Energy Department Trade Missions: Authority, Results, and Management
Issues (Testimony, 04/24/96, GAO/T-NSIAD-96-151).

GAO discussed four trade missions sponsored by the Department of Energy
(DOE), focusing on: (1) DOE authority and role in these missions; (2)
the results of the missions; and (3) management weaknesses inherent in
DOE-sponsored trade missions. GAO noted that: (1) the Secretary of
Energy has explicit statutory authority to undertake export promotion
activities; (2) in 1995, DOE funding for export promotion totalled $14
million; (3) DOE performed advocacy on behalf of U.S. energy companies
seeking to capture some of the emerging energy markets in China, India,
and Pakistan; (4) it is difficult to measure the impact of these federal
advocacy activities because sales forecasts are unclear, of the numerous
participants involved, and of problems in calculating the value of sales
agreements and maintenance contracts; (5) the four trade missions
resulted in $19.7 billion in potential and finalized fuel supply and
power purchase agreements and oil and gas exploration agreements; (6)
DOE subsequently reported that finalized agreements totalled $2.03
billion, but export data show that the value of these agreements seem to
be overstated by over 50 percent; (7) most companies participating in
DOE trade missions support DOE efforts, but a few said that they could
complete their business agreements without DOE involvement; (8) the
planning for these missions is complicated by time constraints, last
minute changes in plans, and lack of familiarity with conducting large,
overseas trade missions; and (9) DOE has introduced new procedures to
correct DOE management weaknesses, but they have not been fully tested
in practice.

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

 REPORTNUM:  T-NSIAD-96-151
     TITLE:  Energy Department Trade Missions: Authority, Results, and 
             Management Issues
      DATE:  04/24/96
   SUBJECT:  International trade
             Energy industry
             Exporting
             Energy marketing
             Foreign trade policies
             Foreign trade agreements
             Sales promotion
             International travel
             International economic relations
             Business assistance
IDENTIFIER:  India
             Pakistan
             China
             South Africa
             
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Cover
================================================================ COVER


Before the Subcommittee on Oversight and Investigations, Committee on
Commerce, House of Representatives

For Release on Delivery
Expected at
9:30 a.m., EDT
Wednesday,
April 24, 1996

ENERGY DEPARTMENT TRADE MISSIONS -
AUTHORITY, RESULTS, AND MANAGEMENT
ISSUES

Statement of JayEtta Z.  Hecker, Associate Director
International Relations and Trade Issues
National Security and International Affairs Division

GAO/T-NSIAD-96-151

GAO/NSIAD-96-151T


(711182)


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

  DOE - x
  TPCC - x
  IG - x
  GSA - x

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the four trade missions that
the Secretary of Energy has led during her term in office.  The four
trade missions were to India, Pakistan, China, and South Africa.\1 My
statement will cover

(1) the Department of Energy's (DOE) authority and role in conducting
trade missions;
(2) the difficulties inherent in trying to quantify the value of
trade missions, including a review of DOE's reports of the results of
the four trade missions; and
(3) management weaknesses of DOE in running these trade missions. 

My testimony is based on our current and past work at DOE and our
reviews of governmentwide export promotion issues.\2


--------------------
\1 The trade missions to India (July 1994), Pakistan (September
1994), and China (February 1995) were designated as "presidential
missions." The trip to South Africa (August 1995) was designated as a
"Clinton Administration Delegation on Sustainable Energy and
Empowerment to South Africa." The Secretary has stated that the
purpose of these missions was to advance U.S.  business interests and
create jobs. 

\2 See Energy Management:  Some Unsubstantiated Payments for the
Secretary's Foreign Travel (GAO/T-RCED-96-59, Jan.  4, 1996); Export
Promotion:  Rationales for and Against Government Programs and
Expenditures (GAO/T-GGD-95-169, May 23, 1995); Export Promotion: 
Governmentwide Strategy Needed for Federal Programs (GAO/T-GGD-93-7,
Mar.  15, 1993); and Export Promotion:  Federal Programs Lack
Organizational and Funding Cohesiveness (GAO/NSIAD-92-49, Jan.  10,
1992). 


   SUMMARY
---------------------------------------------------------- Chapter 0:1

In short, the Secretary of Energy has legislative authority to
conduct trade missions.  DOE's rationale for using this authority is
based on the significant economic potential in developing energy
markets and the active assistance that foreign governments provide
their private companies.  DOE is one of 19 agencies that conducts
federal export promotion activities and is part of the Trade
Promotion Coordinating Committee (TPCC) that is charged with
coordinating federal export promotion activities. 

Measuring the impact of federal advocacy activities is inherently
difficult.  For example, it is not always clear that sales generated
through such activities are additional to what would otherwise have
been exported in their absence.  Further, since many parties
participate in a single project, isolating the contribution of any
one participant is problematic.  While DOE has reported the results
of its advocacy based on the value of business agreements signed
during the missions, calculating the actual value of such agreements
yields speculative results.  DOE identified $19.7 billion in
potential and finalized agreements signed during the Secretary's four
trade missions and related follow-up trips, and later reported that
there were $2.03 billion in finalized deals.  We reviewed the
finalized deals comprising the $2.03 billion and found that in some
cases U.S.  exports appear to be substantially less than 50 percent
of the project's total estimated exports. 

Company representatives that participated in the missions generally
supported the Secretary's efforts and the resulting intangible
benefits such as increased credibility, access, and acceleration of
projects.  Several of the company officials we interviewed said their
completed business agreements would have occurred without DOE's
involvement. 

