Nuclear Nonproliferation
Better Management Controls Needed for Some DOE Projects in Russia and Other Countries
Gao ID: GAO-05-828 August 29, 2005
The National Defense Authorization Act for FY 2004 mandated that we assess the management of threat reduction and nonproliferation programs that the Departments of Defense and Energy each administer. The objective of this report is to assess how the Department of Energy's National Nuclear Security Administration (NNSA) implements management controls, which we define here to be the processes ensuring that work done under a contract meets contract specifications and that payments go to contractors as intended.
Two NNSA offices, the Office of Nuclear Risk Reduction (designated by NNSA as NA-23) and International Material Protection and Cooperation (NA- 25), documented management controls for almost all of their contracts that we reviewed, but the third office, the Office of Nonproliferation and International Security (NA-24), did not document controls for most of their contracts because they could not provide the required documentation. More specifically, for eight of the nine NA-23 and NA-25 contracts we reviewed, the NA-23 headquarters staff and the laboratory staff that manage the contracts for NA-25 provided to us complete records of deliverables and invoices, as well as evidence that technical officials reviewed and approved the deliverables and contract officers reviewed and approved the invoices. (For the ninth contract, NA-25 provided us with incomplete documentation of its controls.) In addition, NA-23 and NA-25 each apply procedural guidance that assists managers in maintaining these controls. However, according to an NNSA official, none of the three offices currently perform periodic reviews to ensure their existing management controls remain appropriate. In contrast, we were unable to determine if NA-24 implements management controls because, for seven of the nine contracts we reviewed, the documentation it provided to us was in most cases either incomplete or it provided no clear audit trail that we could follow. (Documentation was complete for the eighth and ninth contracts.) The types of documents that were missing varied across and within some contracts. In addition, NA-24 does not provide its contract managers with procedural guidance on how to maintain its management controls, nor does it perform a periodic review of its controls to ensure the controls are effective and appropriate.
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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GAO-05-828, Nuclear Nonproliferation: Better Management Controls Needed for Some DOE Projects in Russia and Other Countries
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Report to Congressional Committees:
August 2005:
Nuclear Nonproliferation:
Better Management Controls Needed for Some DOE Projects in Russia and
Other Countries:
GAO-05-828:
GAO Highlights:
Highlights of GAO-05-828, a report to congressional committees:
Why GAO Did This Study:
The National Defense Authorization Act for FY 2004 mandated that we
assess the management of threat reduction and nonproliferation programs
that the Departments of Defense and Energy each administer. The
objective of this report is to assess how the Department of Energy‘s
National Nuclear Security Administration (NNSA) implements management
controls, which we define here to be the processes ensuring that work
done under a contract meets contract specifications and that payments
go to contractors as intended.
What GAO Found:
Two NNSA offices, the Office of Nuclear Risk Reduction (designated by
NNSA as NA-23) and International Material Protection and Cooperation
(NA-25), documented management controls for almost all of their
contracts that we reviewed, but the third office, the Office of
Nonproliferation and International Security (NA-24), did not document
controls for most of their contracts because they could not provide the
required documentation. More specifically, for eight of the nine NA-23
and NA-25 contracts we reviewed, the NA-23 headquarters staff and the
laboratory staff that manage the contracts for NA-25 provided to us
complete records of deliverables and invoices, as well as evidence that
technical officials reviewed and approved the deliverables and contract
officers reviewed and approved the invoices. (For the ninth contract,
NA-25 provided us with incomplete documentation of its controls.) In
addition, NA-23 and NA-25 each apply procedural guidance that assists
managers in maintaining these controls. However, according to an NNSA
official, none of the three offices currently perform periodic reviews
to ensure their existing management controls remain appropriate.
In contrast, we were unable to determine if NA-24 implements management
controls because, for seven of the nine contracts we reviewed, the
documentation it provided to us was in most cases either incomplete or
it provided no clear audit trail that we could follow. (Documentation
was complete for the eighth and ninth contracts.) The types of
documents that were missing varied across and within some contracts. In
addition, NA-24 does not provide its contract managers with procedural
guidance on how to maintain its management controls, nor does it
perform a periodic review of its controls to ensure the controls are
effective and appropriate.
Table 1: NNSA Documentation of Management Controls in Nuclear
Nonproliferation Contracts, by Number of Contracts:
[See PDF for image]
Source: GAO.
[End of table]
What GAO Recommends:
To create effective management controls, we recommend that the
Secretary of Energy, working with the Administrator of NNSA, require
that: (1) NNSA develop guidance for implementing and documenting
management controls, (2) program managers have quick access to key
contract records, regardless of the records‘ location, and (3) NNSA
perform periodic reviews of its management controls to ensure their
effectiveness. NNSA accepted our recommendations but took issue with
our assessment of management controls in some cases. We believe that
the facts support our assessment and that the implementation of our
recommendations will improve the effectiveness of the management
controls we reviewed.
www.gao.gov/cgi-bin/getrpt?GAO-05-828.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gene Aloise, 202-512-
3841, aloisee@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Management Controls Are in Place for Two of the Three NNSA Offices
Administering Contracts for Nuclear Nonproliferation Projects:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Scope and Methodology:
Appendixes:
Appendix I: NNSA Contracts:
Appendix II: Documentation of Management Controls - GAO Assessment by
Contract:
Appendix III: Comments from the Department of Energy:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: NNSA Documentation of Management Controls in Nuclear
Nonproliferation Contracts, by Number of Contracts:
Abbreviations:
BNL: Brookhaven National Laboratory:
CRDF: U.S. Civilian Research and Development Foundation:
DOD: Department of Defense:
DOE: Department of Energy:
FRAEC: Foundation for Russian American Economic Cooperation:
GIPP: Global Initiatives for Proliferation Prevention:
HEU: Highly Enriched Uranium:
INL: Idaho National Laboratory:
IPP: Initiatives for Proliferation Prevention:
ISTC: International Science and Technology Center:
LANL: Los Alamos National Laboratory:
LBNL: Lawrence Berkeley National Laboratory:
LEU: Low Enrichment Uranium:
LLNL: Lawrence Livermore National Laboratory:
NNSA: National Nuclear Security Administration:
ORNL: Oak Ridge National Laboratory:
PNNL: Pacific Northwest National Laboratory:
SNL: Sandia National Laboratory:
STCU: Science and Technology Center of Ukraine:
TST: Technical Survey Team:
Letter August 29, 2005:
The Honorable John Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Duncan Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
In March 2000, the National Nuclear Security Administration (NNSA)
assumed responsibility for carrying out the Department of Energy's
(DOE) national security and nuclear nonproliferation
responsibilities.[Footnote 1] These nuclear nonproliferation projects,
most of which have been undertaken in Russia but also reside in many
other foreign countries,[Footnote 2] involve DOE's national
laboratories,[Footnote 3] U.S. contractors, and Russian scientists and
contractors and entail activities such as upgrading the security of
nuclear weapons sites and "blending-down" weapons-grade highly enriched
uranium so it can be used in nuclear power plants to generate
electricity. From fiscal year 2001 through fiscal year 2004, DOE
obligated $1.7 billion on these projects, which are comprised of
multiple contracts for construction work or the provision of services.
