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[Senate Hearing 108-97]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 108-97

                  DEPARTMENT OF ENERGY LAB MANAGEMENT

=======================================================================

                                HEARINGS

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

     TO EVALUATE CHANGES OVER TIME IN THE RELATIONSHIP BETWEEN THE 
DEPARTMENT OF ENERGY AND ITS PREDECESSORS AND CONTRACTORS OPERATING DOE 
LABORATORIES AND SITES TO DETERMINE IF THESE CHANGES HAVE AFFECTED THE 
  ABILITY OF SCIENTISTS AND ENGINEERS TO RESPOND TO NATIONAL MISSIONS

                                  AND

 TO CONTRAST THE MANAGEMENT OF SCIENCE AND TECHNOLOGY RESOURCES BY THE 
    DEPARTMENT OF ENERGY WITH MANAGEMENT OF SUCH RESOURCES IN OTHER 
   AGENCIES AND IN THE PRIVATE SECTOR TOWARDS THE GOAL OF SUGGESTING 
 APPROACHES FOR OPTIMIZING THE DOE'S MANAGEMENT AND USE OF ITS SCIENCE 
                        AND TECHNOLOGY RESOURCES

                               __________

                             JUNE 24, 2003

                             JULY 17, 2003

                       Printed for the use of the
               Committee on Energy and Natural Resources

                                 ______

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                            WASHINGTON : 2003
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma                JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho                DANIEL K. AKAKA, Hawaii
BEN NIGHTHORSE CAMPBELL, Colorado    BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee           RON WYDEN, Oregon
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri            MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana                EVAN BAYH, Indiana
GORDON SMITH, Oregon                 DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                CHARLES E. SCHUMER, New York
JON KYL, Arizona                     MARIA CANTWELL, Washington

                       Alex Flint, Staff Director
                     James P. Beirne, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                 Pete Lyons, Professional Staff Member
                  Jonathan Epstein, Legislative Fellow

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearings:
    June 24, 2003................................................     1
    July 17, 2003................................................    49

                               STATEMENTS
                             June 24, 2003

Bunning, Hon. Jim, U.S. Senator from Kentucky....................     2
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Hecker, Sigfried S., Senior Fellow, Los Alamos National 
  Laboratory, Los Alamos, NM.....................................    18
Krebs, Dr. Martha, President, Science Strategies, Los Angeles, CA     8
Peoples, Dr. John, Jr., Director Emeritus, Fermi National 
  Accelerator Laboratory, Batavia, IL............................    30
Postma, Dr. Herman, Oak Ridge, TN................................     3

                             July 17, 2003

Domenici, Hon. Pete V., U.S. Senator from New Mexico.............    49
Gibbons, Dr. John H., President, Resource Strategies.............    58
Reis, Dr. Victor H., Senior Vice President, Hicks & Associates, 
  Inc............................................................    50
Schneider, Dr. William, Jr., Chairman, Defense Science Board, 
  Department of Defense..........................................    61
Spencer, Dr. William J., Chairman Emeritus, International 
  SEMATECH.......................................................    54

 
                  DEPARTMENT OF ENERGY LAB MANAGEMENT

                              ----------                              

                         TUESDAY, JUNE 24, 2003

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:13 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Pete V. 
Domenici, chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMENICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. The hearing will please come to order. First, 
I want to apologize for being late, and thank the Senators for 
coming, the two of you. With this hearing today we begin a 
series of hearings devoted to the relationship between the 
Department of Energy and its laboratories and other facilities.
    From these hearings, my goal is to develop a better 
understanding of how to optimize the relationship in order to 
balance the critical contributions of these laboratories 
towards national missions with increasing demands from the 
Department and Congress for ``improved accountability,'' in 
quotation marks.
    Recent discussions about contract issues at the 
laboratories have highlighted the fact that the criteria on 
which the Department judges the extension or competition on 
current contracts are all extremely vague. In addition, there 
have been many studies noting that increased micro-management 
of the labs, much of it in the name of providing increased 
accountability, has greatly complicated the ability of lab 
scientists and engineers to deliver on their critical national 
missions. In addition, there have been many problems identified 
at various laboratories encompassing security, environmental, 
financial, or administrative issues. These concerns increase 
desires to provide still more micro-management for the 
laboratories.
    With the current decision to compete the Idaho and Los 
Alamos contracts, this is an appropriate time to explore these 
issues. In today's hearings, I hope we can explain the changes 
that have occurred in the relationship between the Federal 
Government and the lab scientists and engineers. We need to 
understand how these changes may have complicated their ability 
to address national missions.
    In a second hearing set for July 17, we will hear from 
witnesses with experience in multiple Federal agencies or with 
experience in both the private sector and a Federal agency. 
From that hearing, we can better understand how the DOE's labs 
are viewed relative to other Federal or private laboratories.
    In future hearings, we will hear from leaders of some of 
the studies that have explored the productivity of the DOE labs 
and ways to increase their productivity. In addition, I plan to 
hear testimony on the various contract models that are now used 
by the Department, with the hopes of exploring ``best 
practices'' that might be applicable to more of the labs.
    We have four witnesses today. Each of these witnesses has 
great leadership experience, either within the laboratory or 
from the vantage point of the Department.
    Dr. Herman Postma served as Director at Oak Ridge under 
both Union Carbide and Martin Marietta. He has served for 12 
years on Sandia's advisory board. His career at Oak Ridge 
included the Atomic Energy Commission, the Energy Research and 
Development Administration, and the Department of Energy 
leadership.
    The Honorable Martha Krebs--nice to see you again--served 
as subcommittee staff director at the House Committee on 
Science. She has held management positions at Lawrence Berkeley 
lab before she served as Director of the DOE Office of Science. 
She is now president of Science Strategies. Her experience 
includes views of the labs from DOE headquarters as well as 
from within the laboratory.
    Dr. John Peoples has been with Fermilab for more than three 
decades. He served as director from 1989 to 1999 of that 
institution, and is now Director emeritus of the lab. The 
single-purpose labs of the Department provide critical 
facilities to our great Nation and the world of science. Dr. 
Peoples brings the perspective of these single-purpose labs to 
today's discussion.
    And finally, my good friend, longtime friend, Dr. Sig 
Hecker, it is so great to see you again. I hope we speak a 
little bit after the hearing. He joins us from Los Alamos, 
where he is now a senior fellow. Sig served as Director of the 
lab for 11 years, from 1986 to 1997. He has been associated 
with Los Alamos in various ways over the last 38 years. Over 
many years of working with Sig, I know he has carefully 
considered the changes in the Department's governance of the 
laboratories.
    With those introductions, let us begin with you, Dr. 
Postma, and proceed with the rest of the witnesses. Your 
written testimony will be made part of the record now, so you 
don't have to worry about that. Limit your oral arguments to 5 
minutes. The clock is right up here in front. Please proceed.
    [A prepared statement from Senator Bunning Follows:]

   Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky

    Thank you, Mr. Chairman.
    I appreciate having this opportunity to take a look at the 
Department of Energy's contractors.
    This hearing will focus mainly on the Department of Energy's 
project management and contracts at its national laboratories. These 
laboratories play an important role in our national security.
    As some of my colleagues on the committee know, the Paducah uranium 
enrichment plant is located in Paducah, Kentucky. And while it is not a 
national laboratory, I think this hearing may help answer some project 
management and contract questions I have about the Department of 
Energy's role in cleaning it up.
    We have been dealing with contamination at the uranium gaseous 
diffusion plant in Paducah for some time now. After more than five 
decades of operation at the Paducah plant, there is now severe 
contamination from improper disposal of hazardous and radioactive 
materials at the site.
    The progress with cleaning up the site has been very slow. The 
schedule for cleanup at the plant has been repeatedly delayed and 
projected costs have increased. Currently, the plant is proposed to be 
cleaned up by 2024.
    The Paducah plant has had several contractors to manage the cleanup 
over the past decades. The Department of Energy recently announced its 
plan to rebid the Paducah contract. I am hopeful that the Department of 
Energy's new contractors will work hard to efficiently cleanup the 
site.
    I look forward to hearing the testimony from our witnesses today 
about issues concerning the Department of Energy's project management 
and contracts. I hope that what is revealed today and in subsequent 
hearings will help to improve the cleanup at the Paducah plant.