A number of management weaknesses exist in DOE's trade mission
program.  DOE's processes for acquiring aircraft, recovering expenses
from and approving travel for nonfederal travelers, and documenting
U.S.  embassy expenses were weak.  New procedures have been
introduced to correct these weaknesses but they have not been fully
tested in practice. 

With that overview, I would now like to discuss each of these issues
in greater detail. 


   DOE'S AUTHORITY FOR CONDUCTING
   TRADE MISSIONS AND ROLE IN
   EXPORT PROMOTION ACTIVITIES
---------------------------------------------------------- Chapter 0:2

Before discussing the specifics of DOE trade missions, I would first
like to provide some context by reviewing DOE's statutory authority
for conducting overseas trade missions and its role within the
federal export promotion apparatus.\3

According to DOE, the Secretary was given explicit statutory
authority to undertake export promotion activities under various
legislative enactments, including the Export Enhancement Act of
1992\4 and the Energy Policy Act of 1992.\5 We have reviewed this
legislation and agree that the Secretary has the authority to conduct
export promotion activities, including trade mission activities. 

Regarding its role in the federal export promotion apparatus, DOE is
a member of the interagency TPCC, whose role is to increase the
effectiveness and coordination of all activities involving government
promotion of exports.  TPCC is chaired by the Commerce Department and
is comprised of 19 federal agencies.  According to the TPCC's latest
annual report,\6 DOE funded about $14 million for export promotion in
fiscal year 1995, making it one of the smallest TPCC players in terms
of funding.\7 Federal export promotion funding totaled about $3.1
billion in fiscal year 1995.  Three federal agencies--the U.S. 
Department of Agriculture, the U.S.  Export-Import Bank (Eximbank),
and the Department of Commerce--accounted for about 90 percent of all
federal export promotion funding for fiscal year 1995. 

DOE's high-level advocacy on behalf of U.S.  energy companies is
conducted in emerging energy markets like China, India, and Pakistan. 
According to DOE, each of these countries will need new sources of
energy in the coming years, representing a huge potential market for
U.S.  businesses.  For example, DOE anticipates that China will need
an estimated 100,000 megawatts of new electric power generation over
the next 5 years, with each new 1,000-megawatt power plant generally
valued at $1 billion.  In addition, India is expected to need more
than an estimated 140,000 megawatts of new electric power by 2007,
requiring an investment of about $200 billion.  According to DOE,
overall, Asian economies alone are expected to spend as much as $1
trillion on power-related infrastructure over the next 15 years, and
U.S.  cutting-edge technologies in the electric power, renewable
energy, and energy efficiency fields provide important opportunities
for the United States to compete for this business. 

DOE's high-level advocacy is also a response to similar advocacy
efforts that foreign governments conduct in energy markets.  TPCC
reports that competitor industrialized nations perform similar export
promotion activities and that foreign governments are increasingly
aggressive in helping their firms compete for major projects in
foreign markets.  Foreign governments use a variety of tactics,
including performing high-level advocacy, providing project financing
(including low-interest-rate loans and corporate financial
assistance), and making promises of technology transfer and aid funds
in order to obtain projects for their own companies.\8

For instance, in January 1996, the Canadian Prime Minister and 7
ministers took 300 business representatives from a variety of
industry sectors to India.  Advocacy is not just limited to our major
industrialized competitors.  In August 1995, a Malaysian
cross-sectoral trade mission of 250 high-level government officials
and business executives visited South Africa at the same time that
the U.S.  Secretary of Energy's trade mission was visiting the
country. 


--------------------
\3 Federal export promotion programs include efforts to provide
export financing; export-related information, such as market research
and trade leads; export facilitation services, such as business
counseling; and other support services, such as trade missions and
business advocacy. 

\4 Public Law 102-429, 106 Stat.  2186, 2199-2205 (Oct.  21, 1992). 
The Export Enhancement Act established the Trade Promotion
Coordinating Committee (TPCC), which included DOE representation, and
called, among other things, for "better delivery of services to
United States businesses, including .  .  .  representation of United
States business interests abroad." (15 U.S.C.  4727(b)(3)(B)). 

\5 Public Law 102-486, 106 Stat.  2776-3133 (Oct.  24, 1992).  The
Energy Policy Act established a new TPCC subgroup to "seek to expand
the export .  .  .  of clean coal technologies," which the Secretary
of Energy would chair (42 U.S.C.  13361(a),(b)).  The Secretary was
given responsibility for promoting exports of clean coal
technologies, as well as renewable energy technologies (42 U.S.C. 
13361(d), 13316(b)).  In the latter case, the act specifically
assigns the Secretary responsibility for assisting U.S.  firms that
are competing with foreign firms for opportunities to undertake
projects in foreign countries (42 U.S.C.  13316(b)(9)). 

\6 The National Export Strategy, Third Annual Report to the United
States Congress, Trade Promotion Coordinating Committee (Washington,
D.C.:  Oct.  1995), p.  119. 

\7 According to a DOE official, this figure does not include most of
the costs of the four secretarial trade missions.  The costs of the
trade missions were covered by DOE program offices' travel budgets
and the Departmental administrative budget. 

