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DEPARTMENT OF ENERGY OVERSIGHT: WHAT 

IS NECESSARY TO IMPROVE PROJECT MANAGEMENT AND MISSION PERFORMANCE? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JULY 24, 2013 

Serial No. 113–76 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

GREGG HARPER, Mississippi 

PETE OLSON, Texas 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

BRUCE L. BRALEY, Iowa 

BEN RAY LUJAN, New Mexico 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

PETER WELCH, Vermont 

PAUL TONKO, New York 

GENE GREEN, Texas 

JOHN D. DINGELL, Michigan (ex officio) 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Kathy Castor, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 4 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 74 

WITNESSES

Daniel B. Poneman, Deputy Secretary, Department of Energy .......................... 9 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 79 

Gregory H. Friedman, Inspector General, Department of Energy ...................... 17 

Prepared statement .......................................................................................... 19 

Answers to submitted questions ...................................................................... 103 

David C. Trimble, Director, Natural Resources and Environment Team, Government Accountability Office ............................................................................. 29 

Prepared statement .......................................................................................... 31 

Answers to submitted questions ...................................................................... 106 

SUBMITTED MATERIAL

Hearing memorandum, dated July 22, 2013, submitted by Mr. Murphy ........... 75 

(1) 

DEPARTMENT OF ENERGY OVERSIGHT: WHAT 

IS NECESSARY TO IMPROVE PROJECT MANAGEMENT AND MISSION PERFORMANCE? 

WEDNESDAY, JULY 24, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:02 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Tim Murphy 

(chairman of the subcommittee) presiding. 

Members present: Representatives Murphy, Burgess, Blackburn, 

Scalise, Harper, Olson, Gardner, Griffith, Johnson, Ellmers, Braley, 

Lujan, Castor, Tonko, Green, and Waxman (ex officio). 

Staff present: Carl Anderson, Counsel, Oversight; Charlotte 

Baker, Press Secretary; Sean Bonyun, Communications Director; 

Annie Caputo, Professional Staff Member; Karen Christian, Chief 

Counsel, Oversight and Investigations; Andy Duberstein, Deputy 

Press Secretary; Vincent Esposito, Fellow, Nuclear Programs; Brad 

Grantz, Policy Coordinator, Oversight and Investigations; Brittany 

Havens, Legislative Clerk; Brandon Mooney, Professional Staff 

Member; Peter Spencer, Professional Staff Member, Oversight; 

John Stone, Counsel, Oversight; Brian Cohen, Democratic Staff Director, Oversight and Investigations, and Senior Policy Advisor; 

Kiren Gopal, Democratic Counsel; Hannah Green, Democratic Staff 

Assistant; and Stephen Salsbury, Democratic Special Assistant. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Good morning, and welcome. 

We convene this hearing as part of the committee’s ongoing oversight of the Department of Energy to review how the Department 

may improve its project management and its mission performance. 

The hearing will feature testimony from Daniel Poneman, the 

Deputy Secretary of Energy, who will describe and explain the reorganization of the Department’s management structure announced 

just last week by the new Secretary of Energy, Ernest Moniz. We 

will also hear from Greg Friedman, the DOE Inspector General, 

and from David Trimble, of the Government Accountability Office, 

both of whom will provide important context to help understand 

the potential of the Secretary’s plans. Welcome, gentlemen. 

2 

The announced reorganization makes some significant changes to 

the Department’s management structure with a more explicit focus 

on project management, so-called enterprise-wide mission support, 

and the integration of the agency’s science and applied energy programs. The new structure will transform the Office of Under Secretary, which previously managed the Department’s energy programs, into the Office of Under Secretary for Management and Performance. Under this setup, a new Under Secretary will manage 

the agency’s large and challenging environmental cleanup responsibilities as well as a number of agency-wide mission support offices, and national laboratory operations. 

The energy programs, including the Offices of Fossil Energy, Nuclear Energy, Energy Efficiency and Renewable energy, the Office 

of Electricity Delivery and Reliability will now be managed more 

closely with the Department’s Office of Science by an Under Secretary for Science and Energy. In addition, the Secretary plans to 

reform agency safety and security oversight and also plans to establish various secretarial councils to address select policy issues. 

On paper, these changes look like positive steps to help DOE address the tremendous challenges and opportunities before the agency. On the energy-mission side, we know that the prospects of 

North American energy production have surpassed all expectations 

in recent years. How this agency integrates the strength of its 

world-class science and engineering with its applied energy and 

various energy infrastructure programs to help maximize the benefits of this new reality for the American public is of key importance. 

Meanwhile, DOE’s core science and engineering missions must 

also confront the Federal Government’s tremendous environmental 

responsibilities. Fifty years of Cold War nuclear research, development and weapons production have left behind contaminated water 

and soils, and tens of millions of gallons and millions of cubic meters of waste that must be cleaned up. Cleanup costs, estimated at 

more than $250 billion, are a Federal liability surpassed only by 

Social Security and Medicare. 

Repeated audits for this subcommittee by GAO have found that 

over the past two decades, DOE has suffered from substantial and 

continual weaknesses in effectively overseeing contractors and 

managing large, expensive and technically complex projects. But 

multibillion-dollar projects aren’t the only problem. This past December, GAO told us that DOE did not have sufficient documentation to assess performance on almost 40 percent of its non-major 

projects—those costing less than $750 million. 

Lessons generated out of the serious security failure that occurred one year ago at the Y–12 site in Oak Ridge, Tennessee, has 

indicated how the successful reliance on Department contractors 

depends on strong and clear lines of accountability and on meaningful and consistent measurement of contractor performance. Attempts to institute what is called on the ‘‘eyes on, hands off’’ contractor oversight in recent years weakened accountability and were 

taken to a point that Washington had no clue about the mounting 

security risks in Tennessee. 

We heard testimony from then-Secretary Steven Chu’s own outside advisors that the Department’s decentralized management of 

3 

the national security sites allowed them to leverage their unique 

missions and geography to justify being held to different levels of 

security standards. Confused accountability and conflicting priorities and messages from Washington created a culture of what is 

called ‘‘tolerating the intolerable,’’ as one of the Secretary’s advisors 

put it. 

That episode relates to DOE’s governance of the nuclear security 

enterprise, but it points to accountability, management and oversight issues that require constant attention across all of the agency’s operations and projects if the agency is to perform its work 

safely, securely, and protective of taxpayers’ dollars. 

Of course, whether and how the Secretary’s efforts will help improve the documented deficiencies in the Department’s performance 

will remain to be seen. The object of today’s hearing is to build a 

record that will help the committee monitor progress and conduct 

constructive oversight in coming months. Our goal is to help ensure 

the Department can sustain management and performance improvements and develop a culture of accountability, safety and security that extends throughout the agency’s operations. 

[The prepared statement of Mr. Murphy follows:] 

PREPARED STATEMENT OF HON. TIM MURPHY

We convene this hearing as part of the committee’s ongoing oversight of the Department of Energy to look particularly at what is necessary for the Department to 

improve its project management and mission performance. 

The hearing will feature testimony from Daniel Poneman, the Deputy Secretary 

of Energy, who will describe and explain the reorganization of the Department’s 

management structure announced just last week by the new Secretary of Energy, 

Ernest Moniz. We will also hear from Greg Friedman, the DOE Inspector General, 

and David Trimble, of the Government Accountability Office, both of whom will 

provideimportant context to help understand the potential of the Secretary’s plans. 

The announced reorganization makes some significant changes to the Department’s managementstructure, with a more explicit focus on project management, socalled enterprise-wide mission support, and the integration of the agency’s science 

and applied energy programs. 

The new structure will transform the Office of Under Secretary, which previously 

managed theDepartment’s energy programs, into the Office of Under Secretary for 

Management and Performance.Under this set-up, a new Under Secretary will manage the agency’s large and challenging environmental cleanup responsibilities as 

well as a number of agency-wide mission support offices, and national laboratory operations. 

The energy programs—including the Offices of Fossil Energy, Nuclear Energy, 

Energy Efficiency and Renewable Energy, the Office of Electricity Delivery and Reliability—will now be managed more closely with the Department’s Office of Science, 

by an Under Secretary for Science and Energy. In addition, the secretary plans to 

reform agency safety and security oversight and also plans to establish various Secretarial councils to address select policy issues. 

On paper, these changes look like positive steps to help DOE address the tremendous challenges and opportunities before the agency. On the energy-mission side, we 

know that the prospects of North American energy production have surpassed all 

expectations in recent years. How this agency integrates the strength of its worldclass science and engineering with its applied energy and various energy infrastructure programs to help maximize the benefits of this new reality for the American 

public is of key importance. 

Meanwhile, DOE’s core science and engineering missions must also confront the 

Federal Government’s tremendous environmental responsibilities. Fifty years of 

Cold War nuclear research, development and weapons production have left behind 

contaminated water and soils, and tens of millions of gallons and millions of cubic 

meters of waste that must be cleaned up. Cleanup costs, estimated at more than 

$250 billion, are a Federal liability surpassed only by Social Security and Medicare. 

Repeated audits for this subcommittee by GAO have found that, over the past two 

decades, DOE has suffered from substantial and continual weaknesses in effectively 

4 

overseeing contractors and managing large, expensive, and technically complex 

projects. But multibillion-dollar projects aren’t the only problem. This past December, GAO told us that DOE did not have sufficient documentation to assess performance on almost 40 percent of its nonmajor projects—those costing less than $750 

million. 

Lessons generated out of the serious security failure that occurred one year ago 

at the Y–12 site in Oak Ridge, Tennessee, has indicated how the successful reliance 

on Department contractors depends on strong and clear lines of accountability and 

on meaningful and consistent measurement of contractor performance. Attempts to 

institute ‘‘eyes on, hands off’’ contractor oversight in recent years weakened accountability and were taken to a point that Washington had no clue about the mounting 

security risks in Tennessee. 

We heard testimony from then-Secretary Steven Chu’s own outside advisors that 

the Department’s decentralized management of the national security sites allowed 

them to ‘‘leverage’’ their unique missions and geography to justify being held to different levels of security standards. Confused accountability and conflicting priorities 

and messages from Washington created a culture of ‘‘tolerating the intolerable,’’ as 

one of the Secretary’s advisors put it. 

That episode relates to DOE’s governance of the nuclear security enterprise, but 

it points toaccountability, management, and oversight issues that require constant 

attention across all of the agency’s operations and projects—if the agency is to perform its work safety, securely, and protective of taxpayers’ dollars. 

Of course, whether and how the secretary’s efforts will help improve the documented deficiencies in the Department’s performance will remain to be seen. The 

object of today’s hearing is to build a record that will help the committee monitor 

progress and conduct constructive oversight in coming months. Our goal is to help 

ensure the Department can sustain management and performance improvements 

and develop a culture of accountability, safety, and security that extends throughout 

the agency’s operations. 

Mr. MURPHY. With that in mind, I look forward to an informative 

hearing, and I now recognize for 5 minutes the gentlelady from 

Florida, Ms. Castor, who is sitting in today for Ranking Member 

DeGette. 

OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Ms. CASTOR. Well, good morning, and thank you, Chairman Murphy. I am glad we are here today to discuss management and performance issues at the Department of Energy. 

This committee has held a number of productive hearings on 

these important but sometimes overlooked areas. On this committee, there is a bipartisan consensus and there has been for some 

time regarding the importance of making sure that DOE is effectively managing its contractors and its environmental management 

and keeping the nuclear complex safe. 

The recent confirmation of Energy Secretary Moniz and his efforts to reorganize the Department make this the perfect time to 

reexamine the longstanding agency weaknesses because for too 

long, the structure and culture at DOE has allowed for inadequate 

focus on management and performance. Because of the size of the 

agency, the complexity of its mission and its reliance on contractors—it is the largest civilian contracting agency in the Federal 

Government—it has proved difficult to set up effective performance 

and benchmarking procedures. But these tasks are essential in 

order to evaluate the quality of the work being carried out by the 

agency. 

So I am interested in hearing from the witnesses today about the 

progress the Department of Energy has made in resolving these 

issues and about the GAO’s and IG’s recent work in the area. The 

5 

Secretary’s announcement last week regarding DOE reorganization 

that created a new Under Secretary for Management and Performance is an encouraging development, and she must tackle these 

challenges head on. I am eager to learn more about how exactly 

this role will function and how the new integrated organizational 

approach will further DOE’s mission and help build a clean energy 

economy. 

It is a positive sign that DOE has a renewed commitment to resolving some of the thorny issues that have plagued the agency 

across multiple administrations. The effort must be sustained, and 

while there are no easy answers, I am confident that these challenges are not insurmountable. The Government Accountability Office designed contract administration and project management as a 

high-risk area in 1990. That it remains on the list is 2013 is proof 

of both the mistakes that have been made since that time and the 

inherent challenges of managing one of the most complex Federal 

agencies, especially when it comes to nuclear safety and security. 

Security lapses at the Nation’s nuclear weapons complex have 

been well documented from the Los Alamos National Lab to the 

shocking breach last year at the Y–12 facility in Oak Ridge, Tennessee, where an 83-year-old nun broke into what was supposed to 

be a highly secured area. 

GAO reported recently that DOE and NNSA continue to face 

challenges in ensuring that oversight of safety and performance activities is effective. I would like to hear from DOE today about 

what more the agency can do to instill a culture of safety and what 

security measures have been put in place over the past year to ensure that critically important facilities are protected. The persistent issues at our nuclear facilities make very clear the need for 

strong oversight from this committee. Because DOE so heavily relies on contractors to carry out its mission activities, effective contractor governance is critical. But in January of this year, the Inspector General reported that despite at least 5 years of effort, 

NNSA had not yet implemented fully function and effective contractor assurance systems. NNSA must improve upon these efforts. 

Finally, I continue to be concerned by DOE’s longstanding problems relating to inaccurate cost estimates. The GAO has reported 

that cost-estimate practices are not uniform and that cost-estimating guidance is not up to date. The bottom line here is that taxpayers’ dollars are at risk if the Department of Energy cannot accurately estimate costs. If we can conduct world-class nuclear research, then surely we can have consistent cost-estimating practices. So I would like to hear from the Deputy Secretary about 

what is being done to remedy these problems and how the new 

management structure will bring greater focus to these challenges. 

The restructuring at the Department of Energy presents an opportunity for a fresh start with respect to DOE’s management and 

performance issues. There is bipartisan agreement that these 

issues must be taken seriously, so thank you, Chairman Murphy, 

for holding this hearing today, and I look forward to having a productive session. 

Mr. MURPHY. The gentlelady yields back, and now I recognize the 

vice chair of the subcommittee, Dr. Burgess, for 5 minutes. 

6 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman, and thanks to our witnesses for being here today to help us as we study this subject. 

Last month, before the Subcommittee on Energy and Power, Secretary Moniz testified that he would be addressing the restructuring of management and performance within the Department of 

Energy as one of his top priorities. This admission comes as welcome news to those of us who have been concerned for several 

terms of Congress about the structure of the Department of Energy. As such, it is the intention of this hearing to identify what 

concerns Department officials have themselves, and going forward 

to the extent that they can be remedied. 

But I can’t help but reference, since the ranking member brought 

it up in her opening statement, in a previous subcommittee hearing 

many, many years ago when the problems at Los Alamos Lab were 

surfacing and apparently the thumb drive was a relatively new invention and was utilized for the inappropriate transfer of information, the response of the Director of Los Alamos was to fill the little 

USB ports with JB weld, which did solve the problem temporarily 

but I have got to believe that the clever criminal mind could find 

a way around that. 

Members of Congress are not the only ones who have apprehensions that the structure of the Department of Energy has given rise 

to security risks and mismanagement. Because of the way the Department of Energy has been set up, in 1990 the Government Accountability Office designated the Department’s contract management as high risk, saying that inadequate oversight has left it ripe 

for fraud and abuse. For the most part, Department of Energy has 

tried to address such high-risk areas, and the GAO has since removed the designation from its Office of Science. Since being listed 

as high risk, the Department of Energy has also taken the initiative to implement a corrective action plans and hopes to be removed from GAO’s list. Despite this effort, a total of 12 projects are 

currently either at risk of breaching performance baselines or expected to breach performance baselines. 

Unfortunate incidents have occurred. A year ago, last July, antinuclear activists entered the Y–12 complex and sprayed antiwar 

slogans on the exterior of a highly enriched uranium materials facility, a very dangerous exercise for them personally and certainly 

exposed the risks of that facility. 

To date, the GAO, the Department of Energy, the Inspector General and Secretary Moniz himself have stated that reorganization 

is paramount in order to address future concerns at the Department of Energy. I will tell you as a physician that in order to prescribe the right medicine, you need to correctly diagnose the problem, so with that in mind, I am looking forward to the testimony 

of our witnesses today, and thank you, Mr. Chairman. I will yield 

back. 

Mr. MURPHY. The gentleman yields back. Now to the ranking 

member of the full committee, Mr. Waxman of California, for 5 

minutes. 

7 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you Mr. Chairman. I appreciate you holding 

this hearing on management and performance at the Department 

of Energy. 

Secretary Moniz has gotten off to a very good start at DOE, and 

I am pleased with the extent to which he has moved quickly to 

make positive changes since his confirmation. I think he has a good 

vision for the agency. 

The energy subject at the top of my priority list is climate 

change. Secretary Moniz understands the challenges posed by rising levels of carbon pollution. He will play a key role in the implementation of the President’s National Climate Action Plan. His efforts to identify the threats our energy sector faces due to climate 

change and to improve energy efficiency are important. 

I am also impressed at the quick action he has taken to address 

the subject of this hearing: longstanding DOE problems with cost 

management, environmental compliance and physical security at 

the Nation’s nuclear complex. These are not new problems at DOE. 

The agency is the largest civilian contractor in the Federal Government. For more than 20 years, dating to the first President Bush, 

GAO has placed DOE contract management on its high-risk list. 

As one of his first acts, Secretary Moniz announced a reorganization that will create a new Under Secretary for Management and 

Performance. The President has nominated Beth Robinson, currently NASA’s Chief Financial Officer, to fill the position. This restructuring will put one official in charge of strengthening environmental cleanup, contracting oversight, human capital and other important functions. I am interested in learning today about how this 

reorganization will strengthen lines of authority, program oversight, and internal coordination. I appreciate that Deputy Secretary 

Poneman is here today to discuss these changes and to explain to 

us how this new focus will represent an improvement over previous 

agency efforts. I also appreciate that the DOE Inspector General 

and Mr. Trimble from the Government Accountability Office are 

here to provide their views on these changes. 

Mr. Chairman, I hope this is not the last hearing we hold on this 

subject. This committee has held multiple hearings on the subject 

of DOE management. Most recently, we held a hearing in March 

on the alarming incident involving an 83-year-old breaking into the 

highly secure DOE Y–12 facility in Tennessee. One of the conclusions from that hearing was that NNSA and DOE and their contractors need more oversight: from within their own agencies, from 

Congress, and from independent entities like GAO and the Inspector General. 

The organizational changes announced by Secretary Moniz are 

promising. We know that the longstanding problems at DOE will 

not be easy to solve. But the Department of Energy’s vital missions 

to develop new clean energy technologies and protect our nuclear 

stockpile are too important to the Nation for us to ignore. 

I look forward to today’s hearing and appreciate this committee’s 

efforts to make sure that DOE’s project management and mission 

performance improvements are on track. 

8 

I want to apologize in advance to the witnesses. I think every 

subcommittee on this committee is having meetings simultaneously 

this morning, and so I am telling each one when I am not present 

I am at the other one, and then I am going to go fishing. No, no, 

no, I will be at one hearing or the other, and I will try to get back 

here, Mr. Chairman. 

Mr. MURPHY. We thank the ranking member for being omnipresent as well, and the same goes for the chairman of the full 

committee, Mr. Upton, who will probably be joining us here, but 

thank you. 

I now want to introduce our witnesses for today. I mentioned 

them before but let me give you a little more background. The first 

is the Honorable Daniel Poneman, the Deputy Secretary for the 

U.S. Department of Energy, and as Deputy Secretary, he also 

serves as the Chief Operating Officer of the Department. Nominated to this position by the President on April 20, 2009, and confirmed by the Senate later, and in addition between April and May 

of 2013 was the Acting Secretary of Energy. Good to have you here, 

sir. 

Our second witness is the Honorable Gregory Friedman, the Inspector General for the U.S. Department of Energy. In this capacity, he is responsible for nationwide independent program of audits, 

inspections and law enforcement efforts related to the Department 

of Energy’s programs and operations. In addition to these responsibilities, Mr. Friedman also serves as a member of the Recovery 

Act Accountability and Transparency Board and the Government 

Accountability and Transparency Board. 

Our third witness, David Trimble, serves as Director in the U.S. 

Government Accountability Office Natural Resources and Environmental Group. In this role, he provides leadership and oversight on 

U.S. and international nuclear security and cleanup issues including a number of projects conducted for this subcommittee. 

I will now swear in the witnesses. As you are aware, this committee is holding an investigative hearing, and when doing so has 

the practice of taking testimony under oath. Do you have any objections to testifying under oath? Thank you. The chair then advises 

you that under the rules of the House and the rules of the committee, you are entitled to be advised by counsel. Do you desire to 

be advised by counsel during the hearing today? None of the witnesses wishes to be advised by counsel, so in that case, if you 

would please rise and raise your right hand, I will swear you in. 

[Witnesses sworn.] 

Mr. MURPHY. You are now under oath and subject to the penalties set forth in Title XVIII, section 1001 of the United States 

Code. You may now each give a 5-minute summary of your written 

statement. We will begin with Mr. Poneman. 

9 

STATEMENTS OF DANIEL B. PONEMAN, DEPUTY SECRETARY, 

DEPARTMENT OF ENERGY; GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY; AND DAVID C. 

TRIMBLE, DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT TEAM, GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF DANIEL B. PONEMAN 

Mr. PONEMAN. Thank you, Chairman Murphy, Ranking Member 

Castor and distinguished members of this subcommittee. I want to 

thank you all for the opportunity to discuss with you today the Department of Energy’s ongoing efforts to improve its management 

and performance. In the past month, the President has given two 

major policy speeches, and the work that we do at the Department 

of Energy lies at the heart of both of these issues. 

On June 19th in Berlin, the President echoed the nuclear security vision he first laid out in his 2009 Prague speech, calling on 

the global community to secure vulnerable materials, combat nuclear terrorism and proliferation, and build a sustainable and secure nuclear energy industry. As long as nuclear weapons exist, it 

is also this Department’s responsibility to ensure that the U.S. nuclear stockpile remains safe, secure, and effective. 

Less than a week later at Georgetown University, the President 

laid out a commonsense plan to reduce the effects of climate change 

by cutting dangerous carbon pollution, increasing the production of 

clean energy, and doubling down on energy efficiency. As the President said, and I am quoting, ‘‘A low-carbon, clean energy economy 

can be an engine of growth for decades to come.’’ By taking action 

to reduce carbon pollution, the United States can spark new jobs 

and industries building cleaner and more efficient energy technologies. 

These presidential priorities demand the best from us in terms 

of our performance, and so last week Secretary Moniz and I announced a reorganization that will better focus our efforts on all 

four mission areas of the Department: nuclear security, solving the 

Nation’s energy challenges, advancing fundamental science, and 

environmental stewardship. For the Department to carry out our 

critical work in these areas, the Secretary has made clear that we 

must renew our focus on improving our management and performance in addressing the challenges that the Department has faced 

for its entire history. And in doing so, we will follow the President’s 

direction to us earlier this month when he instructed his Cabinet 

to develop an aggressive management agenda for his second term, 

and I am quoting the President again, ‘‘that delivers a smarter, 

more innovative and more accountable government for its citizens.’’ 

The first major component of the reorganization expands the 

portfolio of the statutory Under Secretary for Science to include the 

energy technology portfolio, establishing the Office of the Under 

Secretary for Science and energy. Successful innovation for implementing the President’s all-of-the-above energy strategy requires 

the ability closely to integrate basic science, applied research and 

technology demonstration. This is especially important in light of 

the urgency of addressing climate change and the need rapidly to 

develop technologies to materially alter the trajectory of greenhouse gas pollution. 

10 

The second major component of the reorganization consolidates 

the primary mission and operational support functions of the Department within the Offices of the Under Secretary for Management and Performance and also includes the Office of Environmental Management and the Office of Legacy Management as part 

of its structure and functions. Moving the Office of Environmental 

Management under the purview of the Under Secretary for Management and Performance brings the Department’s strongest 

project management capabilities resident within the Office of Acquisition and Project Management directly to bear on one of the 

Department’s most vexing yet vital challenges: cleaning up the nuclear waste that is a legacy byproduct of the Cold War. 

In addition, transferring the Offices of Environmental Management and Legacy Management from the Under Secretary for Nuclear Security will allow this Under Secretary to focus exclusively 

on the NNSA’s forward-looking missions while entrusting the environmental management mission to an organization devoted to solving management challenges. Aside from increasing the management resources available to oversee large projects, consolidating 

mission-support functions in the Office of the Under Secretary for 

Management and Performance will place a senior policy official 

dedicated to the task of management improvement on a full-time 

basis. The consolidation of these mission-support functions such as 

the Office of Management and Administration and the Office of the 

Chief Human Capital Officer will clarify and strengthen the lines 

of authority and accountability of these functions. The goal will be 

to institute enterprise-wide solutions to common challenges faced 

by program officers across the complex such as information management, acquisition and human resources. Within the Office of 

Management and Performance, we will also establish a new organizational unit: the National Laboratory Operations Board. It will 

have responsibility for oversight of administrative, mission support 

and infrastructure management of the National Laboratory System. 