         STATEMENT OF DR. HERMAN POSTMA, OAK RIDGE, TN

    Dr. Postma. Thank you. Thank you, Mr. Chairman, and 
Senators. It is good to be here. I want to start off with what 
I call the top line or the bottom line, which is that the 
relationship between DOE and its laboratories has been 
fundamentally sound for about 60 years. These are some of the 
very best laboratories in the world, and in order to be so they 
had to change over that period of time into many different 
things and different ways.
    They have successfully done so, but that does not mean they 
are perfect. It does not mean that the relationship could not 
stand some improvement, as every organization that is an 
organization must confront those things which influence it and 
make changes appropriately.
    I have some observations on the structure and the 
governance of that relationship. I call some of them Postma's 
laws. This is taking off a little bit after Augustine's laws, 
except they are not as funny as his were. One was the action-
reaction law, that any time DOE did something to change the 
structure, we could count on about 8 to 10 years later they 
would precisely undo what they had done for exactly the 
opposite reasons, and we would go through that cycle again. 
There is what I call the ``music man theory,'' in which 
contractors have great resolve in formulating precisely their 
proposal, finding out ways to precisely improve everything in 
all kinds of ways, except they do not know the territory. When 
they get in, they find things are quite different and have to 
make appropriate modifications, in often too fast a manner.
    There is the bait-and-switch theory, in which some of the 
winning team stays together for a year or two and then runs off 
to another proposal, in which case there is another transition 
that takes place.
    There is the halo theory, which I have also called the wave 
theory. This has to do with the initial halo effect. A new 
contractor arrives with the Department of Energy and looks good 
because they bring in a good team. They sort of like it after a 
while, and then they start bidding on new proposals from the 
Department of Energy, and DOE is enamored with that. Pretty 
soon, we have a company that has four or five contracts and a 
substantial part of DOE's business.
    Well, somebody stumbles out of those organizations, and 
then everybody looks bad from that contractor. The latest case 
was Martin Marietta-Lockheed Martin, but you can go back 
through the history and look at Westinghouse, who rose and 
fell; EG&G, who rose and fell; Lockheed Martin, who rose and 
fell; and now Bechtel, where there are signs of a little 
crumbling here and there, and disenchantment by the Department 
of Energy. So there is an anti-halo theory, as well.
    There is another thing, living with your sins. The 
contractor and team don't stay long enough together to see that 
what they started, they have to live with the results. That is, 
don't cut and run. Don't go do something and get out of town 
before your sins catch up with you.
    There is the ``breaking the back'' theory, which is not a 
theory. This says the demands, audits, and everything performed 
by the Department of Energy on contractors and the contractor's 
mother organization also does the same thing, turn out to be in 
many cases an unbearable load.
    I remember one time there were 23 audits going on in my 
organization at the same time by outsiders. That is an awful 
lot to bear.
    It was also impacted by what I call the ``closet 
dictator.'' There are some people who have been waiting in the 
wings for years to get even one way or another. As soon as 
something happens, they can jump on the perpetrator of that 
misdeed and just pounce on them with a lot of new rules.
    There are some good changes. They have to be good, because 
if you don't change, well, you will be changed. But there are 
ways to avoid these problems. I think better consideration to 
fit the contractors with the job is important, like a science 
lab should have strong university involvement as either single 
or consortia; that the comprehensive energy laboratories should 
have strong university and industrial teams, because they do 
have a mix. The lab should have strong industrial teams, and 
the university has a role as well.
    The production complex should have strong industrial 
contractors. I think the contractors ought to be around long 
enough, but there maybe ought to be some limits. Currently, the 
rule is, DOE bids for a 5-year contract, extends for 5 years 
more, unless things are not great, and gets rid of them. I 
think that is too hard and fast a rule. I have found, for 
example, in looking that Lockheed Martin has a contract with a 
team member in the United Kingdom and they just got a 25-year 
extension, which would be unheard of.
    There is another contractor here in the United States, a 
Department of Energy contractor, who normally would get a 5-
year contract and had been doing very well, but they are only 
going to get a 1-year contract extension at a time. No one can 
plan well with this kind of thing.
    The original Procurement Policy and Acquisition Act said 
that long-term relationships should be the expectation. ``Long-
term'' has a quite different meaning. It does not mean forever, 
and it should not mean forever; but it should not mean 5 years 
or 1 year at a time.
    The contractor team longevity should be part of the 
contract. The contract ought to include community involvement 
where it is appropriate. I believe strongly that technology 
transfer ought to be restored as an incentive within such 
contracts to help the American economy and to make sure that 
the work done at laboratories gets out.
    Particularly, I think there ought to be an encouragement of 
Sandia-like experiments and more appropriate governance. John 
Gordon testified about 16 months ago about a new governance 
model for Sandia. His testimony is quoted in here, but it has 
fallen on deaf ears, apparently. What started off as a great 
intention of allowing more self--not control, but more self-
audits, more rules internally, and more things really 
appropriate to industrial practices, has been thwarted 
essentially by a contract extension and nobody doing anything. 
I viewed this as a step forward, but apparently it has fallen 
into disarray.
    Don't attribute the transgressions of one lab to all labs. 
Not all labs are alike. Not all of them had the transgressions. 
If someone does something bad, penalize them; don't penalize 
everybody. I think that nurturing future laboratory directors 
from within is important. They should have outside experience 
early in their career. But too often we find that people 
brought in from the outside completely fresh to the system are 
shocked by the system, and sometimes cannot exist within it. It 
is so alien to their past practices that they have sometimes 
left after only a few months.
    I believe one of DEA's most important roles is to make sure 
that the right person for the prime leadership role is chosen, 
and stand behind that person as they are learning.
    Finally, I believe that the GOCO structure, government-
owned and contractor-operated, has served the country very 
well. It has gone through some ups and downs. It can be 
improved. But 60 years of outstanding performance ought to 
stand for something. Thank you.
    [The prepared statement of Dr. Postma follows:]

         Prepared Statement of Dr. Herman Postma, Oak Ridge, TN

                              INTRODUCTION

    Bottom (top) line: The GOCO (Government Owned Contractor Operated) 
governance of DOE Laboratories has served the U.S. extremely well 
yielding some of the best labs and best science and engineering in the 
world. These laboratories founded during or immediately after WWII were 
at the beginning comprehensive and dominated both the performance of 
the Nation's science agenda and quality for many years. Today there is 
much more competition from other national labs (National Institutes of 
Health, NASA, Agency) in the U.S. and abroad and not surprisingly that 
early dominance is not as great. But to have maintained a strong 
leadership role for these 60 years as science, governments, budgets and 
priorities have changed, is a testimony to their ability to morph, 
change, adapt, create, and reinvent themselves many times. But I 
believe that those changes have been made more difficult because of 
unwise practices, undue burdens and unnecessary mistakes. There are 
lessons to be learned from past experiences, which I will try to 
recount some here with some ideas for avoidance in the future.

            HISTORICAL OVERVIEW ON STRUCTURAL AND GOVERNANCE

    Early day relationships had very short contracts, no competition, 
fewer rules, regulations, and orders and there was a consistent joint 
focus on ability to get work done. Lab Directors often got together 
themselves in 70s and 80s to compare notes and forge some common 
directions to improve the labs overall-best practices in today's 
jargon. These confabs were later attended by field office and then 
became HQ oriented (so the early format died).
    Various structural formats exist in today's FFRDCs (Federally 
Funded Research and Development Centers): Primes, Teams, Intramural/
Extramural, Agency Labs, GOGO, GOCO, COCO and some joint arrangements 
of private/DOE common labs (at PNL.) But it is primarily GOCO 
throughout DOE. There is no one very best and obvious mode or everyone 
would be going in that direction.
    Personal Observations lead to Evolution of Postma Laws (some result 
from Fads, Foolishness, and Fickleness):
    Action-Reaction Law: Most past actions in taking things apart have 
later reversed those actions to put back them together again after 
several years lapse (Hanford + others).
    Music Man Theory: Contractors who have great resolve in formulating 
the proposal find that upon winning they didn't know the territory as 
well as they thought and many things are either not possible or are too 
daunting.
    Bait and Switch Theory: Sometimes the winning team stays together 
as such only long enough to put some changes in place and then that 
crew becomes the leadership for a new proposal elsewhere.
    Halo Theory: New contractors seemingly enjoy an initial halo effect 
(look really good and can do no wrong) and quickly get other contracts 
(a significant fraction of DOE contracts) after nabbing the first one--
Westinghouse, EGG, Lockheed Martin, Bechtel--but then rapidly fall from 
grace (halo shatters) after a few years and even disappear entirely 
from that business.
    Why this rise and fall? Theories abound. Shallow reserve of talent, 
lose interest, can't make money compared to core business, changing 
priorities within company. The converse is also true (anti-halo?). When 
DOE sees failure in one contract, it carries over to all of that 
company's contracts and thus gets rid of them all in an equally short 
time period.
    Living With Your Sins: Contract and team ought to stay long enough 
to see the outcome of their changes but not so long as to become too 
comfortable, arrogant or irrelevant.
    Breaking the Back (Not a Theory): Increasing demands, regulations, 
rules, simultaneous audits make the job unnecessarily hard to perform. 
Every review committee (latest was Galvin) has denounced the 
overbearing bureaucracy and its impact on getting the job done. I 
believe there is also the role of the ``closet dictators'' in which 
some people extract vengeance for past sins or multiply the intent of 
the original order by laying on extra levels of compliance.
    Good Changes: Some of this change is inevitable since times change, 
missions change, interests change, so contractors must change or be 
changed. Also time causes ``bureaucratic creep''. Easy mechanisms seem 
to exist to increase the loads but not to reduce them. Unless a 
significant recent exception becomes implemented: the NNSA has made 
several good changes and Sandia has been approved to suggest an 
innovative team approach to governance.

                   SOME WAYS TO AVOID THESE PROBLEMS

Better Fit the Contractor(s) With the Job
    Science Labs should have strong University involvement (single or 
consortia).
    Comprehensive Energy Labs should have a strong University and 
industrial team.
    Weapons Labs should have strong industrial and University team.
    Production Complex should have industrial contractors.
Keep Contractors Long Enough But Also Consider Some Limits
    Good Procurement Rules Exist Now: Currently and normally DOE bids 
five-year contracts with a very likely one five-year extension but then 
competitively rebids if longer (including current holder). Beware of 
``If you compete it that means you don't love us and we won't play'' 
(They almost always do). Some other contracts indicate the spread of 
what is deemed an appropriate time: the UK in March 2003 extended a 
contract to Lockheed Martin and partner for 25 years for managing its 
weapons production. Conversely DOE recently conditionally and narrowly 
extended a well-performed contract (normally 5 years) for only 1 year.
    The Office Federal Procurement Policy (Letter of 4/4/89) and FAR 
(Federal Acquisition Act) on FFRDC 35.017 section 4-both argue toward 
the establishment of ``long term relationships'' as the expectation. 
Long term has a quite different meaning now.
    New Kind of Limit: Limit contractors to holding few contracts 
whether prime or as team member regardless of mix and match unless a 
compelling overall need and commitment is there-not a fill in for other 
work, not a bait and switch, deep management talent, not a place to 
``put'' people. Avoid the halo effect. Spread the competitive net to 
get other interests and views involved.
    Have contractor team longevity as part of contract. Keeping a good 
team together long enough to accomplish promised changes and train 
successors. Have community involvement as part of contract. Have 
contractors commit in the bid to explicit community involvement and 
investment. It is important to the government interests to be a good 
corporate citizen and to have the mission's acceptance widespread in 
the region especially in communities in which DOE is dominant. Good 
community involvement increases tolerance for future mission changes.
    Restore Technology Transfer as incentive. Make sure contractors 
establish a strong technology transfer program to create strong 
American technology-it is a national security issue (security and 
economic) and has been diminishing in last decade and doesn't seem to 
be in the DOE mission any longer.
    Encourage Sandia like experiments in more appropriate governance. 
Sandia received permission in 2001 from NNSA to think about a series of 
simplifications toward more self-audits, fewer and better orders. 
Sandia started a series of suggestions based on successful industrial 
approaches that would return more people to the bench within the same 
money constraints.
    As General John Gordon testified 16 months ago:

          ``A new governance model will be designed to capitalize on 
        the private-sector expertise and experience of NNSA's 
        management and operating contractors while simultaneously 
        increasing their accountability for high performance and 
        responsiveness to NNSA program and stewardship requirements.''
          ``The governance strategy will be accompanied by an assurance 
        model that will rely as much as practicable on third-party, 
        private-sector assurance systems such as comprehensive internal 
        auditing, oversight by boards and external panels, third-party 
        certification, and direct engagement between oversight bodies 
        and NNSA's leadership.''