\8 We have reported that European Union (EU) competitors provide more
export financing assistance to their exporters than does the U.S. 
government.  In 1993, the Eximbank financed about $15.1 billion of
U.S.  exports--about 3.2 percent of total U.S.  exports.  In
comparison, five EU governments--France, Germany, Italy, the
Netherlands, and the United Kingdom (U.K.)--collectively supported at
least $74.8 billion (or about 7.1 percent) of their total exports in
that year.  See Export Finance:  Comparative Analysis of U.S.  and
European Union Export Credit Agencies (GAO/GGD-96-1, Oct.  24, 1995). 


   MEASURING THE IMPACT OF FEDERAL
   ADVOCACY ACTIVITIES IS
   DIFFICULT
---------------------------------------------------------- Chapter 0:3

In general, several factors make it difficult to quantify the precise
impact of federal advocacy activities: 

(1) The determination of whether the sales generated through trade
missions are additional to what would have been exported in their
absence is not always clear. 

(2) Numerous participants (U.S.  government agencies as well as
foreign governments) may be involved in a single project.  This makes
it difficult to identify and isolate the contribution of any one
participant. 

(3) Figures used to quantify the success of trade missions,
particularly if they are based on tentative business agreements such
as letters of intent or memorandums of understanding, may be
speculative. 

(4) The calculation of the value of follow-on sales agreements and
maintenance contracts that can flow from the introduction of U.S. 
engineering and technological standards is difficult.  These sales
can be as significant in monetary terms as the original sales
contract. 

TPCC has recognized some of the difficulties in measuring the results
of export promotion programs and has tasked a TPCC working group to
develop better performance measures for these activities.\9 An update
of working group activities will be provided in the next TPCC annual
report due for release in September 1996.  DOE has also recognized
some of the uncertainties associated with this issue and is now
reviewing its estimation practices. 


--------------------
\9 See National Export Strategy (GAO/NSIAD-96-132R, Mar.  26, 1996). 


      VALUE OF THE BUSINESS
      AGREEMENTS REPORTED BY DOE
-------------------------------------------------------- Chapter 0:3.1

Despite the difficulties in measuring the impact of federal advocacy
activities, DOE has reported the results of its advocacy based on the
value of signed business agreements.  In a December 28, 1995, letter
to the Chairman of this Committee, the Secretary of Energy stated
that the Secretary's four trade missions resulted in $19.7 billion in
potential and finalized agreements.  These agreements include
memorandums of intent or understanding (the first and necessary step
to any business deal), fuel supply and power purchase agreements for
power plants, oil and gas exploration and production agreements, and
other steps necessary to advance business deals.  According to DOE,
this was the total estimate of deals signed, as reported by the U.S. 
companies on these missions. 

As you requested, we reviewed DOE's estimates of the impact of its
advocacy.  In response, I would like to clarify what the $19.7
billion is and what it is not.  The $19.7 billion is the total
potential value of business agreements signed during the four trade
missions led by the Secretary, two follow-up trade missions that were
led by the Secretary or Deputy Secretary, and several follow-up
visits of foreign trade delegations to the United States (see app. 
I).  The $19.7 billion estimate is not the finalized value of deals
to the United States or the value of U.S.  exports.  Moreover, for
some of the agreements that have been finalized, the U.S.  export
value is substantially less than 50 percent of the project's total
exports. 


         FINALIZED AGREEMENTS
------------------------------------------------------ Chapter 0:3.1.1

DOE has reported that of the $19.7 billion in agreements, about $2.03
billion in business agreements have reached either "financial
closure" or "sales agreement," that is, have been finalized. 

In an effort to clarify what this number represents, we conducted an
independent review of the 14 business deals that DOE used as the
basis for the $2.03 billion estimate (see app.  II).  As part of this
process, we reviewed DOE documents and interviewed government
officials.  We also interviewed business representatives from most of
these companies and studied their written responses to questions
posed by this Committee.  We studied related business filings, annual
reports, and business journal articles for these deals as well. 
Although we are including private-sector estimates of the potential
value of U.S.  exports associated with these deals, we caution that
these projections are inherently uncertain. 

Our review of the likely composition of the 14 deals makes it clear
that the $2.03 billion figure that DOE reported should not be
confused with the potential U.S.  export value of the deals.  For
example, the largest single deal reported by DOE is a $660-million
power project in Pakistan with an estimated U.S.  export value of
about $218 million (over 30 percent of the total project value),
which represents virtually all of the total exports associated with
the project, according to Eximbank officials.\10 The Eximbank
provided financing for this project.\11

In some of the cases, the U.S.  export value is substantially less
than 50 percent of the total exports associated with the agreements. 
For example, three power plant projects valued at about $950 million
comprise about 47 percent of the $2.03 billion: 

  -- Two power projects in Pakistan, sponsored by the same company,
     have a total value of $700 million and estimated exports of $400
     million.  The estimated U.S.  export value is about $80 million
     (20 percent), according to company officials and the financing
     documents we reviewed.\12 Japan's Export-Import Bank and
     Mitsubishi Heavy Industries are major participants in financing
     and constructing these projects, which suggests that Japanese
     companies will receive a significant share of the sales. 

  -- One $250-million power plant in India has estimated exports of
     about $160 million.  The estimated U.S.  export value is about
     $40 million (25 percent), according to a company official.\13
     The U.K.'s Export Credit Guarantees Department and the U.K.'s
     Rolls Royce company are major participants in this project,
     which suggests that U.K.  companies will receive a significant
     share of the sales. 

