U.S. Department of Energy 

Office of Inspector General 

Office of Audit Services 

Audit Report 

Work for Others Performed by the 

Department of Energy for the 

Department of Defense

DOE/IG-0829 October 2009 
Department of Energy 

Washington, DC 20585 

October 26, 2009 

MEMORANDUM FOR THE SECRETARY 

FROM: Gregory H. Friedman 

 Inspector General 

SUBJECT: INFORMATION: Audit Report on "Work for Others Performed by the 

 Department of Energy for the Department of Defense" 

BACKGROUND

Pursuant to the Atomic Energy Act of 1954, as amended, and the Economy Act of 1932, the 

Department of Energy and its semi-autonomous National Nuclear Security Administration 

(NNSA) provide research and technical assistance to other Federal agencies on a reimbursable, 

full cost recovery basis through the Work for Others (WFO) program. For the vast majority of 

WFO technical projects, Department Federal officials furnish administrative project oversight 

while the actual detailed scientific or technical work is completed by the Department's 

"management and operating" contractors. These contractors are awarded a special contract type 

specifically created under the Federal Acquisition Regulation to manage and operate Department 

sites and facilities, including sophisticated laboratories and technical centers, on a governmentowned, contractor-operated basis. 

With annual expenditures exceeding $1 billion, the Department of Defense (DoD) is one of the 

Department's largest WFO customers. Work performed for DoD at the Department's national 

laboratories and other facilities includes highly technical research in areas such as nuclear 

weapons systems, counter-terrorism, and in-theater troop support. The National Defense 

Authorization Act for Fiscal Year (FY) 2009, required the Inspectors General of the DoD and the 

Department to review procurement methods to determine whether the Department complied with 

DoD procurement requirements and/or whether alternative procurement policies were in place. 

In response, we focused our review on projects performed by NNSA because it completes the 

vast majority (approximately $900 million in FY 2008) of the Department's work for DoD. As 

part of this effort, and, at the specific request of the DoD Office of Inspector General (DoD 

OIG), we identified the universe of WFO technical projects that received new funding in the 

fourth quarter of FY 2008 at NNSA sites. We independently reviewed a judgmental sample of 

11 projects selected by the DoD OIG to meet the objectives of this audit. 

RESULTS OF AUDIT

Our review revealed that NNSA managed DoD WFO technical projects in a manner consistent 

with requirements of the Atomic Energy Act of 1954, the Federal Acquisition Regulation, and 

the Department's implementing guidance, the Department of Energy Acquisition Regulation. 

Because of the very nature of the Department's management and operating contracting model, 

WFO projects may not be technically compliant with DoD procurement regulations in certain 

instances. We found that NNSA did not let new contracts or task orders for the DoD WFO 

technical projects we reviewed and instead managed them under its existing internal 
2 

control process as part of its management and operating contract structure. In one instance, we 

noted that the Department had, at DoD's request, supplemented its control structure to 

incorporate specific DoD procurement requirements. 

Senior Department of Energy procurement officials acknowledged that neither the Department 

nor NNSA modified their existing prime contracts to incorporate specific defense procurement 

requirements because such modifications would be inappropriate, costly, and inefficient. In 

short, they informed us that the Department had developed and implemented a series of controls 

designed to monitor overall contractor performance, including WFO technical projects. 

Department and NNSA officials noted, however, that they were willing to incorporate DoD 

specific requirements into work orders should DoD request and fund such efforts. Additional 

details regarding management of WFO technical projects are discussed in the body of this report. 

Given the importance of the work products resulting from the collaborations between the 

Department and DoD, we concluded that identifying avenues to improve these relationships 

would serve the national interest. Based on our review, including the analysis of the 11 projects 

and discussions with both Department Federal and contractor officials, we identified several 

opportunities to achieve this objective. In particular, we noted that NNSA and its contractors 

had not: 

• Always (2 of the 11 projects) provided DoD customers with specifically requested cost 

information the customer believed it needed to determine the reasonableness of costs 

charged for WFO technical projects. However, we found no evidence that DoD pursued 

the request with the contractor or pressed Department officials to intervene. And, based 

on Department documentation, each of the DoD sponsors ultimately elected to proceed 

with the requested work even though it had not received the desired information; and, 

• Adequately defined roles and responsibilities of the Department and those of DoD 

customers for monitoring the technical performance of the management and operating 

contractor on WFO technical projects. 