Three offices within NNSA administer most of the nonproliferation
projects:[Footnote 4]
* The Office of Nuclear Risk Reduction (designated by NNSA as NA-23)
seeks to reduce the risk of accidents at foreign nuclear facilities by,
among other things, strengthening foreign governments' abilities to
respond to nuclear emergencies. For example, two current projects aim
to enable two Russian cities, Seversk and Zheleznogorsk, to replace
nuclear power reactors that produce weapons-grade material that the
cities currently use for heat and electricity production with fossil-
fuel electricity plants.[Footnote 5] NA-23 staff provide the day-to-day
management of the contracts for these projects.
* The Office of Nonproliferation and International Security (NA-24),
counters proliferation and strengthens the nonproliferation regime by
promoting transparency and verification in the dismantlement of weapons
of mass destruction (WMD), denying acquisition of WMD by terrorists and
illicit trade in nuclear technology, and encouraging international
partners to strengthen their export controls and redirect the work of
former nuclear scientists, technicians, and engineers toward projects
with commercial potential, such as the development of titanium alloys
for medical applications. DOE's national laboratories provide most of
the day-to-day technical management of the contracts for these
projects.
* The Office of International Material Protection and Cooperation (NA-
25) administers projects designed to, among other things, improve the
security of weapons-usable nuclear and radiological material and
enhance detection infrastructure at sites that currently store these
materials. The national laboratories provide most of the day-to-day
management of the contracts that carry out these projects.
The three NNSA offices use essentially the same process to ensure
contractors' work and payments made to them meet the specifications of
the contract. After contractors or scientists complete a task, they
send a deliverable (a technical report or other documentation of the
work performed) and an invoice to the appropriate national laboratory
or NNSA office for technical review and approval. If the technical
reviewer approves the deliverable, he or she documents approval and
forwards the documentation of the approval, along with the invoice, to
the contract officer at the national laboratory or NNSA office. If the
contract officer approves the invoice, in most cases, the national
laboratory then makes payment to the contractors or
scientists.[Footnote 6] In other cases, the deliverable and invoice
then proceed to the relevant NNSA office for further review, and either
the office or another organization makes the final payment to the
contractors or scientists.[Footnote 7]
A key way for federal program managers to ensure accountability within
such contracting processes, as well as to improve outcomes and minimize
problems in their programs, is to implement appropriate management
(internal) controls. As described in two GAO documents, Standards for
Internal Controls in the Federal Government and Internal Control
Management and Evaluation Tool, management controls can address many
activities in a program or organization. Therefore, it is important
that a program's management controls relate directly to its processes
and activities. Thus, in the context of NNSA's nuclear nonproliferation
projects, appropriate management controls mean that the three offices
do the following with each component contract:
* maintain complete records of deliverables and technical officials'
review and approval of them;
* maintain complete records of invoices and contract officers' review
and approval of them;
* maintain documentation of the above records for ready access by
agency program managers, either at a national laboratory or
headquarters, to facilitate active monitoring of the contract;
* use formal, procedural guidance that specifies processes for
maintaining management controls; and:
* periodically review management control processes and documentation to
ensure they remain appropriate and effective.
The National Defense Authorization Act for Fiscal Year 2004[Footnote 8]
mandated that we assess the management controls used to carry out
nonproliferation and threat reduction projects administered by DOE and
the Department of Defense (DOD) and the effect of these controls on the
execution of the projects. In response, we have issued two reports to
date. The first report assessed how DOD and NNSA use their own
strategies to guide their respective threat reduction and
nonproliferation projects and how well the agencies have coordinated
their strategies.[Footnote 9] The second report examined DOD's
management controls for its Cooperative Threat Reduction
program.[Footnote 10] This report, which completes our response to the
mandate, assesses NNSA's implementation of management controls for its
nuclear nonproliferation projects.
To perform this assessment, we obtained from the three relevant NNSA
offices a list of contracts for nuclear nonproliferation projects that
were active between June 2001 and June 2004. From this list, we then
identified contracts whose value exceeded $1 million. Going down this
list, we selected a nonprobability sample of the largest 18 dollar-
value contracts: two from NA-23, nine from NA-24, and seven from NA-
25.[Footnote 11] This mix reflected the proportion of contracts among
the three offices that were active from June 2001 through June 2004 and
included at least one contract from each of the national laboratories
cited on the original list of nonproliferation contracts that we
received from NNSA--Brookhaven in New York, Los Alamos and Sandia in
New Mexico, Lawrence Berkeley and Lawrence Livermore in California, Oak
Ridge and the Y-12 National Security Complex in Tennessee, Pacific
Northwest in Washington, and the Idaho National Laboratory. In
addition, we obtained documents on the three offices and the 18
contracts and interviewed officials from each of the offices and
national laboratories.[Footnote 12] A more detailed description of our
methodology is included at the end of this letter.
We conducted our work from May 2004 to July 2005 in accordance with
generally accepted government auditing standards.
Results in Brief:
Two NNSA offices, NA-23 and NA-25, documented management controls for
almost all of their contracts that we reviewed; but the third office,
NA-24, could not provide us with complete records related to its
contracts, and thus could not document its management controls.
Regarding NA-23 and NA-25, for eight of the nine contracts we reviewed,
the staffs that manage these contracts provided to us complete records
of deliverables, invoices, and evidence that technical reviewers
approved the deliverables and contract officers approved the invoices.
NA-23 and NA-25, as evidenced by their ability to provide us with key
contract records, maintain the key contract documents at headquarters
and the national laboratories, respectively, such that the records are
quickly accessible for active monitoring by contract and program
managers. In addition, NA-23 and NA-25 each use formal procedural
guidance on how to maintain management controls for their contracts.
Finally, according to NNSA officials, neither of the offices performs
periodic reviews of their management control processes, although NA-23
had a review performed on its management controls at the outset of its
projects.
Regarding NA-24, staff could not provide a complete set of
deliverables, invoices, and approvals of deliverables and invoices for
seven of the nine contracts we reviewed. The types of missing documents
differed among contracts. For example, for one contract, NA-24
documented that a technical official had approved work performed but
provided no proof that a contract officer had approved the invoice for
the work. On another contract, NA-24 provided us with fewer than half
the deliverables and one-fifth of the invoices. Moreover, although NA-
24 officials told us that the national laboratories maintain key
contract records so that NA-24's managers have quick access to them,
the inability of NA-24 to obtain these records suggests that this may
not be the case. In addition, NA-24 does not use formal, procedural
guidance on how to maintain management controls for its contracts.
Finally, like NA-23 and NA-25, NA-24 does not periodically review its
management control processes, as suggested by GAO management control
standards, to ensure that the controls remain appropriate and
effective.
We are recommending that the Secretary of Energy, working with the
Administrator of the National Nuclear Security Administration, require
NNSA to take a number of actions designed to strengthen its management
control processes. Specifically, we recommend that (1) NNSA develop
formal, procedural guidance for its program managers that clearly
states management control processes; (2) NNSA's program managers
maintain quick access to key contract records such as deliverables and
invoices that relate to management controls, regardless of the records'
location; and (3) NNSA perform periodic reviews of its management
controls to ensure their effectiveness.