While examining these U.S.  export content issues, we noted that DOE
does not have or use guidelines that specifically incorporate U.S. 
content considerations as a basis for selecting businesses on DOE-led
trade missions.  The Commerce Department has developed advocacy
guidelines to assist U.S.  government personnel in determining
whether and to what extent U.S.  government support is appropriate in
advocating for individual projects. 

Given the increasingly complex nature of international transactions,
the Commerce Department guidelines were developed in 1993 to assist
U.S.  government officials in making these determinations.  The
guidelines place a premium on U.S.  content, including employment, in
the determination of whether and to what extent a given project is
considered to be in the national interest.\14

Company representatives that participated in the missions generally
supported the Secretary's efforts.  Although several of the company
officials we interviewed said their completed business agreements
would have occurred without DOE's involvement, many also said that
their projects were accelerated as a result of the trade missions. 
Others, including some Commerce Department officers stationed in the
four overseas posts that DOE visited, cited such intangible benefits
as increased credibility with foreign officials and the opportunity
to establish new or high-level contacts with business and government
officials. 

Now let me turn to the administration of DOE's trade missions. 


--------------------
\10 According to Eximbank and company officials, the size of the
project is about $625 million and not $660 million as reported by
DOE. 

\11 Generally, Eximbank programs may support only sales of U.S. 
goods and services.  If the U.S.  export contains foreign-made
components, Eximbank will provide support only for the U.S.  content
portion.  Eximbank approved $243 million in financing for this
project in November 1995. 

\12 We assumed that the value of the turnkey contracts was a
reasonable proxy of the value of the exports associated with the
project.  The turnkey contracts for these projects were about $400
million. 

\13 Company officials reported the agreement value was $245 million. 
The turnkey contract for this project totaled $163 million. 

\14 To implement its guidelines, Commerce has developed a background
data questionnaire for companies that seek U.S.  government advocacy
support.  Among other items, the questionnaire requests information
on total project value, the value of U.S.  exports, and the expected
direct and indirect effect on U.S.  jobs.  The Commerce guidelines do
say that bids with lesser U.S.  content may, under certain
circumstances, also be determined to be deserving of comparable,
nondiscriminatory treatment by the U.S.  government.  The guidelines
state that in cases where the U.S.  content does not exceed 50
percent, the following factors may be considered in determining
whether U.S.  government support of a bid or proposal is in the
national interest:  U.S.  materials and equipment content, U.S. 
labor content, contribution to the U.S.  technology base,
repatriation of profits to the U.S.  economy, and the potential for
follow-on business that would benefit the U.S.  economy. 


   MANAGEMENT WEAKNESSES EXISTED
   IN THE FOUR DOE TRADE MISSIONS
---------------------------------------------------------- Chapter 0:4

The procedures that DOE used for chartering aircraft, recovering
costs from nonfederal participants, approving the travel expenses of
certain nonfederal travelers, and obtaining services from U.S. 
embassies were weak.  These procedures have been the subject of
critical reports from our office and the DOE Inspector General
(IG).\15 Our recent work highlights issues of continuing concern. 

According to program officials, the planning for these missions was
complicated by time constraints and frequent, last-minute changes in
plans.  These planning difficulties were further compounded by DOE's
lack of familiarity with the requirements for conducting large,
overseas trade missions.  We noted that the Secretary's first trade
mission, the mission to India, took place less than 2 months after
President Clinton made a commitment to send a high-level mission to
India during Prime Minister Rao's May 1994 state visit.  DOE's second
trade mission, to Pakistan, took place less than 3 months after the
India trip.  According to DOE officials, "heroic" efforts were
sometimes needed to overcome the ad hoc planning process to ensure
that the missions were completed on schedule. 

DOE has recognized these inadequacies and in March 1996 introduced
some new, interim international travel policies and procedures to
address these management weaknesses.  These new procedures are
designed to help assure that DOE's future international missions are
more cost-effective and better managed, but they have yet to be fully
tested in practice.  A DOE official told us that DOE believes that
the newly designed procedures are adequate to ensure that taxpayers'
interests are protected. 


--------------------
\15 For example, see Unsubstantiated DOE Travel Payments
(GAO/RCED-96-58R, Dec.  28, 1995), and Audit of Department of Energy
International Charter Flights, Office of Inspector General,
Department of Energy (Washington, D.C.:  Nov.  7, 1994).  In November
1994, after the first two trade missions were completed, DOE's IG
raised concerns about the process and the procedures that DOE used to
acquire these services.  The IG found that DOE had not established a
systematic and cost-effective process to acquire international air
services nor for recouping costs from nonfederal passengers.  The IG
"suggested" that DOE prepare formal procedures for acquiring
international air services, including writing a clarification of the
responsibilities of all interested parties.  In December 1994, the IG
communicated additional concerns to the Deputy Secretary on this
matter.  He concluded that DOE should ensure that all processes and
procedures covering international travel were addressed before any
additional trips were undertaken.  Although DOE agreed that improved
procedures were needed, the final two trade missions were completed
before these suggested improvements were fully implemented. 


      AIR CHARTER SERVICES
-------------------------------------------------------- Chapter 0:4.1

The costs of air transportation services represent the largest
expense of the four DOE missions.  DOE's total cost of the four
missions was about $2.8 million (see app.  III).  According to
program officials, DOE used an evolving process for obtaining air
transportation services for the four trade missions. 