These matters were brought to the attention of NNSA officials during the course of the audit. 

They informed us that they had initiated corrective actions to address these concerns. Their 

planned actions are, according to NNSA officials, designed to ensure that DoD customers are 

provided with all appropriate cost and pricing information as requested by the DoD customer and 

clarify responsibilities for monitoring and control of WFO technical projects. These actions, when 

fully implemented throughout the Department of Energy complex, are likely to be helpful in 

improving management of WFO technical projects. We have also made several recommendations 

designed to improve management of the Department's WFO process. Details of our findings, 

management actions, and our recommendations are discussed in the body of this report. 

Our review of this matter is substantially complete. However, based on the results of efforts to 

resolve these issues, we may elect to engage in additional reviews in the future. 

MANAGEMENT REACTION

Management provided technical comments on this report. Management's comments have 

been included in Appendix 3. 
3 

Attachment 

cc: Deputy Secretary 

 Chief of Staff 

 Administrator, National Nuclear Security Administration 

 Director, Office of Procurement & Assistance Management, MA-60 

 Director, Office of Acquisition and Supply Management, NA-63 

 Technical Director for Institutional and Joint Programs, NA-121.4 

 Manager, Sandia Site Office 

 Manager, Livermore Site Office
REPORT ON WORK FOR OTHERS PERFORMED BY THE 

DEPARTMENT OF ENERGY FOR THE DEPARTMENT OF 

DEFENSE 

TABLE OF 

CONTENTS 

Work for Others Projects

Details of Finding ............................................................................................................................1 

Recommendations and Comments...................................................................................................7

Appendices 

1. Objective, Scope, and Methodology........................................................................................10

2. Prior Report..............................................................................................................................12 

3. Management Technical Comments..........................................................................................13 
Work for Others Projects 

Departmental The National Nuclear Security Administration's (NNSA) 

Management of Work control structure was generally consistent with meeting the 

for Others Projects Department of Energy's (Department) requirements for Work 

for Others (WFO) projects; however, it may not have always 

ensured that Department of Defense (DoD) requirements were 

met. Although NNSA prime contracts under which work is 

performed for DoD do not specifically comply with certain 

defense procurement requirements, we noted that the 

Department had developed and implemented its own regimen 

of safeguards designed to ensure that WFO technical projects 

were appropriate. We also found that NNSA, in at least one 

case, had included unique DoD procurement requirements in 

the inter-agency agreement for a WFO technical project at the 

request of the DoD. 

In particular, the Department requires that work performed 

under the WFO program be consistent with the mission of the 

facility conducting the work and not: 

• Have an adverse impact on programs assigned to the 

facility completing the work; 

• Compete directly with private sector work; and, 

• Create a burden on Department or NNSA resources. 

The Department also requires its contractors to establish prices 

for the work performed for others to ensure that the full cost of 

such work is recovered from customers. Because WFO efforts 

are performed under existing contracts, Department officials 

told us that costs charged to external customers are the same as 

those incurred by the Department for normal mission work 

performed under its management and operating contracts. 

An NNSA procurement official noted that WFO technical 

projects are performed pursuant to inter-agency agreements as 

permitted by the Atomic Energy Act of 1954, as amended 

(42. U.S.C. 2053), and the Economy Act of 1932, as amended 

(31 U.S.C. 1535), by existing management and operating 

contractors and that they generally do not involve separate 

tasks and delivery orders. The NNSA official asserted, 

therefore, that defense procurement requirements are not 

applicable for modification into NNSA's prime contracts. For 

example, because WFO technical projects are performed under 

the scope and terms and conditions of its existing facility 

contracts and are not separate awards, an NNSA official

________________________________________________________________ 

Page 1 Details of Finding 
 

explained that they do not make price reasonableness 

determinations or obtain certified cost or pricing data for 

individual WFO technical projects performed for DoD, or any 

other Federal customer. According to this official, the 

evaluation of price reasonableness and cost and pricing data is 

performed as part of the original award of its management and 

operating contract. Additionally, NNSA officials noted that 

because WFO technical projects amount to technical directions 

under existing level-of-effort contracts, certified cost or pricing 

data per Federal Acquisition Regulation 15.403-4 is not 

required. NNSA also told us that it provides administrative 

oversight of WFO technical projects to ensure that they satisfy 

the Department's program policies, including their consistency 

with the facilities' mission. As such, the Department requires 

its Federal field elements to, among other things, establish 

procedures for monitoring projects in parallel with contractors 

and WFO customers. We found that the NNSA does not 

routinely assign separate contracting officer representatives to 

monitor contractor performance on individual WFO technical 

projects performed for DoD customers. Instead, a contracting 

officer and various contracting officer technical representatives 

are assigned to monitor performance of the management and 

operating contractor as a whole. An NNSA official pointed out 

that while contractor performance on individual DoD WFO 

technical projects is not separately monitored, overall 

performance is monitored by the Department's contractor 

performance control structure, including annual performance 

measures and evaluation. 

