United States General Accounting Office

GAO Report to the Ranking Minority Member,

Committee on Governmental Affairs,

U.S. Senate

July 1995 ENVIRONMENTAL

MANAGEMENT

Impacts of Increases in

DOE’s Workforce

GAO/RCED-95-207

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-260784 

July 25, 1995

The Honorable John Glenn

Ranking Minority Member

Committee on Governmental

 Affairs

United States Senate

Dear Senator Glenn:

In order to better manage the billions of dollars it is spending to clean up

the nation’s nuclear weapons complex, the Department of Energy (DOE)

has initiated several productivity improvements. One such improvement

included the hiring of up to 1,600 new employees, who are expected to

save millions of dollars by replacing contractor staff and improving the

productivity of the environmental cleanup. This effort resulted from the

designation of DOE’s Office of Environmental Management as a pilot

project under the Government Performance and Results Act of 1993

(GPRA). The act requires federal agencies, beginning in 1997, to develop

strategic plans and performance measures to improve their operations.

The act also provides for the initiation of a series of pilot projects in fiscal

years 1994, 1995, and 1996. The Office of Management and Budget (OMB),

which coordinates GPRA pilot projects, allowed DOE, as part of its pilot

project, to hire up to 1,200 new employees during fiscal years 1994 and

1995, and an additional 400 in fiscal year 1996.

This report responds to your request that we review DOE’s process for

hiring the new employees. We agreed to (1) identify the process DOE used

to justify the new hires, (2) determine whether DOE’s justifications support

the claimed cost savings and productivity improvements, and (3) identify

how DOE plans to assure itself that the expected cost savings and

productivity improvements will be achieved.

Results in Brief DOE used a competitive bidding process to justify the allocation of the

initial 1,200 new positions to its field and headquarters offices involved in

environmental cleanup. The offices were required to submit written bids

detailing staff needs, the expected productivity improvements, and the

associated cost savings. Collectively, the offices requested 1,575 new staff,

referred to as full-time equivalents (FTE),1

 and estimated that the new staff

could help save over $1.235 billion in fiscal years 1995 and 1996. Savings

1

Each FTE represents one full-time staff person.

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B-260784 

would occur as a result of increased federal oversight of contractors and

greater federal involvement in contract management. DOE evaluated the

bids, allocated the FTEs to its field and headquarters offices, and lowered

the 2-year savings target to about $890 million. The savings target does not

include the salaries and benefits for the new staff—about $84 million

annually for the initial 1,200 new staff.

Most of the productivity improvements and cost savings that the field

offices estimated they could achieve were not adequately or completely

justified, according to our review of DOE’s bid analysis. That analysis

concluded that about 87 percent—almost $900 million—of the over $1.035

billion in savings that were to accrue largely from productivity

improvements had inadequate justifications. DOE management was also

concerned about the justifications but believed that the bids were

sufficient for allocating the FTEs and establishing savings goals, and

planned to hold office managers accountable for meeting those goals.

Rather than waiting to see if productivity improvements occur, DOE is

reducing Environmental Management’s budget by almost $300 million in

fiscal year 1995 and possibly by greater amounts in future years.

Although budgets are being reduced, it is currently unknown whether

productivity improvements will occur. To measure productivity

improvements, DOE is developing procedures to collect, validate, and

report the productivity improvements and resulting dollar savings the new

staff are expected to achieve. These procedures are expected to be

completed by the fourth quarter of fiscal year 1995.

Background Since 1989, DOE has spent about $23 billion cleaning up the environmental

contamination resulting from over 50 years of nuclear weapons

production. During this time, the agency has completed the restoration of

less than 20 percent of the total number of contaminated sites. One reason

DOE cites for the slow progress is that it has an insufficient workforce to

manage and oversee what it calls “the largest environmental cleanup

program in the world.” In 1993, the Environmental Management Program

had a contractor-to-federal-worker ratio of 21 to 1—one of the highest

ratios in the federal government—and the highest funding per FTE in the

federal government, $3.3 million per FTE.