  -- For the July 1994 India trip, DOE used a Department of Defense
     VC-137, the military version of the Boeing 707.  DOE managed the
     fare collections from the non-DOE passengers.  Passengers were
     billed after the trip was completed. 

  -- For the September 1994 Pakistan trip, DOE chartered a DC-8
     through a charter agent.\16 DOE used a Department of the
     Interior working capital fund as the mechanism to pay for the
     charter aircraft and to collect fares from the federal and
     nonfederal travelers. 

  -- For the February 1995 China trip, DOE's contract travel agency,
     Omega Travel, chartered a DC-8 through a charter agent.  DOE
     assisted Omega in chartering the aircraft and collecting the
     fares from the nonfederal passengers. 

  -- For the August 1995 South Africa trip, DOE chartered a DC-8
     through a charter agent.  The charter agent managed the fare
     collections for all passengers.  Government Transportation
     Requests were used as the vehicle for paying DOE's costs of the
     charter aircraft. 

DOE justified the use of charter aircraft for the trade missions
because of a special need for planning and conferencing facilities
during enroute travel.\17 According to DOE, no scheduled commercial
airline service could fulfill this need. 

In at least one instance, DOE did not fully comply with the
requirements of federal regulations devised to help ensure the
efficient and effective management and use of government aviation
resources.  Provisions of the Federal Property Management Regulations
require advance written approval for travel on government aircraft by
DOE's General Counsel or his principal deputy on a trip-by-trip
basis.\18 Although such approval was obtained for the India and South
Africa trip, it was not obtained for the Pakistan trip or the China
trip.  DOE acknowledged that prior written approval should have been
obtained for the Pakistan trip.  DOE officials said prior written
approval was not needed for the China trip because it did not involve
the use of a DOE-chartered aircraft but instead the DOE purchase of
seats for federal travelers from a General Services Administration
(GSA) contractor.  DOE stated that GSA advised DOE at the time that
the regulatory requirement for General Counsel approval was not
applicable to this situation.\19

It is clear that using military and charter aircraft added to the
costs of the trips.  We compared the government cost of using charter
aircraft to regularly scheduled commercial air service using cost
estimates and related information developed by DOE before each trip. 
We estimate that the decision to use the military and charter
aircraft increased the cost to the government by at least $588,435
(i.e., the savings if the government-funded travelers had used
commercial air carriers for each of the four trade missions (see app. 
IV)).\20 DOE said that security considerations on the India trip and
the need for conferencing facilities on all the missions precluded
the use of commercial aircraft. 


--------------------
\16 According to DOE, a charter agent, Flight Time International, was
used to obtain this particular aircraft.  Flight Time International
is a charter broker and does not own nor operate its aircraft.  It
queries and receives bids from airlines and passes the information on
to its customers. 

\17 The justifications for the charter aircraft included a
requirement for "conferencing or work tables in sufficient space to
accommodate not less than 8 separate and simultaneous work groups of
2 to 4 persons each."

\18 41 CFR 101-137.405. 

\19 GSA is the agency that promulgates the Federal Property
Management Regulations. 

\20 Our analysis is based on DOE's estimates of the costs of
comparable commercial air service for India, Pakistan, and China. 
For South Africa, we developed our own estimate by comparing the cost
of using the charter (excluding DOE's cost of additional side trips
to Kimberley and Capetown) to the estimated round-trip cost of flying
from Washington, D.C., to Capetown to Johannesburg and return at a
commercial business class rate. 


      RECOVERING COSTS FROM
      NONFEDERAL PARTICIPANTS
-------------------------------------------------------- Chapter 0:4.2

DOE efforts to recover costs from the trade missions' nonfederal
participants have also been problematic.  Although DOE established a
policy of full-cost recovery after the India trip, it has yet to
completely realize this goal, as of March 26, 1996.  It still has a
total of $50,646 in accounts receivable from the first two trips
($29,646 from the Pakistan trip).  On the last two missions,
collecting fares was the responsibility of the company that chartered
the aircraft. 

I would also like to point out that DOE paid $50,595 to cover the
additional cost of a scheduled trip to Kimberley and the cost of an
unplanned stop in Capetown on the South Africa trip.\21 None of these
costs were passed on to the other nonfederal travelers.  A DOE
official said DOE did not attempt to recover the additional costs
because DOE was responsible for making the decisions that added to
the costs.  They also said they would face a loss of credibility with
the U.S.  business community if they attempted to recover the
additional costs of these trips after the travelers had already been
billed. 


--------------------
\21 According to program officials, the trip to Kimberley was made to
conduct official governmental activities, and the stop in Capetown
was made because the plane's weight did not allow a nonstop flight to
be made from Johannesburg at the scheduled departure time. 


      INVITATIONAL TRAVEL ISSUES
-------------------------------------------------------- Chapter 0:4.3

I would now like to take a few moments and discuss DOE's handling of
"invitational travelers" on its trade missions.  The term
"invitational traveler," as used in this testimony, refers to those
nonfederal travelers who participated in the missions and had their
travel expenses paid for by DOE (see app.  V).  This term does not
refer to the private sector representatives who participated on these
missions and paid their own way. 

