Department of Energy: Clearer Missions and Better Management are Needed
at the National Laboratories (Testimony, 10/09/97, GAO/T-RCED-98-25).

GAO discussed the changing missions of the Department of Energy's (DOE)
national laboratories and their management.

GAO noted that: (1) despite a consensus on the need to sharpen the
laboratories' focus and improve DOE's management of them, achieving
these goals has been elusive; (2) DOE manages the national laboratories
program by program, not laboratory by laboratory or as a coordinated
research system with diverse objectives; (3) major new efforts in such
areas as stockpile stewardship and major research projects--projects
that heavily involve laboratories--will require significant improvements
in how DOE and the laboratories are managed; (4) past frustration over
the laboratories' loss of mission focus and management weaknesses has
led some experts to suggest alternatives, such as privatizing them or
developing quasi-governmental entities to oversee their missions and
activities; (5) while the lack of consensus on what the laboratories
should do has made fundamental changes hard to achieve, some changes are
occurring in laboratory management; (6) nevertheless, the challenges
facing DOE in important areas, such as managing the stockpile
stewardship program, raise concerns about how effectively DOE can manage
these new initiatives given its past weaknesses in project management;
and (7) the Government Performance and Results Act offers a framework to
achieve fundamental change.

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

 REPORTNUM:  T-RCED-98-25
     TITLE:  Department of Energy: Clearer Missions and Better 
             Management are Needed at the National Laboratories
      DATE:  10/09/97
   SUBJECT:  Research program management
             Laboratories
             Agency missions
             Contract monitoring
             Strategic planning
             Federal agency reorganization
             Privatization
IDENTIFIER:  DOE Stockpile Stewardship and Management Program
             GPRA
             Government Performance and Results Act of 1993
             DOE Accelerated Strategic Computing Initiative
             
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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
10:00 a.m.  EDT
Thursday
October 9, 1997

DEPARTMENT OF ENERGY - CLEARER
MISSIONS AND BETTER MANAGEMENT ARE
NEEDED AT THE NATIONAL
LABORATORIES

Statement by
Victor S.  Rezendes, Director,
Energy, Resources, and Science Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-25

GAO/RCED-98-25T


(141061)


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

  DOE -

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

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to testify on the changing missions of the Department
of Energy (DOE) national laboratories and their management.  In the
past we have reported on how improved management is needed if DOE and
the laboratories are to successfully meet new mission
responsibilities.  The information included in this testimony is
drawn from our past work on DOE's national laboratories, contract
reform, and other issues.\1

In summary, Mr.  Chairman, despite a consensus on the need to sharpen
the laboratories' focus and improve DOE's management of them,
achieving these goals has been elusive.  DOE currently manages the
national laboratories program by program, not laboratory by
laboratory or as a coordinated research system with diverse
objectives.  Major new efforts in such areas as stockpile stewardship
and major research projects--projects that heavily involve
laboratories--will require significant improvements in how DOE and
the laboratories are managed.  Past frustration over the
laboratories' loss of mission focus and management weaknesses has led
some experts to suggest alternatives, such as privatizing them or
developing quasi-governmental entities to oversee their missions and
activities.  While the lack of consensus on what the laboratories
should do has made fundamental changes hard to achieve, some changes
are occurring in laboratory management.  Nevertheless, the challenges
facing the Department--in important areas such as managing the
stockpile stewardship program--raise concerns about how effectively
DOE can manage these new initiatives given their past weaknesses in
project management.  The Government Performance and Results Act
offers a framework to achieve fundamental change. 

Before discussing these issues in more detail, we would like to
provide some background on the national laboratories. 


--------------------
\1 See Related GAO Products at the end of this testimony. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

DOE manages the federal government's largest research and development
system, consisting of about 30 laboratories, with about 58,000
employees and operating budgets of about $7.5 billion annually.  Nine
of these are multiprogram national laboratories that account for
about 70 percent of DOE's laboratory budget.  DOE estimates that it
has invested more than $100 billion in all of its laboratories over
the past 20 years.  Most of DOE's multiprogram national laboratories
were established during or just after World War II as part of the
Manhattan Project, which developed the world's first atomic bombs. 
These national laboratories have since expanded their missions to
encompass civilian research and development in many disciplines--from
high-energy physics to advanced computing to human genetics.  DOE
owns the laboratories but contracts with universities and
private-sector organizations for their management and operation. 
Nearly all of DOE's national laboratories are operated by nonprofit
institutions. 


