Department of Energy Development and Management of the Strategic Petroleum Reserve

GAO discussed the Strategic Petroleum Reserve (SPR), focusing on: (1) problems in the development of SPR facilities and the implications of such problems for the readiness of the SPR; (2) problems with the SPR oil distribution system; and (3) the Department of Energy's (DOE) management of the SPR. GAO noted that three SPR facilities problems that affect SPR readiness are: (1) continuing difficulties in the development of instrumentation and control systems; (2) continuing difficulties in the development of a logistics support system; and (3) a backlog of maintenance work at SPR sites. GAO also stated that: (1) existing SPR distribution systems will not meet the originally proposed distribution rate of 4.5 million barrels of oil per day; and (2) DOE has proposed additional pipeline construction that will bring the distribution capacity of SPR to 4 million barrels per day. In addition, GAO stated that DOE management of SPR has resulted in: (1) ineffective controls over contractors; (2) inadequate financial controls at the SPR Project Office; and (3) extensive use of cost-reimbursable contracts for high-value activities. DOE is soliciting bids for a contract that would integrate all SPR management, operations, and maintenance functions under a single contractor. GAO noted that it is uncertain whether this approach will alleviate contract administration problems at SPR and believes that DOE needs to closely monitor performance under the contract.