The third component increases coordination across the Department for a number of important cross-cutting policy issues that affect a number of programs across the Department. The Secretary 

has established the following secretarial councils: an Energy Council, a National Laboratory Policy Council, a Revised Credit Review 

Board including the establishment of a new Risk Committee, and 

the Cybersecurity Council. 

I would like to bring to your attention two final areas in which 

we are seeking to improve coordination between program offices: 

policy formation and physical security management. First, we are 

examining opportunity for consolidating and upgrading the policy 

analysis functions of the Department. This capability will be needed to support the government-wide Quadrennial Energy Review the 

President called for in his June 25th climate speech at Georgetown 

University. The core of our new systems analysis capability will be 

formed from the existing Office of Policy and International Affairs. 

We will also examine opportunities to draw from the policy expertise of the program offices. 

A second area under careful study is security management. I 

have previously testified before this subcommittee on the DepartVerDate Aug 31 2005 09:48 Mar 18, 2014 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\113-76~1\113-76~1 WAYNE
11 

ment’s management of security and improvements we have made 

in the last year’s Y–12 incident but this a matter of such serious 

that we must always continue our efforts to improve our performance, and I very much take account of the wise words of the chairman and ranking member here on that subject this morning. This 

includes thorough examination of broad issues of governance as 

they relate to the security of our category I nuclear materials. In 

recent months, we have been engaged in a thorough review of our 

security management, not just within NNSA or at the labs but enterprise-wide including assignment of authority and responsibility, 

contracting, performance measurement and accountability. 

Finally, the Department under the leadership of Secretary Moniz 

has made management improvement a top priority, and we are aggressively pursuing a broad agenda of initiatives. The Secretary 

has challenged us to further elevate our performance, and I appreciate the opportunity to appear before this subcommittee to discuss 

our efforts to do so and of course, I would be pleased to answer any 

questions from subcommittee members. Thank you. 

[The prepared statement of Mr. Poneman follows:] 

12 


86600.001

Prepared Statement 

The Honorable Daniel B. Poneman 

Deputy Secretary of Energy 

Before the Subcommittee of Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

July 24, 2013 

Chairman Murphy, Ranking Member DeGette and Members of the Subcommittee: 

Thank you for the opportunity to discuss with you today the Department of Energy's ongoing efforts to 

improve its management and performance. These efforts are more important than ever, in light of the 

increasing responsibilities the President has entrusted to the Department. 

Let me explain. In the past month, the President has given two major policy speeches, and the work 

that we do at the Department of Energy lies at the heart of both of these issues. 

On June 19, in Berlin, the President echoed the nuclear security vision he first laid out in his 2009 Prague 

speech - calling on the global community to secure vulnerable materials, decrease the number of 

nuclear weapons, and build a sustainable and secure nuclear energy industry. The Department of 

Energy plays a vital role in achieving President Obama's nuclear security objectives, including the 

prevention of nuclear terrorism and the grave and urgent threat it presents to our nation and the world. 

As long as nuclear weapons exist, it is also the Department's responsibility to ensure that the U.S. 

nuclear stockpile remains safe, secure, and effective. 

Less than a week later at Georgetown University, the President laid out a common sense plan to reduce 

the effects of climate change by cutting dangerous carbon pollution, increasing the production of clean 

energy, and doubling down on energy efficiency. For our part, the Department of Energy supports the 

groundbreaking science and innovation that is essential to the President's vision. As the President said, 

"A low-carbon, clean energy economy can be an engine of growth for decades to come." By taking 

action to reduce carbon pollution, the United States can spark new jobs and industries building cleaner 

and more efficient energy technologies. 

These presidential priorities demand the best from us in terms of our performance, and so last week the 

Energy Secretary and I announced a reorganization that will better focus our efforts on all four mission 

areas of the Department: nuclear security, solving the Nation's energy challenges, advancing 

fundamental science, and environmental stewardship. For the Department to carry out our critical work 

in these areas, the Secretary has made clear that we must renew our focus on improving our 

management and performance in addressing the challenges that the Department has faced for its entire 
13 


86600.002

history. For that reason, the reorganization will also focus heavily on increasing the focus on 

management and establishing a system of Departmental Councils to improve coordination of issues that 

cut across organizational lines. 

On July 12, the Secretary approved a top-level reorganization ofthe Department that reallocates the 

responsibilities ofthe Department's three Offices of Under Secretary. This reorganization has three 

primary objectives: 

To improve integration of the science and applied energy R&D programs of the Department by 

establishing an Under Secretary for Science and Energy; 

To improve project management and increase the effectiveness and efficiency of our mission 

support functions across the Department by establishing an Under Secretary for Management 

and Performance; and 

• To establish an enterprise-wide vision and coordination of major cross-cutting programs. 

The balance of my testimony will describe these changes, and how they will address the Department's 

mission and management challenges. 

Integrate the Science and Energy Portfolios 

The first major component of the reorganization expands the portfolio of the statutory Under Secretary 

for Science to include the energy technology portfolio, establishing the Office of the Under Secretary for 

Science and Energy. Successful innovation for implementing the President's "all of the above" energy 

strategy requires the ability to closely integrate basic science, applied research, and technology 

demonstration. It also should enable clear feedback loops, so barriers to technology development can 

inform scientific direction and inquiry. 

We also need to accelerate the innovation process - to rapidly translate scientific discovery into 

transformative technologies. This is especially important in light of the urgency of addressing climate 

change and the need rapidly to develop technologies to materially alter the trajectory of greenhouse gas 

pollution. 

Establishing the Office of the Under Secretary for Science and Energy is key to enabling this critical 

transformation, and to implement the recommendation ofthe President's Council of Advisors on 

Science and Technology (PCAST) and other studies that have pOinted to the need to improve integration 

of the science and applied energy R&D programs of the Department. This office will have direct 

oversight responsibility for the following offices: 

Office of Science (SC) 

• Office of Energy Efficiency and Renewable Energy (EERE) 

• Office of Nuclear Energy (NE) 

Office of Fossil Energy (FE) 

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Office of Electricity Delivery and Energy Reliability (OE) 

Office of Indian Energy (IE) 

Office of Technology Transfer Coordinator 

Elevate the Status of Management and Performance 

The reorganization consolidates the primary mission and operational support functions of the 

Department within the office of the Under Secretary for Management and Performance, and also 

includes the Office of Environmental Management and Office of Legacy Management as part of its 

structure and functions. The purpose of this consolidation is to elevate the Department's focus on and 

attention to these important functions. This office will have full-time oversight of the operational 

functions of the following offices: 

Office of Management and Administration (MA) 

Office of the Chief Human Capital Officer (HC) 

Office of the Chief Information Officer (CIO) 1 

• Office of Economic Impact and Diversity (ED) 

Office of Hearings and Appeals (OHA) 

Office of Environmental Management (EM) 

Office of Legacy Management (LM) 

Moving the Office of Environmental Management under the purview of the Under Secretary for 

Management and Performance brings the Department's strongest project management capabilities, 

resident within the Office of Acquisition and Project Management, directly to bear on one of the 

Department's most vexing yet vital challenges: cleaning up nuclear waste that is a legacy byproduct of 

the Cold War. These DOE sites include Hanford, WA, Savannah River, SC, and Paducah, KY. 

This reorganization will enable the new Under Secretary for Management and Performance to utilize a 

more concentrated level of resources and to apply better managerial discipline to address project 

management issues in this critical area. Reforms initiated over the past several years have begun to 

bear fruit. The GAO has narrowed the scope of its high-risk designation for DOEls contract 

administration and project management to major capital asset projects - those costing more than $750 

million. Efforts are now under way to address the serious challenges confronting several major 

construction projects. In addition, the Secretary has approved the formation of a new working group, 

representing offices across the Department, including NNSA, to continue on efforts to improve 

performance in this area. 

In addition, transferring the Offices of Environmental Management and Legacy Management from the 

Undersecretary for Nuclear Security will allow this undersecretary to focus exclusively on NNSA's 

forward-looking missions - including stewardship of our nation's nuclear stockpile and advancing the 

1 The CHCO and ClO would continue to have direct access to the Secretary so that they can provide 

broad policy advice and other functions, as specified by statute or regulation. 

3 
15 


86600.004

President's nuclear security agenda - while entrusting the Environmental Management mission to an 

organization devoted to solving management challenges, 

Improving the effectiveness and efficiency of Departmental operations has been a continuing effort over 

the past four years, and it remains a top priority forthe senior leadership of the Department, Although 

significant progress has been made, we understand clearly that we need to do much more, Aside from 

increasing the management resources available to oversee large projects, consolidating mission support 

functions in the Office of the Under Secretary for Management and Performance will place a senior 

policy official dedicated to the task of management improvement on a full-time basis, 

The consolidation of these mission support functions - such as the Office of Management and 

Administration and Office of the Chief Human Capital Officer - will clarify and strengthen the lines of 

authority and accountability of these functions, The goal will be to institute enterprise-wide solutions to 

common challenges faced by program offices across the complex, such as information management, 

acquisition, and human resources, The Chief Human Capital Officer and Director of the Office of Civil 

Rights will continue to have direct access to the Office of the Secretary to provide broad policy advice 

and other functions - but day-to-day operations will be under the oversight of the Under Secretary, 

Within the Office of Management and Performance, we will also establish a new organizational unit: the 

National Laboratory Operations Board, It will have responsibility for oversight of administrative, mission 

support, and infrastructure management of the National Laboratory System, This office will enable us to 

establish an enterprise-wide effort to tackle the parallel administrative issues affecting the labs, 

regardless of which program office administers each of them, 

Improve Enterprise-Wide Management Coordination 

We are also planning ways to increase coordination across the Department, 

For a number of important cross-cutting policy issues, which all affect a number of programs across the 

Department, the Secretary has established the following Secretarial Councils: 

An Energy Council; 

A National Laboratory Policy Council; 

A revised Credit Review Board, including establishment of a new Risk Committee; and 

A Cyber Security Council. 

We are also reactivating and restructuring the Secretary of Energy Advisory Board (SEAB), with the 

restructured SEAB having four standing subcommittees to address each of the major Departmental 

misSion areas, 

I would like to bring to your attention two final areas in which we are seeking to improve the 

coordination between programs offices: policy formation and physical security management, 

4 
16 


86600.005

First, we are examining opportunities for consolidating and upgrading the policy analysis functions of 

the Department. A PCAST report recommended a broader systems approach to energy policy planning. 

This capability will be needed to support the government-wide Quadrennial Energy Review the 

PreSident called for in his June 25 climate policy speech at Georgetown University. The core of our new 

energy systems analysis capability will be formed from the existing Office of Policy and International 

Affairs. We will also examine opportunities to draw from the policy expertise of the program offices. 

A second area under careful study is security management. I have previously testified before this 

Subcommittee on the Department's management of security, and improvements we have made in the 

wake of last year's Y-12 incident, but this is a matter of such seriousness that we are committed to 

continue our efforts to improve our performance, including through examination of broad issues of 

governance as they relate to the security of our Category I nuclear materials. In recent months, we have 

been engaged in a thorough review of our security management -not just within NNSA or at the labs, 

but enterprise-wide - including delegation of authority and responsibility, contracting, performance 

measurement and ultimate accountability. 

We are undertaking this assessment deliberately, and I want to assure the Committee that we are 

working on this issue, and plan to adopt organizational and management changes when we conclude 

our internal review. We will of course keep the Subcommittee informed of these efforts. 

Conclusion 

These organizational changes will enhance the Department's ability to carry out its responsibilities to 

the President and to the Congress, while improving our financial stewardship at a time of tight fiscal 

constraints. Reducing the cost of doing business within the Department will enable us to allocate more 

resources toward our mission objectives in national security, science, clean energy, and environmental 

stewardship. 

The Department, under the leadership of the Secretary, has made management improvement a top 

priority, and we are aggressively pursuing a broad agenda of initiatives. He has brought new ideas to 

the Department, drawing from the work of the President's Council of Advisors on Science and 

Technology and other inputs, as well as from his prior service to DOE. The Secretary has challenged us 

to further elevate our performance, and I appreciate the opportunity to appear before the 

subcommittee to discuss our efforts to do so. I would be pleased to answer any questions from 

Subcommittee members. 

5 
17 

Mr. MURPHY. Thank you. 

Mr. Friedman for 5 minutes. 

STATEMENT OF GREGORY H. FRIEDMAN 

Mr. FRIEDMAN. Mr. Chairman, Ms. Castor, members of the subcommittee, I appreciate the opportunity to testify at your request 

on the major challenges facing the Department of Energy. 

The Department is, as has been described, responsible for executing some of the Nation’s most complex and technologically advanced missions. The Office of Inspector General provides independent oversight of the Department’s operations to promote economy and efficiency and to detect and prevent fraud, waste and 

abuse. 

My office annually identifies what it considers to be the most significant management challenges facing the Department. For 2013, 

this list includes operational efficiency and cost savings, contract 

and financial assistance award management, cybersecurity, energy 

supply, environmental cleanup, human capital management, nuclear waste disposal, safeguards and security, and stockpile stewardship. Because of their complexity, these challenges are not amenable to immediate resolution. Therefore, they must be addressed 

through a sustained effort over time. 

In 2012 and 2013, due to what appeared to us to be obvious 

looming budget constraints, we identified operational efficiency and 

cost savings as the Department’s preeminent management challenge. In doing so, we presented the Department with five suggestions to optimize operations. These include applying the Quadrennial Technology Review strategic planning concept to the Department’s entire science and technology portfolio, eliminating costly 

duplicative National Nuclear Security Administration functions, 

evaluating, consolidating and/or rightsizing the Department’s laboratory and technology complex, reprioritizing the Department’s 

environmental remedial efforts with the goal of funding work on a 

risk basis, and realigning the current structure of the Department’s 

physical security apparatus. These suggestions provide only a 

starting point for further discussion and examination. They represent approaches that we readily acknowledge are difficult to implement, highly controversial and politically challenging. 

Virtually all of our work intersects with one or more of the management challenges that I alluded to earlier. In my written statement, I have summarized three recent reports that are reflective 

of this relationship. These include first contract management, 

project management and quality assurance concerns with the Department’s contractor-managed construction of the Waste Treatment and Immobilization Plant—the WTP—in Hanford, Washington. The current cost estimate for the WTP project is over $12 

billion, or three times larger than its original budget. Second, 

issues relating to the implementation and effectiveness of contractor assurance systems by NNSA and its contractors, and finally, efforts by the Department to reduce international travel as 

a means of reducing Federal expenditures. 

In its invitation letter, the subcommittee expressed specific interest in the status of project management at the Department. Your 

interest reflects a concern that we share and one that is clearly of 

18 

prime importance to the Department’s senior leaders. The Department currently has several major projects including the WTP that 

are significantly over budget and face considerable delays. As I 

have testified previously, there are several common threads central 

to these and related contract and project management problems. 

Improvements are needed to ensure that project scopes and supporting cost estimates are realistic, manageable, recognizing the 

technical challenges facing many Department efforts. The change 

control management is adequate and project baselines are updated 

on a real-time basis to maintain their effectiveness as a primary 

tool. Contract terms are kept current to track with project events, 

contractor performances measured against established metrics including realistic and reliable cost estimates, Federal staffing is sufficient both in terms of size and expertise to provide effective contract and project oversight, and finally, the project have focused, 

empowered and consistent Federal project manager leadership 

throughout their lifecycle. 

As Deputy Secretary Poneman has discussed, Secretary Moniz 

recently unveiled a new structure for the Department, which is designed to focus on key programmatic priorities and agency performance and management. We are hopeful that the new initiatives, as 

widespread as they are, as has been described the Deputy Secretary, will help to address the Department’s management challenges. We look forward to working with Secretary Moniz, Deputy 

Secretary Poneman, program officials and the Congress to enhance 

departmental operations and in so doing to advance the interest of 

the U.S. taxpayers. 

Mr. Chairman and members of the subcommittee, this concludes 

my statement. I would be pleased to answer any questions that you 

may have. 

[The prepared statement of Mr. Friedman follows:] 

19 


86600.006

Statement of Gregory H. Friedman 

Inspector General 

U.S. Department of Energy 

Before the 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

FOR RELEASE ON DELIVERY 

10:00 am 

July 24, 2013 
20 


86600.007

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity to testify at your 

request on the major challenges facing the Department of Energy as identified by the Office of 

Inspector General (01G), 

The Department of Energy is a multi-faceted agency responsible for executing some of the 

Nation's most complex and technologically advanced missions. These missions include cutting 

edge work in basic and applied science, clean energy innovation, energy efficiency and 

conservation, environmental cleanup, nuclear weapons stewardship, and efforts to enhance 

national security. In order to execute this diverse portfolio. the Department receives an annual 

appropriation approaching $30 billion, employs nearly 110,000 Federal and contractor personnel, 

and manages assets valued at over $180 billion. 

The OIG providcs independent oversight of the Department's operations through a rigorous 

program of audits, inspections, and investigations designed to promote economy and efficiency, 

and to detect and prevent fraud, waste, abuse, and mismanagement. A primary aspect of our 

work involves the examination of Department programs and procedures through a combination 

of performance and financial reviews, including cyclical evaluations of management and 

operating costs of the Department's numerous contractors. Much of our work is governed by an 

annual risk asscssment process. Through this process, the OIG establishes its internal operating 

strategy based on an overarching goal of addressing the Department's most pressing issues on a 

pri0l1ty basis. 1 

Department of Energy Management Challenges 

Updated annually. the OIG identifies what it considers to be the most significant management 

challenges facing the Departmcnt. We have a unique, independent perspective, which allows us 

to provide management, the Congress, and the taxpayers with an unfiltered view of Departmental 

operations. For Fiscal Year (FY) 20 \3, our list of significant management challenges includes: 

• Operational Efficiency and Cost Savings 

• Contract and Financial Assistance A ward Management 

I A full inventory of published OIG reports can be found at: http://energy.gov/ig!calendar-year-reports. 
21 


86600.008

• Cyber Security 

• Energy Supply 

• Environmental Cleanup 

• Human Capital Management 

• Nuclear Waste Disposal 

• Safeguards and Security 

• Stockpile Stewardship 

Given the inherent nature and eomplexity of these challenges, they are not amenable to 

immediate resolution. Thus, these challenges must be addressed through a concentrated, 

persistent effort over time. 

Office of Inspector General Activities 

Our inventory of work products provides the underpinning of our management challenges report. 

Virtually all of our work intersects with one or more of these challenge areas. I would like to 

discuss three recent reports that are reflective of this relationship. These include: project 

management, environmental cleanup, and contract administration issues at the Hanford Site; 

general Department contractor governance issues; and management of foreign travel by the 

Department and its contractors. 

Waste Treatment and Immobilization Plant Ouality Assurance2 

An OIG review reported on problems with the Department's contractor-managed construction of 

the Waste Treatment and Immobilization Plant (WTP) in Hanford, Washington, a project with an 

estimated cost of over $12 billion or three times larger than its original budget. Our review 

found that contractor management of this project, one of the largest undertakings of its kind, did 

not always meet quality assurance and contract requirements. To shield plant workers from 

intense radiation during WTP operations, processing vessels are to be located in scaled 

compaltments called black cells. Because there is no engineered access to black cells once 

operations begin, it is critical that processing vessels last for the WTP's 40-year expected design 

2 The Department of Energy's $12.2 Billion Waste Treatment and Immobilization Plant-Quality Assurance l;suesBlack Cell Vessels, DOEIIG-0863. available at: http://energy.gov/sites/prod/files/IG-0863 O.pdf 

2 
22 


86600.009

life without in-service inspection and maintenance. However, the contractor responsible for the 

WTP effort procured black cell vessels that were missing required documentation intended to 

provide evidence that welds to the vessels met specifications. As we reported, this was 

inconsistent with the project's quality assurance process. 

Wc also found that the Department paid the WTP contractor a $15 million incentive fee for 

production of a vessel that was later determined to be defective. Our review disclosed that 

although the Department demanded return of the fee, it was never actually reimbursed. 

Department management told us the $15 million incentive fee payment issue was included for 

consideration as part of the WTP contract restructuring; however, management could not furnish 

documentation to explain or support the rationale for its decision to forego recovery of the fee. 

While it has a number of unique characteristics, the history of the WTP project is, in many 

ways, emblematic of the Department's long-standing problems with contract administration and 

project management, particularly as they relate to the Department's $268 billion environmental 

remediation liability. 

Contractor Governance3 

Given the Department's ncar total reliance on contractor support for mission execution, the 

importance of efforts related to enhancing contractor governance, and contractor performance, 

transparency, and effecti veness, cannot be overstated. In 2012, to assess Department progress 

in this area, we reviewed the status of contractor assurance systems by NNSA and its 

contractors. 

We found that since July 2007, the Department and NNSA had required contractors to 

implement self-assessment systems to measure performance and help ensnre effective and 

efficient mission accomplishment. NNSA's approach relics on contractors to assess and 

evaluate their own performance, with Federal oversight of contractor activities, especially with 

regard to nuclear safety and secun ty. 

3 National Nuclear Security Administration Contractor Govemance, DOEfIG-0881, available at: 

http://cnergy.gov/sites/prod/files/IG-0881.pdf. 

3 
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86600.010

Yet, as we reported, despite at least five years of effort, NNSA and its support offices and site 

contractors still had not implemented fully functional and effective contractor assurance 

systems. Specifically: 

• The contractor governance system was rendered ineffective by what Federal site level 

officials referred to as an "eyes on, hands off" approach to contract management; 

• Contractor self-assessments were not effective in identifying weaknesses; 

• Contractor weaknesses were not effectively communicated to senior management 

officials; and 

• Performance metrics tracked in the assurance systems were not clearly linked to those 

contained in the contractor performance evaluation plans used to determine fees. 

We found that NNSA had placed substantial reliance on its contractors' ability to self identify 

and COlTcct weaknesses, even those that have the potential to threaten the safe, secure, effective 

and efficient operation of the Department's national security facilities. Our findings suggested 

that sueh reliance may be unjustified absent more intense Federal validation of contractor 

assertions. 

The underlying fact pattern associated with a July 2012 security breach at the Y-12 National 

Security Complex in Oak Ridge, Tennessee, as well as an ensuing compromise of Protective 

Force secUlity tests at the facility, illustrated the potential severity of concerns regarding 

NNSA's contractor governance approach. While there were a number of relevant factors, the 

most significant may have been the "eyes on, hands off' approach attributed to the Federal staff 

providing contract oversight at Y -12. 

The Department's Management o(Foreign Traver 

Given its extensive reliance on contractors, measures to address the management challenges 

facing the Department, particularly in the area of efficiency and cost savings, must inherently 

involve issues related to contract governance, contract administration, efforts to measure 

4 The Department of Energy's Management of Foreign Travel, DOEIIG-0872, available at: 

http://energy.gov/sites/prod/filesIDOE-IG-0872.pdf. 

4 
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86600.011

contractor performance, and efforts [0 hold contractors accountable. In this context, we recently 

examined the Department's response to a Presidential directive to reduce travel as a means of 

reducing Federal expenditures. To its credit, in response to the Presidential directive, the 

Department implemented a mandatory 30 percent reduction in Federal employee travel. 

However, parallel action had not been taken to manage or control foreign travel by contractors. 

Consistent with the Department's organizational structure and its significant reliance on 

contractor assistance, the vast majority of these taxpayer-funded trips, in fact about 85 percent, 

were taken by contractor employees. Had the Department applied the 30 percent reduction 

criteria to the international travel costs incurred by its nearly 100,000 contractors, as much as 

$15 million could be saved each year. While we would not anticipate total equality between the 

treatment of Federal and contractor personnel, in our view in this case, an across-the-board 

application of the requirement to reduce travel would have been both appropriate and beneficial. 

Operational Efficiency and Cost Savings 

As part of our Management Challenges report for FY's 2012 and 2013, we concluded that 

Federal budgetary concerns made finding ways to optimize agency operations and reduce costs 

the preeminent management challenge facing the Department. In this context, we added 

Operational Efficiency and Cost Savings to our list of management challenges and presented the 

Department with five suggestions for reducing its cost of operations and enhancing agency 

efficiency. These proposals included: 

• Applying the Quadrennial Technology Review (QTR) strategic planning concept to the 

Department's entire science and technology portfolio; 

• Eliminating costly, duplicative NNSA functions; 

• Evaluating, consolidating, and/or rightsizing the Department's laboratory and technology 

complex; 

• Reprioritizing the Department's environmental remediation efforts with the goal of 

funding the work on a risk basis; and 

• Re-evaluating the cun'ent structure of the Department's physical security apparatus. 

5 
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86600.012

Our intent was, and continues to be, to highlight possible ways in which the Department can 

reduce the overall cost of operations and become more efficient. While the suggestions are 

intended to provide only a starting point for further discussion and examination, we are mindful 

of the fact that they represent approaches that could be difficult to implement, highly 

controversial, and politically challenging. The following five summaries provide additional 

details on these suggestions. 

