Energy Management

The Department of Energy (DOE) spends about 90 percent of its budget--more than $17 billion in fiscal year 1990--on contractors, primarily those managing nuclear weapons facilities. Persistent weaknesses in DOE's oversight and management of contractors have led GAO to designate DOE contracting as one of 16 government programs at high risk for waste, fraud, abuse, and mismanagement. This vulnerability arises mainly from DOE's long-standing management approach of indemnifying nearly all contractor costs and not exercising adequate oversight over contractor operations and activities. This report discusses in detail (1) problems resulting from DOE's approach to contracting and (2) DOE's recent efforts to address these problems.

GAO found that DOE: (1) generally adopted the contracting approach that its predecessor, the Atomic Energy Commission (AEC), used, characterized by limited interference in contractor work and reimbursement of almost all contractor costs; (2) in spite of congressional criticism, continues to use that contract management approach, which is partially responsible for serious environmental, safety, and operational problems at its nuclear production facilities; (3) has included in its management and operating contracts weak, nonstandard, and ineffective clauses that limit its authority, its ability to control costs, and contractor accountability; (4) contract oversight does not adequately detect problems concerning contractors' work for non-DOE sources, inventory errors, appropriate award fees, and the safeguarding of secret documents; (5) does not adequately oversee contractors' use, procurement, or spending for subcontractors; and (6) to improve its contracting approach, plans to incorporate new contract clauses regarding contractor accountability, award fees, contract extension negotiations, work statements, and contractor and subcontractor oversight. GAO believes that, although the corrective actions DOE proposed could help to address longstanding and pervasive contracting weaknesses, DOE contract management currently remains highly vulnerable to waste, fraud, abuse, and mismanagement.