The regulations governing DOE's payment of travel expenses of
"invitational travelers" are contained in 10 C.F.R.  Part 1060.  The
regulations state that DOE may pay the travel expenses of a
nonfederal traveler provided that the person receives an invitation
from DOE to confer with a DOE employee "on matters essential to the
advancement of DOE programs or objectives." If the meetings occur at
a place other than the conferring employee's post of duty, a
principal departmental officer (the DOE Secretary, Deputy Secretary,
or Under Secretary) must have approved and stated the reasons for the
invitation in writing before the travel takes place.  The regulations
also permit payment of such travel expenses where a principal
departmental officer has determined in writing that "it is in the
interest of the Government to provide such payment," and DOE's
General Counsel has determined in writing that the payment is
authorized by statute.  The duties to be performed by a principal
departmental officer cannot be delegated. 

In 77 percent (17 of 22) of the cases, DOE did not provide
documentation showing prior written justification for the
invitational travelers.  In their comments on this testimony, DOE
pointed out that some documents existed indicating Office of the
Secretary approval, but DOE agrees it was not in complete compliance
with 10 C.F.R.  Part 1060. 


      DOCUMENTING EXPENSES FOR
      SERVICES OBTAINED FROM U.S. 
      EMBASSIES
-------------------------------------------------------- Chapter 0:4.4

In our January 1996 testimony before this Committee, we highlighted
some of the problems that DOE was encountering in documenting the
expenses it incurred when using U.S.  embassy services for
administrative and logistical support on two of the four missions.\22
For example, DOE did not have written procedures that specified
either the types of records to be kept or the process to follow in
obtaining support for foreign travel from U.S.  embassies.  During
our review of the Secretary's trip to India, DOE officials could not
provide records to substantiate some of the costs of the mission. 
DOE has taken several steps to address this problem, including the
development of detailed written procedures and closer cooperation
from the State Department in obtaining improved documentation of
overseas expenses.  A DOE official said DOE hopes to resolve issues
related to the embassies' charges by the end of May 1996. 

DOE is still in the process of analyzing the expense reports received
from overseas posts in connection with administrative and logistical
support charges for the July 1994 India trade mission and the other
three trade missions that we examine in today's testimony.  DOE
provided us with the following status report on its efforts:\23

  -- The total embassy logistical and support costs charged to DOE
     for the four missions were about $409,674.  DOE has accepted
     about $257,555 of these charges, has disputed or rejected about
     $135,119 of these charges, and continues to review about $17,000
     of these charges. 

Some of the charges rejected by DOE include

  -- $14,170 for a double billing of a banquet that was not a DOE
     expense and

  -- $6,346 for aircraft fueling services not requested. 


--------------------
\22 See Energy Management:  Some Unsubstantiated Payments for the
Secretary's Foreign Travel. 

\23 DOE, Office of Chief Financial Officer as of April 23, 1996. 


-------------------------------------------------------- Chapter 0:4.5

Mr.  Chairman, this concludes my prepared remarks.  I will be happy
to answer any questions you or other Members of the Subcommittee may
have. 


DOE SUMMARY OF ALL REALIZED AND
POTENTIAL BUSINESS AGREEMENTS
SIGNED DURING DEPARTMENT OF ENERGY
(DOE) TRADE MISSIONS SINCE 1994
=========================================================== Appendix I

                                                              Value of
                                                      Number  agreemen
                                                          of        ts
                                  Head of           agreemen  (million
Mission          Date             delegation              ts        s)
---------------  ---------------  ----------------  --------  --------
South            August 1995      DOE Secretary           10      NA\a
Africa

China            February 1995    DOE Secretary           35  $6,529.7
                                                                     9

India\b          February 1995    DOE Secretary           23  1,324.30

Pakistan         December 1994    DOE Dep. Sec.           18  2,580.20

India            September -      (Reverse trade          23    215.00
                 December 1994    missions to the
                                  United States)\c

Pakistan         September 1994   DOE Secretary           16  3,937.00

India            July 1994        DOE Secretary           18  5,172.30


Total 143 $19,758.59
----------------------------------------------------------------------
----------------------------------------------------------------------
\a According to a response to this Subcommittee in April 1996, DOE
said, "Based on its experience with India, Pakistan, and China
missions, including uncertainties about the economic benefits of
MOUs, DOE chose not to announce financial and job creation benefits
from the mission to South Africa, although the benefits are
considerable.  It is reviewing its estimation practices in order to
learn from these missions and the follow up process."

\b The February trip to India was a follow-up visit made in
conjunction with the China mission. 

\c Reverse trade missions refer to visits of India trade delegations
to the United States. 

Source:  DOE, Office of Energy Exports document provided March 18,
1996. 


DOE SUMMARY OF FINALIZED BUSINESS
AGREEMENTS SIGNED DURING FOUR
TRADE MISSIONS
========================================================== Appendix II

                                            Value assigned
                                                    by DOE
Country               Type of project         (millions)\a  GAO comments
--------------------  --------------------  --------------  --------------------
Pakistan              Gas combined cycle          $660.0\b  Company official
                      power plant                           estimated $218
                                                            million in U.S.
                                                            exports

Pakistan              Oil-fired power                350.0  Company official
                      plant                                 estimated $40
                                                            million in U.S.
                                                            exports

Pakistan              Oil-fired power                350.0  Company official
                      plant                                 estimated $40
                                                            million in U.S.
                                                            exports

India                 Gas combined cycle           250.0\c  Company official
                      power plant                           estimated $39
                                                            million in U.S.
                                                            exports

Pakistan              Oil and gas                    178.8  Company official
                      exploration and                       estimated $72
                      production                            million in U.S.
                      agreements                            exports