This same NNSA official explained that costs incurred by the 

Department's contractors, including those for WFO technical 

projects, are subject to and undergo various financial 

management reviews and audits, including reviews of forward 

pricing rates, final actual costs, and Cost Accounting 

Disclosure Statements. Department procurement officials 

confirmed that NNSA WFO policies described above are 

consistent with those followed by other program elements. 

Consistent with the Department's position, in March 2005, 

NNSA's Office of General Counsel (OGC) opined that DoD 

specific procurement requirements were not applicable to the 

Department's WFO program. The opinion was provided in 

response to a request made by the Department of Navy that the 

Department add over 226 DoD specific procurement 

requirements to the Sandia National Laboratories (Sandia) 

contract as a condition of a Strategic Weapons Security 

________________________________________________________________ 

Page 2 Details of Finding 
 

Systems WFO technical project. The OGC opined that Section 

854 of the National Defense Authorization Act for Fiscal Year 

(FY) 2005 preventing DoD from acquiring goods and services 

through agencies that did not comply with DoD acquisition 

regulation did not apply to the Department's WFO program. 

Specifically, he concluded that the Congressional direction 

applied to the award of contracts, including task orders or 

delivery orders, by a civilian agency on behalf of DoD. The 

attorney that completed the opinion noted that the WFO 

program does not involve the award of a contract or placement 

of a task or delivery order. Rather, the WFO program is simply 

a vehicle through which the Department assists other entities 

and agencies in conducting research at the Department's 

laboratories under the existing scope, terms, and conditions of 

previously awarded management and operating contracts. 

Although NNSA does not believe that it is appropriate to 

modify existing contracts to incorporate defense procurement 

requirements, an NNSA official stated that specific defense 

procurement requirements can be incorporated into the interagency agreement for a WFO technical project. This official 

stated, however, that it is the DoD contracting officer who is 

responsible for identifying unique DoD requirements, 

negotiating for their inclusion, and providing funding to 

support their completion in the inter-agency agreement for 

WFO technical projects. Unless the inter-agency agreement 

includes DoD requirements, NNSA officials said that they are 

not included in the scope of work for the WFO technical 

projects. With one exception, however, we did not identify any 

instances where DoD requested and NNSA included specific 

defense procurement requirements in the inter-agency 

agreements. Specifically, none of the inter-agency agreements 

for the 11 projects we reviewed included unique defense 

procurement requirements. NNSA officials were able to 

provide one example of a WFO technical project providing intheater support to the DoD in Iraq where unique DoD 

requirements were included in the inter-agency agreement at 

the request of the DoD customer, but they were unable to 

provide additional examples. 

Cost Data and Our review identified several issues related to interaction

Coordination Issues with DoD WFO customers. In particular, based on testing of 

WFO technical projects conducted by Sandia; Lawrence 

Livermore National Laboratory (Livermore); and, the Y-12 

National Security Complex (Y-12), we determined that 

NNSA's contractors did not always provide the level of 

________________________________________________________________ 

Page 3 Details of Finding 
 

financial information requested by DoD customers. Some of 

the information that was not provided may have been needed 

by DoD customers to satisfy DoD requirements regarding price 

reasonableness determinations. We also noted that the interagency agreements between the Department and DoD did not 

always clearly specify the respective roles and responsibilities 

of the agencies regarding monitoring contractor performance 

on individual WFO technical projects. 

Supporting/Detailed Cost Information

In 6 of the 11 projects we reviewed, DoD customers requested 

additional information in support of the cost estimate prepared 

by the NNSA's contractors. NNSA contractors provided 

additional cost information for four of the projects but not the 

specifics as requested for the remaining two projects. 