                        Progress Report to Congress on the Organization 
                        and Operations of the NNSA--February, 2002 By 
                        Gen. John Gordon

    The Sandia advisory board of which I was a member thought that to 
be a very encouraging development and strongly urged its speedy 
implementation. Unfortunately that early enthusiastic start has been 
greatly slowed down due in part to negotiating it into a contract 
extension.
    If and when progress once again resumes, I hope all parties would 
refrain from jumping all over Sandia for simple mistakes during this 
trial and transition period.
    Don't automatically attribute the transgressions of one lab to all 
labs. Deal out penalties accordingly. Too often when one lab makes a 
mistake it is assumed that all labs have same attitude and warrant the 
same orders. Limit the punishment to the transgressor and proportion 
the punishment to the transgression.
    Nurture cadre (cross fertilization) of future lab directors from 
within. Too many brand new ``outsiders'' have had problems adapting. 
The labs ought to be encouraged to develop management talent used to 
dealing in the DOE culture but also encourage and acquire those high 
potential people who have some outside experience in other settings. 
When top officials come in cold from the outside they too often are in 
shock at the contrasts and limitations. Talent developed earlier in 
career ought to be made available to other labs to cross-fertilize. 
Complete outsiders are appropriate more if things are seriously broken 
and need vast overhaul and fresh insights.
    Be very hesitant to jump on transgressions with new heavy rules. 
Often the 1% mistake will increase new rules by many fold. Every 
outside review undertaken of the labs has emphasized that too much of 
scientist's time is taken with foolishness having nothing to do with 
the goal. This has not been reduced despite more than a decade of 
concerns and recommendations. Be prepared to push DOE to NNSA like 
steps if DOE cannot do it on its own.
    DOE's most important role. Just as a board's most important job 
whether corporate or university is to choose the right person for the 
prime leadership role, so too is that DOE's most important 
consideration is in vetting the initial contractor's choice, later 
retention and renewal.

                               CONCLUSION

    I firmly believe that the GOCO structure in DOE has served the 
country very well but that there are always improvements possible and 
that some things need to be changed. Just as even great scientists 
change interests, fields and approaches to stay relevant, so too must 
DOE and its laboratories constantly seek out those changes that improve 
the ability to get the right things done right. Among those are 
recognizing that the C in GOCO is being constantly diminished to the 
detriment of the system and the country There are excellent models to 
every mode for improvement suggested in this testimony.

    The Chairman. Thank you very much. I appreciate your 
testimony.
    Dr. Krebs.

           STATEMENT OF DR. MARTHA KREBS, PRESIDENT, 
              SCIENCE STRATEGIES, LOS ANGELES, CA

    Dr. Krebs. Mr. Chairman and members of the committee, it is 
a great honor to appear before you and the committee again. I 
appreciate the opportunity to discuss the subjects of the 
hearing. As you know, most of my professional career has been 
involved with the Department of Energy, but I have served 
inside and outside the beltway a number of times.
    At first, when I was a staff member of the House committee, 
I was here when the Energy Research and Development 
Administration transferred or transitioned into the Department 
of Energy. I read and reviewed at least three major studies 
during that time on the laboratories and their contracts.
    At the lab, I watched certain committees here in the Senate 
and on the House side review business practices and disagree 
with judgments that were made by laboratory and Department of 
Energy managers at that time. I also saw the tiger teams 
created, and the creation of the Office of Environmental 
Management, as well as an increased oversight responsibility 
for the ES&H programs in DOE.
    Finally, when I had the great honor to serve as the 
Director of the Office of Science, I had responsibility for 10 
of those laboratories, and was part of a contract reform 
initiative, another review by the Secretary of Energy's 
advisory board with respect to the laboratories, and the 
recompete of the contracts for Brookhaven and the Oak Ridge 
National Laboratory. I would recount this history--and I do so 
in more detail in my testimony--to show how the Department has 
grappled with the role of the laboratories, their missions, the 
technical and business management, and the extent to which 
laboratory contracts result in under- or over-management by the 
Department of Energy.
    What began in the AEC as a clear concept of what was 
required to manage unique research and development for a high 
national purpose has diminished to concerns about good contract 
law.
    When I served at the Department of Energy and had occasion 
to testify here and before other committees, I always focused 
on the positive, because the Department's mission was 
important, and its laboratories had made so many contributions 
to that mission. Here today I have tried to convey the 
difficulties that face the DOE and its laboratories. I do not 
excuse the laboratories' deficiencies, some of which I 
certainly know to be real.
    I have also observed occasional misjudgments by laboratory 
and contractor leadership. I do not oppose recompetition of 
laboratory contracts categorically. As I said, I was involved 
in two of them. However, I also believe that since the creation 
of the Department there has been well-meaning, often 
unintentional, but ultimately and unfortunately malign neglect 
on the part of the internal and external programmatic sponsors 
of the laboratories.
    In general, I considered myself one when I was in the 
Department of Energy, and there, as I did often in my career, I 
placed an emphasis on keeping the money flowing, and assumed 
that the organizational issues would be overcome.
    The oversight and management elements of the Department and 
of the Congress, which are not responsible for delivering the 
Department's mission, have not been effectively countered by 
program sponsors. I think of the Senate Committee on Energy and 
Natural Resources, Armed Services, the Appropriations 
Committee, as programmatic sponsors of the Department.
    Other agencies suffer embarrassments for their 
ineffectiveness, but they are rarely browbeaten. They are not 
expected to change their procurement policies, and their 
contractors are rarely removed, despite overruns, schedule 
slips, and occasional ethical lapses.
    Although much criticized, the Department has a real and 
important mission. It is complicated, but it has four clear 
elements: energy, the nuclear weapons stockpile, environmental 
management, and science. There may be questions about the 
policies that underlie these missions, but it is not the 
Department of Energy's sole responsibility for brokering 
agreements on policy.
    When there have been disagreements about policy, I often 
see that the content and competition of the management and 
operating contracts for the laboratories have become one of the 
hobbyhorses that critics have ridden.
    Changes in policy or its interpretations may change 
programmatic content, but each of the mission elements will 
need R&D to achieve its goals. The DOE laboratories do 
integrate the full span of basic and applied research, and they 
develop the unique facilities required to support the DOE 
mission in ways that cannot take place in university campuses 
or private sector laboratories. The contractors for these 
laboratories must have the capacity to attract and lead the 
best scientific and engineering talent our Nation can muster.
    Administrative systems at a laboratory cannot be developed 
independently of programmatic activities. Laboratory 
contractors may be partnerships, but the partnership must be 
structured as a single entity. Technical leadership is primary. 
Administrative excellence without technical excellence is 
useless to the Department mission.
    Technical staff can and should be expected to incorporate 
high standards for protecting their safety, the environment, 
and other critical national assets, which is the knowledge they 
generate, as they carry out their daily technical work. To make 
this happen, laboratory leadership must be committed and the 
technical staff must be intimately involved. Self-assessments 
and reviews by the laboratories are critical, but should not be 
used against them as part of what I consider grandstanding 
oversight, in some cases.
    Having said this, adding detailed clauses to contracts or 
competing laboratory contracts for the sake of competition will 
not achieve this kind of performance, and they will not prevent 
intentional individual ethical misdeeds. More reviews won't 
help. The history recounted in my testimony shows that the 
patterns of these reviews are pretty well established. There 
are basically two kinds of reviews. The first kind finds the 
laboratories to be technically outstanding, the crown jewels, 
critical to the Department's missions. They also find that DOE 
micro-manages the laboratories and adds unnecessary cost.
    The second sort of review focuses on specific institutional 
or individual deficiencies that may have already been 
identified by the laboratories or DOE. These findings are then 
used to call into question the contractors of the laboratories 
and the nature of the contracts. They also result in added 
oversight by the Department, which leads to accusations of 
micro-management and added costs.
    The M&O contract concept used by the AEC and supported by 
the Joint Committee on Atomic Energy provided a framework that 
lasted 30 years. The last 25 years have seen continuous attacks 
on that framework. The House and Senate committees, which have 
the principal responsibility for scientific and technical 
program content, must work together to establish a new 
understanding of what the laboratories' M&O contracts should 
be, can be for the next 30 years. That is why I think the 
hearings that you are having today and in the next few months 
are critically important.
    I believe, however, they should also be carried out in some 
way in a joint fashion with the other programmatic committees, 
like the Committee on Armed Services, like the Committee on 
Appropriations; although I know that on this side of the Hill 
appropriations and authorization overlap considerably. A report 
should be written. Hearings are simply not enough.
    We need a written formulation of what your thinking is on 
this matter. If you could work with the corresponding House 
committees, it would be extraordinarily helpful. A clear 
statement from you and from the congressional sponsors, the 
programmatic sponsors, would allow the Department and the 
laboratories to move forward with some assurance of stability.
    I know how hard it would be and will be to do this, but I 
also know that of all the committees that have authority over 
the Department and its laboratories, these are the committees 
which have the biggest commitment to seeing something happen 
with the Nation's investment in the Department.
    Having arrived at such new understanding, I would urge you 
to then support the Department as it resists what will 
undoubtedly be continuing attempts to use the laboratories and 
their contracts to express opposition to the fundamental work 
of the Department, be it nuclear weapons or energy policy.
    I have appreciated the opportunity to speak today.
    [The prepared statement of Dr. Krebs follows:]

Prepared Statement of Dr. Martha Krebs, President, Science Strategies, 
                            Los Angeles, CA