   LABORATORY MISSIONS
---------------------------------------------------------- Chapter 0:2

The nine national laboratories are an important national resource,
having made significant contributions in a variety of scientific
disciplines.  However, they have also expanded their original
missions and suffer many management weaknesses.  In prior work on the
national labs, we found that: 

  -- DOE had not ensured that work at the national laboratories was
     focused and managed to make maximum contributions to national
     priorities. 

  -- DOE had not established clear missions for the laboratories or
     developed a consensus among laboratory and government leaders on
     the laboratories' appropriate missions in the post-Cold War
     environment.  The laboratories' missions are set forth as broad
     goals and activity statements rather than as a coordinated set
     of objectives with specific implementation strategies for
     bringing together the individual and collective strengths of
     each facility to meet departmental and national priorities. 

DOE exacerbated this problem by treating the laboratories as separate
entities, rather than as a coordinated national research system with
unified goals.  We believe the lack of proper departmental mission
direction was compromising the laboratories' effectiveness in meeting
traditional missions and their ability to achieve new national
priorities.  DOE currently manages the national laboratories program
by program, not laboratory by laboratory or as a coordinated research
system with diverse objectives.  This approach prevents the
laboratories from fully capitalizing on one of their great
strengths--combining multidisciplinary talents to solve complex,
cross-cutting issues.  For example, research on preventing the
proliferation of nuclear weapons requires combining expertise in
nonproliferation and weapons design--activities that are carried out
by different labs and managed by different assistant secretaries at
DOE.  The laboratories themselves believed that better linkages are
also needed among the energy conservation, fossil fuel, and nuclear
energy research areas. 

We, along with others, have reported that DOE's management approach
has impeded the laboratories' ability to achieve their goals and
administrative responsibilities.  The guidance and direction from DOE
offices was not always consistent, and laboratories are forced to
meet similar requirements from many different offices.  For example,
we found that laboratories were subjected to hundreds of reviews
annually, ranging from program evaluations to compliance reviews on
administrative requirements.  DOE has been slow in setting priorities
for compliance with its environmental requirements, forcing the
laboratories to treat each requirement as equally important. 
Consequently, DOE had no assurance that the laboratories address more
pressing concerns first, or with enough attention.  As a result,
laboratory officials were kept from managing their research in the
most effective manner, according to many experts. 

Over the past several years, many government advisory groups have
also urged DOE to clarify its laboratories' missions and improve
their management.  For example: 

  -- In 1983, the White House Science Council Federal Laboratory
     Review Panel issued a report (commonly known as the Packard
     Report) about all federal research and development laboratories. 
     It found that while DOE's laboratories had defined their
     missions for part of their work, most activities were fragmented
     and unrelated to the parent agency's policies.  \2

  -- In 1992, DOE's Secretary of Energy Advisory Board found that the
     broad laboratory missions, coupled with rapidly changing world
     events, had ".  .  .  caused a loss of coherence and focus at
     the laboratories, thereby reducing their overall effectiveness
     in responding to their traditional missions as well as new
     national initiatives.  .  .  .adding that DOE and its
     laboratories suffered the.  .  .  .lack of a common vision as to
     the missions .  .  .  ."\3

  -- A 1993 report by an internal Energy Department task force on
     laboratories reported that their missions "must be updated to
     support DOE's new directions and to respond to new national
     imperatives .  .  .  ."\4

  -- The 1995 Galvin Task Force--the latest of these
     initiatives--called for a more "disciplined focus" for the
     national labs and also reported that the labs may be "oversized"
     for their role.\5

  -- The Interagency Federal Laboratory Panel, chartered by
     presidential directive in 1994, has been examining all federal
     laboratories, including DOE's.  The panel's March 1997 report
     noted that "none of the agency strategic plans, however,
     includes a clear and specific vision describing the role and
     nature of that agency's laboratory system--the `end point' of
     reform--in sufficient detail to guide its evolution." In
     addition, the panel noted that "continuing micromanagement of
     the laboratories impedes progress, particularly at DOE."


--------------------
\2 Report of the White House Science Council, Federal Laboratory
Review Panel, Office of Science and Technology Policy, May 15, 1983. 

\3 Secretary of Energy Advisory Board, Final Report, 1992. 

\4 Changes and Challenges at the Department of Energy Laboratories,
Final Draft Report of the Missions of the Laboratories Priority Team,
1993. 

\5 Alternative Futures for the Department of Energy National
Laboratories, Secretary of Energy Advisory Board, Task Force on
Alternative Futures for the Department of Energy National
Laboratories (Feb.  1995). 