Specifically, in a WFO technical project between Sandia and 

the DoD, the WFO agreement stated that a detailed cost 

breakdown was required and should include direct labor, 

indirect costs, other costs such as materials, government 

furnished equipment, and fee. Instead of including specific 

costs, Sandia provided a cost estimate that contained a 

summary of monthly direct labor dollars, direct labor hours, 

travel, and subcontract costs to the DoD customer. The DoD 

customer responded that the proposed cost estimate contained 

insufficient detail to support its analysis and evaluation of 

proposal. The DoD requested individual direct labor categories 

and rates; indirect costs; other direct costs; materials; fringe; 

and, general and administration (G&A) costs. Sandia provided 

a second cost estimate detailing the monthly cost totals and a 

standard form letter stating that its specific overhead cost 

recovery rates and individual salary rates were proprietary 

information and were generally not released externally. 

In another WFO technical project with Livermore, the DoD 

requested a detailed breakdown of the cost estimate including 

direct labor; indirect costs (fringe benefits, overhead, and 

G&A; travel costs); and, an itemized list of acquired equipment 

costs. Livermore prepared a cost estimate that contained 

limited cost details including post doctoral and full time 

equivalent hours and rate per hour, travel, and a summary of 

the total indirect costs. According to Livermore officials, the 

Laboratory historically had not released indirect cost details to 

outside entities. Thus, Livermore did not provide a detailed 

listing of the indirect costs as requested to the DoD. 

________________________________________________________________ 

Page 4 Details of Finding 
 

We found no evidence in either of the above cases that the DoD 

customers continued to pursue obtaining the cost information they 

requested before agreeing to the projects. 

Clearly Defined Roles and Responsibilities

Inter-agency agreements between NNSA and DoD did not 

clearly specify the respective roles and responsibilities of the 

agencies regarding monitoring contractor performance on 

individual WFO technical projects. Department WFO policies 

require Heads of Field Elements and NNSA Site Office 

Managers to develop and implement procedures for WFO 

review, acceptance, authorization, and monitoring; and, 

encourage parallel review and processing by the Department, 

the WFO customer, and NNSA site contractor. Further, the 

Office of Management and Budget (OMB) Office of Federal 

Procurement Policy guidance, dated June 6, 2008, requires 

agencies entering into interagency agreements to specify each 

party's roles and responsibilities to ensure the effective 

management of such agreement. We found no evidence that 

roles and responsibilities for monitoring contractor 

performance was specified in the 11 agreements we reviewed. 

Furthermore, we found no evidence that NNSA had designated 

a contracting officer representative for any of the 11 projects. 

NNSA officials explained that they do not have either the 

resources or the special knowledge of the customer that is 

needed to monitor each WFO technical project performed for 

DoD. These officials also indicated that such services could be 

provided to the DoD customer, but that it would be provided at 

added cost since the Department's policy is to recover the full 

cost of WFO work. The Office of Inspector General (OIG) has 

previously pointed out performance problems that can occur in 

work performed for other agencies because the roles and 

responsibilities of NNSA and customer agencies were not 

clearly defined. Specifically, in our report on National 

Nuclear Security Administration's Construction of a 

Radiological/Nuclear Complex for the Department of 

Homeland Security (DOE/IG-0775, September 12, 2007), we 

pointed out that a lack of clarity about the roles and 

responsibilities of NNSA and the Department of Homeland 

Security for managing and coordinating the project resulted in 

its completion being significantly delayed and original cost 

estimates exceeded. 

________________________________________________________________ 

Page 5 Details of Finding 
 

In response to our prior report, NNSA issued draft guidance to 

its site offices in September 2008 regarding roles and 

responsibilities on WFO agreements. The proposed guidance 

stated that prior to initiating WFO technical projects, site 

offices should specify responsibilities for monitoring contract 

performance in interagency agreements and statements of 

work. However, according to an NNSA official, the guidance 

was not finalized pending a Department decision regarding the 

applicability of the June 2008 OMB guidance, as well as a 

NNSA internal assessment of its site offices' execution of the 

WFO program. This assessment was recently completed and 

NNSA is in the process of evaluating the results to identify any 

systemic problems. 

Recent Guidance According to an NNSA procurement official, cost information 

at the Department's facility and management contractors is 

Federal information and is available to other Federal agencies. 

This official also agreed that WFO agreements should clearly 

define roles and responsibilities of the Federal partners for 

overseeing the facility contractors' performance. Accordingly, 

NNSA issued guidance on August 26, 2009, to its site offices 

regarding the availability of cost information to Federal 

agencies and roles and responsibilities on WFO agreements. 