Expand the OTR strategic planning concept to the Department's entire science and technology 

portfolio: In September 2011, the Department released its inaugural QTR, in essence a rescarch 

and developmcnt strategic plan. In his message prefacing the report, then-Secretary Chu referred 

to the hard budget choices and fiscal challenges facing thc Department, concluding that the 

Department must find ways to intelligently choose between the many technically viable activities 

it could pursue. The QTR, advanced as a mechanism to guide these difficult choices, providcd 

quality analysis and important information. However, as beneficial as it may be, the scope was 

limited to the Depattment's energy-related technology sector. We concluded that the discipline 

of the QTR process should be applied to the Department's entire set of science and technology 

activities. This typc of large-scale planning effort would enable the Depattment to better 

evaluate its multi-billion dollar per year science effort to determine whether initiatives are 

aligned with current priorities; identify metrics to help decision makers confirm that research 

dollars are used for the highest and best purposes; and determine whether the work of its separate 

system of 16 Federally Funded Research and Development Centers (FFRDC) are properly 

integrated. 

Eliminate duplicative NNSA functions: Created in response to national security concerns, NNSA 

was established as a separatcly organized agency within the Department under the Defense 

Authorization Act of 2000. NNSA maintains a set of distinctly separate overhead and indirect 

cost operations that often duplicate existing Departmental functions. These include human 

resources, general counsel, congressional and public affairs, procurement and acquisition, and 

information technology. These expenses arc significant and parallel functions that exist at 

Headquarters as well as a number of field sites where Department and NNSA activities are colocated. In addition to cost considerations, these redundancies can complicate communications 

6 
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86600.013

and program execution and cause different interpretations of core Departmental policy. We 

recommended that the alignment be closely examined with the goals of consolidating 

overlapping efforts, preserving scarce resources, and improving operations. 

Evaluate, consolidate, and lor rightsize the Department's laboratory and technology complex: 

The Department operates 16 FFRDCs at an annual cost of more than $10 billion.5 Of this 

amount, nearly $3.5 hillion was spent on general administrative functions including executive 

direction, human resources, procurement, legal, safeguards and security, utilities, logistics 

support, and information services. In our view, the proportion of scarce science resources 

diverted to administrative, overhead, and indirect costs for each laboratory may be unsustainable 

in the current budget environment. We recommended that the Department, using a BRAC-style 

formulation, analyze, and potentially, realign and consolidate laboratory operations to reduce 

indirect costs and, as a result, provide greater funds for science and research. 

Reprioritize the Department's environmental remediation efforts: The Department's current 

unfunded environmental remediation liability is approximately $268 billion. As a result of more 

than 50 years of nuclear defense and energy research work, the Department spends about $6 

billion per year on its environmental remediation activities. In doing so, at the time of our 

examination, program costs were largely "driven" by 37 individually negotiated Federal Facility 

Agreements (FFA) at key Department sites across the Nation. The FFAs involve no less than 

350 milestones at these sites. The FFAs are augmented by numerous other local agreements with 

their own set of actions, requirements, milestones and due dates. The existing structure needs to 

be modified to reflect the realities of significant reductions in the Department's environmental 

cleanup budget. Consequently, we recommended that the Department revise its current 

remediation strategy and address environmental concerns on a national, complex-wide risk basis. 

This would result in a form of a complex-wide environmental remediation triage, funding only 

high-risk activities that represent imminent or near term danger to health and safety, or further 

environmental degradation. 

5 This figure excludes the sizeable "Work for Others" programs at the Department's national laboratories. 

7 
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86600.014

Re-evaluate the current structure of'the Department's physical securitv apparatus: The 

Department spends more than $1 billion per year providing physical security for its facilities and 

related materials and data. Of this amount, nearly $700 million per year is spent on a eomplexwide protective force staff of nearly 4,000 highly trained professionals. The protective force 

staff is made up exclusively of contractor personnel retained through different mechanisms. 

These arrangements, which lack uniformity and consistency, result in at least 25 separate 

contract instruments, all with costly overhead burdens. We concluded the new budget realities 

require change and we recommended an in-depth evaluation of available options. These 

included a "master contract" to provide security at all Department facilities, consolidating 

protective force contracts by region or Departmental entity, or federalizing the protective force. 

Protective force contract realignment or some form of federalization may reduce security costs 

and improve the Department's physical security posture. 

Observations 

In your invitation letter, thc Subcommittee expressed specific interest in the status of project 

management at the Department. Your interest reflects a concern that we share and one that is 

clearly of prime importance to the DepaJ1ment's senior managers. The Department currently has 

several major projects, such as the WTP, that are significantly ovcr budget and face considerable 

delays. As I have testified previously, there are several "common threads" central to these and 

related contract and project management problems. Improvements are needed to ensure that: 

• Project scopes and snpporting project cost estimates are realistic and manageable, 

recognizing the technical challenges facing many Department efforts; 

• Change control management is adequate and projcct baselines are updated on a real-time 

basis to maintain effectiveness as a primary management tool; 

• Contract telms are kept current to track with project events; 

• Contractor performance is measured against established metrics, including realistic and 

reliable cost estimates; 

• Federal staffing is sufficient, in terms of size and expertise, to provide effective contract 

and project oversight; and 

8 
28 


86600.015

• Projects have focused, empowered and consistent Federal Project Manager leadership 

throughout their lifecycle. 

Secretary Moniz recently unveiled a new structure for the Department, which is designed to 

focus on key programmatic priorities and agency perfonnance and management. We are hopeful 

that the new initiatives will aid in addressing the Department's management challenges. We 

look forward to working with Secretary Moniz, Deputy Secretary Poneman, program officials, 

and the Congress to enhance Departmental efficiency and operations. 

Mr. Chairman and Members of the Subcommittee, that concludes my statement and I will be 

happy to answer any questions you may have. 

9 
29 

Mr. MURPHY. Thank you. I apologize. I had to step out of the 

room for a second. 

Mr. TRIMBLE. 

STATEMENT OF DAVID C. TRIMBLE 

Mr. TRIMBLE. Chairman Murphy, Ranking Member Castor and 

members of the subcommittee, my testimony today discusses our 

observations on the management challenges facing DOE. My observations are drawn from our past work, which has highlighted the 

challenges DOE faces in project and contract management, security 

and safety, and producing reliable enterprise-wide management information. 

Regarding project and contract management, DOE has made 

progress in managing the cost and schedule of non-major projects— 

those costing less than $750 million—and in recognition of this 

progress, we narrowed the focus of our high-risk designation to 

major contracts and projects. 

Major projects, however, continue to pose a challenge for EM and 

NNSA. All of the ongoing major projects continue to experience significant cost increases and schedule delays. UPF costs have increased seven fold, up to $6.5 billion, for a project with a reduced 

scope and 11 years after the schedule. MOX costs have increased 

five fold, up to $7.7 billion, with 15 years added to the schedule. 

Notably, since 2010 alone, cost increases for MOX have totaled $2.8 

billion for a project originally estimated to cost $1.4 billion. WTP 

has tripled in cost to over $12 billion with a decade added to its 

schedule. Moreover, we found that DOE prematurely rewarded the 

contractor for resolving technical issues and completing work. We 

are currently assessing DOE cost-estimating policies and practices 

and plan to issue a report later this year. 

Regarding security, over a decade after NNSA was created to address security issues, the Y–12 security incident has raised concern 

that NNSA has still not embraced security as an essential element 

of its missions. Multiple investigations into the security breach 

identified significant deficiencies in NNSA security organization, 

oversight and culture. DOE and NNSA have taken a number of actions including repairing security equipment, reassigning key security personnel, and firing the Y–12 protective force contractor. DOE 

and NNSA’s leadership have also committed to additional actions 

such as revamping the security oversight model. 

DOE has a long history of security breakdowns and an equally 

long history of instituting responses and remedies to fix these problems. In recent testimony, the leadership of the NNSA security 

task force examining the Y–12 incident identified problems with 

NSSA’s Federal security organization. Notably, in 2003, we reported on these very same problems, problems which have persisted or resurfaced, notwithstanding numerous DOE initiatives to 

fix or address them. The key challenge going forward will not be 

how to implement security improvements but how to sustain them. 

Regarding safety, in September 2012, we testified before this 

subcommittee noting that DOE’s recent safety reforms may have 

actually weakened independent oversight. Notably, since this testimony, reports by DOE have continued to identify safety concerns 

at Pantex and other DOE sites. 

30 

In regard to important enterprise-level management information 

such as budgetary and cost data, in June 2010 we examined 

NNSA’s program to operate and maintain weapons facilities and 

infrastructure and found that NNSA could not accurately identify 

the total costs for this congressionally directed program, and 

NNSA’s budget justification understated these costs by over $500 

million. 

In July 2012, we found deficiencies in NNSA’s validation of budget requests for its programs and concluded that these weaknesses 

impacted the credibility and reliability of those budget estimates. 

According to NNSA’s officials, the agency’s experience and trust in 

its contractors minimized the need for such review. Without accurate cost and budget data, DOE will continue to be surprised by 

cost and schedule problems in its projects and programs, and Congress will not have the information it needs to oversee the billions 

provided yearly in appropriations. 

In closing, let me observe that the Department’s most significant 

mission accomplishments such as keeping the stockpile safe and reliable, successfully closing nuclear facilities such as the old Rocky 

Flats plant, consolidating nuclear material, and energy and science 

breakthroughs are too often overshadowed by repeated project cost 

overruns, schedule delays, glaring security incidents and safety 

mishaps. Until these key management issues are addressed, such 

problems will continue to cast a shadow over DOE’s mission accomplishments. A key step in addressing these longstanding issues will 

be for DOE to embrace sound project management, credible security and security programs, and reliable management information 

systems as key elements of the Department’s mission instead of impediments to this mission. 

Thank you. I would be happy to answer any questions. 

[The prepared statement of Mr. Trimble follows:] 

31 


86600.016

For Release on Delivery 

Expected at 10 am. EDT Wednesday, July 24, 2013 

GAO-13-767T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on Oversight 

and Investigations, Committee on 

Energy and Commerce, House of 

Representatives 

DEPARTMENT OF 

ENERGY 

Observations on DOE's 

Management Challenges 

and Steps Taken to Address 

Them 

Statement of David C. Trimble, Director 

Natural Hesources and Environment 
32 


86600.017

GAO 

Highlights 

Highlights ofGAO-13-767T, a testimony 

before the Subcommittee on Oversight and 

Investigations, Committee on Energy and 

Commerce. House of Representatives 

Why GAO Did This Study 

DOE missions encompass energy 

resources, scientific and technological 

development, environmental cleanup, 

and nuclear security. Management of 

major projects and contracts within EM 

and NNSA, a separately organized 

agency within DOE, remain on GAO's 

list of areas at high risk of waste, fraud, 

abuse, and mismanagement, where 

they have been listed since 1990. 

Progress has been made, but GAO 

continues to identify management 

problems related to cost and schedule 

overruns on major environmental 

cleanup and nuclear projects and 

safety problems at DOE sites that have 

not been fully addressed. 

This testimony discusses ~OE's 

management challenges in (1) 

managing major projects and 

programs, (2) managing security and 

safety at DOE sites, and (3) producing 

reliable enterprise-wide information, 

including budget and cost data. 

Over the past decade, GAO has made 

numerous recommendations in its 

reports to address challenges such as 

those identified in this testimony. DOE 

agreed with most of them and is taking 

steps toward implementing them. 

GAO's work has also recognized some 

of the steps that DOE has taken to 

address these challenges. For 

example, in the most recent update of 

GAO's high~risk series, GAO narrowed 

the focus of the high-risk designation of 

DOE's contract management to EM's 

and NNSA's major contracts and 

projects (Le., those costing $750 

million or more), GAO will continue to 

monitor DOE's implementation of 

actions to resolve long-standing 

management challenges, including 

actions taken in response to GAO's 

recommendations. 

View GAO~13-767T. For more information, 

contact David Trimble at (202) 512-3841 or 

trimbled@gao.gov 

DEPARTMENT OF ENERGY 

Observations on DOE's Management Challenges and 

Steps Taken to Address Them 

What GAO Fouud 

As GAO has reported over the last decade, the Department of Energy's (DOE) 

management of major projects and programs, security and safety at DOE sites, and 

reliable enterprise~wide management information, including budget and cost data, are 

among the most perSistent management challenges the department faces. 

Challenges managing major projects and programs. The Office of Environmental 

Management (EM) and the National Nuclear Security Administration (NNSA) 

continue to face challenges managing major projects and programs, which have 

incurred Significant cost increases and schedule delays. For example, GAO 

reported in July 2013 that the cost estimate range for a project to construct a 

modern Uranium Processing Facility (UPF) at DOE's Y-12 National Security 

Complex in Oak Ridge, Tennessee, had increased five~ to seven·fold to up to 

$6.5 billion since the project's inception in 2004. Furthennore, the most recent 

cost estimate range may no longer be valid after the contractor reported in 

August 2012 that the UPF's roof would have to be raised 13 feet. GAO is 

currently assessing DOE cost estimating policies and practices and plans to 

issue a report based on this work later this year. DOE's actions to improve 

project management appear promising, but their impact on meeting cost and 

schedule targets may not be clear. Because all ongoing major projects have 

been in construction for several years, neither EM nor NNSA has a major project 

that can yet demonstrate the impact of DOE's recent reforms. 

Challenges managing security and safety. Reports about the July 2012 security 

breach at the Y~12 National Security Complex identified numerous, long-standing 

and systemic security issues across the nuclear security enterprise and 

significant safety problems at DOE sites that have not been fully addressed. A 

NNSA Security Task Force and an independent panel convened at the request of 

the Secretary of Energy also found systemic security issues across the nuclear 

security enterprise, and found deficiencies in DOE's security culture and 

overSight, which closely matched issues GAO identified a decade earlier. GAO 

has ongoing work assessing DOE security reforms and plans to issue a report 

based on this work later this year. GAO has also found that DOE management 

weaknesses have contributed to persistent safety problems at NNSA sites. 

Challenges in producing reliable enterprise~wide management information. GAO 

has reported that DOE does not have reliable enterprise~wlde management data 

needed to, among other things, prepare its budget requests, identify the costs of 

its activities, and ensure the validity of its cost estimates. For example. in June 

2013, GAO reported that while different approaches are allowed by Cost 

Accounting Standards, NNSA's management and operations contractors differ in 

how they classify and allocate indirect costs at NNSA laboratories, which limits 

NNSA's ability to assess cost data and meaningfully compare cost management 

performance across laboratories. In addition, GAO reported in June 2010 that 

NNSA could not accurately identify the total costs to operate and maintain 

weapons facilities and infrastructure because of differences among contractors' 

accounting practices. GAO is currently monitoring DOE's ongOing efforts to 

improve its capability to produce reliable enterprjse~wjde information. 

_____________ United States Government Accountability Office 
33 


86600.018

Chairman Murphy, Ranking Member DeGette, and Members of the 

Subcommittee: 

Thank you for the opportunity to discuss our recent work on some of the 

pressing management challenges that the Department of Energy (DOE) 

faces. DOE is responsible for executing some of the nation's most 

complex and technologically advanced missions, working to ensure the 

energy future of the United States, providing scientific and technological 

leadership, overseeing the nation's nuclear security enterprise, and 

resolving the environmental legacy of the Cold War. DOE carries out 

these activities through mission-based program offices including the 

Office of Environmental Management (EM) and the separately organized 

National Nuclear Security Administration (NNSA).l Collectively, these and 

other DOE offices operate dozens of government-owned, contractoroperated facilities throughout the United States. 

Our prior testimonies before this Subcommittee in September 2012' and 

March 2013,3 as well as reports we have issued over the past decade, 

have highlighted various challenges that DOE components-principally 

EM and NNSA-face in carrying out their responsibilities. 4 These 

testimonies and reports have highlighted management challenges 

concerning (1) EM and NNSA projects and programs; (2) security and 

safety at DOE sites; and (3) reliable enterprise-wide management 

information, including budget and cost data. Regarding project and 

program management, EM's and NNSA's management of major projects 

and contracts remains on our list of areas at high risk of waste, fraud, 

1 Specifically, NNSA was created under Title 32 of the National Defense Authorization Act 

for Fiscal Year 2000, Pub. L. No. 106-65, § 3201 et seq. 

2GAO, Modernizing the Nuclear Secudty Enterprise: Observations on the National Nuc/ear 

Security Administration's Oversight of Safety, Security, and Project Management, 

GAO-12-912T (Washington, D.C.: Sept. 12,2012). 

3GAO, Modernizing the Nuclear Security Enterprise: Observations on DOE's and NNSA's 

Efforts to Enhance Oversight of Security, Safety, and Project and Contract Management, 

GAO-13-482T (Washington, D.C.: Mar. 13,2013). 

4A list of recent GAO products assessing DOE's management efforts is included at the 

end of this statement 

Page 1 
34 


86600.019

abuse, and mismanagement, where they have been listed since 1990. 5 

Regarding security and safety management, we have frequently reported 

on security issues and safety incidents at DOE facilities-as when we 

testified before this Subcommittee in March 2013 on the temporary 

shutdown of facilities at Los Alamos National Laboratory in 2004 and, 

more recently, the security breach at the Y -12 National Security Complex 

in July 2012: Regarding reliable enterprise-wide management 

information, we have reported on matters such as the steps that DOE has 

taken to improve its budgeting and cost-estimating practices and the 

weaknesses that persist in these areas. 

In addition to these issues, NNSA's relationship with DOE has come 

under renewed scrutiny. Notably, the Fiscal Year 2013 National Defense 

Authorization Act created the Congressional Advisory Panel on the 

Governance of the Nuclear Security Enterprise to examine options and 

make recommendations for revising the governance structure, mission, 

and management of the nuclear security enterprise. As the new Secretary 

of Energy has alluded to in recent testimony, addressing the management 

challenges that we and other organizations have identified, as well as 

clarifying departmental roles and responsibilities, will be among his top 

priorities. 

In this context, my testimony today discusses three of DOE's most 

persistent management challenges: (1) management of projects and 

5GAO, High-Risk Series: An Update. GAO-13-283 (Washington, D.C.: February 2013) 

We have shifted the focus of the high*fisk designation of EM's and NNSA's contract management to major projects and away from nonmajor projects, those costing less than 

$750 milHon. As defined in the most recent update of our high-risk series, contract 

management includes both contract administration and project management 

6Far additional information on the 2004 temporary shutdown of facilities at Los Alamos, 

see GAO, Stand~Down of Los Alamos National Laboratory: Totaf Costs Uncertain; Almost 

Aff Mission-Critical Programs Were Affected but Have Recovered, GAO-06-83 

(Washington, D,C .. Nov. 18,2005). During the security breach at the Y~12 National 

Security Complex, three trespassers gained access to the protected security area directly 

adjacent to one of the nation's most critically important nuclear weapon-related faCilities 

without being interrupted by the security measures in place. According to DOE's Inspector 

General, thiS secunty incident was unprecedented and represented multiple system 

failures including failures to maintain critical security equipment, respond property to 

alarms, and understand security protocols. The Inspector General found that contractor 

governance and federal oversight did not identify and correct early indications of these 

multiple system breakdowns. See GAO-13-482T and DOE, Office of Inspector General, 

Inquity into the Security Breach at the National Nuclear Security Administration's Y-12 

National Security Complex, DOEflG-0868 (August 2012). 

Page 2 
35 


86600.020

Background 

programs, (2) management of security and safety at DOE sites, and (3) 

reliable enterprise-wide management information, including budget and 

cost data. It focuses on our reports issued from January 2007 to June 

2013. Detailed information about the scope and methodology used to 

conduct this work can be found in each of our issued reports. We 

conducted the performance audit work that supports this statement in 

accordance with generally accepted government auditing standards. 

DOE's missions encompass energy resources, scientific and 

technological development, environmental cleanup, and nuclear security. 

DOE established EM in 1989 to carry out the mission to clean up 

radioactive wastes, spent nuclear fuel, excess plutonium and uranium, 

contaminated facilities, and contaminated soil and groundwater that 

resulted from nuclear weapons production and government-sponsored 

nuclear energy research. NNSA, a separately organized agency within 

DOE, has primary responsibility for ensuring the safety, security, and 

reliability of the nation's nuclear weapons stockpile, including life 

extension programs for multiple weapon types in the U.S. stockpile,? for 

promoting nuclear nonproliferation, and for naval reactor programs. In 

fiscal year 2013, EM and NNSA received about $17 billion to support 

these programs and related activities, which is approximately 60 percent 

of DOE's total budget. Figure 1 shows the fiscal year 2013 funding for 

EM, NNSA, and other DOE programs and activities. 

of the Cold War caused a dramatic shift in how the nation maintains nuclear 

weapons, Instead of designing, testing, and producing new nuc!earweapons, the strategy 

shifted to maintaining the existing nuclear weapons stockpile indefinitely. Ufe extension 

programs extend, through refurbishment, the operational lives of weapons in the nuclear 

stockpile by 20 to 30 years and certify these weapons' military performance requirements 

without underground nuclear testing. GAO, Nuclear Weapons: NNSA and DOD Need to 

More Effectively Manage the Stockpfte Ufe ExtenSion Program, GAO~09-385 

(Washington, D.C .. Mar. 2. 2009). 

Page 3 GAO-13-767T 
36 


86600.021

Figure 1: Funding of DOE Programs and Activities, Fiscal Year 2013 

,----- Environmental and other defense activities 

$5.9 billion 

National Nuclear Security Admin!stration: 

$11.5 billion 

'--------------- Other programs and activities: 

$9.7 billion 

Sourw· DOE. Department 01 Ene'1lY Fiscal Yea' 2014 Congressional &I(lget Re{jllest. DOElCF·Q084, April 2013 

Note: Funding numbers represent the annualized amount programs are authorized to obligate. prior 

to any adjustment for sequestration. 

Contractors operate DOE sites and often conduct their work under 

management and operating (M&O) contracts' These contracts provide 

the contractor with discretion in carrying out the mission of the particular 

contract. Currently, DOE spends 90 percent of its annual budget on 

contracts, making it the largest non-Department of Defense contracting 

agency in the government. 

8M&O contracts are agreements under which the government contracts for the operation, 

maintenance, or support, on its behalf, of a government~owned or -controlled research, 

development, spedal production, or testing establishment wholly or principally devoted to 

one or more of the major programs of the contracting federal agency. Federal Acquisition 

Regulation, 48 C.F.R § 17.601. 

Page 4 GAO·13~767T 
37 


86600.022

DOE Faces 

Challenges Managing 

Its Major Projects and 

Programs 

As we have reported in the past decade, DOE continues to face 

challenges managing its major projects and programs, which have 

incurred significant cost increases and schedule delays in several 

instances, Some recent examples include: 

As we reported earlier this month, NNSA estimates that the project to 

build the Uranium Processing Facility (UPF) at the Y-12 National 

Security Complex in Oak Ridge, Tennessee, will cost between five 

and seven times more than previously thought and will be completed 

over a decade behind schedule.' NNSA estimated in 2004 that the 

UPF would cost from $600 million to $1.1 billion to construct and 

would start operating in 2012. As of June 2012, estimates were 

revised to a cost range from $4.2 billion to $6.5 billion and a 2023 

date for the start of operations. In June 2012, the Deputy Secretary of 

Energy approved the latter cost range and schedule and deferred 

significant portions of the original project scope. Two months later, the 

UPF contractor concluded that UPF's roof would have to be raised 13 

feet and that the start of construction would be further delayed, 

resulting in approximately $540 million in additional costs. As we 

reported, these problems occurred because the contractor did not 

adequately manage and integrate the design work subcontracted to 

four other contractors. Given these additional costs and DOE's stated 

plan to pay for these additional costs from its contingency fund, it is 

unclear if the cost range estimate approved in June 2012 remains 

valid. 

In March 2013, we reported preliminary observations from our 

ongoing review of NNSA's Plutonium Disposition Program that 

highlight the need for continued efforts by DOE to improve contract 

and project management." We reported DOE is currently forecasting 

an increase in the total project cost for the MOX Fuel Fabrication 

Facility at the Savannah River Site in South Carolina from $4.9 billion 

to $7.7 billion and a delay in the start of operations from October 2016 

gGAO, Nuclear Weapons: Factors Leading to Cost Increases with the Uranium Processing 

Facility, GAO-13-686R (Washington, 0 C.: July 12. 2013). 

10A key part of the Plutonium Disposition Program includes the construction of two nuclear 

facilities at DOE's Savannah River Site: a facility that wit! produce mixed oxide (MOX) fuel 

-a mix of plutonium and uranium-~for nuclear reactors and a Waste Solidification Building 

to dispose of the liquid waste from the MOX facility, 

Page 5 GAO·13·767T 
38 


86600.023

to November 2019." According to NNSA officials and the contractor 

for the MOX facility, inadequately designed critical system 

components, such as the gloveboxes to be used for handling 

plutonium and the infrastructure needed to support these gloveboxes, 

are among the primary reasons for the proposed cost increase and 

schedule delay. The performance baseline for the MOX facility was 

set several years before NNSA issued guidance in 2012 to set cost 

and schedule baselines only after design work is 90 percent 

complete." As part of our ongoing review of NNSA's Plutonium 

Disposition Program, we are evaluating whether such guidance would 

have been useful for NNSA to apply to the MOX facility, as well as the 

potential impact this guidance might have had on mitigating cost 

increases and schedule delays. 

