER:  DOE Yucca Mountain Project (NV)
             Yucca Mountain (NV)
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Investigations and Oversight,
Committee on Science, Space, and Technology, House of Representatives

December 1994

NUCLEAR WASTE - DOE'S MANAGEMENT
AND ORGANIZATION OF THE NEVADA
REPOSITORY PROJECT

GAO/RCED-95-27

Repository Organization and Management


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

  DOE - Department of Energy
  TRW - TRW, Inc. 

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


B-258135

December 23, 1994

The Honorable James A.  Hayes
Chairman, Subcommittee on
 Investigations and Oversight
Committee on Science, Space,
 and Technology
House of Representatives

Dear Mr.  Chairman: 

In February 1991, the Department of Energy (DOE) hired a management
and operating contractor (management contractor) for a 10-year period
at an estimated cost of $1 billion to engineer, develop, and manage a
system for permanently disposing of highly radioactive waste.  The
centerpiece of this disposal system, which was mandated by the
Nuclear Waste Policy Act of 1982, as amended, is a geologic
repository for disposing of waste.  The system also includes
capabilities for packaging and transporting waste from nuclear
facilities to the repository and possibly a facility for storing
waste before it is finally disposed of in the repository.  One of
DOE's original objectives for hiring this management contractor was
to reduce the number of participants working on the disposal program. 
This objective included consolidating under the management contractor
much of the work on the program and, in particular, a project to
investigate the suitability of Yucca Mountain, Nevada, for the
repository. 

Concerned about the organization and management of DOE's repository
project, you asked us to determine whether DOE is effectively using
the management contractor--TRW Environmental Safety Systems, Inc., a
wholly owned subsidiary of TRW, Inc.--to manage the project. 
Specifically, we agreed to review DOE's efforts to consolidate
participants' activities, streamline decision-making, and reduce
costs at the repository project.  In addition, we assessed DOE's
recent initiative to reorganize the management of the project. 


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

DOE has not been using TRW to manage the repository project. 
Instead, DOE retained the authority to direct the work of each
project participant, including the management contractor.  Moreover,
DOE has not achieved its objective of consolidating work on the
project under the management contractor.  In fact, there are now more
contractors working on the project than before DOE awarded the
contract to TRW.  These conditions perpetuated a complex distribution
of work and duplication of contractors' responsibilities.  As a
result, over the last 4 years major project participants used almost
one-third of their project funds for management, coordination, and
related support activities. 

In February 1994, a DOE team evaluated the Department's contracting
practices and recommended, among other things, that DOE replace, when
appropriate, its cost-reimbursable management and operating
contracts, such as the TRW contract, with a combination of
competitively awarded fixed-price contracts and performance-based
management contracts.  Also, in June 1994, DOE's Inspector General
recommended that DOE reassess TRW's role on the repository project as
a part of an evaluation of the management contractor's performance
after 3 years.  DOE, however, did not evaluate whether the TRW
management and operating contract could be replaced with a
performance-based management contract or whether a management and
operating contractor was still needed.  Instead, on the basis of the
contractor's performance, DOE decided to continue the contract for
the full 10-year period and to initiate discussions with project
participants about assigning TRW a larger role in managing the
project.  This initiative appears modest in relation to DOE's
contract reform objectives and would not consolidate project
activities under fewer contractors. 


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

In 1987, DOE decided that a successful radioactive waste disposal
program, including the investigation of three candidate repository
sites, could best be ensured if DOE had a long-term partnership with
a management contractor.  Generally, a management and operating
contract is an agreement under which DOE contracts for the operation,
maintenance, or support of a site or facility devoted to one or more
of its programs.  DOE retains responsibility for defining the scope
of the program and providing technical direction to the contractor;
the contractor is responsible for the day-to-day management of the
work, including providing necessary resources and technical,
schedule, and budget direction to other contractors.  DOE and its
predecessor agencies have used this type of contract, in which DOE
pays virtually all the costs and exercises only broad general
oversight, to operate nuclear-related sites and facilities since
World War II.  The proposed management contract for the disposal
program was unique in that the contractor was expected to manage a
program rather than a site or facility. 

