Selected Management Activities at the Naval Petroleum Reserve, California

In response to a congressional request, GAO reviewed certain aspects of the operations of the Department of Energy's (DOE) Naval Petroleum Reserve, California (NPRC), including: (1) the process used in establishing the fee for the contractor to operate NPRC in fiscal year 1984; (2) the adequacy of NPRC audit coverage; and (3) justification for the proposed construction of additional NPRC office space.

GAO found that the contractor's fee was not established in accordance with DOE regulations in 1984. In that year, the contractor accepted a base fee of zero, and thus qualified for an award fee of up to 200 percent of the fixed fee. Therefore, it received a much higher fee for its services than in any of the previous years. The DOE approval process for contractor purchases reduced the contractor's financial risks and made a maximum award fee for this factor unwarranted. Although the contractor did technical work, DOE and another contractor provided technical advice and experience. Furthermore, the contractor had limited responsibility for the administrative and technical management of field operations and had to seek operating committee approval for many minor routine actions. In addition, GAO found that: (1) the scope of independent audit coverage was too limited; (2) the contractor's internal review activity failed to meet GAO standards for independence; and (3) the DOE Inspector General had not covered key aspects of the operations. Finally, GAO questioned whether, in planning additional office space construction, the merits of leasing space had been fully considered.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: James Duffus Iii Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 512-7756