In December 2012, we reported that the estimated cost to construct 

the Waste Treatment and Immobilization Plant in Hanford, 

Washington, had tripled to $12.3 billion since its inception in 2000 and 

that the scheduled completion date had Slipped by nearly a decade to 

2019." We reported that DOE's incentives and management controls 

were inadequate for ensuring effective project management, and DOE 

had in some instances prematurely rewarded the contractor for 

resolving technical issues and completing work. DOE generally 

agreed with the several recommendations we made to improve Waste 

Treatment and Immobilization Plant projects and contract 

management. In May 2013, we reported that significant technical 

challenges at the Waste Treatment Plant remained unresolved, 

contributing to uncertainty as to whether the project will operate safely 

and effectively." 

We also reported in December 2012 on progress by EM and NNSA in 

managing nonmajor projects (Le., those costing less than $750 

11 GAO, Department of Energy: Concerns with Major Construction Projects at the Office of 

EnVironmental Management and NNSA, GAO-13-484T (Washington, D.C,; MaL 20, 

2013). 

12A project's peliormance baseline consists of the project's cost, schedule, and scope (the 

activities needed to achieve project goals). 

13GAQ. Hanford Waste Treatment Plant: DOE Needs to Take Action to Resolve Technical 

and Management Challenges, GAO-13-38 (Washington, D.C.: Dec. 19,2012). 

"GAO-13-510T 

PageS GAO·13·767T 
39 


86600.024

million)." We found that of the 71 nonmajor projects that EM and 

NNSA completed or had under way from fiscal years 2008 to 2012,21 

met or are expected to meet their performance targets for scope, cost, 

and completion date. However, 23 projects did not meet or were not 

expected to meet one or more of those three performance targets. We 

also noted that, for 27 projects, many had insufficiently documented 

performance targets for scope, cost, or completion date, which 

prevented us from determining whether they met their performance 

targets. As a result, we recommended, among other things, that EM 

and NNSA clearly define, document, and track the scope, cost, and 

completion date targets for each of their nonmajor projects. EM and 

NNSA agreed with our recommendations. As we noted in our 

February 2013 high-risk update," we have shifted our focus to major 

contracts and projects, but we will continue to monitor the 

performance of nonmajor projects. 

In April 2010, we reported that weak management by DOE and NNSA 

had allowed the cost, schedule, and scope of ignition-related activities 

at the National Ignition Facility to increase substantially.'? We reported 

that, since 2005, ignition-related costs have increased by around 25 

percent-from $1.6 billion in 2005 to over $2 billion in 2010-and that 

the planned completion date for these activities had slipped from the 

end of fiscal year 2011 to the end of fiscal year 2012 or beyond. We 

made several recommendations to address program management 

weaknesses-which NNSA agreed with-and we are currently 

monitoring their implementation. Ten years earlier, in August 2000, we 

had reported that poor management and oversight of the National 

Ignition Facility construction project at Lawrence Livermore National 

Laboratory had increased the facility's cost by $1 billion and delayed 

its scheduled completion date by 6 years." 

15GAO, Department of Energy: Better fnformation Needed to Determine if Nonmajor 

Projects Meet Performance Targets, GAO-13-129 (Washington, D.C .. Dec. 19, 2012). 

16GAO-13-283. 

17lgnition-related activltles consist of the efforts separate from the facility's construction 

that have been undertaken to prepare for the first attempt at ignition-the extremely 

intense pressures and temperatures that simulate on a small scale the thermonuclear 

conditions created in nuclear explosions. See GAO, Nuclear Weapons: Actions Needed to 

Address Scientific and Technical Challenges and Management Weaknesses at the 

National Ignition Facility, GAO-10-488 (Washington, D.C.: Apr. 8, 2010). 

18GAO, National Ignition Facifity: Management and Oversight Failures Caused Major Cost 

Overruns and Schedule Delays, GAOIRCED-00-271 (Washington, D.C.: Aug. 8.2000) 

Page 7 GAO-13-761T 
40 


86600.025

DOE Faces 

Challenges Managing 

Security and Safety 

In March 2009, we reported that NNSA and the Department of 

Defense had not effectively managed cost, schedule, and technical 

risks for the 861 nuclear bomb and the W76 nuclear warhead 

refurbishments." For the 861 life extension program, NNSA was only 

able to stay on schedule by significantly reducing the number of 

weapons undergoing refurbishment and abandoning some 

refurbishment objectives. We made a number of recommendations to 

improve the management of the nuclear weapons refurbishment 

process. NNSA agreed with these recommendations, and we are 

monitoring their implementation. 

We are currently assessing DOE cost estimating policies and practices 

and plan to issue a report based on this work later this year. DOE's 

actions to improve project management appear promising, but their 

impact on meeting cost and schedule targets may not be clear. 8ecause 

all ongoing major projects have been in construction for several years, 

neither EM nor NNSA has a major project that can yet demonstrate the 

impact of DOE's recent reforms. 

As we testified before this Subcommittee in March 2013,20 reviews of the 

July 2012 security breach at the Y-12 National Security Complex 

identified numerous, long-standing, and systemic security issues across 

the nuclear security enterprise, and significant safety problems remain at 

DOE sites that have not been fully addressed. Some examples from our 

recent work include: 

With regard to security, as we testified in March 2013,21 investigations 

of the security breach at the Y -12 National Security Complex 

performed by NNSA, the DOE Office of Inspector General, and the 

DOE Office of Independent Oversight found problems with NNSA's 

and its contractors' performance, including problems with the 

complex's physical security systems, such as alarms, and the training 

and response of the heavily armed guards supplied by NNSA's 

protective force contractor. In addition, both a NNSA Security Task 

Force and an independent panel convened at the request of the 

20GAO-13-482T 

21GAO-13-482T. 

PageS GAO·13-767T 
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86600.026

Secretary of Energy and composed of three former executives from 

federal agencies and the private sector found systemic security issues 

across the nuclear security enterprise. Both the Secretary's panel and 

the NNSA Security Task Force's leader found deficiencies in DOE's 

security culture and oversight, with some of these being closely 

matched to issues we identified a decade earlier. DOE took a number 

of actions in response to the security breach and the findings of the 

panel and task force. These actions included, among other things, 

immediate actions to repair security equipment, as well as longer-term 

actions that aim to improve NNSA and DOE oversight of security. As 

we testified in March 2013, in assessing DOE's actions regarding 

security and NNSA's new security oversight process, a central 

question will be whether they lead to sustained improvements in 

security at the Y -12 National Security Complex and across the nuclear 

security enterprise. We have ongoing work assessing DOE security 

reforms and plan to issue a report based on this work later this year. 

With regard to safety, in September 2012 we testified before this 

Subcommittee about NNSA management weaknesses that have 

contributed to persistent safety problems at NNSA sites, including lax 

attitudes toward safety procedures, inadequacies in identifying and 

addressing safety programs with appropriate corrective actions, and 

inadequate oversight by NNSA site offices." We stated in our 

testimony that in March 2010, in an effort to address safety problems 

across the nuclear security enterprise, the Secretary of Energy 

announced a reform effort aimed at modifying DOE's oversight 

approach in order to "provide contractors with the flexibility to tailor 

and implement safety and security programs without excessive 

federal oversight or overly prescriptive departmental requirements." 

As we noted in the testimony, DOE's safety reforms did not fully 

address continuing safety concerns and, in fact, may have actually 

weakened independent oversight We noted, for example, that DOE's 

Office of Independent Oversight staff must coordinate its assessment 

activities with NNSA site office management to maximize the use of 

resources, raising concerns about whether Office of Independent 

Oversight staff would be sufficiently independent from site office 

"GAO-12-912T 

Page 9 GAQ·13·767T 
42 


86600.027

management." In our April 2012 report, we recommended that DOE 

analyze the costs and benefits of its safety reform effort and identify 

how the effort will help address safety concerns. DOE agreed with our 

recommendations. 

Moreover, since our September 2012 testimony, DOE's Office of 

Independent Oversight has raised concerns about ongoing safety issues, 

including reluctance by workers at NNSA's Pantex Plant to raise safety 

problems for fear of retaliation and a perception that cost took priority 

over safety, as well as inadequate controls to protect workers or the 

public in the case of earthquake, fires, or radiation exposures at the Y -12 

National Security Complex. In addition, a March 2013 independent 

evaluation of safety culture at DOE's Office of Health, Safety, and 

Security (HSS)-which generally provides policy direction and 

independent oversight of safety and security at DOE sites-found that 

HSS staff raised concerns that the shift in recent years toward a more 

collaborative oversight relationship with site management had weakened 

HSS's effectiveness in providing independent oversight and 

enforcement. 24 

23Within DOE's Office of Health, Safety, and Security (HSS), the Office of Independent 

Oversight conducts periodic appraisals of the environment, safety. and health programs at 

DOE's sites to determine jf DOE officials and contractors are complying with DOE's safety 

regulations and directives. During the review that led to our September 2012 report, the 

Office of Independent Oversight merged with the Office of Enforcement, forming the Office 

of Enforcement and Oversight See GAO, NUclear Safety: DOE Needs to Determine the 

Costs and Benefits of Its Safety Reform Effort GAO-12-347, (Washington: D.C .. Apr 20, 

2012) 

2400E HSS reports directly to the Secretary of Energy and is independent of DOE 

program offices and NNSA See Dr. Sonja 8. Haber, et at An Independent Evaluation of 

Safety Culture at the Us. Department of Energy Office of Health, Safety and SecurityHeadqual1ers (HSS) (Mar. 29, 2013). 

Page 10 
43 


86600.028

DOE Has Not 

Produced Reliable 

Enterprise-Wide 

Management Data 

For more than a decade, we have reported that DOE has not produced 

reliable enterprise-wide management data needed to, among other 

things, prepare its budget requests, identify the costs of its activities and 

ensure the validity of its cost estimates. Some recent examples include: 

In June 2013, we reported that NNSA's M&O contractors differ in how 

they classify and allocate indirect costs at NNSA laboratories." 

Although different approaches are allowed by Cost Accounting 

Standards, these differences limit NNSA's ability to assess cost data 

and meaningfully compare cost management performance across 

laboratories, potentially impeding NNSA's efforts to oversee M&O 

contractors' costs. This work built on the report we issued in June 

2010," in which we found that NNSA could not accurately identify the 

total costs to operate and maintain weapons facilities and 

infrastructure because of differences among contractors' accounting 

practices. We concluded that, without the ability to consistently 

identify program costs, NNSA did not have the ability to adequately 

justify future presidential budget requests and risked being unable to 

identify both the return on investment of planned budget increases 

and opportunities for cost savings. As a result, we recommended that 

NNSA require M&O contractors report to NNSA annually on the total 

costs (I.e., both direct and indirect costs) to operate and maintain 

weapons facilities and infrastructure. 

In July 2012, we reported that NNSA did not comply with DOE's order 

that defines budget formulation because the agency believed the 

order expired in 2003 and no longer applied to NNSA budget 

activities. 27 DOE's order on budget formulation outlines the 

National Nuclear Security Administration: Laboratories' indirect Cost Management 

Has Improved, but Additional Opportunities Exist, GAO-13-534 (Washington, D.C .. June 

28,2013). M&O contractor costs include both direct costs-costs that can be directly 

Identified with specific cost objectives such as a program or project-and indirect costscosts of activities that cannot be specificalJy identified with a specific cost objective but 

which Jndirectly support a program, such as management, administrative, and facility 

costs 

26GAO, Nuclear Weapons: Actions Needed to Identify Total Costs of Weapons Complex 

Infrastructure and Research and Production Capabilities, GAO~10~582 (Washington, D,C.: 

June 21,2010) 

27GAO, Modemizing the Nuclear Security Enterprise.· NNSA's Reviews of Budget 

Estimates and Decisions on Resource Trade~offs Need Strengthening, GAO-12~806 

(Washington, D.C.: July 31, 2012) 

Page 11 GAO·13· 767T 
44 


86600.029

requirements for the department's annual budget formulation process, 

including that budget requests shall be based on cost estimates that 

have been thoroughly reviewed and deemed reasonable, However, 

we found that NNSA is guided by its own policy for its planning, 

programming, budgeting, and evaluation (PPBE) process and its 

associated activities, and found significant deficiencies in NNSA's 

implementation of the process. For example, we found that NNSA did 

not have a thorough, documented process for assessing the validity of 

its budget estimates prior to their inclusion in the President's budget 

submission to Congress, thereby limiting the reliability and credibility 

of the budget submission, but rather conducted informal, 

undocumented reviews of contractor-submitted budget estimates. In 

addition, we found that NNSA's annual budget validation review 

process occurred too late in the budget cycle to inform agency or 

congressional budget development or appropriations decisions. As a 

result, we made a number of recommendations to DOE and NNSA to 

improve the budget review process. The agencies agreed with most of 

these recommendations. 

In January 2012, we reported that costs for contractor-provided 

support functions at NNSA and DOE Office of Science sites-such as 

procuring goods, managing human resources, and maintaining 

facilities-were not fully known for fiscal years 2007 through 2011 

because DOE changed its data collection approach beginning in 2010 

to improve its data and, as a result, did not have complete and 

comparable cost data for all years. 28 We reported that the data for 

fiscal year 2011 were more complete but that changes to DOE's 

definitions for support functions made it difficult to compare costs 

across ali years. We recommended several actions to streamline 

contractor-provided support functions at NNSA and DOE sites. NNSA 

and DOE agreed with these recommendations. 

In conclusion, while DOE's management challenges are significant, we 

have noted in our recent work areas of progress, We have made 

numerous recommendations in our reports to address challenges such as 

those identified in this testimony, and DOE has agreed with and 

Deparlment of Energy: Additional Opportunities Exist to Streamline Supporl 

Functions at NNSA and Office of Science Sites, GAO-12-255 (Washington, D.C.: Jan. 31, 

2012). DOE's Office of Science has been the natJan's single largest funding source for 

basic research in the physical sciences, supporting research in energy sciences, 

advanced sCientific computing, and other fields, 

Page 12 GAO-13-767T 
45 


86600.030

implemented most of them. In addition, our work has recognized steps 

that DOE has taken to address these challenges." For example, in the 

most recent update of our high-risk series in February 2013, we narrowed 

the focus of the high-risk designation of DOE's contract management to 

EM's and NNSA's major contracts and projects.30 We did so to 

acknowledge progress made in managing EM's and NNSA's nonmajor 

projects, noting that DOE continued to demonstrate strong commitment 

and top leadership support for improving contract and project 

management in EM and NNSA. We also noted that DOE had taken steps 

to enhance oversight, such as requiring peer reviews and independent 

cost estimates for projects with values of more than $100 million, as well 

as to improve the accuracy and consistency of data in DOE's central 

repository for project data. 

Over the past several years, management challenges such as those 

discussed here have prompted some to call for removing NNSA from 

DOE and either move it to another department or establish it as an 

independent agency. However, as we have previously stated for the 

record, it is our view that few, if any, of NNSA's management challenges 

stem from the organizational relationship between NNSA and DOE. 31 As 

the new Secretary of Energy considers needed reforms in these areas, 

we note that DOE's management of projects and programs, security and 

safety, and enterprise-wide data must improve-regardless of the 

department's structure. We will continue to monitor DOE's implementation 

of actions to resolve its long-standing management challenges, including 

actions that we have recommended to facilitate the resolution of these 

challenges. 

29 A list of recent GAO products assessing DOE's management efforts is included at the 

end of this statement 

30GAO~ 13~283. In addition, an earlier high-risk update removed DOE's Office of Science 

from the scope of our h!gh~risk area to acknowledge progress that office made in 

addressing human capital and resource issues and meeting projects' cost and schedule 

targets. See GAO, High~Risk Series: An Update, GAO-09~271 (Washington, D.C.: January 

2009). 

31 As we noted in response to questions for the record, a dramatiC organizational change, 

such as making NNSA an independent agency, may be disruptive. Currently, DOE 

provides NNSA with a large number of services, such as personnel and headquarters 

building security, office space, payroll, and information technology, An independent NNSA 

would have to devote substantially more effort to create and then maintain these overhead 

functions 

Page 13 GAO·13·767T 
46 


86600.031

GAO Contact and 

Staff 

Acknowledgments 

Chairman Murphy, Ranking Member DeGette, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions you may have at this time. 

If you or your staff have any questions about this testimony, please 

contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for 

our Office of Congressional Relations and Public Affairs may be found on 

the last page of this statement. GAO staff who made key contributions to 

this testimony are Jonathan Gill, Assistant Director. and Rob Grace, 

Nancy Kintner-Meyer, Michelle Munn, Cheryl Peterson, Jeff Rueckhaus, 

Rebecca Shea, and Kiki Theodoropoulos. 

Page 14 GAO-13-161T 
47 


86600.032

Selected Recent GAO Products Assessing the 

Department of Energy's Management Efforts 

The following is a selection of GAO's recent work assessing the 

Department of Energy's management efforts. 

National Nuclear Security Administration: Laboratories' Indirect Cost 

Management Has Improved, but Additional Opportunities Exist, 

GAO-13-534 (Washington, D.C.: June 28,2013). 

Department of Energy: Observations on Project and Program Cost 

Estimating in NNSA and the Office of Environmental Management, 

GAO-13-510T (Washington, D.C.: May 8,2013). 

Modernizing the Nuclear Security Enterprise: Observations on DOE's and 

NNSA's Efforts to Enhance Oversight of Security, Safety, and Project and 

Contract Management, GAO-13-482T (Washington, D.C.: Mar. 13,2013). 

High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February 

2013). 

Recovery Act: Most DOE Cleanup Projects Are Complete, but Project 

Management Guidance Could Be Strengthened, GAO-13-23 

(Washington, D.C .. Oct. 15, 2012). 

Department of Energy: Better Information Needed to Detennine If 

Nonmajor Projects Meet Perfonnance Targets, GAO-13-129 

(Washington, D.C.: Dec. 19,2012). 

Hanford Waste Treatment Plant: DOE Needs to Take Action to Resolve 

Technical and Management Challenges, GAO-13-38 (Washington, D.C .. 

Dec. 19, 2012). 

Modernizing the Nuclear Security Enterprise: Observations on the 

National Nuclear Security Administration's Oversight of Safety, Security, 

and Project Management, GAO-12-912T (Washington, D.C.: Sept. 12, 

2012). 

Modernizing the Nuclear Security Enterprise: Observations on the 

Organization and Management of the National Nuclear Security 

Administration, GAO-12-867T (Washington, D.C.: June 27,2012). 

Modernizing the Nuclear Security Enterprise: NNSA's Reviews of Budget 

Estimates and Decisions on Resource Trade-offs Need Strengthening, 

GAO-12-806 (Washington, D.C.: July 31,2012). 

Page 15 GAO·13·767T 
48 


86600.033

Selected Recent GAO Products Assessing the 

Department of Energy's Management Efforts 

Spent Nuclear Fuel: Accumulating Quantities at Commercial Reactors 

Present Storage and Other Challenges, GAO-12-797 (Washington, D.C.: 

Aug, 15,2012). 

Nuclear Safety: DOE Needs to Determine the Costs and Benefits of Its 

Safety Reform Effort, GAO-12-347 (Washington, D,C,: Apr. 20, 2012). 

Modernizing the Nuclear Security Enterprise: New Plutonium Research 

Facility at Los Alamos May Not Meet All Mission Needs, GAO-12-337 

(Washington, D.C.: Mar. 26, 2012), 

Department of Energy: Additional Opportunities Exist to Streamline 

Support Functions at NNSA and Office of Science Sites, GAO-12-255 

(Washington, D,C,: Jan, 31, 2012), 

Nuclear Fuel Cycle Options: DOE Needs to Enhance Pfanning for 

Technology Assessment and Collaboration with Industry and Other 

Countries, GAO-12-70 (Washington, D,C,: Oct. 17,2011), 

High-Risk Series: An Update, GAO-11-278 (Washington, D,C,: February 

2011), 

Commercial Nuclear Waste: Effects of a Termination of the Yucca 

Mountain Repository Program and Lessons Learned, GAO-11-229 

(Washington, D,C.: Apr. 8, 2011), 

Nuclear Weapons: National Nuclear Security Administration's Plans for Its 

Uranium Processing Facility Should Better Ref/ect Funding Estimates and 

Technology Readiness, GAO-11-103 (Washington, D,C,: Nov, 19,2010), 

Recovery Act: Most DOE Cleanup Projects Appear to Be Meeting Cost 

and Schedule Targets, but Assessing Impact of Spending Remains a 

Challenge, GAO-10-784 (Washington, D.C,: July 29,2010), 

Nuclear Weapons: Actions Needed to Identify Total Costs of Weapons 

Complex Infrastructure and Research and Production Capabilities, 

GAO-10-582 (Washington, D,C,: June 21, 2010), 

Department of Energy: Actions Needed to Develop High-Quality Cost 

Estimates for Construction and Environmental Cleanup Projects, 

GAO-10-199 (Washington, D,C.: Jan, 14,2010), 

Page 16 
49 


86600.034

(361514) 

Selected Recent GAO Products Assessing the 

Department of Energy's Management Efforts 

Nuclear Weapons: Actions Needed to Identify Total Costs of Weapons 

Complex Infrastructure and Research and Production Capabilities, 

GAO-l0-582 (Washington, D.C.: June 21, 2010). 

Nuclear Waste Management: Key Attributes, Challenges, and Costs for 

the Yucca Mountain Repository and Two Potential Altematives, 

GAO-10-48 (Washington, D.C.: Nov. 4, 2009). 

Information Security: Actions Needed to Belter Manage, Protect, and 

Sustain Improvements to Los Alamos National Laboratory's Classified 

Computer Network, GAO-10-28 (Washington, D.C .. Oct. 14,2009). 

Nuclear Security: Better Oversight Needed to Ensure That Security 

Improvements at Lawrence Livermore National Laboratory Are Fully 

Implemented and Sustained, GAO-09-321 (Washington, D.C.: Mar. 16, 

2009). 

Nuclear Weapons: NNSA and DOD Need to More Effectively Manage the 

Stockpile Life Extension Program, GAO-09-385 (Washington, D.C.: Mar. 

2,2009). 

Nuclear and Worker Safety: Actions Needed to Determine the 

Effectiveness of Safety Improvement Efforts at NNSA's Weapons 

Laboratories, GAO-08-73 (Washington, D.C.: Oct. 31, 2007). 

Nuclear Safety: Department of Energy Needs to Strengthen Its 

Independent Oversight of Nuclear Facilities and Operations, GAO-09-61 

(Washington, D.C.: Oct. 23, 2008). 

National Nuclear Security Administration: Additional Actions Needed to 

Improve Management of the Nation's Nuclear Programs, GAO-07-36 

(Washington, D.C.: Jan.19, 2007). 

Page 17 GAO-13-7S7T 
50 


86600.035

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86600.036

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52 

Mr. MURPHY. Thank you. I will begin questioning here and recognize myself for 5 minutes. 

So Mr. Poneman, let me understand your role here. You are Deputy Secretary and therefore the Chief Operating Officer of the Department, and you had a direct role in managing the program execution and the mission-support functions of the agency and directly 

responsible to the Secretary for managing and implementing these 

organizational challenges, and you have been doing it for about 4 

years. So lots of firsthand experience. So would you explain why 

the Under Secretary for Performance and Management will help 

improve project management in the Department overall? 

Mr. PONEMAN. Yes, sir. I am very excited about this opportunity 

precisely because, as you noted, I have been the chief operating officer, and all of the burden you, yourself, and ranking members 

have identified as well as those we have just heard from the other 

witnesses show you what we are up against. We had frankly improvised an Associate Deputy Secretary in the first term to try to enhance our capacity to tackle these problems, recognizing the full 

weight of the problems and, frankly, having the leadership of Secretary Moniz from his earlier experience at the Department as 

Under Secretary, including his more recent experience writing very 

thoughtfully about how to organize the Department better to tackle 

these challenges as a member of the President’s Council of Advisors 

on Science and Technology. 

It was clear that the opportunity presented by taking one of the 

available Under Secretary positions in the Department and having 

that individual, an individual of authority and in whom the Secretary and myself could propose confidence to work full time on 

these problems was absolutely critical to getting our arms around 

this very daunting agenda. 

Mr. MURPHY. I appreciate the level of what you are facing here 

too, and so how would we be able to measure progress, and are you 

setting some performance baselines? 

Mr. PONEMAN. So it would depend on the precise mission area. 

There are some, Mr. Chairman, across-the-board kinds of metrics 

that we can apply, and let me just start from the outset and responding also to the ranking member’s comment, this aspect of 

metrics and cost estimation and measurement of performance is 

absolutely critical to our successful. If you don’t measure it, you 

don’t manage it. 

But let me just take the largest example, these very large, complex capital projects. We have to have a system of evaluation to 

measure continuously whether we are on or off budget, whether we 

are on or off schedule, and, at the same time, to measure whether 

we are on or off meeting the spec of the project itself. That is to 

say, it is not enough to have a project being on schedule and on 

budget if it doesn’t do the job, and Mr. Trimble alluded to this peripherally in his comments. So we have to make sure that we take 

the orders that are in place in terms of cost estimation under Order 

413–B and actually measure it and have them upload it into our 

business management systems that we put into our quarterly reviews of the business quarterly reviewed by the Government Performance and Requirements Act, and that is a start on how we are 

going to measure our performance. 