DOE expected that the proposed management contractor would develop
waste storage and transportation capabilities and manage the
investigations of the candidate repository sites.  DOE also expected
that the total number of contractors working on the program would
decline because it anticipated that the work of some existing
contractors would be transferred to the management contractor. 
Although amendments to the Nuclear Waste Policy Act in December 1987
directed DOE to investigate only one site, DOE proceeded to hire a
management contractor on the basis that the disposal program, and
particularly the repository project at Yucca Mountain, needed strong
centralized management. 

In February 1991, DOE awarded the management contract to TRW.\1 The
period of the contract covered 10 years, and DOE had an option to
extend the contract another 5 years.  In addition, the contract
required DOE to evaluate TRW's performance after 3 years and, on the
basis of that review, to decide whether the contract should continue
beyond 5 years or be terminated. 

When DOE awarded the contract, there were seven major and nine minor
project participants--contractors and government agencies--already
working on the repository project.\2 With one exception, DOE had
drawn the major participants from its nuclear weapons testing program
at its Nevada Test Site (part of the Yucca Mountain site is on the
test site), located northwest of Las Vegas.  Under the management
contract, TRW's responsibilities included integrating the work of
various program participants, such as existing DOE contractors, and
ensuring that a site at Yucca Mountain, Nevada, was properly
investigated to determine its suitability for use as a repository. 


--------------------
\1 The principal reasons for the delay between DOE's decision to hire
a management contractor and the contract's award were the need to
revise the procurement documentation to reflect the 1987 amendments
and a legal challenge by TRW to DOE's initial decision in 1988 to
award the contract to Bechtel Systems Management, Inc.  For
information on the legal challenge, see Nuclear Waste:  Quarterly
Report as of March 31, 1989 (GAO/RCED-89-178, Aug.  14, 1989). 

\2 GAO defined major participants as contractors and government
agencies receiving $5 million or more in annual project funding and
minor participants as contractors and agencies receiving annual
project funding from $100,000 to $5 million. 


   DOE HAS MADE LIMITED USE OF THE
   MANAGEMENT CONTRACTOR ON THE
   REPOSITORY PROJECT
------------------------------------------------------------ Letter :3

Along with assigning TRW specific responsibility to ensure that the
investigation of the repository site is consistent with the Nuclear
Waste Policy Act of 1982, DOE made TRW responsible for integrating
the work of various program participants, such as national
laboratories, other federal agencies, and DOE prime contractors
conducting work in support of the repository project.  DOE has not,
however, given the contractor authority to manage the investigation
project, nor has it reduced the number of project contractors by
consolidating work under TRW and its subcontractors.  Instead, DOE
added TRW and its subcontractors to the existing project organization
and, therefore, overlooked opportunities to streamline
decision-making and reduce costs. 


      DOE DOES NOT USE THE
      MANAGEMENT CONTRACTOR TO
      MANAGE THE REPOSITORY
      PROJECT
---------------------------------------------------------- Letter :3.1

DOE has not given TRW authority to manage the site investigation. 
Instead, TRW and other project participants report to DOE's project
office, which retains control of the day-to-day investigation
activities.  (See fig.  1.) Language in the contract and the project
office's reluctance to give authority to TRW contributed to this
arrangement. 

   Figure 1:  Organization of
   Yucca Mountain Project Office

   (See figure in printed
   edition.)

   Note:  Effective October 1994,
   Science Applications became a
   subcontractor to TRW, and
   Raytheon essentially ended its
   role on the repository project.

   (See figure in printed
   edition.)

The contract states that TRW will, among other things, be responsible
for the conduct of field-related site characterization
(investigation) and environmental work, utilizing existing project
contractors.  TRW also is responsible for providing technical,
schedule, and budget direction to project contractors.  The contract
also states, however, that direction from TRW to DOE's national
laboratories, other federal agencies, and contractors at the Nevada
Test Site must pass through the DOE representative.  These
laboratories, agencies, and contractors have included six of the
project's seven other major, and several of the minor, participants. 

Also, DOE managers at the repository project resisted what they
considered to be TRW's intrusion into the project.  The former DOE
project manager told us that he did not see the need to hire a
management contractor but was overruled by senior program officials. 
Thereafter, at his direction, the project office established
procedures that limited TRW to providing technical and management
support to the project office to ensure that the office retained sole
authority to direct all project participants. 