In its written comments to a draft of this report, NNSA stated that it
will undertake a series of actions in response to our recommendations,
but it believes that our report creates an inaccurate perception that
the Defense Nuclear Nonproliferation Program, particularly NA-24, is
lacking in the application of management controls. In response, we
believe that the facts support our assessment and that the
implementation of our recommendations will improve the effectiveness of
the management controls we reviewed. We have incorporated technical
changes into the report where appropriate.
Management Controls Are in Place for Two of the Three NNSA Offices
Administering Contracts for Nuclear Nonproliferation Projects:
Two NNSA offices, NA-23 and NA-25, documented management controls for
almost all of their contracts that we reviewed; but the third office,
NA-24, could not provide us with the complete records necessary to
document these controls. Similarly, NA-23 and NA-25 provide their
technical reviewers and contract managers with procedural guidance that
assists in maintaining these controls, while NA-24 did not provide this
type of guidance. In addition, NA-23 and NA-25 maintain the key
contract documents at headquarters and the national laboratories,
respectively, in such a way that the records are quickly accessible for
active monitoring by contract and program managers, as evidenced by
their ability to provide us with key contract records.
NA-23 and NA-25 Documented Management Controls for the Contracts We
Reviewed:
Two NNSA offices, NA-23 and NA-25, documented management controls for
most of their contracts that we reviewed. As shown in table 1, for
eight of the nine contracts we reviewed from these two offices, NA-23
staff and national laboratory officials who manage NA-25's contracts
provided us with complete records of deliverables and invoices as well
as evidence that technical reviewers and contract officers reviewed and
approved deliverables and invoices, respectively. (For the ninth
contract, which involved comprehensive physical protection upgrades to
a strategic rocket forces site in Russia, Oak Ridge National Laboratory
did not provide complete documentation of approvals for deliverables.)
For example, the two contracts we reviewed from NA-23--which are
designed to construct or refurbish fossil-fuel plants for the Russian
cities of Zheleznogorsk and Seversk so that each city can shut down its
plutonium-producing nuclear reactor that it currently uses to generate
heat and electricity--involve multiple contractors in the United States
and Russia. Despite being by far the largest contracts by dollar value
in our sample ($390 million for Seversk and $570 million for
Zheleznogorsk--the next largest contract was valued at $29 million), NA-
23 headquarters provided us with, among other things, complete
documentation of all invoices; photographs of the deliverables (i.e.,
construction work) completed to date; and evidence of the reviews and
approvals of the invoices and payments to the foreign contractors and
subcontractors. NA-23 also provided us with detailed breakdowns of work
(called Work Breakdown Structures), work authorizations, and cost
evaluations for each project. The documentation NA-23 provided us was
among the most complete and organized of all the contracts we reviewed.
An NA-23 official told us that this office makes efforts to specify in
acute detail the work to be done and the costs for that work because
this enables the office to effectively monitor and maintain a degree of
control over the work of foreign contractors and subcontractors.
Table 1: NNSA Documentation of Management Controls in Nuclear
Nonproliferation Contracts, by Number of Contracts:
NNSA Office: NA-23;
Documents complete and management controls evident: 2;
Documents and/or approvals incomplete: 0;
Documents provide no clear audit trail: 0;
Total: 2.
NNSA Office: NA-24;
Documents complete and management controls evident: 2;
Documents and/or approvals incomplete: 4;
Documents provide no clear audit trail: 3;
Total: 9.
NNSA Office: NA-25;
Documents complete and management controls evident: 6;
Documents and/or approvals incomplete: 1;
Documents provide no clear audit trail: 0;
Total: 7.
Source: GAO.
[End of table]
NA-25 officials also provided us with complete documentation of
management controls for the contracts they manage. As shown in table 1,
for six of the seven contracts we reviewed, the national laboratories
that manage these contracts provided complete records of deliverables
and invoices as well as evidence that technical reviewers at the
national laboratories and/or contract officers at the national
laboratories and/or NA-25 reviewed and approved the deliverables and
invoices, respectively. (The seventh contract is the Oak Ridge
contract, mentioned above.) For example, for the two contracts we
reviewed that Brookhaven National Laboratory manages for NA-25, each
invoice on the contracts received at least one approval from technical
reviewers at the laboratory, and each financial transaction received
two approvals from contract managers. In another contract involving the
purchase of nuclear detection devices for deployment in Russia, the
national laboratory managing the contract--Pacific Northwest--provided
us with purchase orders for the contract as well as a receipt of
delivery so that we could verify that the goods purchased had reached
their destination prior to final delivery in Russia.
Both NA-23 and NA-25 maintain copies of key records, such as
deliverables and invoices within quick access to program and contract
managers, as evidenced by the ability of each office to provide these
records to us. NA-23 maintains these records at headquarters, while NA-
25 maintains the records at the national laboratories that provide the
day-to-day management over the contracts. However, it is important to
note that the laboratories should be able to provide NNSA managers with
complete and quick access to contract records, as the national
laboratories are contractors to DOE, and it is NNSA that is ultimately
responsible for monitoring the nonproliferation projects.
NA-23 and NA-25 each apply formal, procedural guidance that assists
technical reviewers and contract managers in maintaining management
controls. For example, because the contracts involve capital
procurement or acquisitions exceeding $5 million, NA-23 must apply the
rules and procedures specified in DOE Order 413.3, Project Management
for the Acquisition of Capital Assets. NA-23's contract managers
receive program guidance through work authorizations signed by an
authorized official at NNSA headquarters and guidance on the payment
process via DOE's Contract Specialist Guide 42.8, which specifies
procedures for review and approval of vouchers and invoices so that
contract managers will handle them in a timely and efficient manner.
According to NA-23 officials, Federal Acquisition Regulations also
stipulate many of the specific steps that NA-23 must undertake in the
planning, implementation, and review of the contracts that make up the
Seversk and Zheleznogorsk projects. NA-25 developed its own procedural
guidance, known as the Project Management Document, for technical
reviewers and contract officials. This guide provides instructions on,
among other things, project planning, funds management, reporting of a
project's ongoing progress and costs, contract management, and
procedures for putting important contract data into NA-25's Program
Management Information System.
Finally, according to NNSA's Director of Policy and Internal Controls
Management and an NNSA official in charge of acquisitions in the Office
of Defense Nuclear Nonproliferation, neither NA-23 nor NA-25 perform
periodic reviews of their management control processes, although NNSA's
Office of Engineering and Project Support, at the outset of NA-23's
projects, did perform a general review of NA-23's management controls.
GAO's management control guidelines state that agencies should monitor
and regularly evaluate their control activities to ensure that they are
still appropriate and working as intended.