Pakistan              Oil and gas                    125.6  Company official
                      exploration and                       said it is too early
                      production                            to estimate the
                      agreements                            value of U.S.
                                                            exports

India                 Sale of wind energy             60.0  DOE official said
                      equipment                             this project may not
                                                            be related to DOE's
                                                            trade missions

China                 Sale of components              24.0  Company official
                      of two 600-megawatt                   estimated U.S.
                      turbine generator                     exports would be $12
                      units                                 million

India                 Sale of wind energy             12.6  Company official
                      equipment                             estimated U.S.
                                                            exports would be $23
                                                            million

India                 Sale of wind energy              9.0  DOE official said
                      equipment                             this deal did not
                                                            materialize

India                 Sale of photovoltaic           6.0\d  Company official
                      cells for assembly                    estimated $2.5
                      in India                              million in U.S.
                                                            exports

Pakistan              Pipeline service                 3.0  Company official
                      contract                              estimated negligible
                                                            U.S. exports

India                 Sale of solar                    3.0  DOE official said
                      lanterns                              this figure
                                                            represents the value
                                                            of improvements to a
                                                            U.S. factory

China                 Joint venture to                 0.9  Company official
                      manufacture high-                     estimated U.S.
                      technology flow                       exports at less than
                      measurement products                  $5 million


Total $2,032.9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Note 1:  We use "finalized business agreements" to refer to
agreements DOE describes as reached financial closure or sales
agreements."

Note 2:  DOE did not cite any finalized business agreements for the
South Africa trade mission. 

\a Based on DOE status report of December 19, 1995. 

\b Agreement value is $625 million, according to company officials
and the Eximbank. 

\c Agreement value is $245 million, according to the company. 

\d Agreement value is $7 million, according to the company. 

Sources:  DOE, Office of Energy Exports, and company officials. 


ESTIMATED COSTS OF FOUR DOE TRADE
MISSIONS
========================================================= Appendix III

Tables III.1-5 illustrate the total estimated costs of four DOE trade
missions, from July 1994 to August 1995. 



                              Table III.1
                
                Total Estimated Cost of Trade Mission to
                           India, July 1994\

Type of cost                                                    Amount
--------------------------------------------------------------  ------
DOE costs
Advance                                                         $127,2
                                                                    73
Delegation
Subsistence and lodging                                         50,455
Administration & logistics (provided by State Dept.)            43,000
                                                                    \a
Department of Defense aircraft\b                                498,96
                                                                     5
======================================================================
Total cost                                                      $719,6
                                                                  93\c
----------------------------------------------------------------------
Note:  Cost as of April 17, 1996. 

\a Total amount accepted by DOE. 

\b Cost to DOE of chartering the aircraft.  DOE managed the fare
collections from the non-DOE passengers.  DOE collected $58,000 from
private-sector travelers that was deposited to miscellaneous receipts
of the U.S.  Treasury. 

\c Net cost to the government is actually $661,693 because
private-sector reimbursements to the U.S.  Treasury totaled $58,000. 

Source:  DOE, Office of Chief Financial Officer. 



                              Table III.2
                
                Total Estimated Cost of Trade Mission to
                        Pakistan, September 1994

Type of cost                                                    Amount
--------------------------------------------------------------  ------
DOE Costs
Advance                                                         $130,0
                                                                    00
Delegation
Subsistence and lodging                                         50,000
Administration & logistics (provided by State Dept.)            50,000
                                                                    \a
Charter airfare\b                                               427,45
                                                                     0
======================================================================
Total cost                                                      $657,4
                                                                  50\c
----------------------------------------------------------------------
Note:  Cost as of April 17, 1996. 

\a Total amount charged to DOE. 

\b Cost to DOE of chartering the aircraft.  DOE used a Department of
the Interior working capital fund as the mechanism to pay for the
charter aircraft and to collect fares from the federal and nonfederal
travelers.  Through this mechanism, private-sector participants
reimbursed the U.S.  Treasury rather than DOE.  Cost includes
$235,672 in reimbursements received from the private sector and
$23,408 in reimbursements pending. 

\c Net cost to the government is actually $421,778 because
private-sector reimbursements to the U.S.  Treasury totaled $235,672. 

Source:  DOE, Office of Chief Financial Officer. 



                              Table III.3
                
                Total Estimated Cost of Trade Mission to
                          China, February 1995

Type of cost                                                    Amount
--------------------------------------------------------------  ------
DOE Costs
Advance                                                         $171,9
                                                                    09
Delegation
Subsistence and lodging                                         206,95
                                                                     6
Administration & logistics (provided by State Dept.)            157,00
                                                                   0\a
Charter airfare                                                 309,01
                                                                     3
======================================================================
Total cost to DOE                                               $844,8
                                                                    78
Private sector costs\b                                          352,98
                                                                     7
======================================================================
Total cost of mission                                           $1,197
                                                                  ,865
----------------------------------------------------------------------
Note:  Cost as of April 17, 1996. 

\a Total amount charged to DOE. 

\b For charter airfare only.  DOE's contract travel agency chartered
an aircraft through a charter agent.  DOE assisted the travel agency
in chartering the aircraft and collecting fares from the nonfederal
passengers. 

Source:  DOE, Office of Chief Financial Officer. 



