Energy Management

As part of a contract to produce enriched uranium at government-owned facilities in Paducah, Kentucky, and Portsmouth, Ohio, Martin Marietta Energy Systems was allowed to bill the government for more than half a million dollars in entertainment and liquor costs. The final tab included golf outings, musical performances, receptions, tours, and a charter boat ride. These parties were thrown for utility executives who are either current or potential customers for the government's enriched uranium. GAO questions the legality of spending federal dollars on alcohol and the presence of bureaucrats and contractor employees at such social gatherings. GAO is waiting to hear from the Department of Energy's Office of General Counsel as to why these costs were allowed.

GAO found that: (1) DOE initiated a new marketing strategy in early 1984 to restore competitiveness, including enhancement of customer services and marketing activities; (2) in February 1988, under the uranium enrichment contract, DOE allowed the contractor to incur entertainment costs retroactively to November 1985; (3) between fiscal years 1986 and 1991, approximately $554,000 out of $24.8 million for marketing costs was for entertainment and alcoholic beverage costs; (4) entertainment and alcoholic beverage costs were prohibited by law in DOE contracts; (5) by its interpretation of the law, DOE believed that alcoholic beverage costs incurred under the uranium enrichment contract were allowable because the contractor's marketing activities were solely in support of and for the benefit of DOE and did not indirectly help the contractor market its own products; (6) DOE developed criteria for management and monitoring of entertainment costs, including requiring advance approval to serve alcohol; (7) it could not find documentation showing compliance with the criteria; and (8) DOE directed the contractor to document in future quarterly reports the reasonableness of expenses, the customer function's effectiveness, and whether the function served its purpose and should be continued.