DOE/IG-0421

AUDIT

REPORT

THE DEPARTMENT OF ENERGY’S

INTERAGENCY AGREEMENT WITH

THE NATIONAL INSTITUTE OF

ENVIRONMENTAL HEALTH

SCIENCES

U.S. DEPARTMENT OF ENERGY

OFFICE OF INSPECTOR GENERAL

OFFICE OF AUDIT SERVICES

JULY 1998
July 21, 1998

MEMORANDUM FOR THE ACTING SECRETARY

FROM: Gregory H. Friedman

Acting Inspector General

SUBJECT: INFORMATION: Audit Report on "The Department of Energy's Interagency Agreement

with the National Institute of Environmental Health Sciences"

BACKGROUND 

The Department of Energy (Department) and the National Institute of Environmental Health Sciences

(NIEHS) entered into an interagency agreement in September 1992 to develop model safety and health

training programs for workers involved in waste cleanup activities at Departmental facilities. Under the

terms of the agreement, recipients of NIEHS training grants were to provide Hazardous Waste

Operations and Emergency Response (HAZWOPER) training to Departmental sites. By June 1997, the

Department had obligated over $40 million to the agreement. The objective of this audit was to

determine whether the interagency agreement with NIEHS was the most cost-effective method of

acquiring the training.

RESULTS OF AUDIT 

The agreement with NIEHS was not the most cost-effective method of acquiring HAZWOPER training.

The rates charged by NIEHS grantees were higher than the rates available from other nonprofit

organizations that were capable of providing the training. The Department entered into the agreement

without first determining whether the training could be acquired more economically by awarding grants

directly to nonprofit organizations. Also, the Department paid NIEHS through an automated withdrawal

system without verifying the reasonableness of the payments. As a result, the Department incurred

$6 million more than necessary for training in Fiscal Year (FY) 1996. We recommend that the Deputy

Assistant Secretary for Site Operations, Office of Environmental Management either terminate the

interagency agreement with NIEHS and award grants directly to nonprofit organizations, or modify the

terms of the agreement to require that training costs closely resemble prices available from competitive

nonprofit organizations.

MANAGEMENT REACTION 

Management did not concur with the finding or recommendation, stating that insufficient justification

existed to challenge what it perceived to be Congressional direction and preference. We found, however,

that the Congressional direction referred to did not preclude the use of cost-effective alternatives to

provide the required hazardous waste training. Management also stated that the finding was not
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supported by the record. Based on these comments, we performed additional analysis and

reconfirmed the accuracy of the cost data included in this report. Finally, management’s comments

indicated that the Department is working with NIEHS to improve reporting requirements and to

require NIEHS to make cost a criterion for award evaluations. We believe this is a positive step.

Attachment

cc: Deputy Secretary

 Under Secretary
Overview 

Introduction and Objective .........................................................1

Observations and Conclusions...................................................1

Interagency Agreement not Cost-Effective 

Details of Finding ......................................................................3

Recommendation and Comments .............................................4

Appendix 

Scope and Methodology ............................................................7

THE DEPARTMENT OF ENERGY'S INTERAGENCY

AGREEMENT WITH THE NATIONAL INSTITUTE OF

ENVIRONMENTAL HEALTH SCIENCES

TABLE OF

CONTENTS
Page 1

INTRODUCTION AND

OBJECTIVE

The Department entered into an interagency agreement with NIEHS in

September 1992 to develop and provide model safety and health training

programs for workers involved in waste cleanup at Departmental

facilities. Congress established the training programs in Section 3131 of

the National Defense Authorization Act for FYs 1992 and 1993.

Section 3131 authorized the Department to award grants to nonprofit

organizations to provide training and education for workers who are or

may be engaged in the cleanup of hazardous substances or emergencies

at nuclear weapon facilities. Section 3131 stated that the Department

should give preference to worker organizations and joint labor

management training programs that were grant recipients under Section

126 of the Superfund Amendments and Reauthorization Act of 1986

(Superfund Act). Congress gave NIEHS the responsibility for initiating

a training grants program under Section 126 of the Superfund Act.

The interagency agreement was established for a 5-year period which

ended September 9, 1997. Under the terms of the agreement, recipients

of NIEHS training grants were to provide HAZWOPER training to

workers at Departmental sites. The Department obligated over

$40 million to the agreement.

In September 1997, the Department entered into a new 5-year

agreement with NIEHS, continuing the performance period through

September 30, 2002. The basic award was for $8 million; however,

management stated that the new agreement could eventually cost

$40 million.

The audit objective was to determine whether the interagency agreement

with NIEHS was the most cost-effective method of acquiring

HAZWOPER training.

The agreement with NIEHS was not the most cost-effective method of

acquiring HAZWOPER training. The rates charged by NIEHS grantees

were higher than the rates available from other nonprofit organizations

that were capable of providing similar training. The Department entered

into the agreement without first determining whether the training could

be acquired more economically by awarding grants directly to nonproft

organizations. Also, the Department paid NIEHS through an automated

withdrawal system without verifying the reasonableness of payments.