53 

Mr. MURPHY. Thank you. Two other quick questions I want to 

get into in terms of lessons learned and remanaging things. Other 

the past 3 years, this committee has dealt with a number of 

cases—Solyndra, Fiscar, A123—where the loan or grant assessments just turned out to be plain wrong, and we have had a number of people before this committee talking about this. You had a 

policy interest to push these out, but the data, as it turns out, just 

didn’t add up for this. So how will the management changes ensure 

that decisions are made based on sound analysis moving forward? 

Mr. PONEMAN. Well, first, Mr. Chairman, let me note that the 

portfolio as a whole, which has been very thoroughly reviewed by 

many including by the late Mr. Herb Allison, is actually performing 

quite well. We have the largest wind farm in the world operating 

quite well, the largest photovoltaic plant operating quite well. Tesla 

has repaid its loan 9 years early. We do the best due diligence we 

can. These programs are intended to promote innovation, and unfortunately, not every case works out. That having been said, we 

have done a number of things recommended by Mr. Allison and we 

have brought new leadership and new staffing inside the Loan Program Office to make sure that, again, we have a very strong ability 

to monitor the existing portfolio, that we have a new risk officer 

set up to look precisely at the questions of risk that you are addressing, and that we have a much more open and transparent set 

of data flowing up from the program office to the Secretary and the 

Deputy Secretary. 

Mr. MURPHY. I appreciate that. It is something we will be watching. A lot of data was there before. We just thought a lot of it was 

also ignored. Multiple departments are saying the Solyndra loan 

wasn’t a good idea. So it isn’t just a matter of having the data but 

making sure you have a system in place to have honest reassessments of that. 

One other quick question in my time. In your testimony you said 

that President laid out a commonsense plan to reduce the effects 

of climate change by cutting dangerous carbon pollution, as you put 

it, increasing the production of clean energy and doubling down on 

energy efficiency. I noticed the Department released a new rule for 

microwave oven efficiencies and included a calculation for the social cost of carbon, and I would like to know if the agency considered doing a formal notice and comment to the microwave rule before using this figure. Did anyone in your office participate in any 

discussions about this social cost of carbon before using it in the 

DOE microwave rule, and can you please submit to us emails and 

documents to help us understand why that was done. 

Mr. PONEMAN. Mr. Chairman, I was present for some discussion 

of social costs of carbon. I was not—I would have to get back to you 

with details on how it related to that particular rule. 

Mr. MURPHY. That is something this committee is going to want 

to review in an open and scientific way. 

Mr. PONEMAN. We would be very happy to supply that. 

Mr. MURPHY. I see my time is expired. Now we will go to Ms. 

Castor for 5 minutes. 

Ms. CASTOR. Thank you, Chairman Murphy. 

It is very important and a positive sign that the Department of 

Energy has taken action where with the reorganization to address 

54 

the persistent flaws in management and oversight of the Department of Energy. We have seen that in many cases there is duplicative activity and unnecessary expenditures because of lack of coordination effective oversight of contractors, and DOE has been facing these problems for years, and your predecessors in multiple Administrations from both political parties have made little headway. 

So is this new Under Secretary of Management and Performance 

a sign that the Department of Energy has learned the lessons of 

the past? 

Mr. PONEMAN. Congresswoman, we are always seeking to learn 

lessons from the past. I personally am learning lessons every single 

day, and our management principles require us to do that. 

Ms. CASTOR. What makes it different this time after decades? 

Mr. PONEMAN. Well, if I may suggest a couple of things, Congresswoman. Number one, both Secretary Moniz and, as the chairman alluded, I have been working on this for some period of time 

so we understand from having witnessed firsthand some of the very 

problems that you all have describe, what has caused some of those 

problems. We believe that the structure the Secretary has designed 

here is well suited to given us the capacity to do better in achieving 

these results, and I would actually echo Mr. Trimble’s comments. 

The test here isn’t, can we impose a new bureaucrat structure on 

the building. The question, can we sustain it? The results, in our 

judgment, will be the proof in the pudding. If we can in this reorganization, which we think suits the problems well, start to deliver 

those kinds of results this committee and our Department want to 

see, that will take root in the Department and the people, the professionals will—— 

Ms. CASTOR. Give us a specific example, something the IG or 

GAO has highlighted that you think or you can show early signs 

in progress. 

Mr. PONEMAN. I will give you one very specific example. Many 

of you have alluded to the fact that since 1990 we have been on 

a high-risk list. The GAO has given us five specific taskings on 

what it takes to get out from under the high-risk list. The Office 

of Science got out in 2009. I will tell you, Congresswoman, we were 

very gratified that the projects up to $750 million came out from 

under? Why did that happen? Because they at GAO said what you 

need to do is break down very big projects to chunkable sizes that 

can be managed more effectively. That is simply one example of 

many I could cite of where we have taken the advice from the 

GAO, applied it and actually obtained a much better result in 

terms of projects coming in on budget and on time. 

Ms. CASTOR. And Mr. Friedman, I know you agree that the contractor workforce needs more vigorous oversight at the Department 

of Energy, correct? 

Mr. FRIEDMAN. I do. 

Ms. CASTOR. You have stated that again and again. What recommendations—highlight your most important recommendations 

from the IG’s office to ensure that DOE contractors are meeting 

their performance standards. 

Mr. FRIEDMAN. Well, I think the Deputy Secretary referred to it 

and others have as well, and that is the question of sustainability. 

I think it is an excellent point. I have been around long enough, 

55 

Ms. Castor, unfortunately in a sense to have seen the Department 

through valleys and mountaintops for years, and invariably a fix is 

imposed or attempted but it loses power after a period of time. We 

get lethargic, or the Department gets lethargic. So sustainability, 

it seems to me, in that process is key. So if the reforms the Deputy 

Secretary has described, if they address the problem, if we sustain 

them going forward, we really will have moved the Department forward. 

Ms. CASTOR. In your testimony, you noted that contractor weaknesses were not effectively communicated to senior management officials. Do you believe that the new Under Secretary for Management and Performance could help strengthen the lines of communication? 

Mr. FRIEDMAN. I hope that is the case, and it is more than just 

the mere establishment of the Under Secretary’s position, which I 

think is an interesting concept and I think has great possibilities. 

It has to permeate the entire organization, that people at all levels 

in the field, in headquarters feel that they can surface problems to 

the Department’s leadership in a way that, number one, of course, 

they won’t feel they will be subjected to retaliation, but more importantly, that they can see meaningful steps taken in response to 

that information to try to address the underlying root causes of the 

problems. 

Ms. CASTOR. Thank you. 

Mr. Trimble, GAO has reported that DOE’s contractor assurance 

systems are producing inconsistent results across the agency. Can 

you elaborate on this finding, and what are the ramifications of 

these inconsistencies and how can DOE improve? 

Mr. TRIMBLE. Well, I think the cost overruns and schedule delays 

are indicative of that. I think what we have seen in our ongoing 

work looking at MOX and UPF is, some concerns where there are— 

the information system being reported to the government, there are 

red lights on the dashboard indicating problems, and the key question we are getting at is, what is being done when those lights go 

off and are people recognizing them and are they taking action and 

is the action effective. And so again, it is sort of the proof-in-thepudding argument. It is, you can establish systems but then do you 

have processes to act on the information you get and does the organization support that. There is a parallel here between, I think, between the problems we have seen on the security side where the 

culture has been highlighted where you can have rules, but if the 

organization and culture is not to abide by the rules, things don’t 

happen. There is that same challenge here on cost and schedule 

management. You can have processes and organizations but everyone has to walk the talk for it to work, and that is sort of where 

the, you know, again a part of the challenge facing the Department 

is going to lie. 

Mr. MURPHY. Thank you. The gentlelady’s time is expired. I will 

recognize the vice chairman, Dr. Burgess, for 5 minutes. 

Mr. BURGESS. Mr. Trimble and Inspector Friedman, let us follow 

up on that about walking the talk a little bit. How do you know, 

Inspector Friedman, that stuff is going to get reported in the management plan you are proposing that now there is greater flexibility and freedom for people to report problems that are identified? 

56 

Mr. FRIEDMAN. Dr. Burgess, I am not instituting—I don’t manage the Department obviously, and I am not instituting the new 

process; the Deputy Secretary and the Secretary are. But I think 

I understand your question. I think the test will be if the very core 

issues that we are talking about here and the reason that you are 

holding—one of the reasons that you are holding this hearing, if 

those issues are addressed through an open line of communication 

and we can demonstrate that the communications are working, we 

reduce the number of complaints we get from employees who say 

that their concerns are not being addressed. We can gauge that 

quite effectively as to whether the process is working. 

Mr. BURGESS. And so from that, do you have confidence that the 

process is working? 

Mr. FRIEDMAN. At this point, I don’t have that confidence. If we 

reconvene at some point in the future, if we have time to see the 

new system in place and take a look at it and evaluate it, I will 

be more than happy to come back and give you my review. 

Mr. BURGESS. Well, I suspect we will. You know, you have been 

kind to be with us every times and I suspect that we will have an 

opportunity to talk. 

Secretary Poneman, can you address that? 

Mr. PONEMAN. Yes, sir. It is a work in progress. We actually 

measure it quite regularly. We have self-evaluations. We have 

third parties come in, and they evaluate. I personally have spent 

hours and hours speaking to 4,000 people out at Hanford making 

sure people understand there can be no retaliation for people coming forward expressing their concerns. We had an—I put out quarterly a notice saying anyone who has a differing professional opinion can be heard, and we actually had the experience of a differing 

professional opinion be sustained as we reviewed it. There is never 

grounds for complacency. As others have said, it is a cultural issue. 

We have to keep working at it. We will never be perfect but we are 

trying to improve it at a cultural level, at an institutional level, 

and we are trying to measure it on a periodic basis. You made the 

very good point in your opening statement, we have to measure 

these things or we are not going to know if we are doing better. 

Mr. BURGESS. Yes. A chance to measure is a chance to cure. 

Mr. PONEMAN. Your point about the diagnosis is critical, by. 

Mr. BURGESS. Well, just as far as developing that culture of accountability within the Department, how do you feel that that is 

going? I don’t get the impression from Mr. Trimble that is quite 

where it needs to be but where do you think? 

Mr. PONEMAN. I think, Congressman, there too it is a work in 

process. Actually, the sunshine of some of the things the President 

has required in terms of disclosure of our results on the Internet 

I think is a very powerful tool. As has been noted by many members of this committee, much of work is performed by contractors. 

They are indeed sensitive to how their work is evaluated and how 

that is disclosed. Again, I think we have improved. 

One critical thing I would like to note, Congressman, is, we have 

made it a policy of the Department to align the taxpayer incentives 

and interest with those of the contractors so we cannot get into a 

situation in which a contractor can do well and the taxpayer do 

poorly. 

57 

Mr. BURGESS. Let me ask you a question about that, because obviously there is a lapse. They involve scientists, and you want your 

scientists to do your best work, and how do you ensure that that 

is deliverable for the President and the Congress and the taxpayer 

does not get in the way of delivering on the scientific product required? 

Mr. PONEMAN. You have just put your finger on an absolutely 

critical factor. People sometimes lose sight of the fact that these 

labs have produced the most awesome intellectual property in history beginning with the weapon that won World War II. The last 

thing we want to do is to stifle that creativity. So what we need 

to do is give these people the tools and the authority to get their 

work done, but we have to have in exchange transparency into 

what they are doing because we are the owners on behalf of the 

taxpayer to have the transparency to hold them accountable to the 

results that we expect from them. 

Mr. BURGESS. And since you brought up Los Alamos, I took a 

visit out there in 2005. It was a long time ago. And their security 

detail, they apparently have been tested and found wanting at 

some point in the past. They were fairly sensitive about it and 

demonstrated that sensitivity to me with what they were able to 

do, which is why we had the hearing on Y–12, I didn’t understand 

how those people could be in the audience that day. I thought they 

should be interred in someplace because of the response of the security team when you wander into the kill zone. You don’t ask 

questions; you take them out. So what am I missing on that? 

Mr. PONEMAN. Congressman, you are not missing a thing. We 

discussed this before. That was an unforgivable breach. The cameras were out. The guards were not responding properly. We have 

taken all of the immediate steps that we could including aligning 

the security force subcontract under the management and operations contract including removing the responsible individuals, but 

we are continuing, as I said earlier, to look at the broader systemic 

changes that we need to do to make sure, per Mr. Trimble, that 

these changes that we have started are sustained. 

Mr. BURGESS. Would you give advice to the protesting public to 

not try this again? 

Mr. PONEMAN. Yes, I surely would, because what was a very terrible, terrible episode could have been tragic with loss-of-life consequences. 

Mr. BURGESS. Yes, it could. Thank you, Mr. Chairman. I will 

yield back. 

Mr. MURPHY. Thank you. Mr. Lujan for 5 minutes. 

Mr. LUJAN. Mr. Chairman, thank you very much, and thank you 

and to the ranking member for calling this important hearing. 

Mr. Poneman, could you help me understand how the reorganization is going to help with management of the national labs? There 

are a number of new entities concerning the labs that have different responsibilities and reporting chains. These include the National Lab Operations Board, which reports to the new Under Secretary of Management and Performance, the National Lab Policy 

Council reporting to the Secretary, in addition to the Under Secretary for Science and Energy has primary responsibility for many 

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bility for the rest. Is this going to result in more inspections and 

transactional oversight at the labs or less but more effective inspections and oversight, as a number of experts have called for? 

Mr. PONEMAN. Congressman, I don’t think we will—the metric 

won’t be number of inspections per se but rather the results which 

will endeavor to measure, but let me try to make sense of what 

sounded a bit intensive in terms of the kind of oversight from your 

comment. 

The National Laboratory Council is absolutely critical to the 

point Dr. Burgess just raised. We need to make sure that we get 

together with all the lab directors, the fountainhead of our innovation, and think through what are we trying to do as a Nation in 

support of the President. The very first meeting that Secretary 

Moniz had out of town in a rare time we traveled together was to 

Oak Ridge to meet with all of them. That is a big thing, what we 

are trying to do. The lab operations board that will report to this 

new Under Secretary will deal with all of those issues like real estate and IT purchases and cybersecurity that will enable the smart 

scientists to do the innovative work. So actually, it is a much more 

operational hands-on thing. I don’t think you are going to find it 

a cluttered system in practice, but we would be very happy to stay 

in touch with you as we roll it forward. 

Mr. LUJAN. That is what I am hoping, that we don’t have a cluttered system, that there is not just layers and layers that are put 

on top of each other but that we do follow many of the suggestions 

that have been put forth. That way is effective, that the time that 

is used to be able to go in and look is effective and we are able to 

identify things. Do you foresee any structural changes to NNSA besides moving Environmental Management from NNSA to the 

Under Secretary for Management and Performance? 

Mr. PONEMAN. Congressman, I will make two comments. Number 

one, as I have alluded to, we have received further thoughtful input 

from a number of wise people including some of whom I think have 

visited with this committee on structural changes to enhance our 

security, our physical security, especially for category I nuclear materials, and we are actually, even as we speak, having people look 

deeply at that so Secretary Moniz can make some decisions in the 

near term. That said, as you well know, there is a congressional 

mandated panel that has been empowered to look at these governance issues, and as they continue their work, we will of course be 

in touch with them and look forward to hearing what their results 

are and seeing what further actions, if any, are required. 

Mr. LUJAN. Under the reorganization, the technology transfer coordinator would be put within the Office of the Under Secretary for 

Science and Energy. While this Under Secretary does have responsibility for most of the labs and basic and applied science programs 

at the Department, it does not include the NNSA laboratories. 

What will be done to ensure that tech transfer coordinator will be 

able to coordinate technology transfer activities across the entire 

Department, which spans two Under Secretaries and will not prevent the NNSA laboratories from participating? 

Mr. PONEMAN. Congressman, the entire thrust of the reorganization has been to put stronger leadership at the top, precisely so 

that we can enhance our ability to catch these cross-cutting issues. 

59 

I can tell you because we have already been doing it, this is the 

practice that we have already engaged in, and one example which 

would apply equally when we get the new tech transfer coordinator 

is cybersecurity. We have cybersecurity all across all portfolios of 

the Department, and we have now constituted the Cybersecurity 

Council to make sure that we get that kind of cross cut, that we 

don’t miss a bet in terms of getting the tech transfer. Some of the 

innovation out of the national labs could be very, very important 

in the science and energy portfolio. 

Mr. LUJAN. I am certainly hopeful that there won’t be more burdensome restrictions put on the NNSA laboratories versus the 

other labs when it comes to tech transfer, so I am encouraged by 

that, Mr. Poneman. 

Mr. Friedman, there was an incident in which in New Mexico 

you identified a contractor that was overpaid. You brought it to the 

attention, based on a request from NNSA, where minimum requirements have to be met by contractors in order for these contractors 

to get paid. Can you talk about that and what we can do to prevent 

that from happening in the future? 

Mr. FRIEDMAN. Well, one of the problems we have, Mr. Lujan, 

DOE has an incredible structure of prime contracts and a significant subtext of that is the subcontractors and secondary and tertiary subcontractors that it has. One of the responsibilities of the 

prime contractors is in fact to make sure that the subcontractors 

are responding appropriately, that are paid appropriately, and the 

taxpayers are treated fairly in this process. One of the promising 

things that we have seen is a number of referrals from prime contractors including those in New Mexico, if I might, of cases where 

they believe the subcontractors have not acted appropriately in one 

way or other. So we take those cases very seriously, and a lot of 

our work is done with the subcontractors to the prime contractors, 

that is the national labs in the case of New Mexico. 

Mr. LUJAN. I appreciate that. And Mr. Chairman, this may be an 

area where the committee as a whole, that we can try to get all 

of the additional information or whatever has not been released 

thus far in regards to this instance and maybe some others so that 

we can see if there is going to be any additional information released on this matter or whatever has not been public. So I appreciate that, Mr. Chairman, and look forward to working with you 

and the committee on this. 

Thank you again for the responses. 

Mr. BURGESS [presiding]. I acknowledge the gentleman’s comments and now recognize the gentleman from Virginia, Mr. Griffith, 5 minutes for questions, please. 

Mr. GRIFFITH. Thank you very much, Mr. Chairman. 

The other chairman asked some questions that raised some 

issues for me that I hadn’t really planned on getting into today, but 

I guess this is as good time as any. 

When you talk about trying to, you know, reorganize and make 

things more efficient, are you just rearranging the deck chairs or 

are we actually having some personnel changes? And let me tell 

you what I am referencing in specifics. I have always been bothered by the Solyndra situation, and the response, as yours was 

today, is, you know, we try to do what we can and our due diliVerDate Aug 31 2005 09:48 Mar 18, 2014 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 F:\113-76~1\113-76~1 WAYNE
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gence, etc. And I accept that notwithstanding the fact, as the permanent chairman said of this subcommittee, but there were warning signs out there. I have always been concerned with the subordination issue and the fact that to me, in my opinion, it was horrendous legal advice. I really don’t think it was well done, and I am 

wondering if that department is also being reorganized in any way 

to try to make sure that when Congress says that money is not to 

be subordinated, that that doesn’t mean you can do a loan at 11 

and subordinate at 12 because you didn’t do it at the time of the 

closing, and that was basically what we heard in that investigation. 

Can you answer that for me? 

Mr. PONEMAN. Let me offer a couple of comments, Congressman. 

First of all, in terms of your appropriate question of the structural 

changes, we didn’t start with this reorganization; we started, of 

course, with the Allison report. As you saw, he said the health of 

the portfolio was strong. That said, he had a number of very important practical suggestions in terms of transparency, accountability, 

customer service, portfolio management, and many of those have 

been implemented, point one. Point two, that included making sure 

we had very highly capable people in the positions. Point three, a 

lot of those people are very much focused on portfolio management, 

and there is a brand-new leader of the Loan Program Office, and 

finally, in this reorganization, Secretary Moniz wants to make sure 

that the Credit Review Board itself, which sits above the Credit 

Committee, is strengthened so that we will have the ability in the 

normal kind of boardroom fashion of doing due diligence on transactions to make sure we bring those kinds of disciplines to bear. 

Mr. GRIFFITH. One of my concerns there was, it appeared that 

the legal counsel that was being given was seeing—and this is my 

interpretation, nobody ever said this—saw itself as trying to come 

up with a legal opinion to justify what the Department of Energy 

wanted to do as opposed to protecting the American taxpayers, and 

I would hope that the legal department would see as a part of their 

duty at the very least is to make sure that what they are doing is 

lawful because the laws that Congress pass are intended to protect 

American taxpayers, and the decision to subordinate cost $170 million to the American taxpayers. 

Mr. PONEMAN. Congressman, I would have to dig back into the 

details. I would just say my recollection of the legal advice received 

at the time was there was a higher chance of a higher recovery 

from a going concern than from a fire sale, and the question at the 

time that it was presented was whether subordination would meet 

the statutory requirement that the Secretary was obliged to seek 

the maximum recovery for the taxpayer. But we can obviously follow up on that. 

Mr. GRIFFITH. And I would like you to follow up on what has 

happened because while I think that may have been the party line, 

so to speak, when you looked it, the rules that were required to follow and make that decision, even though subordination was not 

lawful, the following rules in other situations to do that were also 

not followed, so it was just a big mess and it cost the taxpayers 

a lot of money. 

Inspector General, in that same regard, at the time I asked some 

questions that you were unable to answer for me because the invesVerDate Aug 31 2005 09:48 Mar 18, 2014 Jkt 037690 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 F:\113-76~1\113-76~1 WAYNE
61 

tigation had not yet been completed. I am not asking you to answer 

questions that you can’t and probably use another day to get into 

that, but has that investigation been completed on the internal 

workings at the Department of Energy in regard to the subordination issue? 

Mr. FREIDMAN. Mr. Griffith, both the Justice Department and 

our office are prepared to say that there is an active investigation, 

criminal investigation ongoing, and as much as I would love to be 

able to answer your question, and I truly would—— 

Mr. GRIFFITH. I just wanted to know if it was still ongoing. I appreciate that. Thank you very much. 

Back to you, Deputy Secretary. As a part of this, another issue 

has been brought to my attention, and I am not going to tell you 

I am well versed in it, but it does concern me, and that relates to 

the National Nuclear Security Administration and the National Security Complex and Pantex plant management contracts, and in 

that process, GAO has said that there was an upheld—they upheld 

a procurement protest. My concern on that is, is that apparently, 

according to a press report that has been brought to me, in three 

instances, the source selection authority at the 11th hour changed 

some of the criteria, and I know there are all these big companies 

jockeying for position, but at the 11th hour three matters were 

changed, and that changed who got the contract. On its face, that 

doesn’t smell right to me. Are you all looking into that matter and 

trying to make sure those things don’t happen? 

Mr. PONEMAN. Congressman, precisely because if I understand 

which procurement you are talking about, it is still open and we 

are still working on it. I cannot comment on what we are doing, 

but obviously we do everything possible to make sure that we hew 

to all of the requirements, statutory, regulatory and ethical, that 

apply. 

Mr. GRIFFITH. Well, you can understand my concern. When rules 

are changed at the last minute, it is hard for people to honestly 

compete. 

Mr. BURGESS. The gentleman’s time has expired. We will go to 

the gentleman from Texas, Mr. Green, 5 minutes for your questions, please. 

Mr. GREEN. Thank you, Mr. Chairman. 

In today’s testimony from the GAO and the Inspector General, 

we have heard how many instances of significant cost increases for 

major environmental management and nuclear programs, cases 

where actual contract costs far exceeded the original cost estimates. 

This is a problem we need to solve in order for the DOE and Congress to make informed decisions about allocating resources. We 

must have accurate and reliable information. 

Mr. Trimble, can you give us some examples of how inaccurate 

cost estimates impact the agency’s ability to function efficiently and 

effectively? 

Mr. TRIMBLE. Sure. Aside from the examples I gave in my testimony, you know, the obvious ones—MOX, WTP, UPF—you have 

other issues involving, say, projects, for example, the Pit disassembly building, which entered design. It was supposed to be an 

adjunct to the MOX facility, $730 million spent before it was canceled. I think what is interesting about these cases is that in all 

62 

of them, at the very beginning, the critical decision point one, there 

is no requirement currently for an independent cost estimate. So 

DOE can start a project and go a long time before it hits the decision point two requirement where you actually have an independent cost estimate requirement. But we have already spent tens 

if not hundreds of millions of dollars on these projects. So you start 

on a path. The control weakness hits you early. You spent a lot of 

money and it takes a long time before you are in a position to rectify that. 

Mr. GREEN. What are the reasons we have seen so many cost increases in the past, and how can DOE do a better job of producing 

cost estimates that are accurate? 

Mr. TRIMBLE. Well, in the past we have recommended that at 

CD–1, the decision point early in the process, that there an independent cost estimate. We have had past recommendations, for example, to have a cost estimating policy. Right there is guidance but 

there is not a policy. The Department had guidance. We first reported on this issue in 1983. In the mid-1980s, they instituted a 

policy. They rescinded the policy around 1995. They put guidance 

into their processes but there is no cost policy which would then 

tell contractors, hey, you are coming up with an estimate for this 

project, these are—this is how you are going to do the estimate or 

these are the rules I want to see, what are the marks you have to 

hit to give me a quality estimate. Right now we don’t have that. 

There is guidance that creates looseness in the system and problems. 

Mr. GREEN. Deputy Secretary, obviously DOE is not the only 

Federal agency that has trouble with cost estimates. What steps 

has DOE taken to improve the reliability and uniformity of its cost 

estimates? 