Specifically, the guidance stated that cost and technical 

performance data will be provided to a requestor to ensure the 

technical representatives have sufficient information to monitor 

the WFO technical projects. The guidance also stated that, 

prior to initiating WFO technical projects, site offices should 

specify the Department's, DoD's or other federal entity 

requestor's responsibilities for monitoring contract performance 

in interagency agreements or statements of work. These 

actions, if fully implemented, should result in more visible cost 

information and clearly defined roles and responsibilities to 

monitor WFO performance. 

While NNSA's recent guidance addresses issues discussed in 

this report, it applies only to NNSA contracting officers and 

does not apply to the entire Department. We could find no 

evidence that the Department has issued similar clarifying 

guidance that would be applicable to other sites performing 

work for DoD including those managed by the Office of 

Science.

________________________________________________________________ 

Page 6 Details of Finding 
 

As required by the National Defense Authorization Act 

(NDAA), the DoD recently announced that procurements from 

non-defense agencies that had not certified as complying with 

defense procurement requirements would be limited to 

$100,000 or less. The Department certified to DoD in 2008 

and 2009, that all reimbursable work performed for DoD by the 

Department's contractors would comply with Federal 

Acquisition Regulations and Department of Energy Acquisition 

Regulations. The Department, however, acknowledged that 

DoD may determine that additional requirements are necessary 

to meet the requirements of the NDAA. The Department 

asserted that it did not believe that the subject NDAA 

requirements were applicable to reimbursable work performed 

by the Department and its contractors; however, it committed 

to reaching agreement with DoD on additional work 

requirements prior to performing any work. 

Despite the Department's certification to DoD, Sandia 

informed us that it has received notice from certain DoD 

customers that they will halt funding for WFO technical 

projects under the terms of the NDAA. Realistically, in the 

case of Sandia, this restriction could prevent DoD from 

acquiring mission-related services that could be critical to the 

national defense and which are available from no other sources. 

Cost and Performance Without detailed cost information and clarification of 

Impacts contractor performance monitoring roles and responsibilities, 

NNSA cannot be assured that it is meeting the needs of its DoD 

customers. For example, without detailed cost and pricing 

information, DoD customers may not be able to obtain all 

pricing information they believe is necessary to satisfy defense 

procurement regulation requirements. Unless monitoring roles 

and responsibilities are clearly defined for WFO projects, vital 

national security projects performed by NNSA for DoD may 

not be completed within cost estimates and established 

performance schedules. Prompt action to address recently 

imposed procurement restrictions is also necessary to ensure 

that DoD continues to be provided with unique, and likely 

mission critical, research and other services. 

RECOMMENDATIONS We recommend that the Department's Director, Office of 

Procurement and Assistance Management, and NNSA's Senior 

Procurement Executive: 

1. Enter into a Memorandum of Understanding (MOU) 

with the DoD Senior Procurement Executive to 

________________________________________________________________ 

Page 7 Recommendations and Comments 
 

establish the respective agencies' roles and 

responsibilities pertaining to WFO technical projects to 

ensure compliance with the National Defense 

Authorization Act; and, 

2. Continue to work with DoD procurement officials and 

Congress as necessary to resolve recently imposed 

funding restrictions on WFO technical projects. 

We also recommend that the Department's Director, Office of 

Procurement and Assistance Management in coordination with 

NNSA's Senior Procurement Executive issue guidance: 

1. Clarifying its policy on the release of detailed cost and 

pricing information to WFO customers; and, 

2. Requiring Department contracting officers to clearly 

specify the Department's and other federal entity 

requestor's roles and responsibilities for monitoring 

contractor performance on WFO technical projects. 

Finally, we also recommend that the Senior Procurement 

Executive, NNSA, periodically monitor WFO agreements to 

ensure that the directions regarding pricing data and clarity of 

responsibilities are adhered to. 

MANAGEMENT Department and NNSA procurement officials provided 

REACTION AND technical comments on a draft of this report. We addressed 

AUDITORS COMMENTS management's technical comments throughout the body of this 

report. 

Additionally, management questioned the level of detail for 

cost and pricing data that should be provided to DoD, and how 

coordination with the Defense Contract Audit Agency would 

be achieved should DoD task that agency to audit cost and 

pricing data. Management also suggested that we focus our 

recommendations solely on the Department and NNSA 

entering into a MOU with DoD regarding roles and 

responsibilities for ensuring compliance with the NDAA. 