   CURRENT MANAGEMENT ISSUES
   FACING THE NATIONAL LABS
---------------------------------------------------------- Chapter 0:3

As DOE contemplates the future missions of the national laboratories,
a variety of management issues will require its full attention.  DOE
struggles to manage big projects successfully, is slow to reap the
benefits of its own contract reforms, and continues to face recurrent
problems as it manages the laboratories through its complex
organizational structure. 

DOE's success with managing big projects is not outstanding.  From
1980 through 1996, DOE conducted 80 projects that it designated as
"major system acquisitions" (MSAs), which are its largest and most
critical projects, ranging in cost from $100 million to billions of
dollars.  Many of these projects were managed directly by the
laboratories.  As of June 1996, 31 of the projects had been
terminated prior to completion after total expenditures of over $10
billion.  Only 15 of the projects were completed, and most of them
were finished behind schedule and with cost overruns.  Furthermore, 3
of the 15 completed projects have yet to be used for their intended
purposes.  The remaining 34 projects continue, many with substantial
overruns and "schedule slippage."

We believe there are four key factors underlying the cost overruns,
schedule slippage, and terminations of DOE's largest projects: 

  -- DOE's constantly changing missions often make it difficult to
     maintain departmental and congressional support for these
     long-term, high-cost projects. 

  -- The MSAs' incremental, annual funding subjects them to potential
     delays or terminations in each year. 

  -- A flawed system of incentives does not always reward individuals
     and organizations for "doing the right thing" and has often
     rewarded contractors despite poor performance. 

  -- DOE has difficulty in hiring, training, and retaining enough
     people with the requisite skills to provide effective oversight
     and/or management of contractors' operations. 

Many of these problems stem from DOE's longstanding weak contract
management.  Proper oversight of its 110,000 contractor employees,
who perform nearly all of the Department's work, has never been easy. 
Historically, these contractors worked largely without any financial
risk, were paid even when performing poorly, and enjoyed a management
policy of "least interference" by DOE and its predecessor agencies. 
DOE is now reforming its contracting practices to make them more
business-like and results-oriented.  While we believe that these
reforms are generally a step in the right direction, at this time we
are unsure whether the Department is truly committed to fully
implementing some of its own recommendations.  For example, despite
the change in DOE's contract award policy from sole source to one
favoring full and open competition, DOE decided to extend, rather
than compete, its $2.3 billion contracts with the University of
California to operate three laboratories.  Furthermore, DOE may have
weakened its negotiating position when it conditionally decided to
extend these three contracts before negotiating the contract terms. 
Also, through mid-1996, DOE chose to extend 12 contracts that have
never been competitively awarded, including those for Argonne
National Laboratory and Ames Laboratory, whose contractors have been
in place continuously since 1946 and 1943, respectively.  In another
example, some problems have arisen in DOE's implementation of
performance-based contracting, which is a key component of contract
reform, according to the Department.  For example, the fees that the
Brookhaven National Laboratory could earn are not linked to
performance. 

DOE continues to miss the benefits of competition, which is a major
feature of its much-promoted contract reform effort.  While DOE has
changed its policy and adopted competitive contract awards as the new
standard for its management and operating contracts, in practice, DOE
continues to make noncompetitive awards.  Of the 24 decisions to
award new management and operating contracts between July 1994 and
August 1996, DOE noncompetitively awarded 16 of them. 

Findings from DOE's Office of Oversight (under the Assistant
Secretary for Environment, Safety and Health) raise old concerns
about how DOE manages its laboratory contractors.  Reports conducted
since 1996 from this office on three major DOE laboratories (Los
Alamos National Laboratory, Brookhaven National Laboratory, and the
Idaho National Environment and Engineering Laboratory) show that
DOE's chronic management problems continue.  Each laboratory points
to new or recently implemented programs that, given time, may correct
the problems.  But taking a historical perspective, these
"corrective" programs are implemented, then are overtaken by events
or management changes, then other corrective programs are implemented
in a seemingly unending succession.  The end result is that the
original problems are never fully resolved.  The main problems
continue to be confusion about responsibilities; confusion about
which regulations and/or guidelines apply; inadequate management
attention to environment, safety and health issues at the contractor
and subcontractor levels; and inadequate DOE oversight of contractor
operations.  We and others (including DOE's Inspector General and the
Defense Nuclear Facilities Safety Board) have identified these
problems repeatedly over the years. 