    Mr. Chairman, Members of the Committee, it is a great honor to 
appear before you and the Committee again. I appreciate the opportunity 
to discuss the relationships among the Congress, the Department of 
Energy, and the management of the National Laboratories. These hearings 
are important and as I congratulate the Committee as they begin, later 
I will encourage you to do more not only within the Senate but with 
your colleagues in the House. This testimony provides a brief 
description of my career and its intersection with the recent history 
of the Department of Energy. I then provide a similarly brief 
discussion of the relationship between the Laboratories and the AEC. 
With that as context, I summarize the many reviews of the DOE 
Laboratories that have addressed both technical performance and the 
character of the DOE's relationship with the Laboratories. I also 
review internal and external oversight of Laboratory business practices 
that resulted in criticism of the details and the long-term nature of 
the Laboratory contracts. Finally, I make some recommendations.
    As you know, Mr. Chairman, most of my professional career has been 
involved with the Department of Energy, its science and energy 
programs, and its Laboratories. From 1977 to 1983, I served as staff 
member and Subcommittee Staff Director on the House Science Committee 
during the transition from the Energy Research and Development 
Administration (ERDA) to the cabinet Department of Energy. The 
Laboratory missions and the Management and Operating Contract concept 
were reviewed three times in that period by the DOE Energy Research 
Advisory Board (ERAB), the President's Council of Science and 
Technology Advisors (Packard Panel), and the President's Private Sector 
Survey on Cost Control (The Grace Commission),
    From 1983 to 1993, I was Associate Director for Planning and 
Development at the Lawrence Berkeley National Laboratory, operated for 
the DOE by the University of California. During that period, 
legislation was enacted that gave new authorities for technology 
transfer to the DOE laboratories; the Competition in Contracting Act 
also placed new expectations on Federal agencies for competitive 
procurements for goods and services. In addition, oversight by the 
House Committees on Energy and Commerce and Government Operations and 
the Senate Committee on Governmental Affairs focused on DOE and 
Laboratory management of procurement, security and environmental 
compliance. The Department initiated the broad reviews of 
environmental, health and safety performance at the Laboratories, known 
as the Tiger Teams. The Department created the Environmental Management 
program and raised its own questions about the need to reform the 
contracts for the Laboratories and the new clean-up sites. It also 
expanded the role of the ES&H Office from policy to detailed guidance 
and oversight.
    From 1993 to 2000, I served as Director of the Office of Science, 
an Assistant Secretary level position. I had responsibility for the 
DOE's basic research programs and its 10 multi-program and single-
purpose National Laboratories. During this time, the Department 
undertook a Contract Reform initiative, chartered the Secretary of 
Energy Advisory Board Review of the Laboratories (Galvin Committee), 
created the Laboratory Operations Board, and competed the contracts for 
the Brookhaven National Laboratory and the Oak Ridge National 
Laboratory. Throughout this whole time, the GAO has issued numerous 
reports, both specific and general, on the Department's management of 
the Laboratories.
    I recount this intertwined history of my career and the Department 
of Energy not just to convey my experience, but also to show how the 
Department has grappled with the role of the Laboratories, their 
missions, their technical and business management and the extent to 
which the Laboratory contracts result in under- or over-management by 
the Department of Energy staff.

                BACKGROUND: THE ATOMIC ENERGY COMMISSION

    The National Laboratories began as part of the Manhattan Project; 
by the end of World War II, there were numerous universities and non-
profit institutions intimately engaged in research and development for 
the Project. Soon after the establishment of the AEC in 1946, the 
General Manager, Carroll Wilson, convened an Advisory Board to 
recommend how the Commission should interact with contractors for 
research and development. (Ref. 1) It was recognized that the wartime 
urgency and command relationships of the Manhattan Engineering District 
would not be necessary or even desirable in peacetime. The Atomic 
Energy Act of 1946 provided new contracting authorities to permit the 
new agency flexibility.
    The continuing need to engage the best scientific and engineering 
minds also argued for a different organizational structure that would 
attract the right people and provide an effective environment where 
scientifically driven work of vital national security interest could be 
carried out. Its recommendations focused predominantly on university 
and non-profit institutions. The Board also enumerated the motivations 
and risks that a university or non-profit would face in operating an 
AEC laboratory. In large measure they have not changed dramatically. 
Among the possible motivations were:

          (1) patriotic motives;
          (2) opportunities for enlargement of staff in certain fields 
        of activity;
          (3) provision of additional research and educational 
        facilities for staff and students;
          (4) underwriting of direct and indirect costs of research of 
        such a character as to enhance the prestige of the institution.

    Among the risks were:

          (1) need to use institutional funds as working capital;
          (2) need to assume financial risks to insure continuity of 
        operation when contract renewals are delayed;
          (3) possible overexpansion of plant involving continued fixed 
        charges after government contract work ceases.

    Throughout the report of the Board, the Commission is urged to 
recognize that these contracts would procure management as well as 
goods and services. It noted that Commission staff should not manage 
research but rather should determine high level program requirements 
and, in the field, oversee the fulfillment of the contract provisions. 
In large measure, the detailed scientific and engineering activities 
required to meet program requirements were left to Laboratory 
management. When questions arose as to contractual compliance, 
solutions should be developed in an interactive and mutual manner. It 
was expected that the private sector contractors were ``financially and 
morally respectable'' parties, which would not require the detailed and 
adversarial provisions and processes of traditional government 
contracts.
    The Advisory Board addressed procurement in some detail. They noted 
that detailed records that would follow the evolution of components 
into larger research equipment and facilities would require tracking 
systems that would cost more than they were worth. They dealt with the 
need for much of the facilities to be government-owned, due to both 
programmatic and security considerations. As a result, the standard, 
university R&D contract would not suffice. It was expected that the 
contracts would be long term; the issue of competing specific 
Laboratory contracts was not raised.
    Thus, it is clear that the general characteristics of the 
Management and Operating (M&O) Contract for the AEC Laboratories were 
laid out early in its existence. In the late 1940s and early 1950s, as 
the Department of Defense found itself in need of independent technical 
studies and analyses, it used the AEC M&O contract as a model for 
establishing institutions such as IDA, CNA and RAND. The Federal 
Acquisition Regulation for FFRDCs provides that ``FFRDCs are operated, 
managed, and/or administered by either a university, consortium of 
universities, other not-for-profit or nonprofit organization, or 
industrial firm, as an autonomous organization or as an identifiable 
separate operating unit of a parent organization. Long-term 
relationships between the Government and FFRDCs are encouraged in order 
to provide the continuity that will attract high-quality personnel. 
This relationship should be of the type to encourage the FFRDC to 
maintain currency in its field(s) of expertise, maintain its 
objectivity and independence, preserve its familiarity with the needs 
of its sponsor(s) and provide a quick response capability.'' (Ref. 4, 
App. B) Most of the DOE laboratories are FFRDCs. It is also worth 
noting that the DOD FFRDCs have been renewed without competition for 
the last half century.
    Another notable characteristic of the AEC was its relationship with 
the Congress, as embodied in the Joint Committee on Atomic Energy. It 
was effectively the Commission's Board of Directors; it focused on the 
performance of Commission programs by both Commission staff and the 
Laboratories. It authorized the Commission programs; it provided 
exemptions from many regulations in the ES&H arena; its Members sat 
with the Subcommittees on Energy and Water Appropriations, when the AEC 
budget was considered. In some respects, the Joint Committee protected 
the Commission and especially the Laboratories from the larger 
political forces that were being debated in the post World War II era. 
The disestablishment of the Joint Committee in 1977 and the creation of 
the Department of Energy later in 1977 opened the new Department as a 
whole to the oversight and legislative jurisdiction of more than 20 
Congressional committees and subcommittees. In later sections, I will 
discuss the impact of this broadening of Congressional oversight and 
loss of institutional memory in wake of the abolition of the Joint 
Committee and the merger of disparate Federal agencies that became the 
Department of Energy. Let me now turn to more recent times.