      PROJECT WORK HAS NOT BEEN
      CONSOLIDATED
---------------------------------------------------------- Letter :3.2

A DOE priority in hiring a management contractor was to consolidate
work under the contractor's direction and reduce the number of
participants working on the disposal program, including the
repository project.  DOE, however, has not achieved this objective at
the project.  Instead, DOE added TRW and its subcontractors to the
seven major participants already working on the project when the
contract was awarded.  One result is that DOE is supporting the
management and administrative costs of two architecture and
engineering contractors.  Also, the agency has not taken advantage of
the opportunity afforded by the management contract to make project
contractors more accountable and to integrate projects, as well as to
simplify the assignment of work tasks and the administration of
contracts. 

DOE has been reluctant to transfer work to TRW from its other
contractors, in part because its own project management has been
reluctant to accept the contractor on the project.  Also, other
project participants perceived a "conflict of interest" in TRW's dual
roles of integrating project activities and performing some project
activities.  Such a conflict, they maintained, could permit TRW to
take unfair advantage of other participants in allocating project
work. 

The management contract identified work then assigned to existing
contractors that potentially could be transferred to TRW.  In 1991,
TRW assumed responsibility for some of this work and, at DOE's
direction, developed a plan for transferring the remaining work. 
Thereafter, Science Applications International Corporation, which had
been providing technical and management support to DOE's project
office and was the largest contractor on the project, argued that
implementing the transfer plan would infringe on its contractual
rights.  As a result, DOE agreed to review the plan and make
adjustments if warranted.  Although DOE concluded that the plan was
sound and essential to carrying out its program mission, DOE deferred
transferring some of the work addressed in the plan, including work
assigned to Science Applications.  The deferred work was subject to
annual review to determine whether it would be transferred.  The
first review, performed in June 1993, did not result in a transfer of
work.\3

Although DOE has, after 3 years, transferred some of the project work
to TRW, six of the seven major participants that were working on the
project at the beginning of 1991, as well as nine minor participants,
continue to work on the project.  The seventh major
participant--Raytheon Services, Nevada--essentially left the project
at the end of fiscal year 1994.  Some participants have special
expertise and narrow project responsibilities.  For example, the U.S. 
Geological Survey is a major participant whose role is essentially
limited to scientific studies of the Yucca Mountain site.  Others,
however, perform more traditional engineering, construction, and
support services that the management contractor could either directly
perform or subcontract to others if it was responsible for these
activities.  Furthermore, six subcontractors to TRW also have roles
on the project.  (See fig.  1.)

In April 1993, TRW proposed to assume responsibility for architecture
and engineering services for the site drilling program from Raytheon
Services, Nevada.  TRW's stated intent was to establish a single
point of responsibility and accountability for all design work,
improve the integration of design work among the various elements of
the project, simplify the process of assigning new and modified
tasks, and eliminate the encumbrance of administering two
architecture and engineering contracts (TRW was also providing this
service for the design of an underground exploratory studies facility
and the repository). 

DOE's handling of TRW's proposal illustrates a reluctance to
consolidate project work under the management contractor.  DOE's
project office initially responded that it would retain Raytheon on
the project.  Early in 1994, however, the project office decided to
transfer Raytheon's work to Science Applications, which did not have
existing architecture and engineering capability on the project. 
According to officials in the project office, DOE made this decision
to take advantage of Science Applications' familiarity with the
drilling program and to ensure that TRW did not appear to be taking
unfair competitive advantage of other contractors by recommending
that their work be transferred to TRW. 

Finally, not only has DOE not reduced the number of project
participants, but also more participants are now working on more
aspects of the project than when DOE brought the management
contractor on board.  To help manage the investigation project, DOE
has divided the work activities into 13 basic categories and
subdivided these categories into thousands of subcategories.  Four of
the basic categories directly relate to the potential development of
a repository and waste disposal system at Yucca Mountain.  These
categories include site investigation activities and activities
related to the development of designs for the waste package and
repository and to the development of an underground facility for
exploratory studies.  Other basic categories, such as environmental
monitoring activities at Yucca Mountain, regulatory activities,
project management, and support services, also support the potential
development of a repository at the site.  In fiscal years 1991 and
1992, an average of five major participants worked in each of the
project's basic work categories.  In fiscal years 1993 and 1994, this
average increased to six participants (counting TRW and its
subcontractors as one participant). 