NA-24 Provided Insufficient Documentation on Management Controls:
NA-24 could not provide evidence of the records necessary to document
its management controls. Despite our numerous inquiries from January
2005 to June 2005 and discussions with agency officials--including one
with NNSA's Principal Assistant Deputy Administrator--the documentation
we received on seven of the nine contracts we examined from this office
was either incomplete or did not provide a clear audit trail that we
could follow. (For the two other contracts, one managed by Brookhaven
National Laboratory and one managed by Los Alamos National Laboratory,
laboratory officials provided complete documentation of management
controls.) For example, for one contract managed by the Idaho National
Laboratory involving the discovery of bioactive compounds in Russia
that may be used in watershed protection or carbon sequestration:
* Ten of the 35 invoices did not include a document showing that NA-24
had authorized payment to the Russian contractors.
* Fourteen invoices on this contract did not include evidence that
Idaho National Laboratory's technical reviewer for the contract
approved the deliverable on which the invoice was based.
For another contract managed through NA-24 headquarters, Foundation for
Russian American Economic Cooperation (FRAEC), NA-24 provided us with
documentation, but we were able to determine very little about the
contract on the basis of this documentation because of the following
reasons:
* there appeared to be no explanation of the linkages between the work
products outlined in the contract, the deliverables, and the invoices,
and:
* we received fewer than half of the invoices for the contract and
fewer than one-fifth of the deliverables for the contract.
Senior officials with NA-24 told us that it doesn't need to keep copies
of key contract documents because the documents are maintained at the
national laboratories managing the contracts and accessible to NA-24.
However, the fact NA-24 was unable to obtain complete sets of records
on seven of the nine contracts we reviewed suggests otherwise. In
addition, NA-24 did not provide us with formal, written guidance that
provides managers with the procedures on how to process and maintain
key contract records, and the office appears to rely on each national
laboratory to provide its own procedural guidelines.
Finally, NA-24, like NA-23 and NA-25, does not perform periodic reviews
of its management control processes. GAO's management control
guidelines state that agencies should monitor and regularly evaluate
their control activities to ensure that they are still appropriate and
working as intended.
Conclusions:
On the basis of our review of the contracts, it appears that, if an
NNSA program office provides its managers with procedural guidance on
how to maintain management controls, the office does a better job at
implementing and documenting these management controls. In our view,
procedural guidance enables program and contract managers to implement
and document management controls in a systematic way, as evidenced by
the fact that NA-23 and NA-25 each use procedural guidance and were
able to document their controls.
In addition, maintaining managers' quick and complete access to key
contract records--regardless of whether the records are located at the
national laboratory or NNSA headquarters--appears to coincide with
maintaining and documenting management controls. Officials at NA-24
told us that they have access to all contract records through the
laboratories that manage their contracts, yet the office was unable to
provide us with these records.
Finally, as required by GAO standards for management controls, periodic
reviews of management controls would help the NNSA offices that we
reviewed determine whether they are adhering to their management
controls and whether these controls are relevant and effective. For
example, if NA-24 had performed a review of its management control
procedures, it might have discovered that it did not have on hand
complete sets of invoices and approvals of deliverables for each of the
office's nonproliferation contracts.
Recommendations:
To ensure that each NNSA office that we reviewed maintains complete
documentation of its management controls, we recommend that the
Secretary of Energy, working with the Administrator of the National
Nuclear Security Administration, require NNSA to take the following
three actions:
* each NNSA office use formal, procedural guidance that clearly states
management control processes;
* NNSA's program managers maintain quick access to key contract records
such as deliverables and invoices that relate to management controls,
regardless of whether the records are located at a national laboratory
or headquarters; and:
* NNSA perform periodic reviews of its management control processes to
be certain that each program office's management controls can be
documented and remain appropriate and effective.
Agency Comments and Our Evaluation:
We provided the Department of Energy's National Nuclear Security
Administration (NNSA) with a draft of this report for its review and
comment. NNSA's written comments are presented as appendix III. In its
written comments, NNSA notes that it will undertake a series of actions
in response to our recommendations, but also states that our report
creates an incorrect perception that the Defense Nuclear
Nonproliferation Program, particularly NA-24, is lacking in the
application of management controls.
In their comments to our draft report, NNSA's major points are as
follow:
1. We reviewed only contracts from a portion of NA-24, Global
Initiatives for Proliferation Prevention (GIPP), and we did not receive
complete documentation from NA-24 because we did not speak to the
procurement officer for the GIPP program;
2. NA-24 has implemented "very stringent" management controls;
3. We mischaracterize the management controls on two contracts--one
managed by the Idaho National Laboratory (INL) and the other managed by
NA-24 headquarters staff;
4. For an NA-25 contract managed by Oak Ridge National Laboratory, we
received incomplete documentation because of an initial
misunderstanding by the laboratory rather than a control problem within
NA-25, and that managers at Oak Ridge sent us the missing documents on
August 16, 2005.
5. NA-25 does conduct external program management reviews of its
management controls through a Technical Survey Team (TST).
First, regarding the scope of our review, at the outset of our work, we
asked NA-24 for a list of all its contracts in Russia and other
countries that were active from the beginning of June 2001 through the
end of June 2004, then took a nonprobability sample of those contracts.
We did not intentionally focus solely on NA-24's GIPP program.
Regardless, as we state in the report, results from nonprobability
samples cannot be used to make inferences about a population, and our
statements about NA-24 relate to its ability to document the management
controls for the contracts we examined. Regarding NNSA's comment that
we did not meet with the GIPP procurement officer, it is unclear to us
why NNSA is making this point. For most of the contracts we reviewed,
NA-24 provided us with documents directly. After providing NA-24 with a
fact sheet stating that we received incomplete documentation for seven
of the nine the contracts we reviewed, we met with NA-24's Assistant
Deputy Administrator on June 27, 2005, who provided us with additional
documentation that she characterized as "complete". After a thorough
review, we found much of this additional documentation to be
incomplete, indecipherable, and often duplicative of the information we
had already been given earlier in our review. On August 17, 2005, after
submitting our draft report to NNSA for comment, we met again with the
Assistant Deputy Administrator as well as the Associate Assistant
Deputy Administrator, the Principal Assistant Deputy Administrator for
Defense Nuclear Nonproliferation, and the GIPP procurement officer. At
this meeting, the procurement officer provided us with no new
documentation, and the NA-24 officials again asserted that the
documents they provided us in June were "complete". Furthermore, during
the meeting, while discussing some of the documents that we found to be
missing, we asked the officials to produce a few of these documents at
random from the materials they gave us in June. In most cases, they
were unable to do so. In fact, in the case of one missing document, an
NA-24 official stated that it "had to be somewhere in there" (included
in the materials submitted in June), but it was not.
Second, we disagree with NA-24's contention that it has implemented
"very stringent" management controls. Although NNSA cites a number of
actions that NA-24 has taken to strengthen its controls, the fact
remains that NA-24 did not provide us with sufficient documentation for
seven of the nine contracts we reviewed despite numerous requests from
us to do so. For example, on one contract managed by the Y-12 National
Security Complex, rather than providing a "real-time" technical
reviewer's approval for each deliverable, NA-24 provided us with a
single email from the technical reviewer, dated June 24, 2005, that
purported to cover two years' worth of missing approvals. This post-hoc
approval does not represent a satisfactory management control. Based on
what NA-24 provided us, we believe that the office's controls for some
contracts we reviewed are weak. In our view, NA-24 needs to implement
actions that address and strengthen the specific management controls we
identify in the report, and we are encouraged that NNSA has agreed to
implement our recommendations.