New challenges await DOE as it prepares to orchestrate its ambitious
Stockpile Stewardship and Management Program, a $4.5 billion a year
enterprise to test and maintain nuclear weapons without conducting
explosive tests.  Laboratories will have an integral role in the
program.  With no underground nuclear testing, and no new nuclear
weapons designs, DOE expects existing weapons to remain in the
stockpile well into the next century.  This means that the weapons
will age beyond original design expectations and DOE believes an
alternative to underground testing must be developed to verify the
safety and reliability of the weapons.  This program includes a
multimillion-dollar a year Accelerated Strategic Computing
Initiative, involving three different manufacturers as well as three
laboratories in a plan to integrate supercomputing facilities from
distant sites. 

DOE and the Congress should pay close attention to how this costly
and complex program is being managed in light of DOE's past problems
in managing similar programs.  For example, DOE is responsible for
managing the nation's nuclear weapons stockpile, including providing
surveillance of weapons currently in the stockpile.  DOE provides
three types of stockpile surveillance tests--flight tests, nonnuclear
systems laboratory tests, and nuclear and nonnuclear component
tests--on nine types of nuclear weapons.  DOE has been behind
schedule in conducting flight tests on three types of weapons and in
conducting laboratory tests on one type of weapon and most if its key
components (in some instances, several years behind).  Reasons for
the delays include the suspension of testing at one facility because
it lacked an approved safety study required to disassemble and
inspect one type of weapon, and at another facility because of
concerns about safety procedures.  We found that DOE lacked written
plans needed to put testing programs back on schedule, and several
factors could cause further delays.  These factors included the
possible expiration of required safety studies, future limitations on
the number of flight tests, and the lack of contingency plans in the
event a test facility is shut down. 


   OPPORTUNITIES FOR IMPROVEMENT
---------------------------------------------------------- Chapter 0:4

DOE has several initiatives under way that it believes address
mission and management problems raised by us and by others.  For
example, DOE believes its strategic planning process provides the
framework for more focused missions for the laboratories.  It also
established the Laboratory Operations Board in 1995 to provide
mission focus and management attention on the national laboratories. 
The Board published a strategic plan for the laboratories with more
reports to follow.  The Board also points to the laboratories'
significant productivity gains and to streamlined systems in DOE to
help improve management. 

DOE also believes that reforming its contracts, specifically by
introducing performance measures to guide and evaluate the
laboratories' activities, will form a basis for a more productive
management approach that better integrates the laboratories'
missions. 

We generally agree that these initiatives have some potential for
helping DOE to refocus the missions of the laboratories and improve
their management.  However, these initiatives have not yet been
implemented, or in the case of contract reform, will take years to be
fully operational.  The recent reviews by DOE's Office of Oversight
mentioned earlier, however, suggest that considerably more attention
is needed before these reforms can be judged totally successful. 
Thus, their outcome, while initially promising, is very uncertain. 

We also caution that in the past, DOE has introduced planning systems
and reorganized many times--all without significant success. 
Additionally, as we noted earlier, previous advisory groups have
recommended that DOE refocus the laboratories' missions and improve
its management of them, yet the Department has failed to achieve
fundamental change. 

The lack of long term, fundamental change in DOE has prompted some
experts to suggest alternatives to how DOE's national laboratories
are managed.  For example, to sharpen focus and improve management,
the Galvin Task Force suggested creating private or federal-private
corporations to manage most or all of the laboratories.  Under this
arrangement, nonprofit corporations would operate the laboratories
under the direction of a board of trustees that would channel funding
to various laboratories to meet the needs of both government and
nongovernment entities.  DOE would be a customer, rather than the
direct manager of the laboratories.  Although the task force provided
few details about how such an alternative structure would be
developed and implemented, its proposal raises important issues for
DOE and the Congress to consider, such as (1) how to monitor and
oversee the expenditure of public funds by privately managed and
operated entities; (2) how to continue the laboratories' significant
responsibilities for addressing environmental, safety, and health
problems at their facilities, some of which are governed by legal
agreements between DOE, The U.S.  Environmental Protection Agency,
and the states; and (3) how to maintain federal access to facilities
so that national priorities, including national security missions,
are met. 

In addition, other organizational options that have been proposed by
experts include the following: 

  -- Convert some laboratories, particularly those working closely
     with the private sector, into independent entities. 

  -- Transfer the responsibility for one or more laboratories to
     other agencies, whose responsibilities and mission are closely
     aligned with a particular DOE laboratory. 

  -- Create a "lead lab" arrangement, under which one laboratory is
     given a leadership role in a mission or technology area and
     other laboratories are selected to work in that area. 