--------------------
\3 At the request of the Chairman, House Committee on Science, Space,
and Technology, we are investigating the circumstances pertaining to
this review for possible conflict of interest involving senior
managers of the project office and Science Applications. 


      PROJECT DECISION-MAKING HAS
      NOT BEEN STREAMLINED
---------------------------------------------------------- Letter :3.3

Limiting TRW's role in the project while allowing each contractor
independence has perpetuated a complex distribution of work and
duplication of contractors' responsibilities. 

Construction management on the Yucca Mountain project is spread among
several contractors with little control to ensure that planning,
design, and performance are coordinated and comply with the project's
testing needs.  For example, DOE's project office and five
participants are involved in drilling a test hole from the surface of
the Yucca Mountain site.  (See fig.  2.) Three project contractors
and other subcontractors are also involved in planning construction
and testing in the underground exploratory studies facility. 

   Figure 2:  Work Flow Process
   for Test Hole Drilling

   (See figure in printed
   edition.)

While project management suffers from a complex distribution of work,
project integration is also a problem.  A March 1994 review of
quality assurance performed by DOE on how effectively the project was
integrating data for design purposes found, among other things, the
following: 

Some of the work being done was so narrowly focused that information
necessary to complete or modify construction designs, which could
have been collected while the work was in progress, was overlooked. 
Subsequently, the work had to be redone to provide this information. 

Some of the project's principal investigators were withholding data
until they could publish professional papers without regard for other
project participants' needs for the data. 

The Nuclear Waste Technical Review Board, which was created by the
Congress to evaluate DOE's disposal program, also found that
integration was lacking among those working on plans for the
repository, on the waste package that would be placed in the
repository, and on the underground testing of the effects of heat
from waste on the packages and the repository.\4 The Board expressed
concern that designs and test plans in these areas are not far enough
along in their development to provide needed information for the
design of one part of the underground test area.  The Board added
that delaying the testing on the effects of heat would, in turn,
delay making critical decisions on, among other things, the final
design of the waste packages. 


--------------------
\4 Report to the U.S.  Congress and the Secretary of Energy, January
to December 1993 (Nuclear Waste Technical Review Board, May 1994). 


      DOE HAS NOT TAKEN ADVANTAGE
      OF COST-REDUCTION
      OPPORTUNITIES
---------------------------------------------------------- Letter :3.4

By not consolidating and streamlining project operations, DOE has
forgone an opportunity to reduce costs for management, coordination
and planning, and administration that absorb resources that could
otherwise be used on scientific investigations of the site.\5

Costs for management, coordination and planning, and support services
accounted for about $225 million, or 34 percent, of the $679 million
in total project costs incurred by TRW (including its subcontractors)
and the seven other major project participants in fiscal years 1991
through 1994. 

Because each project participant incurs costs for management,
coordination and planning, and support services in performing its
assigned activities, the total costs of these types of activities are
affected by the number of project participants.  Therefore,
consolidating project activities under fewer participants could
potentially reduce the total costs for management, coordination and
planning, and support services and free up more project funds for
other uses, such as site investigations and activities related to the
repository, exploratory studies facility, and waste package design. 
As we have previously reported, relatively few project funds have
been allocated to these latter activities; for example, DOE allocated
only $60 million of $166 million in project funds to these work
activities in fiscal year 1992.\6

Where consolidations have occurred, TRW has reported reductions in
project staff and costs achieved by eliminating redundancies and
realizing economies of scale.  According to the contractor, for
example, in eight work activities transferred to it, the number of
staff has been reduced from 257 to 184 at an estimated annual savings
of $7.2 million.  DOE recognized these consolidations as notable
achievements in its evaluation of TRW's performance in the first 6
months of fiscal year 1993. 

DOE, however, has not taken full advantage of opportunities to
consolidate and streamline project activities under fewer
contractors.  For example, TRW had estimated that transferring
Raytheon's architecture and engineering responsibilities to TRW would
save about $2 million annually in management and support costs.  As
discussed earlier, because DOE decided to transfer this work to
Science Applications, the Department will continue to support the
costs for management, coordination and planning, and support services
incurred by two architecture and engineering contractors. 