The level of detail for cost and pricing data to be provided to 

DoD should be based, in our view, on agreements reached in 

the development of the recommended MOU between the 

Department, NNSA and DoD. Coordination with the Defense 

Contract Audit Agency, and other audit organizations outside 

the Department, is the responsibility of the OIG as the 

________________________________________________________________ 

Page 8 Recommendations and Comments 
 

cognizant audit organization for the Department of Energy and 

NNSA. 

Finally, we continue to believe that further actions are 

warranted in the areas of guidance and monitoring the 

performance of WFO technical projects by the Department's 

and NNSA's management and operating contractors that are 

beyond the establishment of the recommended MOU. 

________________________________________________________________ 

Page 9 Recommendations and Comments 
Appendix 1 

OBJECTIVE To determine whether the Department of Energy 

(Department) complied with Department of Defense (DoD) 

procurement requirements when performing work for the 

DoD. 

SCOPE The audit was performed between March and October 2009 

at Sandia National Laboratories (Sandia), the Sandia Site 

Office; Lawrence Livermore National Laboratory 

(Livermore); the Livermore Site Office; the Y-12 National 

Security Complex (Y-12); Y-12 Site Office; and, 

Department and the National Nuclear Security 

Administration Headquarters. We reviewed 11 projects 

judgmentally selected by the DoD Office of Inspector 

General (DoD OIG) that either received new or continuing 

DoD obligations in the last quarter of Fiscal Year (FY) 

2008. 

METHODOLOGY To accomplish the audit objective, we: 

• Reviewed applicable Laws, Departmental Orders, 

other Departmental guidance, and contracts; 

• Reviewed and analyzed internal NNSA guidance; 

• Identified the universe of Work for Others (WFO) 

projects that received new DoD funding in the 

fourth quarter of FY 2008 at NNSA's sites; 

• Tested 11 WFO technical projects judgmentally 

selected by the DoD OIG for compliance with 

Department WFO policies and procedures; and, 

• Interviewed key Department, NNSA, and contractor 

personnel. 

We conducted this performance audit in accordance with 

generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on 

our audit objective. We believe that the evidence obtained 

provides a reasonable basis for findings and conclusions 

based on our audit objective. The audit included tests of 

controls and compliance with laws and regulations 

necessary to satisfy the audit objective. Because our 

review was limited, it would not necessarily have disclosed 

all internal control deficiencies that may have existed at the 

________________________________________________________________ 

Page 10 Objective, Scope, and Methodology 
Appendix 1 (continued) 

time of our audit. We assessed performance measures 

established under the Government Performance and Results 

Act of 1993 and found that Sandia, Livermore, and Y-12 had 

specific performance measures related to the WFO program. 

Finally, we determined that computer-processed data was 

integral to meeting the objective of this audit. 

Department and NNSA officials waived an exit conference. 

________________________________________________________________ 

Page 11 Objective, Scope, and Methodology 
Appendix 2 

PRIOR REPORT

Office of Inspector General Report 

• The National Nuclear Security Administration's Construction of a 

Radiological/Nuclear Complex for Homeland Security, (DOE/IG-0775, September 

2007). The Department of Energy (Department) and the Department of Homeland 

Security (Homeland Security) entered into an interagency agreement with National 

Nuclear Security Administration's Nevada Site Office to construct the 

Radiological/Nuclear Countermeasures Test and Evaluation Complex (Rad/Nuc 

CTEC). Homeland Security requested that the project be fast-tracked so that 

construction at Nevada Test Site could begin before building design was completed in 

order to have the project completed by February 2007. The audit determined that 

management and coordination responsibilities between the Department and 

Homeland Security were not clearly defined and the project was not appropriately 

staffed. The audit concluded that experience with the (Rad/Nuc CTEC) project 

provided important "lessons learned" for managing the Department's expanding 

portfolio of Work for Others projects. 

