Managing DOE

The Energy Department (DOE) has not kept centralized data on the costs it reimburses contractors for outside litigation; however, available data indicate that DOE spent about $40 million in fiscal year 1992 on costs linked to the legal defense of current and former contractors. Most costs were for legal fees, travel and administrative expenses, and consultant fees incurred by outside law firms hired by the contractors. These costs, however, were poorly controlled because DOE lacked effective criteria spelling out what costs it would reimburse. As a result, DOE was being billed at higher rates that other federal agencies for professional legal fees, travel, word processing, and photocopying. Furthermore, legal bills were being reimbursed with little or no departmental oversight. DOE has begun to strengthen its control over these costs. In particular, it issued specific cost guidelines and instituted procedures for periodically reporting all litigation costs. DOE is also establishing an audit function to enable it to conduct a detailed review of the bills it receives for legal services. Finally, DOE is trying to consolidate cases involving multiple contractors and law firms to improve case management and cut costs.

GAO found that: (1) although DOE cannot accurately determine the total amount it reimburses contractors for their outside litigation costs, preliminary findings show that in 1992, DOE spent about $40 million on its contractor litigation costs; (2) most DOE contractor legal costs are incurred through the hiring of outside law firms; (3) DOE does not have effective cost controls for reimbursing outside legal services; (4) DOE has been billed at higher rates than other federal entities for professional legal fees, travel, word processing, document duplication, and other litigation expenses because it has not effectively overseen contractor payments or developed adequate criteria that define which costs are reimbursable; and (5) DOE efforts to improve its cost controls include issuing specific cost guidelines, instituting procedures for periodically reporting all litigation costs, establishing audit functions that enable it to conduct detailed reviews of legal bills, and consolidating cases involving multiple contractors and law firms to improve case management and reduce costs.