--------------------
\5 Management costs do not include the salary and related costs of
the DOE employees assigned to the project office. 

\6 Nuclear Waste:  Yucca Mountain Project Behind Schedule and Facing
Major Scientific Uncertainties (GAO/RCED-93-124, May 21, 1993). 


   DOE MISSED OPPORTUNITY TO
   REEVALUATE REPOSITORY PROJECT
   ORGANIZATION
------------------------------------------------------------ Letter :4

In February 1994, a DOE contract reform team recommended, among other
things, that the Department replace, when appropriate, its standard
cost-reimbursable contracts (such as TRW's management contract) with
a combination of competitively awarded fixed-price contracts and
performance-based management contracts.  Also, in June 1994, DOE's
Inspector General recommended that DOE reassess TRW's role on the
repository project as a part of the required evaluation of TRW's
performance after 3 years.  But DOE did not evaluate whether the TRW
management and operating contract could be replaced with a
performance-based contract or whether a management and operating
contractor was still needed.  Instead, on the basis of the
contractor's performance, DOE decided to continue TRW's contract for
the full 10-year period and to initiate discussions with all
participants on the repository project about assigning TRW a larger
role in managing the project.  DOE's plans fall short of the
recommendations of the Secretary's contract reform team and would not
consolidate project activities under fewer contractors. 


      DOE REVIEWS RECOMMENDED
      CHANGES
---------------------------------------------------------- Letter :4.1

From June 1993 until February 1994, a contract reform team
established by the Secretary of Energy evaluated the Department's
contracting practices and developed numerous recommendations for
improvement.  The team's principal focus was on traditional
cost-reimbursable management and operating contracts, such as the
contract DOE had awarded to TRW.  According to the Secretary's
preface to the team's report, common to the many weaknesses in DOE's
contracting practices is that DOE is not adequately in control of its
contractors and is not in a position to ensure the prudent
expenditure of taxpayer dollars. 

Among other things, the contract reform team found that many
award-fee contracts suffer from the absence of well-defined
performance criteria and measures that would allow DOE to effectively
evaluate whether and how much to award in fees.  The reform team
recommended that DOE replace its standard management and operating
contract with a new performance-based management contract.  The
performance-based management contract would be designed to retain the
talents of the private sector in integrating the efficient operation
of a site or facility, with no presumption that the contractor would
itself handle any or all of the site operations.  The team also
recommended that DOE strengthen the agency's systems for selecting
and managing contractors and review current management and operating
contracts for the purpose of identifying discrete tasks for
fixed-price contracts and subcontracts.  (For additional details on
the contract reform initiative, see app.  I.)

Also, in June 1994, the Inspector General issued a report on his
office's review of the management of the Yucca Mountain project that
identified several weaknesses.\7 The Inspector General found, in
part, that 2-1/2 years after DOE hired TRW, the anticipated reduction
in the number of participants on the repository project had not
materialized, nor had management and integration of the project been
effectively implemented. 

The Inspector General reported that the provision in the management
contract requiring DOE to evaluate TRW's performance after 3 years
provided a unique opportunity to streamline the project, better
define the roles of the participants, and achieve cost savings.  The
Inspector General recommended that the contractor's role be
reassessed in conjunction with the performance evaluation.  Prior to
the award of the management contract to TRW, DOE's Inspector General
had questioned whether DOE needed to hire a management contractor
because the 1987 amendments to the Nuclear Waste Policy Act had
reduced the number of candidate sites for a repository from three to
only the one site at Yucca Mountain.  At that time, managers of the
disposal program disagreed with the Inspector General because, in
their view, the program and repository project needed strong
centralized management. 


--------------------
\7 Audit of Costs and Management of the Yucca Mountain Project
(DOE/IG-0351, June 23, 1994). 