In September 1993, DOE requested that OMB designate the Environmental

Management Program as a pilot project under GPRA and authorize

additional employees as part of that project. The agency asserted that it

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B-260784 

did not have sufficient staff with the skills needed to oversee contractors

and review their cost estimates. To support its position, DOE cited our

reports and reports by the Congressional Budget Office,2

 which supported

the need for additional federal staff to manage the cleanup program. The

reports noted the impact of FTE ceilings that restricted the agency from

hiring enough federal employees to manage the cleanup program, the use

of support service contractors at substantially greater cost, limitations in

staff skills for adequate contract management, and the lack of federal

expertise. In addition, a study conducted for DOE in 1993 concluded that

federal staff have minimal supervision of agency cleanup projects, and as a

result, the cleanup is costing significantly more than comparable private

sector and government projects. DOE said that it wanted to increase its

oversight of contractors and involve federal employees more in contract

management.

DOE proposed to hire 1,600 new employees by (1) converting 1,050 support

service contractor positions to federal positions and (2) adding 550 federal

employees to help manage the environmental program. The agency

estimated that the new staff would save $188 million through fiscal year

1996 by better managing contractors’ operations and would produce more

tangible environmental results. OMB authorized DOE to hire 1,200 of the

1,600 additional staff requested during fiscal years 1994 and 1995 and the

additional 400 in fiscal year 1996. As of May 31, 1995, the agency had hired

about 700 new employees. Those hired to date have included project

engineers, cost analysts, estimators, and environmental safety and health

specialists. However, DOE is considering not hiring all of the approved FTEs

because of budget constraints, according to the leader of the Office of

Environmental Management’s evaluation team.

DOE Justified the

New Staff Through

Competitive Bids

DOE required field and headquarters offices to include justifications for the

initial 1,200 FTEs as part of a competitive bidding process. The offices were

required to submit bids containing detailed information on their additional

personnel needs and on the savings they anticipate will be achieved from

the new staff. DOE evaluated the bids and allocated all 1,200 positions that

OMB had approved. The additional 400 FTEs were approved by OMB in

May 1995 but had not been allocated at the conclusion of our review.

2

Energy Management: Using DOE Employees Can Reduce Costs for Some Support Services

(GAO/RCED-91-186, Aug. 16, 1991); Department of Energy: Project Management at the Rocky Flats

Plant Needs Improvement (GAO/RCED-93-32, Oct. 16, 1992); and Cleaning Up the Department of

Energy’s Nuclear Weapons Complex, Congressional Budget Office (May 1994).

Page 3 GAO/RCED-95-207 Increases in DOE’s Workforce
B-260784 

Both field and headquarters offices competed for the 1,200 positions, but

DOE used a different process to allocate the new positions to the offices. A

team of DOE analysts reviewed the bids submitted by the field offices and

then submitted their recommendations to management for review. The

team reviewed the bids for compliance with requirements and for the

adequacy of the justifications supporting the savings. Senior

Environmental Management and other headquarters officials reviewed the

bids submitted by the headquarters offices and then made the

determinations. The DOE senior management officials included the

Assistant Secretary for Environmental Management, the Assistant

Secretary for Human Resources and Administration, and the Associate

Deputy Secretary for Field Management.

By early March 1994, 11 field and 15 headquarters offices had submitted

bids for new staff. Collectively, the offices requested 1,575 new FTEs and

proposed a total of $1.235 billion in savings. In mid-March 1994, the field

offices presented their bids orally to DOE management, the review team,

and an OMB representative. In their presentations, field office managers

explained their bids and responded to management’s questions. Following

the presentations, management asked the field offices to revise and

resubmit their bids for final consideration. The revised bids were to

respond to numerous questions raised during the presentations.

In May 1994, DOE informed the field offices of their FTE allocations and the

savings targets they were to achieve. The field offices were allocated 831

FTEs, with a total savings target of almost $876 million for fiscal years 1995

and 1996. The headquarters offices were provided with 369 FTEs and a

savings target totaling $14.5 million. These savings do not include the FTEs’

salary and benefit costs, about $70,000 per employee—$84 million

annually if all 1,200 new employees are hired.3

 Although DOE’s agreement

with OMB stipulated that contractor positions would be reduced in

conjunction with the new hires, the offices that were allocated new

positions have not received the funds that were previously paid to

contractors. Instead, DOE required those offices to absorb the additional

costs in existing budgets. Appendix I summarizes the initial and revised

bids, the allocation of FTEs, and the decisions on the savings targets for the

field and headquarters offices.