Third, for the INL-managed contract, NNSA asserts that it provided us
in June with the documentation we sought. However, the documents were
indecipherable to us because most were unlabeled, presented in no
particular chronological order, and rely on emails in which neither the
sender's nor recipients' positions were identified. For the
headquarters-managed contract, NNSA contends that, at our meeting on
August 17, 2005, it explained how the process of deliverables and
invoices for this contract (providing assistance to the Foundation for
Russian American Economic Cooperation) differs from the processes of
other contracts we examined. Although this may be the case, the
documents that NA-24 provided did not clearly explain or illustrate
those processes. More importantly, the documents that NA-24 provided
comprised fewer than one-half of the deliverables and one-fifth of the
invoices that we identified in June as missing.
Fourth, although we have fewer concerns about NA-25's management
controls, in the case of one of the contracts managed by Oak Ridge
National Laboratory, managers provided acceptable documentation of
technical reviewers' approvals on only three of six deliverables.
Although we agree with NNSA that officials at the laboratory did not
initially provide us with complete documentation of technical
approvals, as we state in the report, NNSA is ultimately responsible
for the controls on its contracts, even if the contracts are managed
day-to-day by someone else. In addition, the documentation that
officials at the laboratory sent us on August 16, 2005, did not provide
all the information that was missing. Rather, they provided
documentation of one additional technical review and resubmitted
materials that we had already informed Oak Ridge managers did not
represent acceptable documentation. As a result, we stand by our
recommendation that NNSA perform periodic reviews of management
controls for each of the three offices we examined.
Fifth, regarding NNSA's statement that TST performs external reviews of
NA-25's management controls, it is important to note that the TST is a
panel of experts established by DOE to determine if DOE-installed
security systems at Russian nuclear sites meet departmental guidelines
for effectively reducing the risk of nuclear theft. Moreover, we spoke
to NNSA's Director of Policy and Internal Controls Management on August
26, 2005, and he agreed that, while the TST provides useful project
oversight, it does not provide the kind of comprehensive review of
program management controls examined in our review. More importantly,
during the course of our work, NA-25 did not provide evidence of any
reviews of their management controls.
Finally, we believe it is important to note that management controls
were most evident on NA-24 and NA-25 contracts managed by national
laboratories from which we were able to obtain all the necessary
documentation directly, without any NNSA headquarters involvement. This
was especially noteworthy in the case of NA-24 because both of this
office's contracts that we determined demonstrated effective management
controls were managed by a national laboratory - Brookhaven or Los
Alamos - and in both cases we obtained all the necessary documents
directly from the laboratory managers.
Scope and Methodology:
To assess the effectiveness of the NNSA's management controls of its
nonproliferation projects, we identified the three offices within NNSA
that currently oversee and manage the nonproliferation projects that
fell within the scope of our work: (1) the Office of Nuclear Risk
Reduction (designated by NNSA as NA-23), (2) the Office of
Nonproliferation and International Security (NA-24), and (3) the Office
of International Material Protection and Cooperation (NA-25). To
identify what constitutes management controls, we consulted two GAO
documents: Standards for Internal Controls in the Federal Government
and Internal Control Management and Evaluation Tool. Using these
documents, we focused on the management controls associated with NNSA's
nonproliferation contracts. More specifically, we examined the
supervisory actions designed to ensure that the work performed under
the contract (known as "deliverables") meet the contract's
specifications and that payments for that work receive required
approvals and reach the intended recipients. To do this, we sought from
NNSA the following documents for each of the contracts we reviewed:
* statement of work;
* contract deliverables (or summary of the deliverable - as
practicable);
* technical approval from an NNSA or national laboratory official for
each deliverable;
* invoices for all deliverables;
* documentation of an independent payment authorization and review for
each deliverable, which should include at least one signature from a
national laboratory financial office official supervising the contract
and/or one official at NNSA headquarters;
* approval letter from NNSA or the national laboratory authorizing the
final payment of the contractors for a deliverable (as applicable);
* a guide to the process each national laboratory uses to approve a
deliverable and authorize payment.
To select a nonprobability sample of contracts, we obtained, from the
three offices in NNSA, a list of all their nonproliferation contracts
in Russia and other countries that were active from the beginning of
June 2001 through the end of June 2004. We identified contracts whose
value exceeded $1 million and arranged them in descending dollar value.
We chose the 15 contracts with the largest dollar value, subject to the
constraints that (1) no more than two contracts come from NA-23, 7
contracts from NA-24, and six contracts from NA-25 and (2) a single
national laboratory manages no more than three contracts in our
sample.[Footnote 13] We chose these constraints so that (1) the mix of
contracts among the three offices in our sample roughly reflected the
mix of contracts among the three offices in our original list and (2)
the sample would reflect a diversity of laboratories. Finally, we
included one contract from each of the three remaining laboratories
that were not yet included in our sample, bringing our final list to 18
contracts.
To ensure that NNSA's lists of its nuclear nonproliferation contracts
were sufficiently reliable for our purposes, we obtained responses to a
series of questions covering issues such as data entry, data access,
quality-control procedures, and the accuracy and completeness of the
data for the eight databases from which these data were drawn. Follow-
up questions were added, whenever necessary. Based on our review of
this work, we found these data to be sufficiently reliable for the
purpose of using these lists to select a nonprobability sample of 18
contracts for review.
In addition to contract documents, we also interviewed NNSA officials
in Washington, D.C., and Germantown, Maryland. To gather information
about the contracts we selected for review, we traveled to Brookhaven
National Laboratory in New York and Los Alamos and Sandia National
Laboratories in New Mexico to meet with laboratory officials and
program, project, procurement, and contract managers to explain our
review; to learn about NNSA programs and projects, as well as
procedures for implementing management controls; and to determine the
kinds of project documents we would need. To gather information and
documents on the remaining contracts, on the basis of what we learned
during these trips, we sent detailed written communications and
conducted teleconferences, numerous and frequent in some cases, with
the requisite staff in headquarters and at other national laboratories.
Specifically, we contacted staff at the Lawrence Berkeley and Lawrence
Livermore National Laboratories in California, the Oak Ridge National
Laboratory and the Y-12 National Security Complex in Tennessee, the
Pacific Northwest National Laboratory in Washington, and the Idaho
National Laboratory. We focused on identifying the controls implemented
to ensure that former Soviet Union partners meet contract terms before
the invoices for the deliverables are paid.
After we gathered and evaluated all the available documentation from
NNSA headquarters and the various national laboratories for each
contract, we assessed the contracts on the basis of the completeness of
their documentation and overall evidence of the implementation of
management controls. We placed each contract in one of three
categories: (1) contracts for which all or almost all of the necessary
documentation was provided--especially the major contract documents
(statement of work and task orders), deliverables, and technical and
independent contractual/financial approvals of each deliverable--
providing clear evidence of the systematic implementation of management
controls throughout the life-cycle of the contract; (2) contracts for
which most of the documents were provided, suggesting that systematic
implementation of management controls may be occurring but not clearly
indicating as much; and (3) contracts for which there were significant
gaps in necessary documentation, providing no basis to conclude that
systematic management controls are implemented.[Footnote 14]
We conducted our review between May 2004 and July 2005 in accordance
with generally accepted government auditing standards.