      DOE DECIDES TO CONTINUE TRW
      CONTRACT AND RESTRUCTURE
      PROJECT ORGANIZATION
---------------------------------------------------------- Letter :4.2

Earlier this year, DOE assembled a team that evaluated TRW's
performance for the 3 years ending in February 1994.  On June 24,
1994, the director of the program concluded on the basis of that
evaluation that (1) TRW had demonstrated the technical and managerial
expertise required to succeed in fulfilling its mission and (2) it
was unlikely that reopening the competition would result in the award
of a contract to a successor whose performance would be materially
better.  Therefore, the director determined that the contract should
be continued for its full 10 years. 

In conjunction with the specific review of TRW's performance and a
general review of the program and project, the director of the
disposal program initiated a restructuring of the arrangement of
participants in the repository project to define clear lines of
responsibility and accountability.  The director said that he
recognized, upon assuming his position in 1993, that the organization
of the project--including the interrelationships among
participants--was a fundamental problem that would take several years
to correct.  The first step in correcting the problem--reorganizing
the program and the project office at the federal level--has been
completed, and the next step is to restructure the arrangement of
project participants.  This step, the director said, involves two
principal components. 

First, DOE wants to make TRW responsible and accountable for managing
and integrating all site investigation activities.  To accomplish
this objective, DOE must find a way to give TRW authority over all
other project participants that perform these activities.  DOE's
preferred approach is for the other participants to enter into
contracts with TRW.\8 Discussions on this initiative among DOE, TRW,
and performing participants are ongoing. 

Second, DOE intends to establish a separate contract for assisting
its project office in developing the technical bases for key project
decisions that DOE must make.  Currently, such assistance, called
management support, is provided by both TRW and Science Applications. 
For the initial implementation of this initiative, Science
Applications and its subcontractor--Integrated Resources
Group--became subcontractors to TRW on October 1, 1994.  For a period
of time expected to last up to 3 years, the specific employees of TRW
and of these two subcontractors that perform management support
services will be organizationally and physically separated from the
rest of their organizations.  At the end of this initial period, DOE
expects to competitively award a new contract for management support
services for the entire disposal program, including the repository
project. 

According to the director of the disposal program, the new
arrangement of project participants that he is attempting to put in
place would be consistent with the reforms advocated by the contract
reform team.  (Fig.  3 illustrates the project organization
envisioned by DOE.)

   Figure 3:  Proposed
   Rearrangement of Project
   Participants

   (See figure in printed
   edition.)

   Source:  DOE.

   (See figure in printed
   edition.)


--------------------
\8 An exception is the U.S.  Geological Survey; as a federal agency,
it may not subcontract to TRW.  DOE expects to retain its present
agreement with the Geological Survey and negotiate a written
understanding with that agency on the agency's relationship to TRW. 


      DOE'S ACTIONS FALL SHORT OF
      CONTRACT REFORM GOALS
---------------------------------------------------------- Letter :4.3

Although DOE's planned reorganization of the repository project
could, if implemented, place more authority and accountability under
the management contractor, DOE's plans fall short of the
recommendations of the Secretary's contract reform team and DOE's
Inspector General.  For example, by deciding to continue TRW's
management contract, DOE put itself in the position of retaining the
contractor for 7 more years under a traditional cost-reimbursable
management contract.  The contract reform team had concluded that
such contracts should be replaced, when appropriate, with fixed-price
contracts and/or management contracts that have performance measures
built into them. 

Moreover, the proposed reorganization of participants would not
consolidate project activities under fewer contractors.  With the
exception of Raytheon Services, which, as discussed earlier, is
withdrawing from the project, TRW's team of subcontractors, several
of DOE's national laboratories, and the other existing project
participants would remain on the project.  In addition, in about 3
years, DOE expects to award a new contract for management support
services for the disposal program, including the project. 

In January 1994, the Secretary initiated an independent financial and
management review of the repository project headed by a 2-member
panel appointed by the Secretary and the governor of Nevada.  On
November 10, 1994, the panel selected a contractor to conduct the
review over approximately the next year.  Because the review is to
include an analysis of the effectiveness of the project organization,
it may, when completed, provide better insights on the extent to
which DOE's initiative to reorganize the project meets the
Department's contract reform goals. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

Although TRW is responsible for some elements of the disposal
program, DOE has retained authority and responsibility for directing
the work of each participant, including TRW, on the repository
project.  Moreover, because there are more participants now than
ever, project participants spend about one-third of their project
funds on management, coordination and planning, and support
activities.  DOE now recognizes a need to improve the organization
and management of the repository project and has begun discussions
toward that objective with project participants.  Nevertheless, DOE's
proposal to reorganize the repository project appears modest in
relation to the Department's contract reform goals and would not
consolidate project activities under fewer contractors.  We are not,
however, recommending at this time that DOE take additional steps
toward achieving the Department's contract reform goals and the
original objective of consolidating project activities pending the
completion of the Secretary's independent financial and management
review of the project and DOE's response to the findings,
conclusions, and recommendations of that review. 