3

If all 1,600 new employees are hired, the annual salary and benefit cost would be about $112 million.

Page 4 GAO/RCED-95-207 Increases in DOE’s Workforce
B-260784 

Most of the Proposed

Savings Were Not

Adequately Justified,

but Budgets Were

Reduced Nonetheless

Most of the cost savings and productivity improvements proposed in the

field offices’ bids were not adequately justified, according to DOE’s

evaluation team. The evaluation team concluded that the field offices had

not adequately justified 87 percent of the savings that they said could be

achieved. Despite finding these weaknesses in the justifications, in May

1994 DOE approved most of the savings proposed in the field offices’ bids.

In two separate reviews of the field offices’ bids, the evaluation team

expressed concerns about the quality of the supporting justifications and

the likelihood of achieving the savings through improved productivity. The

team concluded that most of the justifications of the savings were

inadequate. As a result of the first review in March 1994, the field offices

were required to revise their bids. Consequently, the overall 2-year savings

target proposed in the initial bids was reduced from $1.221 billion to

$1.035 billion. In its review of the field offices’ revised bids, the evaluation

team concluded that the justifications were not adequate for almost

$900 million—87 percent—of the $1.0354

 billion in savings targeted for the

2 years. Despite this finding, most of the savings targets were approved.

For example, DOE’s Savannah River Site first proposed that it could save

$121 million in fiscal years 1995 and 1996. However, $56 million of that

amount—46 percent—was due to a reduction in contractor positions that

had occurred in a prior year and was unrelated to the savings that would

result from the new positions. DOE questioned the $56 million during its

review of Savannah River’s first bid but did not subtract that amount from

the site’s expected savings. In a similar example, about 48 percent of the

Oak Ridge Site’s overall proposed savings was to come from the

elimination of about 500 contractor positions. The evaluation team

commented that Oak Ridge had not adequately explained the proposed

cuts in contractors, and in its second review, the team classified these

savings as inadequately justified. However, DOE later approved the

productivity savings that were to accrue from the cuts in Oak Ridge’s

contractor personnel.

In another example, the evaluation team considered almost all of the

$549 million in savings contained in the Hanford Site’s first proposal to be

unjustified. The team commented that most of Hanford’s proposed savings

were unrealistic or apparently based on productivity initiatives unrelated

to the new FTEs. Hanford reduced its proposed savings in a revised bid, but

the evaluation team’s subsequent review concluded that only 4 percent of

Hanford’s revised proposed savings was fully justified. Nonetheless,

according to members of the evaluation team, DOE approved almost all of

4

Figures do not add because of rounding.

Page 5 GAO/RCED-95-207 Increases in DOE’s Workforce
B-260784 

Hanford’s proposed savings because the bids were considered an adequate

basis for allocating the FTEs and imposing budget cuts at the field offices.

On the basis of the evaluation team’s findings, DOE further reduced the

field offices’ total savings targets from $1.035 billion to about $876 million,5

 which still included a substantial amount of savings that was not

adequately justified. DOE then set savings targets for both field and

headquarters offices of $442 million for fiscal year 1995 and $448 million

for fiscal year 1996. DOE believed that the bids were adequate for allocating

the FTEs and planned to hold office managers accountable for meeting

those goals.

Despite the fact that the savings targets were not fully justified, budget

reductions are occurring. As shown in figure 1, DOE expects to cut the

Office of Environmental Management’s budget by $913 million over fiscal

years 1995 and 1996, even though it considered only $136 million of that

amount fully justified through the bid process.

5

The $876 million figure does not include the $14.51 million in savings proposed by the headquarters

offices.