                              Table III.4
                
                Total Estimated Cost of Trade Mission to
                       South Africa, August 1995

Type of cost                                                    Amount
--------------------------------------------------------------  ------
DOE Costs
Advance                                                         $161,2
                                                                    00
Delegation
Subsistence and lodging                                         49,400
Administration & logistics                                      112,13
 (provided by State Dept.)                                         9\a
Charter airfare                                                 248,91
                                                                     0
Commercial airfare                                              12,000
======================================================================
Total cost to DOE                                               $583,6
                                                                    49
Private sector costs
Delegation traveling on charter\b                               294,56
                                                                     7
Delegation traveling commercially                               72,000
Other mission costs\c                                           25,800
======================================================================
Total private sector costs                                      $392,3
                                                                    67
======================================================================
Total cost of mission                                           $976,0
                                                                    16
----------------------------------------------------------------------
Note:  Cost as of April 17, 1996. 

\a DOE's portion of accepted charges. 

\b DOE chartered a DC-8 aircraft through a charter agent.  The
charter agent managed the fare collections for all passengers. 
Government Transportation Requests were used as the vehicle for
paying DOE's costs of the charter aircraft. 

\c Each private-sector delegate paid a $600 pro rata share for costs
associated with the meetings. 

Source:  DOE, Office of Chief Financial Officer. 



                              Table III.5
                
                 Total Estimated Costs of the Four DOE
                Trade Missions, from July 1994 to August
                                  1995

                                                     Total
                                                      cost       Total
                                                        of        cost
Mission                                          mission\a      to DOE
----------------------------------------------  ----------  ----------
India                                             $719,693    $719,693
Pakistan                                           657,450     657,450
China                                            1,197,865     844,878
South Africa                                       976,016     583,649
======================================================================
Total                                           $3,551,024  $2,805,670
                                                                    \b
----------------------------------------------------------------------
Note:  Cost as of April 17, 1996. 

\a Cost does not include costs to the private sector for subsistence
and lodging. 

\b Actual cost to the government was $2,511,998.  Private-sector
participants reimbursed the U.S.  Treasury $58,000 for the charter
airfare to India and $235,672 for the charter airfare to Pakistan. 

Source:  DOE, Office of Chief Financial Officer. 


COST COMPARISON OF CHARTER VERSUS
COMMERCIAL FARES FOR FOUR TRADE
MISSIONS
========================================================== Appendix IV

                                                               Total
                              Number and    Government     estimated
                              percent of      share of    commercial
                       Total  government         total      fare for  Difference
                      passen     -funded       charter    government     between
Mission                 gers  passengers        cost\a    passengers       fares
--------------------  ------  ----------  ------------  ------------  ----------
India                     59  15 (25.4%)    $375,765\b       $42,000    $333,765
Pakistan                  65  20 (30.8%)       127,820        80,000      47,820
China                     67  26 (38.8%)       256,896       100,334     156,562
South Africa\c            67  25 (37.3%)       188,738       138,450      50,288
================================================================================
Total                                                                   $588,435
--------------------------------------------------------------------------------
\a With the exception of India, the government share is calculated as
the government's proportional share of the anticipated passenger load
times the actual charter cost.  The analysis assumed that all fares
for nonfederal travelers will be collected. 

\b In the case of India, nonfederal travelers were billed at a
commercial rate of $2,800 per passenger.  We calculated the
government share as the actual charter cost minus the product of the
number of nonfederal travelers times the commercial rate.  We assumed
that full reimbursement was received for these passengers. 

\c South Africa comparison excluded the additional costs of the
charter aircraft trips to Kimberley and Capetown. 

Source:  Information provided by DOE. 


INVITATIONAL TRAVELERS ON FOUR DOE
TRADE MISSIONS
=========================================================== Appendix V

                                                             Travelers
                           Travelers for       Travelers  not approved
                                    whom     approved as            as
                            invitational    invitational  invitational
                              travel was   per 10 C.F.R.        per 10
Trip                                paid            1060   C.F.R. 1060
------------------------  --------------  --------------  ------------
South Africa -                         6               0             6
 Aug. 1995
China -                                6               5             1
 Feb. 1995
Pakistan -                             6               0             6
 Sept. 1994
India -                                4               0             4
 July 1994
======================================================================
Total                                 22               5      17 (77%)
----------------------------------------------------------------------
Source:  GAO analysis based on DOE information. 


SCOPE AND METHODOLOGY
========================================================== Appendix VI

To complete our work, we interviewed DOE officials; company
officials; U.S.  Export-Import Bank (Eximbank) officials; and
Department of Commerce officials, including Foreign Commercial
Service officers stationed abroad.  We reviewed various DOE and
Commerce Department documents, including DOE trade mission trip
reports, and over 17,000 pages of documentation provided by DOE to
this Subcommittee.  We also reviewed financing documents provided by
the Treasury Department and the Eximbank, DOE press releases, and
other documents relating to specific business agreements and
companies. 

At the request of this Subcommittee, we focused on the 14 business
agreements that DOE characterized as having reached "financial
closure or sales agreement." We did not review the other business
agreements that were characterized as potential agreements by DOE. 
We contacted the 13 companies associated with these agreements to
obtain additional information about the nature and extent of DOE's
assistance.  In two cases, we were not able to obtain a company
response to our questions.  We relied on the businesses involved to
provide estimates of the U.S.  export value and the size of their
agreements.  We did not verify the value of the estimates provided
nor did we examine the actual contracts associated with the business
agreements.  In regard to the costs of the trips, we relied upon
information provided by DOE's Office of the Chief Financial Officer. 


*** End of document. ***