Mr. PONEMAN. A couple things, Mr. Chairman. I think it is very 

important to point out a clarification here. Under our directive 

413–B, which applies to the big capital projects, for the first time 

we insisted that each of these main gates of identifying the mission, picking the main technology and so forth that we do have cost 

estimation. There are different terms of art of what you call it, but 

one of the reasons, frankly, sir, why we have gotten in trouble is 

because people have said, oh, this is too early in the project, you 

can’t tell anything at this point, to which I say, you know, if you 

are going to St. Louis or Mars, you should be able to give me the 

right number of zeros, OK. So we actually have tried, and I invite 

you to look at 413–B and we will have your staff briefed on it. That 

tries to get at exactly the problem that Mr. Trimble has identified 

in response to your question. 

Also, it is not only a question of having the requirements in there 

but a question of having the metrics, and so instead of requiring 

a constant manual uploading of data from the contractor to the 

Federal oversight and so on, we are trying to, through what we call 

the PARS software system, make sure that the very same data that 

is entered by the contractor is transparent from, as we say, from 

stem to stern and that we have got real-time accurate data on what 

is happening on the ground because the real problem enters into 

it, sir, when we get a gap in the reporting of what is happening 

on the ground and when it comes to our attention. 

63 

Mr. GREEN. Mr. Trimble, do you think that is progress, and is 

it the solution to the issue identified? 

Mr. TRIMBLE. Well, I think we may disagree a little bit on how 

robust the 413 requirements are at CD–1, and I think that that 

would be a great question for the record, and we can give you a 

more robust answer on that. 

Mr. GREEN. I appreciate that. Thank you, Mr. Chairman. I yield 

back. 

Mr. BURGESS. The gentleman yields back his time. The chair recognizes the gentleman from Texas, Mr. Olson, 5 minutes for questions, please. 

Mr. OLSON. I thank the chair, and good morning to our witnesses. This is not news, gentlemen, but one of my responsibilities 

under the Constitution of the United States is to provide oversight 

on behalf of the people of Texas 22 of the Executive Branch agencies and oversight of the Department of Energy. The Department’s 

budget remains in the tens of billions of dollars. It covers topics as 

diverse as financial support for emerging solar power technologies 

to safeguarding technology responsible for the most potent weapons 

mankind has ever created. Guaranteeing commonsense execution of 

DOE’s mission is not just needed to protect taxpayer dollars, it is 

needed for national security. There have been problems in the past 

but with the new Secretary and a new organizational structure, I 

see this hearing as the first step to prevent problems in the future. 

And my first question is for you, Mr. Friedman—I am sorry. This 

is for you, Secretary Poneman. In Inspector General Friedman’s 

testimony, he laid out a number of suggestions that he recommends 

as solutions to some of DOE’s problems, specific ideas from reducing duplication at NNSA to reevaluating security. And many of 

these sound like excellent suggestions but they are similar to suggestions from 2012. My question, sir, is, what is the process at 

DOE for considering suggestions that the Inspector General 

makes? What keeps them from being heard but ignored? 

Mr. PONEMAN. Congressman, with all due respect, they are heard 

but they are very, very closely heeded to, and under the Inspector 

General Act, if my memory serves me, of 1978. This is an absolutely critical function in the Department. I would be the first to 

tell you that in an organization, as you say, about a $25 billion 

budget, 115,000, 110,000 people working, we have a lot, a lot of 

problems, and one of our critical tools is the Inspector General reports. They come in, they get seen at the highest levels by the Secretary and myself, and we take them very, very seriously. We have 

not, and I suspect we never will, hit 100 percent in terms of executing against all of the ideas that come in, and in fact, sometimes 

we have responses and we have different approaches and so forth. 

But I cannot exaggerate—it is an invaluable tool, and we will continue to use it to enhance our performance. 

Mr. OLSON. Thank you, sir. And I am a Texan, so I am not looking to provoke a little battle here, but Mr. Friedman, I would appreciate your comments on the issue as well. 

Mr. FRIEDMAN. I couldn’t have posed the question better if I had 

been sitting where you are sitting and you were sitting where I 

was sitting, Mr. Olson. 

Mr. OLSON. You don’t want my seat, trust me. 

64 

Mr. FRIEDMAN. The Deputy Secretary, I have known him for a 

number of years, and he has been extremely responsive to our reports, and the way he has described it is absolutely accurate. I said 

in my testimony that the five recommendations for cost savings 

that we have enunciated in 2 years sequentially are politically 

challenging, they are highly controversial and very difficult for anyone to grasp, get their hands around and really implement. So I am 

a realist, and I understand that while I hope they’re considered 

and I hope they receive serious thought, I anticipate that implementation if it ever is to happen is going to take some time. 

Mr. OLSON. Well, we need to correct these problems, as I mentioned. Some of these issues are very important to our national security and our country. 

One further question for you, Secretary Poneman. You and Secretary Moniz held a DOE town hall, a forum that showcased some 

of your new organizational changes. There are two points that were 

discussed that were better communication and improving DOE’s 

‘‘tooth to tail ratio.’’ Reducing redundancy and streamlining your 

work are both noble goals. However, it seems to me that there have 

been long questions about this broader philosophical approach that 

has been taken in running this Department. How far will this reorganization move DOE forward in improving mission execution? 

What are some of the next steps that are being considered? 

Mr. PONEMAN. Well, Congressman, it was just announced here a 

week or so ago, so it is still in early stages. The first thing we have 

to do is to make sure that we have got the people encumbering 

these new positions that will have the capacity to achieve these 

outcomes—point one. Point two, some of the things we have already started, and the first thing I will just note because we 

haven’t had the meeting, I chair the Cybersecurity Council, which 

is crossing cutting. Secretary Moniz himself just attended ex officio 

to show his commitment to this cross-cutting effort. We have got 

to get better in terms of various IT systems that they can talk to 

each other so that they can be robust in making sure that our most 

secret secrets that have you said are our sacred obligation to protect are fully protected. It is going to be a work in progress, and 

we welcome—I sincerely mean this—we warmly welcome the oversight of this committee to make sure that we stay on track. 

Mr. OLSON. Thank you. I have run out of time, but what a great 

comment about the Secretary. Being a military officer, one thing 

the leader can do is get involved with the troops and show them 

he cares, and it sounds like he is doing that. 

I yield back the balance of my time. 

Mr. MURPHY. Thank you. I now recognize the gentleman from 

New York, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

For the first time, GAO earlier this included climate change in 

its high-risk list. GAO recognized the reality of climate change and 

found that the Federal Government is not well positioned to address the fiscal exposures presented by climate change. I would like 

to hear from GAO about the risk of inaction and how the Federal 

Government can respond to this given threat. 

Mr. Trimble, why did GAO decide to include better management 

of climate risk on its high-risk list this year? 

65 

Mr. TRIMBLE. The addition of climate change, it is really—the 

way we phrased that is the adaptation of response to climate 

change from a Federal perspective, and the rationale on that is 

really just looking at the potential Federal exposure to the potential liabilities that are associated with extreme climate events. 

Those changes run from sort of being the insurer of last resort. 

They involve being a significant landlord of large Federal assets 

such as NASA facilities, DOE facilities, and they also involve sort 

of agricultural and Federal lands issues. So when you look at sort 

of the portfolio, sort of chits or pieces that we have in the game, 

all of those areas have potential implications. Changing climate 

has a potential implication for all those in terms of the Federal 

Government’s exposure to liabilities. 

Mr. TONKO. And you noted in the high-risk report that climate 

change adaptation is a risk mitigation strategy to help protect vulnerable communities. If we fail to do things like raise a river or 

coastal dykes or build higher bridges, what kind of adverse impacts 

might be experienced? 

Mr. TRIMBLE. Well, absolutely, and I think that is what is interesting about this. If you look at some of the experiences with the 

recent extreme weather events, there are some very simple engineering changes that could have been built in. A lot of the associated costs and economic repercussions of those events would have 

been mitigated. So for example, how you attach a bridge to its 

moorings, the height of the bridge, in terms of insurance exposure 

of homes, do you have a backflow check valve. There are many, 

many simple things that are sort of low cost that can help mitigate 

that exposure. So that is part of the adaptation focus. 

Mr. TONKO. You know, I had witnessed in my district a couple 

of years ago Irene and Lee, and the exponentially increased volume 

of water flowing through some of the creek beds, and so as we displace this infrastructure with the ravages of Mother Nature, it became imperative, I believe, for government to build back intelligently, effectively, and to build the same stretch, same span or 

same height on a bridge would just be wasted money. So it is interesting to hear you say that. 

What recommendations do you have for us to address the high 

risk of climate change? 

Mr. TRIMBLE. With that, I may have exhausted my knowledge. 

I know we have several reports dealing with adaptation to climate 

change, and I know we have made recommendations to the Administration on coordinating Federal response to climate change sort 

of at the Executive Office of the President level, to coordinate policies for each agency. I know there has been a lot of action in that 

regard. 

Mr. MURPHY. Is your mic on? 

Mr. TONKO. Under Secretary, growing threats of climate change, 

critical government infrastructure could be at risk. What is DOE 

doing or what does it hope to do to protect critical infrastructure 

and more generally to mitigate the effects of climate change? 

Mr. PONEMAN. This is a huge challenge, Congressman. We are 

working on it not only in terms of our own enterprise, but we are, 

as you know, responsible as the sector-specific agency for homeland 

protection for protecting the electric grid, the natural gas pipeline 

66 

system and so forth. We have been from the first day of—actually 

from before Hurricane Sandy striking at the center of the Federal 

effort working very closely with FEMA and with the President to 

make sure that we are taking those steps first on the mitigation 

side so that we can reduce the risks of these raging storms and 

floods the President has alluded to, but also we are working in 

terms of the area of New York and New Jersey reconstruction, 

smart grid, distributed generation, micro grids so that you can 

have a self-healing grid in the case of a devastating storm so that 

the critical places like hospitals and gas stations and places like 

that actually are able to respond better. 

It would be hard for me to exaggerate, sir, the amount of time 

and effort that this is taking. It is a much larger chunk of our effort in the Department that in the past, precisely because the problem has become so much greater. 

Mr. TONKO. All right. The ounce of prevention here could be a 

pound of cure when you look at the comeback and disaster aid 

monies that are required not only to restore and rebuild but to do 

it effectively and intelligently. 

Mr. PONEMAN. Absolutely. 

Mr. TONKO. I thank you very much. 

Mr. MURPHY. I thank the gentleman. The gentleman yields back. 

Now Mr. Scalise is recognized for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate you having 

the hearing, and I appreciate our witnesses coming to testify. 

When we got the reports back, and you all have addressed a 

number of the items and the problems that were identified, but 

when you look at the overall DOE budget, you see that 90 percent 

of the budget is, in essence, contractors. You know, when you look 

at the agencies that have addressed some of the problems, the two 

agencies that were still remaining within DOE that were still considered high risk have over 64 percent of the budget, so there is 

still a lot of the budget that is still out there, and one of the points 

I want to bring up, and I will start with Mr. Friedman, is going 

back to 2007, DOE and NNSA have required contractors to implement a self-assessment strategy to identify deficiencies. I want to 

ask you how you feel that process is working where you are in essence allowing the contractors to assess themselves to identify deficiencies, considering there is such a large percentage of the overall 

DOE budget that is going towards contractors. How does this process work? Is that the best method to get us the efficiencies that we 

are looking for? 

Mr. FRIEDMAN. Well, we issued a report on that, Mr. Scalise, several months ago on the contractor assurance process, and frankly, 

we think it is not ripe and it is not mature and therefore it is not 

as effective as it needs to be to satisfy basic requirements to protect 

the interest of the U.S. taxpayers. There was a disconnect, for example, between contractor metrics and the pay-for-performance 

mechanism that was in place. There were a number of other weaknesses that we identified in that report. So does it have promise? 

I guess it has potential, but at this point we don’t think the Department nor NNSA are there. 

67 

Mr. SCALISE. I want Mr. Poneman to be able to address this as 

well. How do you plan on addressing those deficiencies that were 

outlined in that report? 

Mr. PONEMAN. Congressman, I take a very old-fashioned view of 

this. It is true, and you know, one should note, this committee has 

noted several times, our national security imperative, this structure goes literally back to the Manhattan Project. This is how it 

was set up because President Roosevelt understood that he didn’t 

know how to have the chemistry and physics and so forth. So it 

started a long time ago. But my view is still the same one that you 

would have if you are building a house: the contractor has got the 

expertise but you are the owner. That is what GOCO means: government owned, contractor operated. What we need to do, Congressman, in my judgment is to make sure that as an owner, just 

like any owner would in a house situation, you have got the expertise to hold the contractor accountable, and the mechanisms that 

we are talking about in this set of reforms in addition to the things 

we have been trying to do in terms of contract management, in 

terms of transparency of metrics that come out of their performance are intended to put us in that position to be a smart owner. 

Mr. SCALISE. And Mr. Trimble, do you have any follow-up on 

what this says about the DOE’s ability to rely on contractors for 

self-assessment? 

Mr. TRIMBLE. Well, we have ongoing work on the contractor assurance model. Right now we also have an ongoing review looking 

at the security reforms. Both those are in process, so we will have 

more to add later. I think as the Inspector General notes, we have 

observed some of the problems, and I think in addition to the Y– 

12 incident, there was a case at Livermore where in 2009 the DOE 

found—gave the security force there one of its lowest ratings, and 

this was 6 months earlier then that inspection the local site office 

had given a 100 percent rating. So again, it is a matter of how do 

you execute this and can the system be made to work, and I think 

notably since Y–12, you know, the DOE has backed off from that 

and has taken a new approach, and that is part of what we are 

looking at in our new review. 

Mr. SCALISE. Thanks. My last—— 

Mr. FRIEDMAN. Mr. Scalise, could I just amplify on my comment 

earlier? 

Mr. SCALISE. Yes, if you can do it real quickly. 

Mr. FRIEDMAN. I will. And the answer, it seems to me, is there 

nothing wrong with contractor self-assessment as long as there is 

adequate government validation. 

Mr. SCALISE. Yes, there has got to be some kind of extra layer 

of somebody looking over the shoulder, and two eyes are better 

than one, especially when one of those sets of eyes is the person 

looking at themselves in the mirror. I want to make sure there is 

another set of eyes checking that. 

I want to talk about cost estimates because that has been a problem, getting cost estimates right, and both Mr. Friedman and Mr. 

Trimble, you have indicated the need to develop realistic timetables 

and baselines to try to address that, but you have also talked about 

trying to break up these larger projects into smaller chunks, you 

know, whatever the terminology you are using is. Can you do that, 

68 

and can you still get reliable baselines and cost estimates as you 

are going forward? How do you plan on doing that? I would ask Mr. 

Poneman or Mr. Trimble. 

Mr. PONEMAN. Well, yes, sir, Congressman, that precise GAO 

recommendation we followed, and because we followed it, I think 

that is one of things that led to better performance that led us to 

get out from under the high-risk list for our projects less than $750 

million. Yes, you can sir. Under Order 413, you can have cost estimates at each of our gates of our capital construction projects, mission identification, selection of technology and so on, and that is 

what we have got to do. 

Mr. BURGESS [presiding]. The gentleman’s time is expired. 

Mr. SCALISE. Thank you. I am out of time. I yield back the balance. 

Mr. BURGESS. I recognize the gentlelady from North Carolina, 5 

minutes for your questions, please. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panel for being here today. 

Mr. Trimble, you indicated in your opening statement that even 

in recent work concerning the DOE’s management of projects 

smaller than $750 million, about 30 or so projects did not provide 

sufficient information and documentation for an assessment of 

their performance. Can you explain why this is significant and 

what your feelings are on that? 

Mr. TRIMBLE. I think this is an issue we have discussed with the 

Department and they have acknowledged and agreed to work on 

this, but it goes back to the justification and the paper behind the 

decisions, and I think this issue has come up in another context, 

but if you don’t have the information and the file on which the decisions are based, it is hard to imagine from an outsider’s perspective how the decision was made in the first place and was it made 

for the right reasons, but it is also impossible to validate the decisions that were made. 

Mrs. ELLMERS. So it really seems like there is really not a process of full evaluation? 

Mr. TRIMBLE. Or there is a process but it is not being followed. 

Mrs. ELLMERS. I see. So you believe the tools are there, it just 

isn’t necessarily—— 

Mr. TRIMBLE. Not necessarily followed in all cases. 

Mrs. ELLMERS. OK. Do you see any other area where lack of information is a hindrance in information gathering in regard to contractors? 

Mr. TRIMBLE. Well, I mean, there is lots of—this could go in a 

lot of different directions. I think one of the questions that comes 

up quite often is, DOE uses an earned value management system 

to track the performance of contractors. Every time we go through 

where there is a re-baselining, it is sort of all your road signs from 

tracking the progress until the project gets suspended because you 

have to re-baseline it, and so your milestones for tracking the performance of that contractor sort of get put on hold. But since this 

process can take a year, two years, 18 months—— 

Mrs. ELLMERS. That time—— 

69 

Mr. TRIMBLE [continuing]. You are sort of flying blind for a little 

while. Now, they take measures to address that, but that is a significant—— 

Mrs. ELLMERS. And time is money. I have used that recently so 

many times. 

Now, does this also relate to contractor assurance programs? I 

mean, is this all related? 

Mr. TRIMBLE. It is not directly related. It is an enabling issue in 

terms of more information and the quality and the robustness of 

your information would support any system. 

Mrs. ELLMERS. Thank you, Mr. Trimble. 

Mr. Deputy Secretary, it looks like you want to make a comment 

about that. 

Mr. PONEMAN. No. I have not heard Mr. Trimble speak to this 

fact before but he has identified a very important problem, which 

is exactly that. When your project goes off its baseline, this system 

that is set up to clock it, it basically comes useless to you, and that 

is the point of maximum danger to have unrestricted cost growth 

and losing control over projects. So we to a first order have got to 

put a tourniquet on that particular problem and then we need to 

have a systemic fix. 

Mrs. ELLMERS. Suggestions on a systemic fix? 

Mr. PONEMAN. Well, look, to me, it all comes down to real-time 

from-the-ground data with the minimum amount of human intervention in uploading from system to system to system. We need to 

know how much pipe is getting laid per day. We have to know 

what valves are going on, and to keep track where the big subcontracted components are coming in, where is that on schedule, even 

if we are between two baselines, and we just have got to get a set 

of metrics and a way to measure that we can monitor real time. 

Mrs. ELLMERS. Mr. Friedman, would you like to expand on that? 

Mr. FRIEDMAN. No, but I think the issue with regard to getting 

off baseline and that interregnum before you get back on baseline 

is what we have found to be a very, very dangerous period, and it 

sometimes lasts far too long. So compressing that period would be 

ideal as far as we were concerned. In other words, once you find 

you are off baseline, re-baseline the entire package, have a changed 

control system that makes sense, so that you have made the whole 

system rational going forward. Otherwise we lose the progress that 

we have made in terms of controlling the project. 

Mrs. ELLMERS. Great. Well, thank you. 

Mr. Chairman, I yield back the remainder of my time. I think 

that was an excellent discussion. 

Mr. MURPHY. The gentlelady yields back. Thank you. I now recognize Mr. Johnson of Ohio. 

Mr. JOHNSON. Thank you, Mr. Chairman, and I too want to 

thank our panelists for being here this morning. 

Mr. Poneman, can you please explain the difference between the 

Department-wide mission support offices and program offices? 

Mr. PONEMAN. Yes, sir. The program offices are the ones that are 

dedicated to the nameplate mission, so maintaining a safe, secure 

and effective arsenal, making scientific breakthroughs, transforming our energy economy, cleaning up legacy waste. The support 

functions are all the things that you need to make that stuff work 

70 

so that you do it legally, financially responsibly with adequate attention to safety and security. Those are enabling elements that 

support the mission. 

Mr. JOHNSON. OK. How do these mission support offices work to 

ensure that management practices and especially cost estimating 

are consistent and effective across the Department? 

Mr. PONEMAN. Well, two points, Congressman. So far, we took 

some of the elements that were in our earlier organization where 

we had a procurement office separate from the contract management office because those were sources of expertise on this very 

point of cost estimation, and we have merged those in a unified office under a very strong leader. But secondly, Congressman, the reorganization that we have described here today is intended to give 

that office the kind of support at the senior executive level of 

Under Secretary to make sure that those disciplines can apply enterprise-wide. 

Mr. JOHNSON. OK. What authority do mission support offices or 

the new Under Secretary managing the offices, for that matter, 

what authority do they have to tell program offices what to do 

when those offices operate under the authority of another Under 

Secretary? 

Mr. PONEMAN. Well, of course, all of these authorities flow out 

of our statute, and under the authority that goes to the Secretary, 

all roads lead up to the Secretary and to the Deputy Secretary. So 

I can assure you, Congressman, that when I hear from my health 

and safety people that a program office has a problem, the program 

office may not disregard that. We are one enterprise, and I have 

often said in our team, the mission elements have got to own support, they have to feel that they own the security, fiscal responsibility, but the support offices have to feel that they own the mission as well and so we try to get that kind of a cross cut. 

Mr. JOHNSON. I certainly understand that that is how it should 

work in principle, but my 26 1⁄2 years in the Air Force and working 

with major program offices and being a program manager myself, 

yes, all roads may lead to the top but if they’re not going down the 

same street with responsibility and accountability aligned, that creates dysfunction, and it basically then becomes a personality-driven 

organization rather than a process-driven organization. 

Mr. PONEMAN. Congressman, that is a very important insight 

there. One of my early lessons in this is when I was assisting Mr. 

Lee Hamilton and Senator Baker when we were asked by Secretary 

Richardson to look at the hard drive lost at Los Alamos back in 

1999, that is what we found. We found that the organizations that 

were committed to the missions did not really feel that personal responsibility for safety and security that was essential to avoid exactly the problem you described. 

Mr. JOHNSON. Sure. Do you think that this might create more 

problems by stovepiping mission support? 

Mr. PONEMAN. Oh, to the contrary, Congressman. I think what 

we are fighting against, in other words, we believe that this reorganization is going to synthesize and bring together mission and support in a much better way than has been done before. We wouldn’t 

do this reorganization otherwise. 

71 

Mr. JOHNSON. It doesn’t appear that the Chief Financial Officer 

is in this new structure. Is the CFO an important mission support 

office, and does the CFO have more mission support authority than 

the management office or the CIO, for example? 

Mr. PONEMAN. Well, the CFO, Congressman, is under the Under 

Secretary for Performance and Management so that would be right 

alongside the other mission support offices such as Management 

and Administration, so that is—obviously the CFO has huge enterprise-wide responsibilities and it is very, very important but in 

terms of the structure, it is embedded inside that Under Secretary 

office. 

Mr. JOHNSON. I associate my same concerns that I previously 

mentioned. You know, at least in the corporate world, if all money 

decisions don’t flow through the CFO, and you have those 

stovepiped organizations, that makes it difficult as well. 

Mr. Friedman, you indicated that Federal staffing must be sufficient in terms of size and expertise to provide effective control and 

project oversight so that projects have focused, empowered and consistent Federal project management leadership throughout their 

lifecycle. Regarding expertise—and I have run out of time—what 

deficiencies have you observed in expertise over the years? 

Mr. FRIEDMAN. Well, as a general point, Congressman Johnson, 

we have found that the Federal managers did not feel they could 

exercise the necessary oversight over the contractors because they 

felt the contractors were so far better prepared for the job and the 

task that they faced. So certainly they need to be recognized professions. They need to get recognition within the Department and outside the Department, and the contractors need to understand that 

they’re dealing with people on par who are prepared to take necessary actions to ensure the government’s interest is protected. In 

terms of personal expertise, I don’t believe we have found that people were inadequately trained on a personal basis. 

Mr. JOHNSON. All right. Thank you, Mr. Chairman. I yield back. 

Mr. MURPHY. The gentleman’s time is expired. Now to the 

gentlelady from Tennessee, home to many Energy projects, Ms. 

Blackburn. 

Mrs. BLACKBURN. That is exactly right, and I welcome you all, 

and Secretary Poneman, I want to come to you and talk a little bit 

about Y–12, and we all know that April 29th, the GAO upheld a 

procurement protest regarding the combined contract, therefore, 

the National Security Complex and Pantex plan, and it was a $22 

billion over 10 years contract. You are familiar with that? 

Mr. PONEMAN. Yes, Congresswoman, but as I testified a little 

earlier today, since that contract action is still under review, we 

will not be able to in this session comment in detail about the 

workings of that. 

Mrs. BLACKBURN. All right. Well, I appreciate that, and I appreciate that there was a desire to get a $3.27 billion savings in that 

contract. I think that what I would like to know is, how can our 

committee be assured that NNSA’s nuclear production mission can 

be safety and effectively carried out under the big cost savings requirement of that type of procurement? What is the guarantee that 

you can give us? 

72 

Mr. PONEMAN. Well, I can tell you, Congresswoman, that we are 

operating under presidential direction in terms of what we need to 

do modernize and recapitalize the complex. We have an extraordinarily detailed stockpile stewardship management plan, and of 

course, given the limitations under the Budget Control Act and the 

sequestration, we need to make sure that we make every dollar 

count towards that mission, and you have the full attention of the 

Secretary and myself and the NNSA to that end, and of course, this 

has to be carried out through these contracts that you are talking 

about. 