Page 6 GAO/RCED-95-207 Increases in DOE’s Workforce
B-260784 

Figure 1: Projected Savings From

Environmental Management’s New

Hires, Fiscal Years 1995 and 1996

Savings (Dollars in Millions)

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

Proposed Savings in Field Offices’ First Bid

Proposed Savings in Revised Bid

Savings DOE Allocated to Field Offices

Actual FTE-Bid-Based Budget Reductions

Revised Savings

DOE Considered Justified

Savings from Environmental Management’s New Hires, FYs 1995-96

1221

1036

876 913

136

DOE Is Developing a

Reporting System to

Track Cost Savings

and Productivity

Improvements

DOE is assured of lower costs because the agency is incurring major

reductions in its cleanup budget—about $913 million in fiscal years 1995

and 1996. Even though these cost savings will occur, DOE has not

developed a reporting system that would track and validate whether

productivity improvements were a result of the new employees. DOE has

developed some of the monitoring and evaluating tools required by GPRA,

such as annual plans and reports that will yield broad information about

the entire pilot project. By the fourth quarter of fiscal year 1995,

procedures to collect, report, and validate the productivity improvements

and resulting dollar savings related to the new staff are expected to be in

place. DOE then plans to include these productivity improvements in its

overall GPRA Environmental Management pilot project reports.

GPRA requires agencies with pilot projects to prepare a strategic plan for

the program, annual plans for each year of a pilot project, and an annual

report that assesses the project’s performance. As of March 1995, DOE had

Page 7 GAO/RCED-95-207 Increases in DOE’s Workforce
B-260784 

completed the strategic plan and performance plans for fiscal years 1994

and 1995 and was preparing a performance plan for fiscal year 1996.

Additionally, the agency was preparing its first performance report, which

will cover fiscal year 1994. The agency is reviewing the performance plan

for fiscal year 1995 through a series of quarterly management reviews and

is tracking field offices’ savings against their savings goals.

While the GPRA reports will provide an overall picture of the Environmental

Management Program’s performance, additional information is required to

track the cost savings and productivity improvements that have resulted

from the new staff. Therefore, offices are developing monitoring and

evaluation systems intended to determine the success of projects that use

the new staff.

Some projects are easily tracked, while others are more difficult. For

example, some of Oak Ridge’s 77 new employees will manage three

specific projects—the removal of cooling towers on the site, demolition of

a power house, and cleanup of selected burial grounds. According to DOE,

it will save about $16 million from these three projects during fiscal years

1995 and 1996. Since these three projects are specifically identified,

measuring the savings will be straightforward. Oak Ridge is also

developing baseline cost data for other environmental restoration projects

and waste management activities that will use new hires—a more difficult

task, according to Oak Ridge staff.

The Savannah River Site is putting systems into place to track the progress

of the productivity improvements and savings realized by its 128 new staff

in the high-level waste program, environmental restoration program, and

waste minimization program, among others. These systems were not in

place at the conclusion of our review. Other sites are also developing

program performance baselines to measure performance against goals.

Agency Comments DOE provided written comments on a draft of this report. (App. III contains

the full text of DOE’s comments.) The agency said that our draft report

fairly represented the process the Office of Environmental Management

used in allocating the new positions for the Environmental Management

Program. However, the agency pointed out that we emphasized the

inadequacy of the justifications supporting the savings projections but did

not give credit to the process that made field office managers accountable

for achieving the projected savings. We believe that our report adequately

addresses managers’ accountability for the projected savings. Specifically,

Page 8 GAO/RCED-95-207 Increases in DOE’s Workforce
B-260784 

we note in our report that DOE plans to hold office managers accountable

for meeting the productivity achievements tied to these savings.

DOE also said that tracking the results from the additional positions will be

especially difficult because the agency is now streamlining its organization

and will be unable to fill all 1,600 positions. Additionally, the agency said

that further budget reductions are expected to cause delays in

accomplishing needed work and may result in increased life-cycle costs.

To perform our work, we met with and obtained data from Environmental

Management officials at DOE headquarters and at four of its field

offices—the Savannah River Operations Office, Oak Ridge Operations

Office, Albuquerque Operations Office, and the Ohio Field Office. We

performed our work between July 1994 and June 1995 in accordance with

generally accepted government auditing standards. (App. II discusses our

objectives, scope, and methodology in more detail.)

As arranged with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after the

date of this letter. At that time, we will send copies to the Secretary of

Energy and other interested parties. We will also make copies available to

others upon request.

Please contact me at (202) 512-3841 if you have any questions. Major

contributors to this report are listed in appendix IV.