      TECHNICAL PERFORMANCE OF THE LABORATORIES--THE CROWN JEWELS

    The early Department of Energy strove to organize itself to manage 
its complex mission of (1) energy policy, technology development and 
regulation; (2) development and production of an effective and safe 
nuclear deterrent; and (3) the advancement of the scientific 
foundations of fields critical to DOE and other national purposes. The 
role of the National Laboratories was in question in almost every area. 
Energy technology was to be used by the private sector but should 
federally funded laboratories be the source of that technology? There 
were also disagreements as to technological emphasis from one 
Administration to the next; this resulted in dramatic budget swings in 
DOE energy technology programs and at the Laboratories.
    The role of the Laboratories was clear in nuclear weapons but 
increasingly controversial. They were a lightning rod for anti-nuclear 
weapons activists and the broadened Congressional jurisdiction provided 
a venue for investigation and debate. The public was also confused as 
to how many weapons labs there were. Every DOE Laboratory was seen as 
part of the weapons program. Even to this day, non-weapons laboratories 
struggle to distinguish themselves in the public view as basic science 
and/or energy technology institutions.
    In the area of scientific foundations, the broader university 
community saw itself as a more efficient and creative competitor for 
Laboratory funds. Funding increases for NIH and NSF in the last decade 
have muted these latter concerns somewhat.
    In the early Reagan Administration, three reviews mentioned earlier 
essentially identified the DOE Laboratories as extraordinary national 
scientific and technical resources, with special capabilities for the 
DOE mission. However, they called for better mission statements for the 
Laboratories. All three reports were concerned about the increasing 
``micromanagement'' of the Laboratories by Department staff. It was 
clear that detailed management guidance had begun to proliferate even 
before DOE was created. The PCAST report, which reviewed what were then 
the more than 700 Federal laboratories, noted the strengths of the DOE 
M&O contracts and the NASA JPL contract. In particular, these 
contracts, permitted the Laboratories to attract and retain the 
nationally competitive staff in comparison to Federal laboratories tied 
to government pay scales. They recommended that other agencies look at 
using such contracts for R&D.
    The ERAB and PCAST reports recommended that Laboratory Directors be 
given authority to use a limited amount of DOE program funds for 
independent research. DOE responded to the report and authorized what 
has come to be called Laboratory Directed R&D (LDRD). In the 1990s, 
LDRD became an interesting example of the lack of historical memory and 
coordination in the Congress. The House sought to terminate LDRD at the 
three weapons laboratories as a use of funds for unauthorized and 
unappropriated purposes. Fortunately the Senate did remember and this 
vital capability was preserved. However, the price paid is specific 
language in Laboratory contracts and a detailed annual prospective 
report. This could be called more ``micromanagement'' or, 
alternatively, a small price to pay.
    By the beginning of the Clinton Administration, DOE's mission had 
expanded to include clean-up of DOE sites. The end of the Cold War and 
the emerging Comprehensive Test Ban Treaty made the structure and 
content of the nuclear weapons program an issue and, of course, the 
character and number of the weapons laboratories was involved. On the 
science side, the Superconducting Super Collider (SSC) was in trouble 
and seen as only one of a number of Lab-based facilities that were over 
budget and behind schedule. And the energy programs were once again 
caught up in a change of emphasis--efficiency and renewables were seen 
as critical. As part of the National Performance Review examining 
Federal agency activities, the Department of Energy chartered a SEAB 
panel, chaired by Robert Galvin to look at the Labs once again. And 
once again the Laboratories were judged to be wonderful scientific 
institutions. It found that DOE requirements and processes were overly 
detailed, and that both the Department and the Laboratories could 
improve performance, if they would do benchmarking and adopt best 
practices from the private sector.
    Another area of the Laboratories' programmatic performance received 
less than sterling reviews during this period, i.e. project management. 
This came to a head early in the Clinton Administration in the wake of 
the termination of the SSC and increasing cost and schedule estimates 
of clean up projects at the Laboratories and former weapons production 
sites. Other lab-based technical projects subsequently had management 
problems as well. The General Accounting Office (GAO) produced several 
reports during this period about DOE project management problems. I 
personally took issue with them on several of their findings related to 
Office of Science projects. A National Research Council Committee was 
charged to review these issues and made suggestions with respect to 
both DOE and laboratory project planning, management and training.
    The issue of project management was of special interest in the new 
Environmental Management Program. Once cleaned up, some of the former 
weapons production sites like Rocky Flats would no longer have a DOE 
program role. For such sites, the issue was raised about the character 
of the contract and the contractors needed to carry out the clean-up. 
In particular, what kind of capabilities were needed and what kind of 
incentives and disincentives were appropriate tools to include in these 
contracts? A dramatically different contractual instrument was 
envisioned. But at the Laboratories, where critical work would 
continue, the task was to merge a contract based on predictable 
outcomes for the clean-up program with the traditional M&O contract 
that had worked well for not easily predictable R&D activities. It was 
not an easy marriage to arrange and the concept of performance-based 
contracts arose with very specific, often quantitative, outcomes in 
project management and more qualitative expectations in R&D. This is 
still a work in progress.
    In general, the Laboratories were seen as critical programmatic 
resources. Even in the case of problems with the management of 
technical projects, the role of the Laboratories was not questioned, 
and often DOE's inappropriate, if not ``micro'', management received 
more criticism than the Laboratories' internal management. After each 
of these reviews, the Laboratories and their program sponsors in DOE 
and in Congress were able to turn their attention once more to program 
performance.
    But this is not the whole story. Through out the 1980's and 1990's, 
Congressional oversight subcommittees and GAO began to review 
Laboratory performance of administrative services. They stipulated the 
contractors' ability to manage R&D but raised questions as to their 
capability to manage routine administrative activities that are 
expected of any government contractor. The very character of the M&O 
contract, the preference to renew rather than compete, and its 
oversight by DOE was attacked.

     PROCUREMENT, SECURITY, ENVIRONMENTAL, SAFETY AND HEALTH (ESH) 
                   ADMINISTRATION AT THE LABORATORIES

    Business Practices Oversight--Part 1. In the mid 1980s, the House 
Energy and Commerce Committee held a series of hearings that examined 
certain procurement and security practices at the Lawrence Livermore 
National Laboratory. With the assistance of the GAO to examine internal 
DOE and Laboratory reviews, the Committee identified what they judged 
to be deficiencies or irregularities: high costs for bicycles used for 
getting around inside the one square mile Laboratory site, inability to 
locate high-value property at acceptable (better than 99%) rates within 
24 hours; the management of a joint LLNL and FBI on-site drug sting, 
called ``Snowstorm'', and the performance of LLNL guards with respect 
to practice drills and security exercises at the Laboratory site. The 
Committee investigation required that DOE answer hundreds of detailed 
questions. The hearings called representatives from DOE headquarters, 
the field offices and the Laboratory for lengthy interrogations. All of 
these issues had been identified by the DOE and the Laboratory and 
involved judgment calls on the part of both as to how or whether to 
respond. The Committee disagreed with those judgments.
    The Committee identified the non-adversarial, interactive 
relationship between DOE staff and Laboratory management as problematic 
and concluded that the M&O contract was one source that fostered such a 
situation. In addition, the Committee was troubled by the fact that 
DOE's M&O policy included a preference for renewal of the contract 
rather than competition. The burden was on the Department to 
demonstrate why competition was needed. In the light of the Competition 
in Contracting Act, this was seen as another unacceptable irregularity.
    The fact that other agencies continued to make exceptions for both 
sole source procurements and uncompleted contract renewals was not 
addressed by the Committee. It is also the case that the Committee did 
not consider the impacts of its considerations on the nuclear weapons 
program activities at the Laboratory, because they were not under the 
Committee's jurisdiction. On the other hand, the House Committees on 
Armed Services and Appropriations with programmatic jurisdiction did 
not take on the Commerce Committee. The result was that the Department 
listened to the loudest complaints as a record was built portraying the 
M&O contract as an impediment to effective management of the DOE 
contractors.
    Environmental Compliance at DOE Sites. At the same time, the new 
openness of the Department of Energy began to bring State and local 
attention to the hazardous chemical contamination at the DOE sites. The 
Congressional exemption of DOE from compliance with federal and state 
ES&H standards was still in force, but pressure was growing to clean up 
the sites. Some facilities had made budget requests to the Department 
for support. However, funding was not forthcoming; neither the 
Administration nor the Congress felt it was a priority. The Senate 
Committee on Governmental Affairs held several hearings on DOE 
environmental and contractor governance issues.
    All of this changed in the Fall of 1989, when the FBI along with 
the EPA raided the Rocky Flats Weapons Production Facility. Eventually 
criminal charges were brought against contractor personnel. The DOE 
declared that it would abide by Federal, State and local laws. Congress 
later enacted legislation that required compliance with Federal 
environmental laws at DOE sites.
    As part of DOE's response, comprehensive reviews (Tiger Teams) of 
ES&H management and compliance took place at every DOE contractor under 
extraordinarily rigorous schedules for both the reviews and corrective 
action implementation. The Teams consisted of DOE staff and consulting 
specialists who had limited understanding of the history of the 
specific sites. The Tiger Teams also took a comprehensive and formal 
view of ES&H management and looked into financial, procurement, 
property management and personnel activities at the site. Almost every 
site was judged to have substantial non-compliance problems. Many of 
these problems had to do with the paperwork required by Federal laws. 
Work rules did not deal systematically with waste disposal or materials 
storage. While contamination sites were often known, they were not 
characterized at a level that would comply with Federal regulations. 
Insufficient remediation activities were underway. The public was 
alarmed.
    Given the Congressional exemption from Federal environmental 
regulation, this state of affairs should not have been a surprise. What 
was surprising at least from the Laboratory perspective, was that both 
the Department and the Congress forgot that they had had a role in 
creating the problem. What had been ``our'' problem became solely the 
Laboratories' problems and their fault.
    There is no question that it was long overdue for the Laboratories 
and DOE to be accountable for environmental compliance. The 
Laboratories learned a lot by bringing their activities and management 
procedures up to date. It was sudden and it was grueling at every level 
of the Laboratories.
    Implications for Contract Management. But as DOE Headquarters moved 
forward, they wanted changes in the contractor relationship and the 
contract. From their point of view, the trust and mutuality implicit in 
the M&O contract was no longer functional. Until this time, the 
Laboratory leadership had seen themselves as the ``contractor'' and so 
did their superiors in the parent organizations. The Department senior 
management wanted separate accountability from the ``contractor'' as 
opposed to the ``Laboratory.'' As a result, many contractors, and 
certainly the University of California, built a whole new 
organizational structure between itself and its Laboratories and its 
senior leadership. The comprehensive view of management for 
environmental compliance also brought a whole new set of reviews and 
expectations for what came to be called the business functions of the 
Laboratories. The new contractor organizations were given 
responsibility for assuring these functions as well. And it was also 
the case that the ES&H Office in DOE grew dramatically and broadened 
its focus from policy to include inspection and compliance.
    Another concept of Laboratory management was also broached at this 
time, which was that technical leadership and business management were 
different skills not to be expected from the same individuals or 
organizations. The notion, called the ``hospital model'', went 
something like this: Doctors practice medicine; they don't manage 
hospitals; administrators do. According to the model, new kinds of 
contractors would be required for Laboratories as well as the clean-up 
sites. Thus, the preference for M&O contract renewal was also broken. 
The Laboratories made the argument that business practices managed in a 
disconnected way from the technical, programmatic work of the 
Laboratories would not gain the respect or commitment of the 
researchers. The business practices used by the Laboratory are a 
critical element of the overall environment, which enabled the 
scientific work to get done. Lab morale and recruitment would suffer if 
the technical and business leadership were not seamless. This 
particular discussion went no further, but for the first time, serious 
questions were raised inside DOE about competition.
    By the time the Clinton Administration took office, multiple layers 
of reviews were occurring at the labs carried out by DOE programs, by 
the ES&H Office, by the DOE field organizations, State and local 
regulators, contractor central organizations and by the Laboratories 
themselves. Costs for the DOE Environmental Management Office were 
skyrocketing. Confidence in field offices and the clean up site 
contractors were at a low ebb. The Integrated Safety Management 
approach, as developed and applied at the Laboratories and included in 
revised contracts, helped to reduce the burden of repetitive and costly 
inspections.
    The Contract Reform Initiative was intended to codify the changed 
relationship with the Department's contractors. In its early stages, it 
addressed the changed needs at the clean-up sites. There was a 
conviction that these sites could be managed as a set of small and 
large projects by a contractor incentivized by a structured fee that 
would motivate timely and compliant completion of the projects. This 
fee would be sufficient to motivate the contractor to put their own 
assets at risk as they do for certain other government contracts. The 
need for a long-term relationship with these contractors was not a high 
priority. Competition for renewal was expected.
    While the Laboratories were recognized as different and that a 
long-term relationship was desired, the preference for renewal was 
replaced with a preference for competition. This is a good example of 
the ``one size fits all'' mentality that is pervasive at the 
Department. The expectation that the contractors could be economically 
motivated to put their own assets at risk for a high enough fee was 
never fully put to rest in the minds of DOE procurement officials. They 
never quite understood that universities and non-profit contractors had 
either very little or no assets to risk or little direct control over 
the assets that they did have. They also did not understand that the 
fees were essentially overhead on the appropriated research programs, 
which would hurt research progress when higher fees were assessed. The 
Laboratory contractor thus would be in a very hard place between the 
DOE research program and their own scientists, if they negotiated for 
higher fees. But the policy still reflects this misunderstanding. It is 
also further perpetuated in the recent Laboratory Operations Board 
Review of the proposed Best Practices Pilot, where some members of the 
review panel believed that a financial incentive was stronger than 
contract term extension. (Ref. 7)
    Business Practices Oversight--Part 2. The Wen Ho Lee case in the 
late 1990s raised many of these concerns again but in the context of 
security. In some respects, security violations, especially at DOE 
weapons laboratories, are more than a failure of business practices. 
The critical generators of information that must be held secure are the 
scientists and engineers themselves. But like environmental management, 
good security management means an integrated approach to all areas of 
the Laboratory's business--procurement, finance, human resources, 
property management--as well as technical programs. Thus it is 
understandable that failures in these systems may and should mean more 
at a weapons laboratory than at other DOE sites. Consider the recent P-
card misuses, which precipitated the recent decisions about the LANL 
contract. P-cards were introduced, because they had been identified as 
a cost-saving best business practice, and DOE had approved of the 
implementation. Further, the abuses were identified through a regularly 
scheduled internal review by the Lab and DOE. This is how a 
``management system'' is supposed to work.
    The fundamental lesson here is clear: contracts and integrated 
management systems cannot protect an institution--DOE, Los Alamos, or 
the University of California--against the intentional, unethical 
behavior of individuals. While the decision to compete the Los Alamos 
contract may be irreversible and well founded, much of the rhetoric 
betrays a view that a competition will get an intrinsically better deal 
for the Department and from the University of California, if it chooses 
to compete. The encouragement of the University to compete with 
possible partners with demonstrated management skills suggests that the 
``hospital'' model is still alive and well in the Department. It 
betrays a fundamental misunderstanding of what it takes to provide and 
manage an environment where creative science can happen.