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

We discussed the facts in this report with the director and deputy
director of DOE's disposal program and with the manager and deputy
manager of DOE's repository project office.  These officials agreed
with the facts in this report and added that the report should
recognize the initiatives that DOE is taking to establish a rational,
effective arrangement of project participants.  The officials said
that these initiatives are consistent with the results of the
Secretary's review of the Department's contracting practices.  We
incorporated a description of DOE's initiatives into our report. 


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

A discussion of our scope and methodology appears in appendix II. 
Our work was performed from August 1993 through December 1994 in
accordance with generally accepted government auditing standards. 

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 7 days after the date of this letter.  At that time, we will
send copies to the appropriate congressional committees; the
Secretary of Energy; and the Director, Office of Management and
Budget.  We will also make copies available to others on request. 

Please contact me on (202) 512-3841 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
III. 

Sincerely yours,

Victor S.  Rezendes
Director, Energy and
 Science Issues


DESCRIPTION OF FINDINGS AND
RECOMMENDATIONS OF THE SECRETARY
OF ENERGY'S CONTRACT REFORM TEAM
=========================================================== Appendix I

From June 1993 until February 1994, the Secretary's contract reform
team evaluated the Department of Energy's (DOE) contracting practices
and developed proposals for improving these practices.  The team's
principal focus was on cost-reimbursable management and operating
contracts.  This is the kind of contract DOE awarded to TRW, Inc., on
the disposal program and has traditionally used for many of its
contractors that work at both the Nevada Test Site and the Yucca
Mountain project.  According to the Secretary's preface to the team's
report, common to all of the numerous weaknesses in DOE's contracting
practices identified by experts within and outside of DOE is a simple
but fundamental problem:  DOE is not adequately in control of its
contractors.  As a result, the Secretary said, the contractors are
not sufficiently accountable to DOE, and DOE is not in a position to
ensure prudent expenditure of taxpayer dollars in pursuit of its
principal missions. 

The contract reform team found that

contracting effectiveness generally has suffered from lack of
competition due, in part, to DOE's long-term relationships with
particular contractors;

many award-fee contracts suffer from the absence of well-defined
performance criteria and measures that would allow DOE to effectively
evaluate whether and how much to award in fees; and

DOE's financial management practices have generally failed to produce
information needed, such as research dollars spent on costs other
than front-line researchers, for effective management. 

The reform team recommended that DOE replace its standard management
and operating contract with a new performance-based management
contract.  The performance-based management contract will be designed
to retain the talents of the private sector in integrating the
efficient operation of a site or facility, with no presumption that
the contractor will itself handle any or all of the site operations. 
The team also recommended that DOE strengthen the agency's systems
for selecting and managing contractors and review current management
and operating contracts for the purpose of identifying discrete tasks
for fixed-price contracts and subcontracts. 

The team reported that implementation of its recommendations would
represent fundamental changes to the agency's contracting practices. 
That is, instead of simply awarding or extending traditional
cost-reimbursable contracts, DOE will now

determine whether discrete tasks or functions can be performed and
bid on separately or subcontracted on a fixed-price basis;

develop objective, policy-based performance measures and incentives
when a cost-reimbursable type of contract is appropriate for some or
all of the work;

use the best contracting approach for a specific facility/site that
addresses required work, policy-driven requirements, and incentives;
and

actively pursue and solicit competition for new contracts. 


SCOPE AND METHODOLOGY
========================================================== Appendix II

We used a four-step methodology to determine whether DOE is
effectively using TRW as a management and operating contractor to
consolidate site investigation activities, streamline project
decision-making, and reduce project costs.  First, we reviewed DOE's
management and operating contract with TRW, related regulations, and
documentation on the agency's justification for hiring a management
contractor.  We compared TRW's roles on the program and the
investigation project with the contract and DOE's justification to
determine whether TRW is performing as DOE intended. 