We are sending copies of this report to interested congressional
committees and the Secretary of Energy. We will also make copies
available to others upon request. In addition, the report will be
available on the GAO Web site at [Hyperlink, http://www.gao.gov] .
If you have any questions regarding this report, please contact Mr.
Aloise at (202) 512-3841 or [Hyperlink, aloisee@gao.gov]. Contact
points for our Office of Congressional Relations and Public Affairs may
be found on the last page of this report. GAO contacts and staff
acknowledgments are listed in appendix IV.
Signed by:
Gene Aloise:
Director, Natural Resources and Environment:
[End of section]
Appendixes:
Appendix I: NNSA Contracts:
The following table lists all NNSA contracts that we reviewed.
Project: Zheleznogorsk Fossil Fuel Plant;
NA: NA-23;
Managing Lab: HQ;
$ Contract: $570,500,000.
Project: Seversk Fossil Fuel Plant Refurbishment;
NA: NA-23;
Managing Lab: HQ;
$ Contract: $390,000,000.
Project: Luch - Task Order 1 - Blend-down HEU to LEU;
NA: NA-25;
Managing Lab: BNL;
$ Contract: $29,024,700.
Project: PBZ-C2 Comprehensive Physical Protection Upgrades to Russian
Navy Site;
NA: NA-25;
Managing Lab: SNL;
$ Contract: $10,737,740.
Project: CBC-B2 Comprehensive Physical Protection Upgrades to Russian
Navy Site;
NA: NA-25;
Managing Lab: SNL;
$ Contract: $10,716,770.
Project: TVZ01-Minatom Guard Railcar Procurement;
NA: NA-25;
Managing Lab: ORNL;
$ Contract: $9,262,000.
Project: COMP2BR-Comprehensive Physical Protection System Upgrades;
NA: NA-25;
Managing Lab: ORNL;
$ Contract: $9,050,000.
Project: Aquila - Purchase of Equipment to enhance the monitoring of
nuclear materials;
NA: NA-25;
Managing Lab: BNL;
$ Contract: $8,825,572.
Project: FRAEC -Technical and administrative assistance in planning,
establishing, and operating the international development centers;
NA: NA-24;
Managing Lab: HQ;
$ Contract: $3,716,319.
Project: Pipe Coating Facility (#63544) - Establish a production
facility within the city of Snezhinsk for the production of insulated
pipes;
NA: NA-24;
Managing Lab: BNL;
$ Contract: $2,600,628.
Project: T2-0192-RU - Development of a 3-D neutronics optimization
algorithm for application to cancer treatment facilities;
NA: NA-24;
Managing Lab: LBNL;
$ Contract: $1,620,000.
Project: Nuclear Non-Proliferation Center -The Analytical Center for
Nuclear Non-Proliferation will carry out research on several projects,
including a Quarterly Information Bulletin and Internet Analysis and
creation of an Internet page;
NA: NA-24;
Managing Lab: HQ;
$ Contract: $1,500,000.
Project: T2-0186-RU - Development of a Tank Retrieval and Closure
Demonstration Center in the Mining and Chemical Combine (MCC) to help
in retrieval and processing of radioactive wastes generated during
production of plutonium for nuclear weapons;
NA: NA-24;
Managing Lab: SNL;
$ Contract: $1,350,000.
Project: T2-0194-RU - The use of new technologies to process important
Ti alloys for medical applications and aerospace industries;
NA: NA- 24;
Managing Lab: LANL;
$ Contract: $1,290,000.
Project: T2-0204-UA - Welding and Reactive Diffusion Joining (RDJ)
repair technologies for use in aircraft and land-based turbine engines;
NA: NA-24;
Managing Lab: ORNL/; Y-12;
$ Contract: $1,260,000.
Project: SAIC/P.O. # 14436 - Nuclear material detectors for border
guards;
NA: NA-25;
Managing Lab: PNNL;
$ Contract: $2,330,700.
Project: T2-0244-RU - Development of an explosives detection system;
NA: NA-24;
Managing Lab: LLNL;
$ Contract: $1,260,000.
Project: T2-2002-RU - Discovery of bioactive compounds from selected
environments in Russia for products such as watershed protection and
carbon sequestration;
NA: NA-24;
Managing Lab: INL;
$ Contract: $1,110,000.
Source: GAO.
[End of table]
[End of section]
Appendix II: Documentation of Management Controls - GAO Assessment by
Contract:
NNSA Office: NA-23;
Managing Lab: HQ;
Project: Zheleznogorsk Fossil Fuel Plant;
Documents complete and management controls evident: 1.
NNSA Office: NA-23;
Managing Lab: HQ;
Project: Seversk Fossil Fuel Plant;
Documents complete and management controls evident: 1.
NNSA Office: NA-25;
Managing Lab: BNL;
Project: Luch Task Order 1 - Blend-down HEU to LEU;
Documents complete and management controls evident: 1.
NNSA Office: NA-25;
Managing Lab: SNL;
Project: PBZ C2 - Security Upgrades to Russian Navy Site;
Documents complete and management controls evident: 1.
NNSA Office: NA-25;
Managing Lab: SNL;
Project: CBC B2 - Security Upgrades to Russian Navy Site;
Documents complete and management controls evident: 1.
NNSA Office: NA-25;
Managing Lab: ORNL;
Project: TVZ01-Minatom Guard Railcar Procurement;
Documents complete and management controls evident: 1.
NNSA Office: NA-25;
Managing Lab: ORNL;
Project: COMP2BR - Comprehensive Physical Protection Systems Upgrades;
Documents and/or approvals incomplete: 1.
NNSA Office: NA-25;
Managing Lab: BNL;
Project: Aquila - Enhanced nuclear materials monitoring systems;
Documents complete and management controls evident: 1.
NNSA Office: NA-24;
Managing Lab: HQ;
Project: FRAEC - Technical and administrative assistance in planning,
establishing, and operating international development centers;
Documents complete and management controls evident: 1.
NNSA Office: NA-24;
Managing Lab: BNL;
Project: SEST #63544 - Pipe Coating Facility;
Documents complete and management controls evident: 1.
NNSA Office: NA-24;
Managing Lab: LBNL;
Project: T2-0192-RU - Neutronics Algorithm for Cancer Treatment;
Documents and/or approvals incomplete: 1.
NNSA Office: NA-24;
Managing Lab: HQ;
Project: Nuclear Non- Proliferation Center;
Documents complete and management controls evident: 1.
NNSA Office: NA-24;
Managing Lab: SNL;
Project: T2-0186-RU - Tank Retrieval;
Documents and/or approvals incomplete: 1.
NNSA Office: NA-24;
Managing Lab: LANL;
Project: T2-0194-RU - Ti Alloys for Medical Applications;
Documents complete and management controls evident: 1.
NNSA Office: NA-24;
Managing Lab: ORNL/Y-12;
Project: T2-204-UA - Welding and Reactive Diffusion Joining;
Documents complete and management controls evident: 1.