Sincerely yours,

Victor S. Rezendes

Director, Energy and

 Science Issues

Page 9 GAO/RCED-95-207 Increases in DOE’s Workforce
Contents

Letter 1

Appendix I 

Environmental

Management’s Bid

FTEs and Savings, by

Office

12

Appendix II 

Objectives, Scope,

and Methodology

13

Appendix III 

Comments From the

Department of Energy

14

Appendix IV 

Major Contributors to

This Report

16

Figure Figure 1: Projected Savings From Environmental Management’s

New Hires, Fiscal Years 1995 and 1996

7

Abbreviations

DOE Department of Energy

FTE full-time equivalent

GAO General Accounting Office

GPRA Government Performance and Results Act of 1993

OMB Office of Management and Budget

Page 10 GAO/RCED-95-207 Increases in DOE’s Workforce
Page 11 GAO/RCED-95-207 Increases in DOE’s Workforce
Appendix I 

Environmental Management’s Bid FTEs and

Savings, by Office

DOE office Original bid Revised bid DOE award

Dollars in millions

Field

office

FTEs

requested

Savings

proposed

FTEs

requested

Savings

proposed

FTEs

awarded

Savings

expected

Albuquerque 168 $81.26 158 $81.39 108 $62.04

Chicago 48 13.70 48 13.70 33 12.00

Idaho 58 53.40 58 41.01 34 39.98

Morgantown 29 57.40 29 57.40 11 26.00

Nevada 61 4.93 61 8.63 36 6.61

Oakland 67 21.54 68 20.61 40 19.43

Oak Ridge 88 77.30 99 77.45 77 77.45

Ohio 133 108.50 129 108.70 106 83.90

Hanford 268 548.95 200 382.00 158 379.20

Rocky Flats 212 132.70 212 120.70 100 56.93

Savannah River 199 121.00 199 124.21 128 112.36

Subtotal 1,331 1,220.68 1,261 1,035.80 831 875.90

Headquarters offices 244 14.51 244 14.51 369 14.51

Total—field and

headquarters offices

1,575 $1,235.19 1,505 $1,050.31 1,200 $890.41

Page 12 GAO/RCED-95-207 Increases in DOE’s Workforce
Appendix II 

Objectives, Scope, and Methodology

In June 1994, the then Chairman, Senate Committee on Governmental

Affairs, asked to us evaluate the portion of a pilot project of the

Department of Energy’s (DOE) Office of Environmental Management that

involves the hiring of additional federal employees (full-time equivalents,

or FTEs). Our review focused on the following three major questions:

• What process did DOE use to justify the new hires?

• Did DOE’s justifications support the claimed cost savings and productivity

improvements?

• How is DOE assuring itself that the established cost savings and

productivity improvements will be achieved?

We selected four of the largest DOE facilities with major environmental

cleanup under way: the Savannah River Site, South Carolina; Oak Ridge

Operations Office, Tennessee; Ohio Field Office, Ohio; and Albuquerque

Operations Office, New Mexico. At each facility, we reviewed the

competitive bid proposals and discussed the proposed savings with

program officials. Additionally, we reviewed the four facilities’

implementation plans and performance reports that were submitted to

DOE. For DOE’s other seven offices, we reviewed their bid proposals,

implementation plans, and performance reports.

We interviewed key officials at DOE headquarters who were responsible for

developing, managing, and evaluating the pilot project, including the new

FTEs. We obtained evaluations of the facilities’ bids and discussed them

with agency officials. We also interviewed the Office of Management and

Budget officials responsible for approving and overseeing the agency’s

pilot project.

Page 13 GAO/RCED-95-207 Increases in DOE’s Workforce
Appendix III 

Comments From the Department of Energy

Page 14 GAO/RCED-95-207 Increases in DOE’s Workforce
Appendix III 

Comments From the Department of Energy

Page 15 GAO/RCED-95-207 Increases in DOE’s Workforce
Appendix IV 

Major Contributors to This Report

Resources,

Community, and

Economic

Development

Division, Washington,

D.C.

Bernice Steinhardt, Associate Director

Richard E. Iager, Senior Evaluator

Office of the General

Counsel

Doreen Stolzenberg Feldman, Assistant General Counsel

Atlanta Regional

Office

John P. Hunt, Jr., Assistant Director

John M. Gates, Evaluator-in-Charge

Marion S. Chastain, Site Senior

Sara Bingham, Communications Analyst

(302126) Page 16 GAO/RCED-95-207 Increases in DOE’s Workforce
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