Energy Management

The Energy Department (DOE) provides the University of California about $2.5 billion a year for research and development at the Los Alamos, Lawrence Livermore, and Lawrence Berkeley Laboratories. In the past, these contracts contained many special, nonstandard clauses that reduced or eliminated DOE's authority to direct the university's actions and contributed to management problems that led to losses of millions of dollars' worth of government property, excessive subcontracting costs, and the loss of classified documents. In 1992, DOE and the University of California negotiated new five-year contracts. This report discusses (1) DOE's efforts to add standard clauses typical of DOE's other contracts and eliminate requirements that weakened DOE's authority, (2) the compensation that DOE negotiated for the current contracts, and (3) proposed changes in contracting policy announced by DOE in February 1994 that may apply to these contracts with the University.

GAO found that: (1) for its current contracts, DOE negotiated standard clauses for property management, procurement systems, and internal audits and included standard criteria for cost allowability that improved DOE authority and clarified performance expectations; (2) the special dispute resolution clause could minimize contract improvements because of limits to DOE authority to control the University's actions; (3) deviations from standard clauses should provide DOE with authority at least equivalent to that provided by standard clauses; (4) DOE has more than doubled the University's contract fees because it has accepted increased financial risks; (5) this approach is not cost-effective and does not improve accountability because contractor risk is still too limited and DOE lacks criteria for measuring the benefits of contractor risks; (6) DOE has waived its fee policy for educational institutions and has not followed procedures to promote fee consistency and uniformity; (7) proposed changes to DOE contracting policy would give DOE increased leverage in negotiating contracts by applying more stringent reimbursement policies, changing its fee policy for nonprofit educational contractors, and opening the contracts to competition; and (8) provisions to waive the new contracting policy create uncertainty as to whether DOE will require the University to comply with the new policy.

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.

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