Second, we identified all major and minor participants--contractors
and government agencies--on the investigation of Yucca Mountain in
fiscal years 1991 through 1994 to identify participants that entered
and left the project after DOE hired TRW.\9 We reviewed TRW's
proposals to DOE for implementing the contract, identified the work
that the agency transferred to TRW, and documented the agency's
reasons for approving or disapproving transfers of work.  We compared
this information to both the terms of TRW's contract and DOE's
justification for hiring a management and operating contractor to
determine whether the planned and actual realignment of work has been
consistent with the contract and DOE's justification. 

Third, we documented the responsibilities and authorities of TRW and
other project participants.  We also documented the project's
decision-making process--the authority to manage discrete work
functions and provide direction to project participants--and the
possible effects these arrangements have on the efficiency and
effectiveness of project performance.  Finally, for fiscal years 1991
through 1994, we reviewed project documents, such as cost reports,
that identified costs that major project participants incurred in
each work category. 

To determine whether a management and operating contractor is the
best means of consolidating project activities and integrating
elements of the disposal program, we first used the results of the
analysis described above to determine whether DOE has effectively
used TRW as a management and operating contractor on the
investigation project.  Because we concluded from this analysis that
DOE has not used TRW to manage that project, we could not determine,
on the basis of project experience, whether a management and
operating contract is the best approach for managing the disposal
program and investigation project.  Therefore, to provide insight on
this issue, we used the results of the Secretary of Energy's contract
reform initiative as criteria for determining whether the use of a
traditional management and operating contract is the best approach
for managing the investigation of Yucca Mountain and integrating that
project and other elements of the disposal program. 


--------------------
\9 We defined major participants as contractors and government
agencies receiving $5 million or more in annual project funding and
minor participants as contractors and agencies receiving annual
project funding from $100,000 to $5 million. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

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

Jim Wells, Associate Director
Dwayne E.  Weigel, Assistant Director

OFFICE OF THE GENERAL COUNSEL

Mindi G.  Weisenbloom, Senior Attorney

SAN FRANCISCO REGIONAL OFFICE

Margie K.  Shields, Regional Management Representative
Eugene P.  Buchert, Evaluator-in-Charge

RELATED GAO PRODUCTS

Nuclear Waste:  Comprehensive Review of the Disposal Program Is
Needed (GAO/RCED-94-299, Sept.  27, 1994). 

Independent Evaluation (GAO/RCED-94-258R, July 27, 1994). 

Nuclear Waste:  Yucca Mountain Project Management and Funding Issues
(GAO/T-RCED-93-58, July 1, 1993). 

Nuclear Waste:  Yucca Mountain Project Behind Schedule and Facing
Major Scientific Uncertainties (GAO/RCED-93-124, May 21, 1993). 

Energy Issues:  Transition Series (GAO/OGC-093-13TR, Dec.  1992). 

Nuclear Waste:  Status of Actions to Improve DOE User-Fee Assessments
(GAO/RCED-92-165, June 10, 1992). 

Nuclear Waste:  DOE's Repository Site Investigations, a Long and
Difficult Task (GAO/RCED-92-73, May 27, 1992). 

Nuclear Waste:  Development of Casks for Transporting Spent Fuel
Needs Modification (GAO/RCED-92-56, Mar.  13, 1992). 

Nuclear Waste:  Operation of Monitored Retrievable Storage Facility
Is Unlikely by 1998 (GAO/RCED-91-194, Sept.  24, 1991). 

Nuclear Waste:  Changes Needed in DOE User-Fee Assessments
(GAO/T-RCED-91-52, May 8, 1991). 

Nuclear Waste:  DOE Expenditures on the Yucca Mountain Project
(GAO/T-RCED-91-37, Apr.  18, 1991). 

Nuclear Waste:  Changes Needed in DOE User-Fee Assessments to Avoid
Funding Shortfall (GAO/RCED-90-65, June 7, 1990). 

Nuclear Waste:  Quarterly Report as of March 31, 1989
(GAO/RCED-89-178, Aug.  14, 1989). 

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