NNSA Office: NA-25;
Managing Lab: PNNL;
Project: SAIC/P.O. #14436 - Nuclear material detectors for border
guards;
Documents complete and management controls evident: 1.
NNSA Office: NA-24;
Managing Lab: LLNL;
Project: T2-0244-RU - Explosive Detection System;
Documents and/or approvals incomplete: 1.
NNSA Office: NA-24;
Managing Lab: INL;
Project: T2-2002-RU (subcontract 240) - Discovery of Bioactive
Compounds;
Documents and/or approvals incomplete: 1.
Total;
Documents complete and management controls evident: 10;
Documents and/or approvals incomplete: 5;
Documents provide no clear audit trail: 3.
Source: GAO.
[End of table]
[End of section]
Appendix III: Comments from the Department of Energy:
Department of Energy:
National Nuclear Security Administration:
Washington, DC 20585:
AUG 23 2005:
Mr. Gene Aloise:
Director:
Natural Resources and Environment:
Government Accountability Office:
Washington, DC:
Dear Mr. Aloise:
The National Nuclear Security Administration (NNSA) appreciated the
opportunity to have reviewed the Government Accountability Office (GAO)
draft report, GAO-05-828, "NUCLEAR NONPROLIFERATION: Better Management
Controls Needed for Some DOE Projects." We understand that this title
will be modified to reflect projects in Russia. We further understand
that this report is the result of a request from the House and Senate
Armed Services Committees to assess how we implement management
controls, i.e., the processes designed to ensure that work performed
under a contract meets contract specification and that payments go to
the contractors as intended.
The draft GAO report creates an incorrect perception that an important
element of our Defense Nuclear Nonproliferation Program is lacking in
the application of management controls related to oversight of
contracts. The Administrator and NNSA take very seriously their
responsibilities for internal controls and the appropriate management
of funds. We are required to abide by the Department's guidelines and
regulations, as well as specific NNSA implementation guidance,
regarding the distribution of funds and program management. In addition
to continuing our longstanding efforts to improve program and project
management across the board, we intend to implement each of the
recommendations noted in the draft GAO report either through the
appropriate program element, NNSA's Head of Contracting Activity, or
the Service Center.
NNSA has several areas of concern, however, with the GAO report that we
believe GAO should consider. First, while the NA-24 program element was
referred to repeatedly in this report, the audit was performed on the
Global Initiatives for Proliferation Prevention (GIPP) program - not NA-
24 as a whole, which includes over a dozen other programs. This audit,
therefore, only covered the GIPP component of the NA-24 portfolio. GIPP
consists of two program elements: the Initiatives for Proliferation
Prevention (IPP), and the Nuclear Cities Initiative (NCI). GIPP
contracts through several mechanisms including two international
organizations, a government organized non-governmental organization,
and our own procurement element. For those projects contracted by NNSA,
our procurement function maintains contract files that include eight of
the nine categories of documents requested by GAO. Regrettably, the
GIPP procurement officer was never contacted by GAO during its review
and was therefore never requested to provide the documentation now
cited to be lacking.
We believe that this report will mistakenly give the impression that
management controls are weak or nonexistent for the GIPP program when,
in fact, the opposite is true. Over the past six years, GIPP has
enacted very stringent management controls, in response to GAO,
Congressional, and White House guidance over the past several years.
With respect to IPP, for example:
* Fixed-price contracts are negotiated with schedules of deliverables
and costs prior to initiation of work;
* Technical monitors verify that deliverables comply with the contract
specifications prior to payment;
* Funds are paid directly to individual bank accounts of scientists
participating in the program; and,
* The Defense Contract Audit Agency (DCAA) performs independent annual
audits. These independent DCAA audit findings for several years
indicate that there are no cases in which funds have been lost or
diverted, illustrating another measure of our internal control of funds.
For its part, NCI has:
* Mandated exhaustive project reviews prior to approving any project
proposal, including independent review for projects exceeding $500K;
Instituted a Management Information System (MIS), with monthly
financial reporting requirements; and,
* Tied disbursement of funds to achievement of specific and measurable
milestones, and documented in the MIS and through quarterly and monthly
financial reports.
We also want to highlight several statements in the report we believe
to be misleading. For example, the report states that certain
documentation was not provided for a project managed by Idaho National
Laboratory (INL), including evidence that INL's technical reviewers had
approved each deliverable and that NNSA had authorized payment to the
Russian contractors. In fact, NNSA provided an e-mail certification
from the INL technical reviewer for each of the fourteen projects
identified; that certification indicates that the deliverable(s) had
been reviewed and approved. In addition, the authorization for payment
by NNSA for each project is in the form of signed task assignments,
which accompany each invoice forwarded to our procurement office.
Second, GAO's statement that "there appears to be no linkage between
contract work products, deliverables and invoices in the contract with
the Foundation for Russian American Economic Cooperation (FRAEC)" is
inaccurate. In an August 17, 2005 meeting with GAO, NNSA thoroughly
explained the explicit linkages between contract work products,
deliverables and invoices in the FRAEC contract. NNSA manages and
oversees the FRAEC contract directly, with no lab participation. FRAEC
operates two facilities for GIPP and submits detailed invoices for
their operating costs. FRAEC reports to NNSA on its activities on a
monthly and quarterly basis. We maintain additional operational
oversight of contractor activities through U.S. representation on the
IDC Board of Directors and through regular meetings with IDC staff.
Although the GAO correctly stated that there are no deadlines
associated with each task in the FRAEC contract, the ongoing nature of
FRAEC's responsibilities to operate the facilities does not lend itself
to a deliverable-based set of deadlines of the sort found in other
contracts. However, NNSA receives a detailed package on a monthly basis
with a breakdown of FRAEC's operational costs and receipts. Those
invoices are not accepted until all documents are reviewed and approved
by our contracting officials. We maintain that the level of detail
contained in the sample packages provided during the August 17 meeting
constitutes a substantial audit trail, and consequently, we request
that GAO reconsider its determination to the contrary, and to
reconsider its portrayal of management controls over the FRAEC
contract. In short, GIPP exercises extensive controls to ensure that
funds are tracked and deliverables verified at multiple points during
the implementation of a project.
Insofar as NA-25 is concerned, another program element mentioned in the
draft report, we acknowledge the statement, "For the ninth contract,
which involved comprehensive physical protection upgrades to Strategic
Rocket Site in Russia, Oak Ridge National Laboratory did not provide
complete documentation of approvals for deliverables or invoices," made
by the GAO in this report. We believe that this was a misunderstanding
on the part of the contractor.
The incomplete documentation referred to in the report was related to
the technical reviewer's approval of deliverables. Since the technical
personnel and financial personnel are co-located, approved deliverables
were verbally communicated and personally delivered to these personnel
in some cases, and followed up with signed invoices or email approvals,
as applicable. Because the original request for information was
misunderstood, Oak Ridge National Laboratory (ORNL) did not provide the
backup documentation for those few deliverables that were, at first,
verbally approved. Correspondence sent to the GAO auditor on August 16,
2005, contains the information originally submitted and the scanned
copies noting approval on those deliverables/invoices that were not
included in the original transmission. We hope that this response has
cleared up any issues. There was no intention to withhold information
and the information was readily available and accessible when
requested.