  -- Consolidate the responsibility for research, development, and
     testing on nuclear weapons within a single laboratory. 

Each of these alternatives has advantages and disadvantages, as does
the Galvin Task Force proposal, and needs to be evaluated in light of
the laboratories' capabilities for designing nuclear weapons and
pursuing other missions of national and strategic importance. 
Furthermore, the government may still need facilities dedicated to
national and defense missions, a factor that would heavily influence
any future organizational decisions. 

Some policymakers have suggested that as an alternative to the
current DOE laboratory structure, the laboratories should be
uncoupled from DOE and placed under other agencies or privatized
where warranted.  The proposals mostly stem from discussions about
dismantling DOE.  Changing mission focus--coupled with DOE's
long-standing management difficulties--has prompted reevaluating of
DOE as an institution.  In this context, experts we consulted in a
1994 survey--which included several former Secretaries of
Energy--suggested that DOE's laboratories could be placed in other
entities if DOE were dismantled.  For example, many respondents
suggested moving DOE's basic research functions to the National
Science Foundation, the Commerce or Interior departments, other
federal agencies, or a new public-private entity.  Some also
suggested that some multiprogram national laboratories could move to
other federal agencies, or share their missions with other agencies. 
A more complicated issue is the placement of the defense
laboratories--Lawrence Livermore, Sandia, and Los Alamos--whose
responsibilities include important national defense responsibilities. 

Dismantling DOE would likely lead to other problems.  Federal
agencies are willing to accept functions but not employees, for doing
so may add to the risk of a reduction-in-force.  Transferring
functions with an elaborate field structure -- such as DOE's -- can
be very expensive.  And, unavoidably, transferred functions could
duplicate existing ones. 


   THE GOVERNMENT PERFORMANCE AND
   RESULTS ACT OFFERS A FRAMEWORK
   FOR FOCUSING THE NATIONAL
   LABORATORIES' MISSIONS AND
   MANAGEMENT
---------------------------------------------------------- Chapter 0:5

A past roadblock to achieving consensus on the laboratories' missions
has been the absence of a framework within which policymakers,
including the Congress, could focus attention on mission and
management issues.  The Government Performance and Results Act of
1993 (Results Act) provides such a framework.  The Results Act
requires agencies to implement meaningful measures of output, and to
use assessments of productivity and quality in combination with
measures of efficiency and cost reduction to characterize the
progress of reform.  Each agency and laboratory would be expected to
have some customized performance measures appropriate to its
missions, but not necessarily applicable or useful to other agencies
and laboratories.  While agencies are just now completing their early
strategic plans, and it is too soon to fully evaluate the results,
the Results Act process provides an opportunity for debating the
future of the laboratories.  In our recent examination of DOE's draft
strategic plan, we found that while DOE has been actively pursuing
the objectives of the Results Act, its draft plan had several
deficiencies.  For example, the plan failed to spell out the
relationship between long-term goals and the annual performance
goals, key factors external to DOE, and the effect of program
evaluations on the development of strategic goals.  This is important
because such linkages show how missions will be translated into
actual strategies throughout the organization--an important component
of the Results Act process that could guide how laboratories are to
be used and evaluated.  We are now in the process of reviewing DOE's
September 1997 plan. 

Mr.  Chairman, this concludes my statement.  I would be happy to
respond to any questions from you or members of the Subcommittee. 

RELATED GAO PRODUCTS

Results Act:  Observations on the Department of Energy's Draft
Strategic Plan (GAO/RCED-97-199R, July 11, 1997). 

Department of Energy:  Contract Reform Is Progressing but Full
Implementation Will Take Years (GAO/RCED-97-18, Dec.  10, 1996). 

Department of Energy:  Opportunity to Improve Management of Major
System Acquisitions (GAO/RCED-97-17, Nov.  26, 1996). 

Nuclear Weapons:  Improvements Needed to DOE's Nuclear Weapons
Stockpile Surveillance Program (GAO/RCED-96-216, July 31, 1996). 

Department of Energy:  A Framework For Restructuring DOE and Its
Missions (GAO/RCED-95-197, Aug.  21, 1995). 

Department of Energy:  National Laboratories Need Clearer Missions
and Better Management (GAO/RCED-95-10, Jan.  27, 1995). 

Department of Energy:  Challenges to Implementing Contract Reform
(GAO/RCED-94-150, Mar.  24, 1994). 

Federal Research:  Information on Fees for Selected Federally Funded
Research and Development Centers (GAO/RCED-96-31FS, Dec.  8, 1995). 


*** End of document. ***