Mrs. BLACKBURN. Let me ask you this. As you look at what has 

transpired in this process, has there been any thought given to revisiting the premise of the RFP when you are looking at some of 

these contracts? Have you all, or Mr. Friedman, have you all given 

any thought to that? Mr. Poneman first. 

Mr. PONEMAN. Well, again, Congresswoman, I don’t think that I 

am permitted to speak to the ins and outs of the RFP since it is 

still under consideration, but what I can tell you is that we are always looking at those things that we can do to do the mission of 

the Department for the President and the Nation safely and securely and in a manner that is cost-effective, and that would always inform any RFP that we have. 

Mrs. BLACKBURN. Mr. Friedman? 

Mr. FRIEDMAN. Congresswoman, I don’t really think we have 

anything to add. I don’t think we have looked at that with any 

specificity. 

Mrs. BLACKBURN. OK. I appreciate that. I think that it is fair to 

say, it is an issue that is tremendously important to us. We have 

a lot of concerns about sacrificing the mission for the cost savings. 

We have a problem with the possibility of the Department having 

failed to verify the validity of the cost savings. We think that that 

as something that when you look at an item that is a critical mission, that it does raise concern for us, so those of us in Tennessee 

will continue to keep a close eye on this. 

And Mr. Poneman, I will just say, I appreciated your comment 

about needing a systemic fix to how we approach some of this, and 

being able to work through real-time data. As you look at a complex like the Y–12 complex, we can see where something of that nature might be helpful, and what we would like to do is to yield a 

better outcome from the work that is done, and then be able to 

quantify and achieve some savings through that process, through 

efficiencies, through technology transfer, things of that nature, that 

will allow a little bit more efficiency. 

I appreciate that, and Mr. Chairman, I will yield my time back. 

Mr. MURPHY. I thank the gentlelady. We were hoping that the 

chairman of the full committee would be here because he found his 

documents from the 1990s when he asked Department of Energy 

a number of questions before about some reorganization, and I 

think he wanted to come and get an update of what has happened 

in the last 20 years or so. But unfortunately, he got tied up, but 

he will submit those. Mr. Poneman? 

Mr. PONEMAN. Mr. Murphy, if I might, I would like to make a 

slight, before we all break, amendment. In discussing with Mr. 

Johnson, who I know is not here now, the CFO’s office, I thought 

73 

it was in the Under Secretaryship but it is of such breadth along 

with GC and others that that one actually is above the fray, so to 

speak, so I just want to—we will get more a detailed answer for 

the record but I didn’t want to leave you all with the wrong impression here, so I just wanted to make that clarification of my earlier 

comment. 

Mr. MURPHY. I appreciate that. Overall, then, we will be submitting other questions to you. We ask for a timely response. Members 

are asked to get questions to us within 10 days. 

And also, I ask unanimous consent that the written opening 

statements of other members be introduced into the record. So 

without objection, we will do that. 

So I would like to thank the witnesses today, and again, as members get more questions to you, we would all appreciate a proper 

response. Thank you so much for being here today, and I wish you 

all the best in getting things working over at the Department of 

Energy, and with that, this hearing is adjourned. 

[Whereupon, at 11:45 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

74 


86600.037

Opening Statement of the Honorable Fred Upton 

Subcommittee on Oversight and Investigations 

Hearing on "Department of Energy Oversight: What is Necessary to Improve 

Project Management and Mission Performance?" 

July 24, 2013 

(As Prepared for Delivery) 

As chairman, one of my priorities is to ensure the agencies we oversee are responsive to - and reflective 

of - our current economic and technological realities. In other words, we want a governing framework 

based on today's needs, not the antiquated priorities from decades ago. Today we take a look at plans for 

a new management structure and other changes at the Department of Energy announced last week by 

Secretary Moniz. Our question is, will these reforms help transform DOE for the innovation era? 

DOE has recently experienced a number of management challenges, particularly with regard to its 

stewardship of the nuclear weapons programs and nuclear cleanup. These challenges and the 

tremendous risks to the public from failure to address them are not new. During my time as Oversight 

Subcommittee Chairman 14 years ago, we took a hard look at agency failures in security and project 

management, pressuring the agency to reform. Some reforms have worked, and some clearly have not 

taken hold, 

The big lesson is that the agency's safety, security, and contract management problems span 

administrations and Congresses. From my experience, and as our witnesses will explain, improving 

DOE's performance requires long, sustained attention to ensure lasting improvement in agency 

performance, 

Today's oversight is especially important because of the new leadership of Secretary Moniz. The 

secretary has been involved in this Department's management and performance challenges before, from 

his time as Under Secretary in the late 1990s, From my conversations with him, he understands the 

challenges at hand, I look forward to the testimony from Deputy Secretary Poneman, who will explain how 

he and Secretary Moniz want to tackle these challenges and how they will ensure these plans work as 

intended, 

Getting project and mission execution right is vital for this important agency to serve the American public, 

As our oversight continues, we are also going to have to ask bigger questions in this enduring effort. In 

1995, I made similar remarks before the Energy and Power Subcommittee as we examined the future of 

the DOE, Eighteen years ago, I expressed my concern that portions of the department were built around 

outdated assumptions of energy scarcity that no longer existed. Even more so today, DOE operates in a 

world that is vastly different from the bleak energy outlook of the1970s, It also operates in a world where 

nuclear commerce takes place in a worldwide competitive marketplace, and where nuclear risks are more 

dispersed. 

We need to start discussing whether the agency is structured and able to adapt to the realities of this 

nation's very bright energy picture. DOE has significant responsibilities that will not and should not go 

away; the agency must be poised to take on new responsibilities that best serve the energy, 

enVironmental, and security needs of the nation. But we also must acknowledge that if we were to start 

from a clean slate, there is no question an Energy Department for this new era of abundance would 

hardly resemble the Department of today. This committee's job will be to ensure the department is 

managed to meet these responsibilities and structured to ensure they are executed in the best interest of 

the American taxpayer. This hearing is an initial step in this important work, 

### 
75 


86600.070

THE COMMITTEE ON ENERGY AND COMMERCE 

MEMORANDUM 

July 22, 2013 

TO: Members, Subcommittee on Oversight and Investigations 

FROM: Committee Majority Staff 

RE: Hearing on "Department of Energy Oversight: What is Necessary to Improve 

Project Management and Mission Performance?" 

On Wednesday, July 24, 2013, at 10:00 a.m. in room 2322 Rayburn House Office Building, 

the Subcommittee on Oversight and Investigations will hold a hearing entitled "Department of 

Energy Oversight: What is Necessary to Improve Project Management and Mission Performance?" 

As part of the Committee's ongoing oversight of the Department of Energy (DOE), this hearing will 

examine the Secretary of Energy's plans for reorganizing DOE's management structure, with a 

focus on how proposed changes will address key management and performance challenges that 

confront the agency. 

I. WITNESSES 

Daniel B. Poneman 

Deputy Secretary 

U.S. Department of Energy 

Gregory H. Friedman 

Inspector General 

U.S. Department of Energy 

David C. Trimble 

Director, Natural Resources and Environment Team 

Government Accountability Office 

II. BACKGROUND 

The U.S. Department of Energy (DOE) traces its origins, and its core scientific and 

technological missions, to the World War II Manhattan Project and subsequently to the Atomic 

Energy Act of 1946, amended in 1954.1 Over time, the missions expanded into what developed 

I See Atomic Energy Act of 1954 (42 U.S.C. § 2011 et seq.). 
76 


86600.071

Majority Memorandum for July 24, 2013, Oversight and Investigations Subcommittee Hearing 

Page 2 

into a sprawling scientific and industrial complex of laboratories and other facilities across the 

nation. During the energy crises of the 1970s, the Atomic Energy Commission - a predecessor 

agency to DOE - was dissolved and the Energy Research and Development Administration took 

on management of the scientific research, nuclear weapons development, and an expanded 

portfolio of energy development programs. DOE in its current form was established as a Cabinet 

agency in 1977 pursuant to the Department of Energy Organization Act. The new agency 

consolidated the core atomic energy and R&D programs and responsibilities with various federal 

energy-related agencies into a single department,2 largely to unify federal energy research, 

policy-making, and information development under one agency umbrella. 

DOE currently engages in a broad range of national security, scientific, and 

environmental activities, including maintenance of the nation's nuclear weapons program, 

nuclear propulsion work for the U.S. Navy, environmental cleanup of the nuclear weapons 

complex, nuclear waste management and disposal, as well as promotion of scientific and 

technical innovation, energy conservation, and energy-related research, and other activities. 3 

The agency is comprised of 10 program offices, 13 staff offices, 9 operations offices, 21 lab and 

technology centers, 4 power marketing administrations, as well as the Energy Information 

Administration and the National Nuclear Security Administration. It maintains approximately 80 

laboratories, sites, and facilities across the United States and seven international offices. It has 

approximately 16,000 federal employees and more than 92,000 contractors. 

DOE is the largest non-Defense Department contracting agency in the Federal government. 

It relies primarily on contractors to carry out its diverse missions, including to operate its national 

laboratories and other facilities and to conduct environmental cleanup, which account collectively for 

about 90 percent of an annual budget that exceeds $26 billion. Many of the challenges confronting 

DOE's mission fulfillment - project delays and cost overruns, safety and security deficienciesderive from the essential structure and organizational philosophy of the agency, in which the 

missions are primarily performed in the field by contractors at the labs and cleanup sites to 

conduct the agency's often high-risk, technically unique, and complex projects. 

As a result of the ongoing challenges, since 1990 the Government Accountability Office 

(GAO) has designated DOE contract management as a "high risk" area because DOE's record of 

inadequate management and oversight of contractors has left the department vulnerable to fraud, 

waste, abuse, and mismanagement. DOE has made progress in addressing this high risk; GAO 

removed the designation from the Office of Science in January 2009. GAO now designates two 

DOE program elements as high risk - the Office of Environmental Management (EM) and the 

National Nuclear Security Administration (NNSA). These two program elements account for about 

64 percent of the agency's annual budget. (The Office of Science accounts for another 20 percent of 

the budget, with the remaining divided among energy programs, mission support, Power Marketing 

Administrations, etc.) 

In light of GAO's high risk listing, DOE reported its root cause analysis of systemic 

challenges to planning and management in 2008. By an overwhehning margin, according the 

2 See Department of Energy Organization Act (August 4. 1977); see also 42 U.S.C Chapter 84. 

3 For links to the offices and descriptiOns of activities, see DOE Program Offices. Labs & Technology Centers. 

Power Marketing Administration. Operations Offices. Other Agencies and Staff Offices. 
77 


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Majority Memorandum for July 24, 2013, Oversight and Investigations Subcommittee Hearing 

Page 3 

report,4 DOE's top challenge was it could not complete front-end planning before establishing 

project baselines. Since that time, DOE has instituted a corrective action plan to take steps necessary 

for removal from the GAO high risk list. Although progress has been made to improve performance, 

a total of 12 projects -- presently estimated to total $19 billion in costs--are either at risk of breaching 

performance baselines or expected to breach performance baselines.s 

Given DOE's national security, cleanup, and related high-risk missions, ensuring 

implementation of the necessary safeguards and security measures as well as the safety and public 

health protections, has long posed tremendous contract administration and project management 

challenges for the department, particularly in NNSA but also in EM and Office of Science 

operations. Testimony at recent Subcommittee on Oversight and Investigations hearings have 

highlighted DOE governance and management challenges that contributed to security and safety 

culture breakdowns, most notably demonstrated by the serious security breach at the Y-12 National 

Security CompJex.6 

The Department of Energy Inspector General has also identified continued management and 

performance challenges at the agency, including operation efficiency and cost savings, contract and 

financial assistance award management, environmental cleanup, human capital management, 

safeguards and security, among others. Moreover, the Inspector General has concluded that Federal 

budgetary concerns place efforts to optimize agency operations and reduce costs the "preeminent 

management challenge facing the Department.,,7 

Against this backdrop, Secretary of Energy Ernest Moniz testified before the 

Subcommittee on Energy and Power on June 13,2013 that he would be addressing management 

and performance of the Department as one of his top priorities. In an announcement to 

Department Employees this past Thursday, July 18, 2013, the Secretary outlined his plans for 

reorganization of DOE's management structure. These plans include consolidating Department 

"mission support functions" and EM programs under a new Under Secretary for Management 

and Performance and expanding the current position of Under Secretary for Science to 

encompass both science and energy missions, so that a single Under Secretary oversees basic 

science, applied research, technology demonstration, and deployment, i.e., missions performed 

by the offices of fossil energy, nuclear energy, electric deliver and energy reliability, etc. 

More specifics on the plan will be provided in DOE's forthcoming written testimony. 

The hearing will provide an opportunity to examine whether and how the reorganization will 

help DOE management address the key challenges confronting the agency that inhibit its 

priorities, and that raise risks to public health, national security, and taxpayer funding. 

4 See Root Cause Analysis: Contract and Project Management. DOE, 2008 and United States Department of Energy: 

Corporate Overview. 2012. 

, See June 2013 Project Dashboard. The largestofthese projects include the Waste Treatment and Immobilization 

Plant ($12.2 billion) at the Hanford Site, WA, the Salt Waste Processing Facility ($1.3 billion) and Mixed Oxide 

Fuel Fabrication Facility ($4.8 billion) at the Savannah River Site, SC. 

6 See, Subcommittee on Oversight and Investigations hearings September 12. 2012 and March 13. 2013. 

1 See,for example, Management Challenges at the Department of Energy - Fiscal Year 2013, Office ofInspector 

General (10-0874). 
78 


86600.073

Majority Memorandum for July 24,2013, Oversight and Investigations Subcommittee Hearing 

Page 4 

III. ISSUES 

The following issues may be examined at the hearing: 

• How will reorganization and performance reforms address identified management 

challenges and the GAO High Risk list? 

• How will reform and reorganization efforts address safety and security challenges across 

the DOE enterprise? 

• What is necessary to measure progress on DOE performance? 

• What is necessary to sustain improvements in DOE contractor performance? 

IV. STAFF CONTACTS 

If you have any questions regarding this hearing, please contact Peter Spencer or Karen 

Christian of the Committee staff at (202) 225-2927. 
79 


86600.038

The Honorable DanieiB. Ponoman 

Deputy Secretary 

U.S. Department of Energy 

1000 Independence Avenue, S.W. 

Washington. D.C. 20585 

Dear Deputy Secretary Poneman: 

August 22, 2013 

Thank you for appearing before the Subcommittee on Oversight and Investigations on 

Wednesday, July 24, 2013, to testifY at the hearing entitled "Department of Energy Oversight: What is 

Necessary to Improve Project Management and Mission Performance?" 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record. which are 

attached. The format of your responses to these questions should be as follows: (1) the name of the 

Member \vhosc question you are addressing. (2) the complete text of the question you arc addressing in 

bold, and (3) your answer to that question in plain text 

Also attached are Member request!) made during the hearing, The tormat of your responses to 

these requests should follow the same fannat as your responses to the additional questions for the record. 

To facilitate the printing of the hearing record. please respond to these questions and requests by 

the close of business on Thursday, September 5. 2013. Your responses should be mailed to Brittany 

Havens~ Legislative Clerk, Committee on Energy and Commerce, 2125 Raybunl House Office Building, 

Washington. I).c. 20515 and c-mailed in Word format to prittany.havens@maiLhou$~QY. 

Thank you again for appearing before the Subcommittee. 

Sincerely, 

I~ 

Tim 

Chainnan 

Subcommittee on Oversight and Investigations 

cc: Diana DcGette. Ranking Member, Subcommittee on Oversight and Investigations 

Attachments 
80 


86600.039

The Honorable Tim Murphy 

Chairman 

Department of Energy 

Washington, DC 20585 

October 22,2013 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

Washington, DC 20515 

Dear Mr. Chairman: 

On July 24, 2013, Daniel B. Poneman, Deputy Secretary, testified regarding "Department 

of Energy Oversight: What is Necessary to Improve Project Management and Mission 

Performance?" 

Enclosed are the answers to 14 questions that were submitted by Representative 

Butterfield and you. 

Also, the three Inserts for the Record that were requested by Representative Johnson and 

you, are enclosed to complete the hearing record. 

If we can be of further assistance, please have your staff contact our Congressional 

Hearing Coordinator, Lillian Owen at (202) 586-2031. 

Enclosures 

Deputy Assistant Secretary 

for Congressional Affairs 

Congressional and Intergovernmental Affairs 

'cc: The Honorable Diana DeGette, Ranking Member 

* Printed wah soy ink on recycled paper 
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86600.040

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q 1. The White House announced it would nominate NASA cbief financial officer Betb 

Robinson for the newly created position of Under Secretary for Management and 

Performance to oversee DOE contracts. A Washington Times article from July 23, 

2013 detailed bow cost overruns at NASA grew six-fold during Ms. Robinson's 

tenure. In ligbt of tbis news report, wbat assurances can you provide that the new 

Undersecretary for Management and Perfomlance will be able to manage DOE 

spending on contracts effectively? 

AI. Dr. Robinson has extensive experience in procurement and project management, 

including experience and insight from her time at NASA. The Department of Energy has 

improved the effectiveness and efficiency of the Department's mission support functions 

and the management of major capital projects and contracts and will continue to do so 

under Elizabeth Robinson's leadership if she is confinlled as Under Secretary for 

Management and Perfonllance. Reducing the cost of doing business within the 

Department and improving project management will enable us to reallocate resources 

toward our mission objectives in national security, science and energy. 
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86600.041

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q2. Renewables such as wind and solar account for less than 4% of power, but 

received almost a billion dollars in direct research money_ At the same time, the 

Administration proposed spending much less than half that amount on clean fossil 

fuel technologies even though fossil energy produces more than 80% of the power 

in the United States. Under Secretary Moniz, will fossil energy research and 

development still remain a pliority for and the Department of Energy? 

A2. Fossil energy research and development is a priority for the Department of Energy. As 

Dr. Moniz stated, in his July 30 visit to the National Energy Technology Laboratory this 

year, "We arc about preparing our future so that all of our fuels have an important role." 

To support this, the Administration has committed nearly $6 billion to clean coal 

technologies, including carbon capture and sequestration and is preparing to issue an $8 

bmion loan guarantee solicitation for advanced fossil energy technologies. 

2 
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86600.042

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q3. Please describe the research into carbon capture sequestration and clean coal 

technologies DOE conducts through the National Energy Technology Laboratory 

and what plans DOE has for continuing or increasing research 011 this frollt? 

A3. DOE's research and development portfolio includes a diverse set of technologies and 

pathways that are focused on capturing C02 emissions and storing them pennanently or 

utilizing them in a beneficial manner, and developing advanced technologies to more 

efficiently and cleanly burn fossil fuels for power generation while facilitating carbon 

capture and storage. These technologies include post-, pre-, and oxy-combustion carbon 

capture; carbon storage development such as small- and large-scale injection tests, 

monitoring technologies, simulation and risk assessment tools, and carbon utilization 

options; gasification, turbines, and fuel cells for advanced power generation; and 

crosscutting activities such as computational modeling and materials development. The 

National Energy Technology Laboratory's (NETL) scientists and engineers conduct 

research in each of these areas to support programmatic goals and objectives while also 

conducting cutting edge R&D that identifies new opportunities and technologies to utilize 

our nation's fossil energy resources cleanly, efficiently, and in a cost-effective manner. 

DOE plans to continue R&D in these areas as part of the President's "all of the above" 

energy strategy as well as the Climate Action Plan. 

3 
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86600.043

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q4. Please provide an update on the progress of contracts awarded through the 

Research Partnership to Secure Energy for America (RPSEA), as well as the 

financial report for RPSEA in FY2012, including but not limited to overhead and 

operational expenses. 

A.4 Over the past six years (2007 - present), over 150 projects have been awarded, 69 of which 

have been completed, and 81 are still active. RPSEA is cunently reviewing proposals 

submitted in response to the 2012 Unconventional Resources Program request for 

proposals (RFP) and the 2012 Small Producers Program RFP. Selections are anticipated to 

be made in early October. RPSEA also has two 2012 Ultra-Deepwater Program RFPs open 

soliciting proposals for 17 technical areas. Selections from those RFPs are anticipated to 

be made in December/January. 

Pursuant to the Energy Policy Act of2005, a total of$35.625 million was obligated to the 

RPSEA contract in FYI2, of which $3.75 million was for administrativeiprogran1matic 

activities, and $31.875 million for research activities. RPSEA received $1 million of the 

$3.75 million for administrative activities in December 2011, and received the remaining 

$2.75 million on Jnne 5, 2012. These funds were expended by RPSEA from January 2012 

through January 2013. The FY12 research funds totaling $31.875 million were obligated 

to the RPSEA contract on September 5, 2012. These funds have all been obligated to 

research subcontracts by RPSEA. 

4 
85 


86600.044

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q5. Please describe in detail the Department's participation in the interagency 

process(es) to develop social cost of carbon estimates, including when the 

process( es) were initiated, who was involved and who managed the process both at 

DOE and for the interagency group, and what records did DOE maintain to 

memorialize process deliberation and participation? 

AS. Staff at DOE provided technical input to the Interagency Working Group on the Social 

Cost of Carbon. The technical update to prior see estimates was conducted in order to 

ensure that DOE and other agencies incorporate the best available peer-reviewed 

information in evaluating the cost and benefits of rulemakings. For more information 

about this process, please refer to OIRA Administrator Howard Shelanski's July 18,2012 

testimony in front of the House Oversight and Government Reform Committee's 

Subcommittee on Energy Policy, Healthcare and Entitlements. 

5 
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86600.045

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q6. Durin g the hearing, you described missiou support offices under tbe proposed 

restructuring, and noted tbat tbe Cbief Financial Officer was not part of the new 

structure, but "above tbe fray, so to speak." 

a. Does tbe CFO office have more mission support authority tban tbe 

management office or tbe CIO, for example. under tbe new structure? 

b. What autbority do these mission support offices bave to tell program 

offices what to do wben those offices operate under tbe authority of 

anotber Under Secretary? 

c. Explain why this does not create management problems by stove-piping or 

siloing certain mission support functions witbin DOE's management 

structure? 

A6a. The Office of the Chief Financial Officer works closely with the Office of the Under 

Secretary for Management and Performance and the other mission support functions of 

the Department on the full range of administrative and management issues, particularly 

insofar as there are budget and financial issues involved. The Office of the Chief 

Financial Officer's authority is not "more" or "less" than the other management offices, 

but rather focused on the particular areas of responsibility of the Chief Financial Officer 

function. 

A6b. The Deputy Secretary remains the Chief Operating Officer of the Department. We fully 

anticipate that program offices across the Department, as well as the Offices of Under 

Secretary for Science and Energy and Under Secretary for National Nuclear Security 

Administration, will work with the Office of the Under Secretary for Management and 

Performance and the Office of the Deputy Secretary on the broad range of policy and 

implementation issues related to the mission support functions of the Department. The 

6 
87 


86600.046

Secretary and the Deputy Secretary retain the authority to establish department-wide 

policies and direct the implementation as necessary. 

A6c. Rather than stovepiping the mission functions, the reorganization creates a structure in 

which all the mission support organizations are unified under the Office of the Under 

Secretary for Management and Performance and can cooperate and work together. 

7 
88 


86600.047

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q7. The Secretary is ultimately responsible and accountable for the various missions 

of the Department. Because ofthis, does it benefit the Seeretary to have stafffor 

certain department-wide functions to provide his eyes and ears (and voice) to 

ensure he can manage the department's various missions? 

a. In the Department of Defense there is a management structnre called 

functional componency, through which the office of the Secretary's 

mission support functions -- the CFO, CIO, Human Resources --

communicate with their functional equivalents in the various Defense 

Department components. Would DOE benefit from such a management 

approach across the agency, including the NNSA? 

b. What are the limits or barriers to implementing such an approach? 

A7a. The mission support functions within Office of the Under Secretary for Management and 

Performance communicate and work on a regular basis with comparable components 

within DOE program offices, including the :NNSA. 

A 7b. The NNSA Act limits the authority of non-NNSA personnel, including the mission 

support functions, to direct or exercise authority with regard to the NNSA. The NNSA 

Act does not, however, limit the ability of the mission support functions to work with the 

Secretary to establish policies that the Secretary has the authority to establish throughout 

the Department. The nOll-NNSA mission support functions communicate with their 

NNSA counterparts as these policies are developed and on a regular basis on the 

implementation of these policies and other matters. 

8 
89 


86600.048

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q8. To the extent program management ofthe national laboratories is the 

responsibility of different DOE offices, how do you ensUI'e such management and 

oversight is performed consistently across DOE? 

a. What office is responsible for ensuring consistent management 

attention to the lab contracts and contractors? 

h. What will be the function of National Laboratory Operations Board and 

what role, if any, will this entity have concerning the development of 

consistent metrics for judging laboratory performance? 

A8. The National Laboratory Operations Board will report to the Office of the Under 

Secretary for Management and Performance and will include representatives from all of 

the program offices that oversee one or more of the national laboratories. Those program 

offices will continue to have the primary responsibility for the program direction and 

oversight of the laboratories. The National Laboratory Policy Council will serve to 

coordinate and develop consistent policies with regard to the Department of Energy's 

management ofthe laboratories. The National Laboratory Operations Board enables the 

Department to address administrative and operational issues affecting the laboratory 

system in a coordinated manner using an enterprise-wide approach. The development of 

consistent metrics for evaluating laJ:>oratory performance is a challenge that may be 

addressed at a policy level by the National Laboratory Policy Council and at an 

administrative level by the National Laboratory Operating Board. 