                              CONCLUSIONS

    When I served at the Department of Energy and had the occasion to 
testify before Congress, I always focused on the positive, because the 
Department's mission was important and its Laboratories had made so 
many significant contributions to that mission and were needed in the 
future. None of that has changed.
    I have tried to describe the evolution of the Department and its 
Laboratories in an objective manner. As I come to conclusions, I can no 
longer do that. I care too much. Today I have dwelled on the 
difficulties that have faced the DOE and its Laboratories. I do not 
excuse the Laboratories' deficiencies, some of which I certainly know 
to be real. I have also shaken my head at what I have seen as 
occasional misjudgments by Laboratory and contractor leadership. I do 
not oppose recompetition of Laboratory contracts categorically. 
However, I also believe that since the creation of the Department, 
there has been well-meaning, often unintentional, but ultimately malign 
neglect on the part of the internal and external programmatic sponsors 
of the Laboratories. The oversight and 'management' elements of the 
Department and of the Congress, which are not responsible for 
delivering the Department's mission, have not been effectively 
countered by program sponsors. Other agencies suffer embarrassments for 
their ineffectiveness, but they are rarely browbeaten. They are not 
expected to change their procurement policies, and their contractors 
are rarely removed despite overruns, schedule slips and occasionally 
ethical lapses.
    Although much criticized, the Department has a real and important 
mission. It is complicated but it has four clear elements: energy, 
nuclear weapons stockpile, environmental management and science. There 
may be questions about the policies that underlie this mission. 
Disagreements about nuclear weapons policy or energy policy do not mean 
that the Department does not have a mission. And the Department is not 
solely responsible for brokering agreements on policy. Both the 
Executive branch and the Congress have often been unable to do their 
parts in developing proactive policies and have used deficiencies in 
the Department as an excuse to avoid the effort. The content and 
competition of the Management & Operating contracts for the 
Laboratories have become one of the hobbyhorses that critics have 
ridden.
    Changes in policy or its interpretation may change programmatic 
content, but each of the mission elements will need R&D to achieve its 
goals. The DOE Laboratories do integrate the full span of basic and 
applied research and they develop the unique facilities required to 
support the mission in ways that cannot take place on university 
campuses or private sector laboratories.
    The contractors for these Laboratories must have the capacity to 
attract and lead the best scientific and engineering talent our Nation 
can muster. Administrative systems at a Laboratory cannot be developed 
independently of programmatic activities. Laboratory contractors may be 
partnerships, but the partnership must be structured as a single 
entity. Technical leadership is primary; administrative excellence 
without technical excellence is useless to the Department mission. 
Technical staff can and should be expected to incorporate high 
standards for protecting their safety, the environment and other 
critical national assets as they carry out their daily technical work. 
To make this happen, Laboratory leadership must be committed and the 
technical staff must be involved in identifying how individual actions 
in research facilities can be carried out to meet these standards. Self 
assessments and reviews by the Laboratories are critical but should not 
be used against them as part of grandstanding oversight. Having said 
this, adding detailed clauses to contracts or competing Laboratory 
contracts for the sake of competition will not achieve this kind of 
performance.
    More reviews won't help. The history recounted above shows that the 
patterns of these reviews are established. There are basically two 
kinds of reviews. The first type finds the Laboratories to be 
technically outstanding crown jewels critical to the Department's 
mission. They also often find that DOE micro-manages the Laboratories. 
The second sort of review focuses on specific institutional or 
individual deficiencies, that may have already been identified by the 
Laboratories or DOE. These findings are then used to call into question 
the contractors of the Laboratories and the nature of the contracts.
    The M&O contract concept used by the AEC and supported by the Joint 
Committee provided a framework that lasted thirty years. The last 25 
years have seen continuous attacks on that framework. The House and 
Senate Committees, which have the principle responsibility for 
scientific and technical program content, must work together to 
establish a new understanding of what the Laboratories' M&O contract 
should be for the next thirty years. The Joint Committee should not and 
cannot be reestablished, but the Senate Committees and the staff of 
Energy and Natural Resources and Armed Services and Appropriations 
should hold joint hearings on this topic. A report should be written; 
hearings alone are not enough. We need a record of Congressional 
thinking on this matter. This should be done in cooperation and 
consultation with the House Committees on Science, Armed Services and 
Appropriations. You may decide that you want a strict preference for 
competition and a more standard 'goods and services' contract. I do not 
believe that is the right position, but a clear statement from this 
group of sponsors will allow the Department and the Laboratories to 
move forward with some assurance of stability.
    I know how hard it would be to do this but I also know that of all 
the Committees that have authority over the Department and its 
Laboratories, these are the Committees which have the biggest 
commitment to seeing something happen with the Nation's investment in 
the Department. Having arrived at such an understanding, I urge these 
Committees to support the Department as it resists what will 
undoubtedly be continuing attempts to use the Laboratories and their 
contracts to express opposition to the fundamental work of the 
Department, be it nuclear weapons or energy policy.
    I have appreciated the opportunity to speak with you today. The 
conclusions from these hearings can set the tone for this 
Administration and future Administrations at the Department as to how 
they use and exercise their stewardship for the remarkable set of 
institutions that are the National Laboratories. Thank you.

References:

    The chronology of events in this document relies strongly on my 
personal memories of events referenced here. A true history would 
require considerably more research into the records of the Congress and 
the Department. The references listed below are also not comprehensive, 
but are useful but not always widely known documents that have or are 
now shaping the DOE-Laboratory relationships.

          1. Report of the Advisory Board on Relationships of the 
        Atomic Energy Commission with its Contractors. First Revision. 
        June 30, 1947. J.W. Hinkley et al.
          2. James T. Ramey and John A. Erlewine. Introduction to the 
        Concept of the ``Administrative Contract'' in Government 
        Sponsored Research and Development. 17 The Federal Bar Journal 
        354 (1957), p.371.
          3. O.S. Hiestand, Jr. and Mark J. Florsheim. The AEC 
        Management Contract Concept. 29 Federal Bar Journal 67 (1969), 
        p.68.
          4. At the Crossroads, A National Laboratory Staff Paper on 
        the M&O Relationship. June 28, 1993.
          5. ``Department of Energy: Clear Missions and More Effective 
        DOE Management Can Enhance the Value of the National 
        Laboratories.'' (GAO/RCED-95-10).
          6. DOE Best Practices Pilot Study. (February 2002)
          7. Need for and Barriers to the Adoption of the 'DOE Best 
        Practices Pilot'. DOE Laboratory Operations Board. April 16, 
        2002.
          8. NNSA Model for Improving Management and Performance. 
        Albuquerque Operations Office. May 2002.

    The Chairman. Thank you very much.
    Dr. Hecker.