As a result, the Department incurred $6 million more than necessary for

training in FY 1996. The audit identified material internal control

weaknesses that management should consider when preparing the

yearend assurance memorandum on internal controls.

Overview

The Department of Energy's Interagency Agreement

With the National Institute of Environmental Health Sciences

OBSERVATIONS AND

CONCLUSIONS
Page 2

Office of Inspector General

The Department of Energy's Interagency Agreement

With the National Institute of Environmental Health Sciences

 /s/
Page 3

The rates charged by NIEHS grantees were significantly higher than the

rates charged by other nonprofit organizations for similar training. The

grantees charged an average of $32.67 per hour for training provided

Departmentwide in FY 1996. However, we determined that local

nonprofit organizations could have provided similar training for an

average of about $11.25 per hour at Savannah River, Richland, and Oak

Ridge.

The nine grantees that provided the training charged between $19.69

and $70.85 per hour Departmentwide. Six of the grantees were labor

unions, two were college consortiums, and one was an occupational

health center. However, nonprofit colleges near Savannah River,

Richland, and Oak Ridge charged between $9.48 and $13.29 per hour

for similar or identical courses. The colleges provided HAZWOPER

training to Savannah River, Richland, and Oak Ridge in prior years and

were providing similar training to other customers at the time of our

audit.

Subpart 17.5 of the Federal Acquisition Regulation prescribes policies

and procedures applicable to interagency acquisitions. At the time the

Department entered into its first agreement with NIEHS, the regulation

required that interagency acquisitions be supported by written

determinations that the agreements were in the best interest of the

Government. The regulation was revised in October 1995 to add a

requirement for a written determination that the supplies or services

being acquired could not be obtained as conveniently or economically by

contracting directly with non-Government sources. This requirement

was established almost 2 years before the Department entered into its

follow-on agreement with NIEHS.

The Department made a written determination that the interagency

agreement with NIEHS was in the Government's best interest.

However, the Department did not perform sufficient analysis to ensure

that the training was, in fact, in the Government's best interest. The

Department did not compare the cost of training provided by the

grantees to the cost of training available from nonprofit organizations

near the sites. Instead of soliciting bids and comparing prices for

specific courses or training programs, the Department elected to acquire

all HAZWOPER training through the NIEHS agreement. The

Department did not perform cost analyses in September 1992, when the

original agreement was awarded, nor in September 1997, when the

follow-on agreement was awarded.

Details of Finding

INTERAGENCY AGREEMENT NOT COST-EFFECTIVE

Local Nonprofit

Organization Could

Have Provided Similar

Training for About

One-Third the Cost

Federal Regulations

Require That

Interagency

Agreements be in the

Government's Best

Interest

Department Did Not

Ensure the Agreement

Was in the Government's

Best Interest
Page 4

The Department reimbursed NIEHS through an automatic withdrawal

system without verifying the reasonableness of the payments.

Requests for payment under the interagency agreement are not

subject to audit or certification before the payments are made. The

Department’s Program Official is responsible for alerting the

Controller’s Office to make adjustments for inappropriate payments

in the event errors are detected after payment. Under the terms of the

agreement, NIEHS was required to provide annual reports to the

Program Official showing the amounts billed by individual grantees

during the year. The Project Manager, when interviewed, did not

have a copy of the annual reports for FY 1996 or prior years. Also,

when the FY 1996 report was obtained, the report did not include the

amounts billed by individual grantees during the year.

As a result of this condition, the Department incurred $6 million more

than necessary for training in FY 1996. The grantees charged $9.1

million for training that could have been obtained for

$3.1 million from local nonprofit organizations. At Savannah River,

Richland, and Oak Ridge, the Department incurred $4.4 million for

training that could have been provided by other nonprofit

organizations for $1.4 million, for a savings of $3 million. We

compared the cost of training reported by the NIEHS grantees to the

cost of training using the average hourly rates available from local

non-profit organizations. The other Departmental sites incurred $4.7

million for training that could have been provided for

$1.7 million, for a savings of $3 million. We compared the cost of

training available from NIEHS grantees at the other sites to the

estimated cost of training using the average hourly rate of $11.25

available from nonprofit organizations at Savannah River, Richland,

and Oak Ridge.

We recommend that the Deputy Assistant Secretary for Site

Operations, Office of Environmental Management either terminate

the interagency agreement with NIEHS and award grants directly to

nonprofit organizations, or modify the terms of the agreement to

require that training costs closely resemble prices available from

competitive nonprofit organizations.

Recommendation and Comments

Department Reimbursed

NIEHS Without Verifying

the Reasonableness of

Payments

Training Costs Were

Excessive

RECOMMENDATION
Page 5

The Office of Environmental Management did not concur with the

finding or recommendation, stating that the finding was not supported

by the record, and that insufficient justification existed to challenge

Congressional direction and preference.