In addition, NNSA is concerned with the accuracy of the description of
NA-25's review of its management control process. As with other NNSA
activities, our projects follow guidance from work authorizations,
adhere to the appropriate Federal Acquisition Regulations, and also
follow the NA-25 Project Management Document, which is updated
annually. During the annual update process, we conduct reviews of our
program management controls and procedures for completeness.
Additionally, we have an external method to review program management
controls in the form of a Technical Survey Team (TST). The TST performs
annual reviews on each project in order to determine that proper
oversight has been exercised, that all guidance in the Project
Management Document has been followed and that, in general, the proper
management controls are in place. They look for good project
management, check contracts, deliverables and payments, and also review
the technical content of the projects. TST reports go directly to the
appropriate Assistant Deputy Administrator (ADA) with issues identified
that may need management attention.
NNSA will take the following specific actions related to the
recommendations mentioned in the draft report:
* The Office of Defense Nuclear Nonproliferation, under which all three
cited offices operate, is in the final stages of publishing its own
Program Management Manual, which will establish execution, evaluation,
and reporting requirements for all nonproliferation programs, including
training and certification standards for all program managers.
* GIPP is updating and developing more extensive guidance detailing
procedures and documentation, to be adhered to by all program
participants.
* GIPP is developing a system to track projects on a deliverable level
and record when payment has been initiated and paid. This system will
ensure timely access to contracts information at Headquarters. This
system will also allow for quick reference to project milestones, so
progress can be closely tracked.
* We will conduct reviews of our management controls on an annual
basis.
* The first GIPP review is currently underway as a part of the study to
develop the project tracking system discussed above and will continue
its DCAA audits on an annual basis.
* NA-23's first review will focus on the Earned Value Management System
of the Seversk Project and is scheduled for the first quarter of FY
2006. This review will be led by the U.S. Army Corps of Engineers.
* NA-25 will continue to review its management controls through the
process described above.
Should you have any questions related to this response, please contact
Richard Speidel, Director, Policy and Internal Controls Management.
Sincerely,
Signed by:
Michael C. Kane:
Associate Administrator for Management and Administration:
cc: Deputy Administrator for Defense Nuclear Nonproliferation:
Senior Procurement Executive:
Director, Service Center:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
F. James Shafer (202) 512-6002:
Staff Acknowledgments:
In addition, Nancy Crothers, Greg Marchand, Judy Pagano, Daren Sweeney,
and Kevin Tarmann made significant contributions to this report.
(360470):
FOOTNOTES
[1] Title 32 of the National Defense Authorization Act for Fiscal Year
2000 (Pub. L. No. 106-65 (1999)) created NNSA as a separately organized
agency within DOE.
[2] Countries in the former Soviet Union receiving these contracts
include Ukraine, Armenia, Georgia, Kazakhstan, Uzbekistan, and the
Kyrgyz Republic. Other countries involved in NNSA nonproliferation
projects include Greece and Turkey. However, of the 72 nonproliferation
projects that NNSA provided us, 66 of the projects, representing over
99.4 percent of their dollar value, involved work in Russia.
[3] DOE oversees the largest laboratory system of its kind in the
world. The mission of DOE's 23 national laboratories has evolved over
the last 55 years. Originally created to design and build atomic bombs
under the Manhattan Project, these national laboratories have since
expanded to conduct research in many disciplines--from high-energy
physics to advanced computing at facilities throughout the nation. Nine
of DOE's laboratories are large, multiprogram national laboratories
that dominate DOE's science and technology activities.
[4] Two other NNSA offices also do nonproliferation work in Russia: the
Office of Global Threat Reduction (NA-21) and Office of Fissile
Materials Disposition (NA-26). NA-21's mission is to identify, secure,
remove, and/or facilitate the disposition of vulnerable, high-risk
nuclear and other radiological materials that pose a threat to the
United States. Many of NA-21's projects were previously administered by
NA-24 and NA-25. NA-26's mission is to reduce inventories of surplus
fissile materials in a safe, secure, transparent, and irreversible
manner. NA-26's projects were not included because at the time we began
our work, they did not have significant nonproliferation contracts
under way outside the United States.
[5] See GAO, Nuclear Nonproliferation: DOE's Effort to Close Russia's
Plutonium Production Reactors Faces Challenges, and Final Shutdown Is
Uncertain, GAO-04-662 (Washington, D.C.: June 4, 2004).
[6] For some contracts under the auspices of NA-24's Initiatives for
Proliferation Prevention (IPP) program, the International Science and
Technology Center (ISTC) in Moscow, or the Science and Technology
Center of Ukraine (STCU) in Kiev manage the contract and make all
payments. In these cases, quarterly payments may be made before the
technical review is completed but, if the technical reviewer is not
satisfied with the progress of the work, the next quarter's payments
may be withheld until the issue is resolved. These centers were the
subject of an earlier GAO report, see GAO, Weapons of Mass Destruction:
State Department Oversight of Science Centers Program, GAO-01-582
(Washington, D.C.: May 10, 2001). See also Nuclear Nonproliferation:
DOE's Efforts to Assist Weapons Scientists in Russia's Nuclear Cities
Face Challenges, GAO-01-429 (Washington, D.C.: May 3, 2001).
[7] Those IPP contracts not managed by one of the science centers are
managed by a national laboratory or NNSA headquarters directly. In
these cases, the process for technical approval of deliverables is
similar, but NNSA headquarters must also approve deliverables before
payments are approved. The actual payments are made via the U.S.
Civilian Research and Development Foundation (CRDF). All IPP program
deliverable payments are made via third parties (ISTC, STCU, and CRDF)
directly into former Soviet weapons scientists' or engineers' bank
accounts in order to comply with the congressional requirement that all
payments be made tax free; these three organizations have the legal and
technical wherewithal to do so.
[8] Pub. L. No. 108-136, § 3611 (2003).
[9] See GAO, Weapons of Mass Destruction: Nonproliferation Programs
Need Better Integration, GAO-05-157 (Washington, D.C.: Jan. 28, 2005).
[10] See GAO, Cooperative Threat Reduction: DOD Has Improved Its
Management and Internal Controls, but Challenges Remain, GAO-05-329
(Washington, D.C.: June 30, 2005).
[11] Results from nonprobability samples cannot be used to make
inferences about a population, because in a nonprobability sample, some
elements of the population being studied have no chance or an unknown
chance of being selected as part of the sample.
[12] Although one of the contracts we examined involves work in
Ukraine, the other 17 contracts involve work in Russia, so we refer to
all work as being in Russia for simplicity of discussion.
[13] Only two contracts from NA-23 had dollar values exceeding $1
million.
[14] The Federal Acquisition Regulation and the Department of Energy
Acquisition Regulation provide regulatory requirements that may apply
to NNSA and laboratory contracts. These requirements include, for
certain contracts, systems for filing and maintenance of documents and
the necessity for implementation of management controls in accordance
with Comptroller General standards. We did not evaluate whether the
contracts reviewed for this report were managed and documented in
accordance with any applicable contracting regulations.
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