        STATEMENT OF SIGFRIED S. HECKER, SENIOR FELLOW, 
         LOS ALAMOS NATIONAL LABORATORY, LOS ALAMOS, NM

    Dr. Hecker. Thank you, Senator Domenici, Senator Bingaman, 
Senator Craig. It is a pleasure to be here this morning to 
share my thoughts.
    I would like to make three points. The first is the GOCO 
system of governance that you have discussed, Senator Domenici, 
for the DOE nuclear weapons labs was based on a partnership 
between the Government to deal with what I call the inherently 
governmental nature of the development, construction, and the 
life cycle support of nuclear weapons. So I will address 
principally my views of GOCO from the defense laboratories' 
standpoint.
    This partnership was designed to steer between the 
alternatives of a completely Federal operation on one hand and 
a procurement-oriented contract operation on the other. I 
maintain that this GOCO partnership was deliberate, it was 
innovative, and it was successful. Not only did these defense 
laboratories provide the cradle-to-grave care for nuclear 
weapons, of course helped to end World War II, helped to 
resolve the Cold War in our favor, but we have also contributed 
to other critical national security missions. I think that 
system of governance is just as important today as it was over 
the past 60 years.
    The second point I want to make is that over the years as 
the missions have evolved and as the public expectations of the 
nuclear enterprises have changed, and the public expectations 
of the laboratories have changed, and the nuclear enterprise 
expectations particularly changed as a result of Three Mile 
Island and the Chernobyl accidents, that both the Department of 
Energy and the laboratories were often slow to make the 
necessary changes.
    However, rather than working together in the spirit of this 
partnership to make the necessary changes, the Department of 
Energy typically responded to public criticism and to intense 
congressional pressure with new orders, more rules, and 
contract terms that fundamentally shifted this governance away 
from a partnership and towards what I would call a hybrid 
Federal operation or procurement operation, perhaps adopting 
the worst of both.
    The lines of responsibilities have then become blurred 
between the Department of Energy and the laboratory, with more 
and more of the operational decisions actually being made by 
Federal employees, but more of the accountability and the 
liability being shifted to the contractors.
    Consequently, it has become increasingly difficult for the 
contractors to take the public service approach that is 
absolutely necessary to do this inherently governmental 
mission. It has also become more difficult to nurture world 
class science, to deal with the risks of nuclear operations, 
and to provide a buffer from the political pressures, as well 
as to provide the continuity that is necessary for stewardship.
    These changes were not made by design, with the best 
governance in mind, but, rather, resulted from the accumulated 
reactions of the Department of Energy to various governmental 
audits, and, as I have mentioned, congressional pressures. The 
net result is a significantly diminished ability of the 
laboratories to accomplish their mission and to dramatically 
reduce the productivity of the laboratories. In other words, 
the current system of governance as it has evolved I would 
maintain is neither deliberate, innovative, nor successful.
    The third point: these problems must be repaired before the 
damage to the entire system becomes irreparable. Although the 
contractors must be held to the highest standards in managing 
all of the operations, the solution to the current crisis is 
not as simple as just competing or changing contractors. If the 
some of governance of is broken, as I maintain it is, then no 
contractor will be able to accomplish the mission successfully 
and productively. To achieve world-class performance, you not 
only need a world-class contractor but you need a world-class 
customer, and you need a revitalized system of governance. Such 
a system must be established, a partnership between the 
government and the contractor.
    By the way, that is a word that is never used in a positive 
sense in any of the GAO audits that I have ever read. We must 
rebuild the trust. Again, trust is viewed as an offense, rather 
than being something inherently necessary in the system when 
you read these audits. They must increase flexibility and value 
this public service orientation of the contractor. In fact, the 
changes that have been made over the past few years if anything 
seemed to go counter to valuing a public and private sector 
partnership and those institutions that have a long record and 
history of public service.
    Mr. Chairman, members of the committee, I go into much 
greater detail in my written statement. Particularly I try to 
convince you there that these are not just abstract thoughts 
about this, but they come first of all from the heart, and they 
come from having had a front row seat in this business for 38 
years. I first came to Los Alamos, in fact, this week 38 years 
ago. I was there as a student, as a scientist, as a manager, as 
a director, and now back as a scientist. I went back as a 
scientist because I felt it was so important that, once we 
develop nuclear weapon stewardship, that we can actually make 
it successful.
    Unfortunately, what I have found is no longer the type of 
attractive environment that brought me to Los Alamos. Quite 
frankly, I came there not to design bombs, not to build bombs; 
I came there because it had the ``University of California'' 
label in front. I was going to be a university professor. It 
created an environment that was the best research environment 
in the world. It brought me back to Los Alamos two other times 
because of that research environment. Only with the course of 
time did I get the sense of the importance and the challenge of 
the nuclear weapons mission, so in essence I was co-opted into 
that. I have done that now for a total of 38 years.
    But now, we no longer have that same supportive research 
environment: the trust, the flexibility, the sense of 
partnership. I don't see it. I hate to say this, but the 
environment is no longer as conducive for the next generation 
of scientists to start at Los Alamos the way I did some years 
ago.
    These are not just my own thoughts. You have heard 
reference made to various other commissions, the Galvin task 
force, and more recently the Hamre Commission on Science and 
Security. If you look through, they will use the words 
``partnership,'' ``trust,'' ``system of governance is broken.''
    Mr. Chairman, I am very encouraged by the fact that you are 
holding this series of hearings. It is especially important 
today, because interestingly, thanks to your efforts and those 
of your colleagues today, we at the weapons laboratories have 
important missions. We actually have adequate budgets. For the 
first time in a long time, we are replacing the aging 
facilities and infrastructure.
    All of those things are very ready to go, but we have 
undermined the environment by letting this partnership 
dissolve. I hope we can fix that. I agree with Martha's 
comments that something needs to be done. The importance of 
Congress and the committees cannot be overstated. My 
recommendation is actually for a congressionally-appointed blue 
ribbon task force to design a system of governance, 60 years 
from when it was first designed, in order that we can meet the 
government missions.
    In the end, if we cannot attract the best of the people to 
the laboratories to do the job for the country, nothing else 
matters much. Thank you.
    [The prepared statement of Dr. Hecker follows:]

  Prepared Statement of Sigfried S. Hecker, Senior Fellow, Los Alamos 
                  National Laboratory, Los Alamos, NM

    Mr. Chairman, I am pleased to be invited to share my views on a 
subject that is of great concern to me. I have prepared this written 
statement. With your permission, I would like to enter it into the 
record along with a comprehensive article I wrote on this subject in 
1997. I will briefly summarize my statement this morning. Specifically, 
I want to make three points.
    First, the GOCO (government owned, contractor operated) system of 
governance for the Department of Energy nuclear weapons laboratories 
was based on a partnership between the government and a contractor to 
deal with the inherently governmental nature of the development, 
construction, and life-cycle support of nuclear weapons. The 
partnership was designed to steer between the alternatives of a 
completely federal operation and a procurement-oriented, contract 
operation. The GOCO partnership was deliberate, innovative and 
successful. Not only did the weapons laboratories provide the cradle-
to-grave care of the nuclear weapons that helped end World War II and 
deter the Soviet Union during the Cold War, but they also contributed 
to other critical national security and civilian missions. The need for 
a successful system of governance for these laboratories is as great as 
ever in light of the challenges of stockpile stewardship in a no-test 
environment and of the increased threats of proliferation of weapons of 
mass destruction and terrorism.
    Second, over the years, as missions evolved and as public 
expectations of these institutions changed, the laboratories were often 
slow to make the necessary changes. However, rather than working with 
the laboratories to institute the necessary changes in the spirit of 
the GOCO partnership, the DOE typically responded to public criticism 
and congressional pressure with new orders, rules, and contract terms 
that fundamentally shifted governance away from the GOCO partnership 
toward a hybrid federal operation and procurement contract operation. 
The lines of responsibility and authority between the DOE and the 
contractors have become blurred, with more and more of the operational 
decisions made by federal employees, but more accountability and 
liability shifted to the contractors. Consequently, it has become 
increasingly difficult for contractors to take the public-service 
approach required for nuclear weapons stewardship, to nurture world-
class science, to deal with the risk of nuclear operations, to provide 
a buffer from political pressures, and to provide the continuity 
necessary for stewardship. These changes were made not by design with 
the best governance in mind, but rather resulted from the accumulated 
reactions of the DOE to government audits and congressional pressure. 
The net result has been to significantly diminish the ability of the 
laboratories to accomplish their missions and to dramatically reduce 
productivity.
    Third, these problems must be repaired before the damage to the 
entire system becomes irreparable. Although contractors must be held to 
the highest standards in managing all of their operations, the solution 
to the current crisis is not as simple as changing contractors. If the 
system of governance is broken, as I contend it is, then no contractor 
will be able to accomplish its mission successfully and productively. 
To achieve world-class performance we must have not only a world-class 
contractor, but also a world-class customer and a revitalized system of 
governance. Such a system must re-establish the partnership between the 
government and the contractor, it must rebuild trust, flexibility, and 
a public-service orientation, and it must opt for contract terms that 
encourage implementation of best practices from the private sector 
rather than adopting prescriptive federal practices. These changes will 
be difficult to implement now that the system has swung so far from 
these features. I believe that a congressionally mandated Blue Ribbon 
Task Force chartered to design an improved system of governance is the 
best way to address this important and urgent problem.

 THE GOCO (GOVERNMENT-OWNED, CONTRACTOR-OPERATED) PARTNERSHIP FOR THE 
                        NUCLEAR WEAPONS PROGRAM

    I will first discuss the salient features of the GOCO partnership 
that formed the basis of governance of the DOE laboratories. Although 
many of these features applied to both weapons and civilian 
laboratories, I will focus my remarks on the nuclear weapons 
laboratories.
    The development, construction, and life-cycle support of the 
nuclear weapons required during the Cold War were inherently 
governmental functions.\1\ However, the government realized that it 
could not enlist the necessary talent to do the job with its own civil-
service employees. Instead, it enlisted contractors to perform the 
government's work on government land, in government facilities, using 
the specialized procurement vehicle of an M&O (management and 
operations) contract.
---------------------------------------------------------------------------
    \1\ ``Inherently governmental function'' means, as a matter of 
policy, a function that is so intimately related to the public interest 
as to mandate performance by government employees. This definition is a 
policy determination, not a legal determination. An inherently 
governmental function includes activities that require either the 
exercise of discretion in applying government authority, or the making 
of value judgments in making decisions for the government. (Quoted from 
the Federal Acquisition Regulations [FAR], Part 7.5).
---------------------------------------------------------------------------
    The government does not normally contract out inherently 
governmental functions such as managing the armed services, conducting 
international relations, or the printing of money. But when it does, 
there is sufficient authority (notably the Atomic Energy Act in the 
case of nuclear weapons) to tailor the resulting contracts in a way 
that addresses the special concerns of both the government and the 
contractor. The government used the M&O contracting vehicle to develop 
the GOCO partnership for atomic energy activities.
    The GOCO partnership was deliberate, innovative and successful. Not 
only did the weapons laboratories provide the cradle-to-grave care of 
the nuclear weapons that helped end World War II and deter the Soviet 
Union during the Cold War, but they also became world-class research 
institutions that positively impacted the broader interests of the 
United States. The GOCO concept was designed as a partnership to steer 
between the alternatives of a completely federal operation and a 
procurement-oriented, contract operation.
    Specifically, for the nuclear weapons laboratories the contractor 
was chosen to bring to the job scientific and management talents that 
typically do not exist in the federal government. Furthermore, the 
contractor was not to be saddled with all federal rules and regulations 
governing procurement, personnel policies, etc., in order to be 
quicker, more flexible, and more effective than the government itself.
    Under the GOCO partnership, the government defines general policy 
and programmatic goals. The contractor is responsible for performing 
the research programs in a technically sound, cost-effective and safe 
manner. In simple terms, the government decides what's to be done, and 
the contractor decides how and by whom. The government, as owner and 
customer, had the responsibility of holding the contractor accountable 
for its performance, for safe and secure operations, and environmental 
stewardship of the government's facilities.
    The nuclear weapons program required the following characteristics:

          --Long-term commitment, but limited access (the government 
        did not want dozens of institutions involved in the design and 
        development of nuclear weapons).
          --Technical excellence and innovation in a highly classified 
        environment.
          --Ability to cope with potentially enormous risks and 
        hazards.
          --Unwavering technical integrity.
          --Unique, expensive facilities.
          --Cost-effective, safe, and environmentally responsible 
        operations.

