Energy Management

The Department of Energy's Contractor Purchasing System Review Program oversees the extensive subcontracting activities of DOE's management and operating contractors. This report describes the subcontracting deficiencies occurring at DOE, identifies shortcomings in the program, and discusses the corrective actions that DOE has committed to take in response to GAO findings. Management and operating subcontracts, totaling more than $5 billion in 1990, are vulnerable to waste, fraud and abuse--a fact that is reflected in DOE's own reviews. Poor procurement practices of contractors, coupled with inadequate DOE oversight, have led to excessive subcontract costs for the government. DOE's reviews have shown that management and operating contractors often do not ensure that subcontract prices are fair and reasonable and that contractors are also restricting competition by inappropriately using sole-source purchases.

GAO found that: (1) a recent DOE CPSR indicated that M&O subcontracts are vulnerable to fraud, waste, and abuse; (2) excessive contract costs are attributed to M&O contractors' poor procurement practices and inadequate DOE oversight; (3) DOE reviews indicated that M&O contractors often failed to ensure that subcontract prices were fair and reasonable, and restricted competition by inappropriately using sole-source purchases; (4) the CPSR identified a number of internal control weaknesses at M&O contractor sites; (5) such CPSR program limitations as insufficient DOE oversight, DOE reluctance to withhold or withdraw purchasing system approval, and field office's inadequate follow-up of contractors' responses to CPSR recommendations restricted DOE ability to identify all significant procurement weaknesses and ensure that identified problems were corrected; and (6) DOE is taking such actions to address internal control problems as centralizing the CPSR program, conducting frequent reviews, and issuing agency-wide CPSR program requirements and procedures.