Management did not agree that local colleges could provide similar

training for less cost than NIEHS. Management stated that the rates

proposed by the local colleges were unrealistically low. Management

believed that the colleges' instructors would be paid near minimum

wages and insufficient funds would be available to pay for indirect

costs. Additionally, management stated NIEHS did not charge a fee

for the administration of the grants, and the Department would have

to absorb such costs if it were to administer the grants directly.

Further, management stated that the Department recently awarded a

performance-based contract with a training rate that was eight times

more expensive than the average NIEHS rate, thus demonstrating the

cost-effectiveness of the NIEHS agreement.

Also, management stated that the NIEHS agreement was in the

Government's best interest. Management stated that 14 months

before the agreement was executed, the Department evaluated the

suitability of the NIEHS training program and concluded that the

program's technical quality was suitable to meet the Department's

needs. Further, management believed that NIEHS fully complied

with Federal competition requirements in awarding the grants.

Finally, management stated that the Department has made significant

improvements to the agreement with NIEHS. The Department will

assist NIEHS to evaluate grantees' proposals and will accompany

NIEHS on training review visits. Also, the Department is working

with NIEHS to improve reporting requirements and to require

NIEHS to make cost a criterion for award evaluations.

Section 3131 required the Department to give preference to worker

organizations and joint labor management training programs

administered by NIEHS. However, it did not preclude the use of

cost-effective alternatives, such as awarding grants directly to

qualified nonprofit organizations.

The local colleges' rates were calculated based on the actual cost of

Recommendation and Comments

MANAGEMENT REACTION

AUDITOR COMMENTS
Page 6

HAZWOPER training per student hour— not the average wage rate

for instructors. Also, NIEHS did, in fact, charge the Department an

administrative fee of about $260,000 for administering the grants

under the first interagency agreement. Further, we reviewed the

performance-based contract referenced by management and found

that management's calculation of the training rate was in error. The

rate in the new contract was actually $19.70 per student hour, which

was substantially less than the average NIEHS rate of $32.67 per

hour and not 8 times higher.

We agree that the Department performed a technical analysis of the

NIEHS training program before the initial agreement was established.

However, the Department did not perform a cost analysis to

determine if the NIEHS agreement was the most cost-effective

alternative for meeting HAZWOPER training requirements.

Therefore, we concluded that the Department did not perform

adequate analysis to fully determine whether the interagency

agreement was in the Government's best interest.

Finally, we are concerned that the actions taken by management in

recent months may not be enough to cause NIEHS grantees' rates to

be comparable to the rates available from competitive nonprofit

organizations. Additionally, we are concerned that the Department's

vulnerability to unnecessary training costs may have increased after

September 1997 because the new NIEHS agreement expanded the

scope of work to permit training in areas other than HAZWOPER

subjects.

Recommendation and Comments
Page 7

Appendix 1

The audit was performed from June 3, 1997, to February 27,1998, at the

following locations: Departmental Headquarters in Washington, D.C.,

and Germantown, Maryland; Savannah River Operations Office in

Aiken, South Carolina; Richland Operations Office in Richland,

Washington; Oak Ridge Operations Office in Oak Ridge, Tennessee;

NIEHS in Raleigh, North Carolina; Laborers/Associated General

Contractors in Pomfret Center, Connecticut; and International Union of

Operating Engineers in Washington, D.C. We tested grantees' training

records for September 1, 1995, through August 31, 1996, at the

Savannah River, Richland, and Oak Ridge Operations Offices.

To accomplish the audit objective, we:

• Reviewed Federal regulations governing interagency

agreements;

• Examined Federal and Departmental training requirements

and training curriculum guidelines for hazardous waste

training;

• Evaluated the terms of the Department's interagency

agreement with NIEHS;

• Analyzed grant files at NIEHS related to the Department's

interagency agreement;

• Visited two grantees to verify the training hours reported and

billed to NIEHS for the Department's training program; and

• Compared the training hours on the grantees' training rosters

with training hours reported in the contractors’ training

management systems at the individual sites.

The audit was performed in accordance with generally accepted

Government auditing standards for performance audits, and included

tests of internal controls and compliance with laws and regulations to the

extent necessary to satisfy the audit objective. Accordingly, the

assessment included reviews of Departmental policies, procedures, and

responsibilities for establishing interagency agreements and monitoring

training received and billed under the NIEHS interagency agreement.

Because our review was limited, it would not necessarily have disclosed

SCOPE

METHODOLOGY

Scope and Methodology
Page 8

training received and billed under the NIEHS interagency agreement.

Because our review was limited, it would not necessarily have disclosed

all internal control deficiencies that may have existed at the time of our

audit. We did not conduct a reliability assessment of computerprocessed data because only a very limited amount of computerprocessed data was used during the audit.

Scope and Methodology
IG Report No. DOE/IG-0421 

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