9 
90 


86600.049

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

Q9. In a January 2010 report, the Government Accountability Office recommended 

that, to better ensUI'e DOE is able to develop high-quality project cost estimates, 

the Secretary of Energy should issue the department's cost-estimating policy and 

updated guidance of as soon as possibl~ and ensure that the policy requires that 

independent cost estimates (ICEs) be conducted for major projects at critical 

decision (CD) milestones CD-I, CD-2, and CD-3. 

a. Explain whether DOE has issued a cost-estimating policy, whether it is 

standardized across the DOE enterprise, when it was issued, and 

whether ICEs have been or will be conducted at milestones CD-l, CD-2, 

and CD-3? 

A9. DOE Order 413.3B, Program and Project Managementfor the Acquisition o.fCapital 

Assets, released on November 29,2010, established cost estimating requirements for 

Independent Cost Reviews (ICRs) and Independent Cost Estimates (ICEs) at each of the 

Department's Critical Decision (CD) milestones for acquisition of capital assets across 

the Department, inclusive of the NationalNuclear Security Administration. On May 9, 

2011, the Department issued DOE Guide 413.3-21, Cost Estimating Guide, which 

establishes best practices for developing cost, estimates by the contractors and project 

teams. Its purpose is to provide uniform guidance and best practices that describe the 

methods and procedures recommended for use at DOE in preparing cost estimates across 

all phases of the Department's capital asset acquisition process. DOE Order 413.3B and 

DOE Guide 413.3-21 are consistent with, and adopt observations, recommendations, 

guidance and best practices from GAO audit reports and GAO's Cost Estimating and 

Assessment Guide (e.g., the Twelve Steps ofa High Quality Cost Estimating Process). 

DOE Order 413.3B, in conjunction with P.L. 112-74 FY2012 Consolidated 

Appropriations Act, requires DOE's Office of Acquisition and Project Management to 

JO 
91 


86600.050

conduct for capital asset projects with a cost of$1 OOM or greater an ICE or ICR at CD-I, 

Approve Alternative Selection and Cost Range, an ICE at CD-2, Approve Performance 

Baseline, and, an ICE at CD-3, Approve Start of Construction/Execution. ICEs have 

been conducted on a number of capital asset projects to include the National Nuclear 

Security Administration's Uranium Capability Replacement Project, the Office of 

Environmental Management's Salt Waste Processing Facility, and the Office of Science's 

Linac Coherent Light SOlll"ce II (LCLS II) Project. 

Jl 
92 


86600.051

QUESTIONS FROM REPRESENTATIVE TIM MURPHY 

QIO. Explain how DOE works with the U.S. Army Corp of Engineers (U8ACE) to 

conduct of independent cost reviews and estimates, and what if any barriers there 

are to increased use of USACE expertise to enhance DOE project oversight and 

management. In addition, what are DOE's plans to increase use of USACE 

independent cost estimating? 

AIO. TIle DOE Office of Acquisition and Project Management (OAPM) has retained the US 

Army Corps of Engineers (USACE) and its cost estimating contractors to augment 

OAPM capabilities when appropriate for complex DOE nuclear processing plant projects. 

To mitigate potential barriers, OAPM and USACE signed a memorandum of 

understanding in 2012 to define this partnership. OAPM, which is responsible for 

conducting Independent Cost Reviews (ICRs) and Independent Cost Estimates (rCEs) 

within DOE, is comprised of a professional staff of engineers with extensive project 

management experience who are also accredited as Certified Cost Professionals by the 

Association for the Advancement of Cost Engineering International (AACEI). As a 

result, OAPM is fully capable of conducting credible and high-quality ICEs and ICRs 

augmented on an as-needed basis with cost estimators, schedulers, risk management 

specialists, and other subject matter experts obtained from OAPM contractors or USACE 

contractors (many of which are the same as the OAPM contractors). 

12 
93 


86600.052

QUESTIONS FROM REPRESENTATIVE G.K. BUTTERFIELD 

Ql. We've seen a consistent and concerted effort to reduce discretionary non-defense 

spending, even at the detriment to agency missions and our constituents. 

Sequestration has negatively affected many agencies but significantly and 

indiscriminately cutting important, mission critical funding. How has sequester 

impacted the Department of Energy's ability to achieve its four mission areas of 

nuclear security, solving the Nation's energy challenges, advancing fundamental 

science, and environmental stewardship? In what ways has the sequester 

impacted the ability of DOE in terms of management and oversight? 

AI. Sequestration cut nearly $1.9 billion fi·om the DepaJiment of Energy's FY 2013 funding 

level. This cut reduces the ability of the Department to carry out its work, slows down 

work already in progress, results in contractor workforce impacts at multiple sites, and 

defers grants, contracts, and hiring to support planned work. 

Over $300 million was cut from prograJns supporting critical investments in scientific 

research aJ1d clean energy technologies, including funding for advanced computing 

systems, climate change research, next-generation manufacturing, fuel-efficient vehicles, 

renewable energy generation, advanced nuclear reactor designs, sustainable carbon 

capture technologies, and electric grid modernization and security. Over $400 million 

was cut from environmental stewardship programs, reSUlting in waste retrieval and 

cleanup schedule delays at sites. Finally, over $800 million was cut from the National 

Nuclear Security Administration programs supporting nuclear weapons stockpile 

stewardship, global nuclear nonproliferation activities, and submarine propUlsion system 

design, resulting in schedule delays and potential cost overruns. 

Sequestration has not had a significant impact on federal management aJ1d oversight. 

13 
94 


86600.053

QUESTIONS FROM REPRESENTATIVE G.K. BUTTERFIELD 

Q2. Most recently, we saw drastic cuts to DOE funding in the Energy and Water 

appropriations bill, which passed the House with immense Democratic opposition. 

The bill cuts funding for FY 14 by 8 percent, and makes drastic cnts to important 

programs such as nuclear non- proliferation, defense-related environmental 

ma,nagcment activities, and renewable energy programs. Many of these cuts 

would be in areas that the GAO and Inspector General have identified need 

improvement, is that correct? How would these significant cuts to missioncritical programs impact the DOE's ability to make necessary improvements and 

fulfill the President's vision? 

A2. The House Energy and Water Appropriations Bill (H.R. 2609) underfunds critical 

investments in our energy and national security. Reductions in these areas will impact 

and could multiply issues that the GAO and Inspector General have identified as needing 

improvement. If enacted, the cuts included in H.R. 2609 will impact mission critical 

programs and national priorities. 

The bill cuts funds that develop our American energy sources to build a clean and secure 

energy future and leaves US competitiveness at risk in new clean energy markets, such as 

advanced vehicles, advanced manufacturing, energy efficiency and domestic renewable 

energy. The bill reduces funding to DOE's Office of Energy Efficiency and Renewable 

Energy (EERE) by 73% from the request, severely limiting investments in innovative 

clean energy research and development and providing less weatherization assistance than 

needed to assist low-income households. Cuts to the Office of Electricity Delivery and 

Energy Reliability will slow efforts to modernize and secure the electricity grid and the 

ability to respond to energy emergencies. The bill reduces Advanced Research Projects 

14 
95 


86600.054

Agency-Energy (ARPA-E) f1mding by 87% compared to the request severely impacting 

funding to potentially transformative energy research. And, cuts to the Office of Science 

will eliminate all funding for new grants, likely lead to terminations of ongoing awards, 

and could reduce or cease operations at all major scientific user facilities. These 

reductions to DOE's science and energy programs would impact U.S. leadership in 

research and economic competitiveness. 

Funding reductions to DOE will also impact the National Nuclear Security 

Administration increasing the risk of schedule delays for key components of the nation's 

nuclear strategy and limiting the ability for Naval Reactors to address current and 

emerging issues in the fleet. The bill delays the Spent Fuel Handling Recapitalization 

Project, potentially jeopardizing the operational availability of aircraft carriers and 

submarines while increasing the project's cost by $335 million. Reductions to Weapons 

Activities will weaken facility operations, construction initiatives, and stockpile support 

activities, all of which directly support the President's nuclear strategy as expressed in the 

Nuclear Posture Review. If enacted, the bill will undercut DOE's ability to maintain the 

nuclear stockpile and cut essential national security efforts required to implement nuclear 

strategy and advance counter-proliferation objectives. 

15 
96 


86600.055

QUESTIONS FROM REPRESENTATIVE G.K. BUTTERFIELD 

Q3. I applaud the Department of Energy and the President's ambitious vision for 

prioritizing climate change reduction and preparing our nuclear capabilities for 

the future. It is encouraging to see the emphasis on innovation while reorganizing 

to become more efficient. Under the new reorganization. there will now be a 

senior policy official dedicated to improving management on a full-time basis, is 

that correct? 

A3. Yes. The Department of Energy has established an Under Secretary for Management and 

Performance to improve project management and increase the effectiveness and 

efficiency of our mission SUppOlt nmctions across the Department. 

Q4. Currently, 90 percent of the Department of Energy's budget of $26 billion is being 

allocated to contractors. Will these consolidations improve oversight of 

contractors and help correct some of the issnes raised by GAO and the IG? 

A4. Yes. The establishment of the Under Secretary for Management and Performance will 

ailow greater oversight of contractors and improve project management and performance 

across the Department. 

16 
97 


86600.056

234 

235 having the data but making sure you have a system in place to 

236 have honest reassessments of that. 

237 One other quick question in my time. In your testimony you 

238 

239 said that President laid out a commonsense plan to reduce the 

240 effects of climate change by cut.ting dangerous carbon pollution, 

241 as you put it, increasing the production of clean energy and 

242 doubling down on energy efficiency. I noticed the Depart.ment 

243 released a new rule for microwave oven efficiencies and included 

244 a calculation for the social cost. of carbon, and I would like to 

245 know if the agency considered doing a formal notice and comment 

246 to the microwave rule before using this figure. Did anyone in 

247 your office participate in any discussions about this social 

248 cost of carbon before using it in the DOE microwave rule, and 

249 can you please submit to us emails and documents to help us 

250 understand why that was done. 

251 Mr. {poneman.} Mr. Chairman, I was present for some 

252 discussion of social costs of carbon. I was not- - I would have 

253 to get back to you with details on how it related to that 

254 particular rule. 

255 Mr. {MUrphy.} That is something this committee is going to 

256 want to review in an open and scientific way. 

257 

258 

Mr. {Poneman.} We would be very happy to supply that. 

259 Ms. {Castor.} Thank you, Chairman Murphy. 

260 

261 It is very important and a positive sign that the 

10 
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86600.057

COMMITTEE: House Energy and Commerce Committee, 

Subcommittee on Energy and Power 

HEARING DATE: July 24, 2013 

WITNESS: Daniel Poneman 

PAGE: 10, LINE: 237-257 

INSERT FOR THE RECORD 

Staff at DOE provided technical input to the Interagency Working Group on the Social Cost of 

Carbon. The technical update to prior SCC estimates was conducted in order to ensure that DOE and 

other agencies incorporate the best available scientific, technical and economic infonnation in 

evaluating the cost and benefits of rulemakings. For more information about this process, please 

refer to OIRA Administrator Howard Shelanski' s July 18, 2012 testimony in front of the House 

Oversight and Government Reform Committee's Subcommittee on Energy Policy, Healthcare and 

Entitlements. 
99 


86600.058

500 

501 portfolio was strong. That said, he had a number of very 

502 important practical suggestions in terms of transparency, 

503 accountability, customer servicing, portfolio management, and 

504 many of those have been implemented, point one. Point two, that 

505 included making sure we had very highly capable people in the 

506 positions. Point three, a lot of those people are very much 

507 focused on portfolio management, and there is a brand-new leader 

508 of the loan program office, and finally, in this reorganization, 

509 secretary Moniz wants to make sure that the Credit Review Board 

5]0 itself, which sits above the Credit committee, is strengthened 

511 so that we will have the ability in the normal kind of boardroom 

512 fashion of doing due diligence on transactions to make sure we 

513 bring those kinds of disciplines to bear. 

514 Mr. {Griffith.} One of my concerns there was, it appeared 

515 that the legal counsel that was being given was seeing--and this 

516 is my interpretation, nobody ever said this--saw itself as 

517 trying to come up with a legal opinion to justify what the 

518 Department of Energy wanted to do as opposed to protecting the 

519 American taxpayers, and I would hope that the legal department 

520 would see as a part of their duty at the very least is to make 

521 sure that what they are doing is lawful because the laws that 

522 congress pass are intended to protect American taxpayers, and 

523 the decision to subordinate cost $170 million to the American 

524 taxpayers. 

20 
100 


86600.059

525 

526 Mr. {poneman.j Congressman, I would have to dig back into 

527 the details to get the--I would just say my recollection of the 

528 legal advice received at the time was there was a higher chance 

529 of a higher recovery from a going concern than from a fire sale, 

530 and the question at the time that it was presented was ~lhether 

53! subordination would meet the statutory requirement that the 

532 secretary was obliged to seek the maximum recovery for the 

533 taxpayer. But we can obviously follow up on that. 

534 Mr. {Griffith.} I just wanted to know if it was still ongoing. 

535 I appreciate that. Thank you very much. 

536 Back to you, Deputy secretary. As a part of this, another 

537 issue has been brought to my attention, and I am not going to 

538 tell you I am well versed in it, but it does concern me, and 

539 that relates to the National Nuclear Security Administration and 

540 the National Security Complex and Pant ex plant management 

541 contracts, and in that process, GAO has said that there was an 

542 upheld--they upheld a procurement protest. My concern on that 

543 is, is that apparently, according to a press report that has 

544 been brought to me, in three instances, the source selection 

545 authority at the 11th hour changed some of the criteria, and I 

546 know there are all these big companies jockeying for position, 

547 but at the 11th hours, three matters were changed and that 

548 changed who got the contract. On its face, that doesn't smell 

549 right to me. Are you all looking into that matter and trying to 

21 
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86600.060

COMMITTEE: House Energy and Commerce Committee, 

Subcommittee on Energy and Power 

HEARING DATE: July 24, 2013 

WITNESS: Daniel Poneman 

Page: 21; Line: 514-535 

INSERT FOR THE RECORD 

At the tj~e of the restructuring, after thorough analysis, DOE concluded that the 

restructured terms - which would allow completion ofthe manufacturing facility - offered 

the greatest likelihood that the loan would be repaid, and was therefore in the best 

interests of taxpayers. Career officials in LPO, including the office's Chief Counsel, as 

well as attorneys in DOE's Office of General Counsel, reviewed the proposed 

restructuring thoroughly and concluded that it was permitted under Title XVII of EP Act, 

as amended, 42 U.S.C, §§ 16511-16514. 
102 


86600.061

Attachment 2-Member Requests for the Reco"d 

The Honorable Tim Murpby 

During the hearing, Members asked you toprovide additional informationfor the record, 

and you indicated that you would provide that information. For your convenience, 

descriptions of the requested information are provided below. 

Q1. Did anyone in your office participate in any discussiollS about this social cost of 

carbon before using it in the DOE microwave rule, and can you please submit to 

us emails and documents to help us understand why that was done. 

AI. Staff at DOE provided technical input to the Interagency Working Group on the Social 

Cost of Carbon. The technical update to prior SCC estimates was conducted in order to 

ensure that DOE and other agencies incorporate the best available scientific, tecJmical 

and economic infOlmation in evaluating the cost and benefits of rulemakings. For more 

information about this process, please refer to OIRA Administrator Howard Shelanski's 

July 18, 2012 testimony in front ofthe House Oversight and Government Reform 

Committee's Subcommittee on Energy Policy, Healthcare and Entitlements. 

17 
103 


86600.062

The Honorable Gregory H. Fdedman 

Inspector General 

U.S. Department of Energy 

1000 Independence Avenue, S. W. 

Washington, D.C. 20585 

Dear Mr. Friedman: 

August 22, 2013 

Thank you for appearing before the Subcommittee on Oversight and Investigations on 

Wednesday, July 24, 20 J3, to testify at the hearing entitled "Department of Energy Oversight: What is 

Necessary to Improve Project Management and Mission Perfonnance?" 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to pennit Melnbcrs to submit additional questions for the record) which are 

altached, The fonnat of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) your answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Thursday, September 5, 2013. Your responses should be mailed to Brittany Havens, 

Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, 

Washington, D.C. 20515 and e-mailed in Word fonnat to brittanv.havens@mail.house.g"lX. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

;=~~ Tim Murphy 

Chairman 

Subcommittee on Oversight ana Investigations 

cc: Diana DeGette, Ranking Member, Subcommittee on Oversight and Investigations 

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The Honorable Tim Murphy 

Chairman 

Department of Energy 

Washington, DC 20585 

August 27, 2013 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

Washington, DC 20515 

Dear Chairman Murphy: 

This is in response to your letter dated August 22, 2013, concerning the Subcommittee on 

Oversight and Investigation's July 24, 2013, hearing entitled "Department of Energy Oversight: 

What is Necessary to Improve Project Management and Mission Performance?" Enclosed are 

answers to the questions addressed to me by Congressman Butterfield. 

Please do not hesitate to contact me if I may be of further assistance. 

Sincerely, 

Enclosure 

cc: The Honorable Diana DeGette, Ra..."'lking Member 

* Printed with soy ink on recycled paper 
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Enclosure 1 

Questions fOr the Record Submitted by Congressman Butterfield 

1. Since 90 percent of the DOE's budget is spent on contractors, it is clear that 

oversight of contractors is an important responsibility of the Department. You 

mention in your testimony that improvements are needed to ensure that federal 

staffing is sufficient to provide effective contract and project oversight, is that 

correct? What impact has sequestration had on the ability of the DOE to provide 

sufficient staffing for improving oversight of contractors? Will proposed cuts in the 

Energy and Water Appropriations bill further complicate the ability of DOE to 

continue to improve contractor oversight? 

As noted in our testimony, sufficient Federal staffing, in terms of size, expertise, and 

experience, is a central element in providing effective Department contract and project 

oversight. Our work has highlighted instances where such Federal staffing was, in our 

judgment, below optimal levels. Although we cannot speak to how the Department will 

prioritize its work going forward, we are concerned that sequestration and other budget 

cuts may exacerbate staffing concerns, as your question suggests. Under these 

circumstances, the Department will have to use available human resource assets as 

effectively as possible. 

2. The Presidential directive reducing DOE employee travel by 30 percent will go a 

long way towards saving taxpayers money. However, it seems that most tripsabout 85 percent - are taken by contractors. Is it tme that the DOE could save up 

to $15 million per year by reducing contractor travel by 30 percent? What changes 

would need to be made to realize these savings? 

Our review determined that if the Department had applied the 30 percent reduction 

criteria to just the international portion of travel costs incurred by its nearly 100,000 

contractors, as much as $15 million could be saved each year. As we noted in our 

testimony, while absolute equality between the treatment of Federal and contractor 

personnel may not be practical, in our view, an across-the-board application of the 

requirement to reduce travel would be beneficial. In terms of needed changes, some 

mechanical modifications to the contract terms might be required. Further, the 

contractors would have to engage in more prioritization of travel requirements to ensure 

that critically important, mission-essential travel would not be affected. 

2 
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August 22. 2013 

David C. Trimble 

Director of Naturai Resources and Environment Team 

U.S. Government Accountability Omce 

441 G Street, N.W. 

Washington. D.C. 20548 

Dear Mr. Trimble: 

Thank you for appearing before the Subcommittee on Oversight and Investigations on 

Wednesday. July 24,2013, to testilY at the hearing entitled "Department of Energy Oversight; Wllat is 

Nccessal'Y to Improve Project Management and Mission Performance?" 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open tor ten business days to permit Members to submit additional questions for the record" which are 

attached. The format of your responses to these questions should be as follows: (l) the name oftbe 

Member whose question you are addressing, (2) the complete text oflhe question you are addressing in 

bold. and (3) your answer to that question in plain text. 

To facilitate the printing oftlle hearing record. please respond to these questions by tile close of 

business all Thursday, September 5, 2013. Your responses should be mailed to Brittany Havens, 

Legislative Clerk, Committee on Energy and Commerce, 2125 House Om"e Building, 

Washington, D.c' 205}5 and e-mailed in Word 

Thank l'ot! again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

ce: Diana DeGette, Ranking Member, Subcommittee on Oversight and Investigations 

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QUESTIONS FOR THE RECORD 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

HOUSE COMMITTEE ON ENERGY AND COMMERCE 

Hearing on Department of Energy Oversight: What Is Necessary to Improve 

Project Management and Mission Performance? 

July 24, 2013 

SUBCOMMITTEE QUESTIONS .................................................................................................. 2 

Government Accountability Office (GAO) .................................................................. 2 

I. The Honorable Tim Murphy ......................................................................................... 2 

2. The Honorable G.K. Butterfield .................................................................................. 3 

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Subcommittee 

Government Accountability Office (GAO) 

1. The Honorable Tim Murphy 

Mr. Trimble, during the hearing, you expressed that GAO may disagree with DOE 

about how robust the requirements under directive 413-B arc. Would you please 

elaborate GAO's view on DOE's requirements for cost estimating at critical 

decision points in project management? 

Our disagreement stems from the extent to which DOE aligns its cost estimating practices 

with the best practices we have identified in our Cost Estimating and Assessment Guide. l 

We reported in 2010 that DOE lacked a cost estimating policy that would, among other 

things, establish roles and responsibilities for those preparing, reviewing, and updating all 

types of cost estimates.2 We recommended, among other things, that DOE should issuc a 

cost estimating policy that requires DOE and its contractors to generate cost estimates in 

accordance with best practices, including requiring that independent cost estimates be 

conducted for major projects at critical decision points 1,2, and 3.3 DOE revised its 

project management order in November 2010 lo, among other things, require that an 

independent cost estimate be prepared at critical dccision point 2 for projects with total 

costs of $1 00 million or greater.4 The revised order left it discretionary as to whether 

independent cost estimates should be prepared at critical decision points I and 3.5 These 

I GAO, GAO Cost Estimating and Assessment Guide: Best Practices/or Deve/oping and Managing Capital 

Program Costs, GAO-09-3SP (Washington, D.C.: March 2009). 

2 GAO, Department of Energy: Actions Needed to Develop High-Quality Cost Estimates fbI' Cons/ruelian 

and Environmental Cleanup Projects, GAO-IO-J99 (Washington. D.C.: Jan. 14,2010). 

1 DOE defines major projects as those with total project costs of$750 million or greater. DOE's project 

management order generally requires DOE management to revicw and approve projects as they pass 

through a series of critical decision points. The order defines 5 critical decision (CD) points-CD-O: 

identify project need; CD-I: define the project; CD-2: establish project baseline; CD-3: start construction; 

CD-4: project completion. 

4 Department of Energy, Program and Project Management for the Acquisition of Capital Assets, DOE 

Order 413.3B (Washington, D.C.: Nov. 2010). 

5 For critical decision point I, for projects with a total cost of $1 00 million or greater, the order allows 

DOE's Oftice of Acquisition and Project Management (APM), which is responsible for reviewing capital 

asset acquisition projects, to conduct either an independent cost estimate or an independent cost review as 

they deem appropriate. As our cost guide points out, an independent cost review is a less rigorous review. 

For critical decision 3, for projects with a total cost of$100 million or greater, the order allows APM to 

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revisions partially address the issue of independent cost estimates but do not fully align 

with best practices that propose independent cost estimates should also be prepared for 

critical decision points I and 3. We are conducting a review of the department's and 

NNSA's cost estimating practices, including a review of the extent to which these 

practices align with cost estimating best practices, and we plan to report on this ongoing 

work in December 2013. 

2. The Honorable G.K. Butterfield 

a. Mr. Trimble, in your testimony you mentioned situations where workers at 

NNSA facilities have been reluctant to raise safety problems for fear of 

retaliation. Docs this problem remain? Has the DOE taken sufficient steps to 

change the procedure of reporting safety concerns? Are adequate 

whistleblower protections in place for DOE employees and contractors? 

As indicated in our testimony, our observations regarding retaliation were drawn from a 

recent report from DOE's Office of Health, Safety and Security. We have not 

independently assessed the extent of this problem, including any actions taken by DOE to 

change the procedures for reporting safety concerns or for whistleblower protections. 

b. Mr. Trimble, you mention in your testimony that DOE has implemented 

most of the recommendations made by GAO and you highlighted a number 

of those. In your opinion, will the reorganization of the DOE with a renewed 

emphasis on management continue to uphold the GAO's recommendations 

and improve management and contractor oversight'! 

We have not reviewed DOE's organizational changes or the underlying rationale for 

them, and at this point it is too soon to determine whether the new structure will be 

effective. That said, DOE must make improvements in the areas of concern identified in 

our most recent testimony and over the years, irrespective of the department's 

organizational structure; structural changes in and of themselves may not be helpful. 

Moreover, the past improvements on which we have reported-including those that led to 

develop an independent cost estimate if warranted by risk and perfonnance indicators or as designated by 

the DOE manager designated with the responsibility for the project. 

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the narrowed focus of our high-risk designation of DOE's contract management-took 

place in a context of strong commitment and top leadership support for improving 

contract and project management. Therefore, we are encouraged by DOE's statement that 

the reorganization will bring with it a renewed emphasis on continuing to improve the 

department's project and contract management. We will continue to monitor DOE's 

implementation of the efforts it undertakes to make improvements in these areas. 

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