___________________________________________________________________ 

Page 12 Prior Report 
Appendix 3 

October 8, 2009 

Joint DOE/NNSA Comments on Draft Audit Report 

Work for Others Performed by the DOE for DOD 

1. The cover memo and draft report contain several references which incorrectly state that 

the requirements of Section 801 of the NDAA for FY 2008 require non-Defense agencies, 

including DOE, to certify and comply with “all defense procurement requirements” (e.g., 

transmittal, 3rd line from bottom, and page 1, first paragraph of draft report), and/or “Defense 

Federal Acquisition Regulations (DFAR) requirements” (several references in cover memo 

and body of the draft report). This characterization of the requirement in the draft report is 

inconsistent with both Section 801 and DOD’s implementing regulations at DFARs 

217.7800. Both require certification and compliance with “defense procurement 

requirements.” The law and regulation neither prescribe compliance/certification with “all” 

defense procurement requirements, nor with DFARs. It should be noted that “defense 

procurement requirements” may be prescribed by various policy issuances which are not 

exclusive to the DFARs. A DOE analog would be the DEAR, DOE/NNSA Acquisition 

Letters, the DOE Acquisition Guide, DOE Orders, and written policy direction by the 

respective DOE and NNSA Senior Procurement Executives. In addition, it should be further 

noted that DOD has not formally defined what “defense procurement requirements” 

encompass beyond general instruction to DOD personnel prescribed at DFARs 217.7802. 

2. Page 2 of the cover memo identifies four bullets as “DOD procurement tasks.” These 

requirements are not unique to DOD nor are all of these requirements prescribed in either the 

FAR or DFARs. Moreover, DOD has not formally prescribed such requirements for DOE 

or, to our knowledge, any other non-Defense agency pursuant to Section 801 and DFARS 

217.7800. The report correctly addresses both DOE and NNSA procurement official’s 

determination that these requirements do not generally apply to WFO technical projects 

under an M&O contract. 

3. Reference 4th bullet on page 2 pertaining to pre-award audits of project level costs. 

Throughout the draft report there are references indicating that DOD desires and that DOE 

should provide DOD with detailed cost and pricing information for the purpose of review and 

audit of such information by DOD officials. The report fails to address the level of detail that 

the OIG believes will satisfy DOD’s concerns with respect to cost/pricing data (e.g., costlevel breakdowns of direct labor rates and indirect rates). Moreover, the provision of such 

information for the purposes of DOD analysis/audit would presumably invite DOD to task 

the Defense Contract Audit Agency (DCAA) to audit the information which would require 

DCAA access to and audit of M&O contractor accounting records. The draft report does not 

address how such access would be coordinated with the DOE OIG as the cognizant auditor 

for DOE M&O contracts. 

4. Page 3 of cover memo and page 5 of the report incorrectly state that DOE has not 

provided the requested DOD certification. Attached are the executed certifications, dated 

October 7, 2008, and October 8, 2009.

___________________________________________________________________ 

Page 13 Management Technical Comments 
Appendix 3 (continued) 

October 8, 2009 

5. Report, page 1, first paragraph indicates a finding that NNSA control structure has not, in 

the past, ensured compliance with DOD procurement requirements for WFO technical 

projects. This should be rewritten to acknowledge that no such requirement existed prior to 

enactment of 801; that DOE/NNSA has, in fact, certified to such compliance subject to DOD 

specifically defining applicable defense procurement requirements for each WFO technical 

project; and, with one exception as noted in the draft report, to date, DOD has not defined 

any such requirements for NNSA (or DOE) WFO technical projects. 

6. Replace the term “WFO project” with “WFO technical project” throughout. 

7. Page 1 of the report, last paragraph, replace “DFARs” with “DOD”. 

8. In lieu of the recommendations on page 6 of the report, we suggest that the OIG consider 

the following single recommendation: 

“The DOE and NNSA Senior Procurement Executives should enter into a Memorandum of 

Agreement with the DOD Senior Procurement Executive to establish the respective agencies 

roles and responsibilities pertaining to WFO technical projects to ensure compliance with 

Section 801 of the NDAA for FY 2008.” 

___________________________________________________________________ 

Page 14 Management Technical Comments 
IG Report No. DOE/IG-0829

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Washington, DC 20585 

ATTN: Customer Relations 

If you wish to discuss this report or your comments with a staff member of the Office of 

Inspector General, please contact Felicia Jones at (202) 253-2162. 
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The Office of Inspector General wants to make the distribution of its reports as customer friendly 

and cost effective as possible. Therefore, this report will be available electronically through the 

Internet at the following address: 

U.S. Department of Energy Office of Inspector General Home Page 

http://www.ig.energy.gov

Your comments would be appreciated and can be provided on the Customer Response Form.