    These requirements were met by appealing to organizations such as 
the University of California and AT&T Bell Labs (two of the most 
respected and innovative research institutions in the world) to join 
the government in a public-service partnership.
    The sine qua non of the University of California's agreement to 
serve the nation was ``no gain, no loss,'' while providing outstanding 
public service. The government's interest in accomplishing high-risk 
research at minimum cost was served by the University's commitment to 
public service with no profit or fee. The University's concern with 
financial risks and liabilities was alleviated by the government's 
commitment to broad indemnification. The laboratories performed large-
scale, complex research and development activities that were essential 
to the mission, but by their very nature carried great inherent risks. 
The only reasonable condition under which the University could serve 
was with federal indemnification. The University's service was rendered 
solely for the advancement of the national interest, without personal 
or institutional gain.
    Under this arrangement, the University did the work, and the 
government covered the cost and took the major financial risks. While 
the government's indemnification of the University was never absolute, 
the basic approach was that the government would bear the risks to 
essentially the same extent as if the government were performing the 
work itself, while appropriately holding the contractor accountable for 
stewardship of government resources.
      changes of the goco relationship over time--a personal view
    Mr. Chairman, in your letter of invitation you asked me to address 
how changes in federal governance of the laboratories over the years 
have impacted the ability of laboratory scientists to respond to 
national missions. I had a front-row seat for 38 of the 60 years of the 
existence of the laboratory system first as a student, then a 
scientist, than a manager and laboratory director, and now, again, as a 
scientist. So, I will take the liberty of providing a brief journey 
through my career at the Los Alamos National Laboratory as a way to 
answer your question and touch upon some of the broader issues you 
raised.

Nirvana
    I first came to Los Alamos in the summer of 1965 as a 21-year old 
student in search of adventure and scientific challenge. Within a week, 
I was working productively in a plutonium lab under the guidance of a 
hands-on mentor in the most modern plutonium facility in the world, the 
Chemistry Metallurgy Research (CMR) Building. I had a productive and 
fascinating summer that greatly influenced the rest of my life.
    Looking back now, what happened that summer was astonishing. First, 
I received a security clearance to work ``inside the fence'' within 
three months--in spite of the fact that I was born in Poland, grew up 
in Austria, had been in the United States less than 10 years, and a 
citizen less than five years. The necessary background checks were done 
expeditiously to allow me to start at the laboratory that summer. The 
clear message was that my new country trusted me and for me that trust 
became the most demanding gift of all. During the past 10 years, the 
clearance process for American-born applicants has typically taken one 
to two years (because of a variety of bureaucratic impediments, not 
because the background checks are more thorough)--a period that seems 
like an eternity, especially for young people eager to get to work. 
Moreover, as I will demonstrate below, the sense of trust, so essential 
to the conduct of our national security mission, has been seriously 
eroded over the years.
    Also, having a 21-year old with no nuclear materials experience 
working in a plutonium lab within one week is not only unheard of 
today, but the federal authorities would most likely consider it 
irresponsible management practice. Yet, I believe that I received an 
excellent, professional, and safe indoctrination because I was mentored 
by experienced scientists and engineers, not guided by a thousand-page 
rulebook. I was taught that safety is an integral part of the fabric of 
work, not something that is added on because of compliance with rules 
and regulations. Safety was our responsibility and every employee knew 
that. However, as I will explain below, environmental, safety, and 
health issues became major issues in the DOE complex and the 
laboratories around 1990. The DOE response was very compliance driven 
and the increased presence of DOE overseers and auditors blurred lines 
of responsibility instead of improving safety. The laboratories, on the 
other hand, were slow to adapt to changing requirements and public 
expectations. Over a period of a few years, they began to adopt best 
practices from the private sector through an integrated safety 
management approach. However, this was very difficult under an overly 
prescriptive federal environment.
    After returning to school to complete my graduate work, I returned 
to Los Alamos three years later as a postdoctoral research fellow and 
what I considered a stop on the way to a university professorship. Los 
Alamos offered one of the most attractive research environments in the 
country and it belonged to the prestigious University of California 
family of campuses and labs. Los Alamos had excellent research 
facilities, a broad spectrum of great scientists and engineers, and 
great financial support. Moreover, the laboratory had the flexibility 
to permit me to follow my research interests. These were times when the 
spirit of partnership permeated every aspect of the laboratory's 
operations. It was a time when the Congress (through the Joint 
Committee on Atomic Energy), the executive branch (through the Atomic 
Energy Commission), and the contractor (the University of California, 
for our laboratory) were true partners in the nation's nuclear 
enterprise. Subsequent to my two-year appointment, I decided to make a 
stop in an industrial research laboratory at General Motors before 
moving on to a university. However, I never reached my destination 
because my Los Alamos colleagues were sufficiently persuasive to 
convince me to return instead to Los Alamos as a technical staff member 
in 1973.
    My goal was to do materials research, not weapons research and 
development. I did not go to school to design or build bombs. I never 
imagined that I would get deeply involved in nuclear materials and 
nuclear weapons. Yet, the environment created by the University of 
California at Los Alamos hooked me to this very day. It gave me the 
opportunity to do world-class research and it allowed me to serve my 
country at the same time. I learned how scientifically fascinating the 
nuclear weapons problems were. It allowed me to learn from Nobel 
laureates and Manhattan Project pioneers. It was an atmosphere that 
awakened a sense of patriotism and public service. I was proud to be 
contributing to the compelling missions of the laboratory--
fundamentally, that of national security, but also contributing to 
energy, environment, and public health. Partnership, flexibility, and 
trust were still central. The bureaucracy at that time was much less 
and seemed bearable; although the old timers complained that things 
were not the way they used to be.

Winds of Change
    During the late 1970s and early 1980s, things began to change. The 
broadened missions of the laboratories that followed the transformation 
in 1977 of the Atomic Energy Commission to the Department of Energy 
(via the short-lived Energy Research and Development Administration) 
brought with them significantly more government bureaucracy. The new 
department was clearly a political entity, not the focused, 
professionally staffed AEC. Moreover, the elimination of the Joint 
Committee on Atomic Energy in Congress decreased the support for 
nuclear activities in Congress and added much bureaucracy because of 
complicated jurisdictional issues.
    During the 1980s, things also changed for me. I took on 
increasingly greater management responsibility along with my research. 
I was fortunate to be asked to lead the laboratory, beginning in 
January 1986 and to serve as its director, which I did until November 
1997. In spite of the changes noted above, the spirit of the GOCO 
partnership between the Department of Energy and the laboratories still 
existed. The laboratories were still part of the DOE family. The DOE 
leadership set overall policies and directions, provided oversight, and 
held us accountable. We, the laboratories, had cradle-to-grave 
technical responsibility for the nation's nuclear weapons. We provided 
continuity from one government administration to the next. For example, 
my tenure as director overlapped that of four Secretaries of Energy. 
This relationship was enabled by the special nature of the GOCO 
partnership contract. The laboratory directors had the responsibility 
for the safety, security, and reliability of nuclear weapons. The 
President's confidence in the nuclear arsenal was based to a large 
extent on the judgment of the directors. Clearly, the directors had to 
act in the best interest of the nation. I was able to do so because the 
University of California had a long history of public service and it 
was protected by a special contract with the government that covered 
major liabilities.
    The partnership between the DOE and the laboratories also 
manifested itself in a number of exciting initiatives to respond to 
changing missions during the late 1980s. As the Soviet Union began to 
disintegrate, we jointly launched initiatives that addressed other 
critical national problems that could benefit from the capabilities of 
the laboratories. These projects included addressing non-proliferation 
concerns, improved conventional munitions, ballistic missile defense, 
enhanced energy supply, the development of high-temperature 
superconductors, the Human Genome Project, and industrial partnerships 
with industries such as the oil and gas industry. These projects were 
partnerships between DOE and the laboratories and had strong backing 
from Congress, especially from Senators Domenici and Bingaman.

The DOE Complex Under Stress and a Retreat From the GOCO Partnership
    But the late 1980s witnessed not only the disintegration of the 
Soviet Union, but also the slow but steady disintegration of the DOE 
nuclear complex. In Washington, there was a loss of a sense of urgency 
for the nuclear weapons mission. In addition, the growing national 
environmental awareness brought into question many past practices in 
the nuclear weapons complex. The public expected greater scrutiny of 
the nuclear complex and better stewardship of the nuclear enterprises, 
especially following the Three Mile Island accident in 1979 and the 
Chernobyl reactor disaster in 1986. The DOE complex experienced 
particularly intense public and congressional scrutiny following a 1984 
federal court decision on an environmental lawsuit regarding the Oak 
Ridge site that ordered all DOE facilities to be placed under federal, 
state, and local environmental regulations instead of being self-
regulated. The resulting changes in operations in the DOE complex 
greatly impacted the productivity of the complex and changed the 
relationship between the DOE and its contractors. Many of the 
production facilities in the nuclear weapons and materials complex were 
shut down, some in keeping with changing mission requirements (such as 
the plutonium production reactors and uranium enrichment facilities) 
and others principally because of regulatory concerns (pit production 
at Rocky Flats, for example).
    It was not the stricter governmental safety and environmental 
regulations per se, but the way DOE responded to these regulations that 
led to these problems. Driven by intense public and congressional 
pressures, the DOE responded with increased oversight and prescriptive 
remedies that focused on compliance and paperwork, rather than improved 
safety and better environmental practices. The increased scrutiny began 
in the weapons production complex, but moved to the laboratories around 
1990 with the implementation of the DOE Tiger Team inspections. The DOE 
increasingly prescribed how the work by the contractors in the complex 
should be performed, rather than specifying what was to be done and 
then holding contractors accountable for doing it safely and 
effectively. The Department and other agencies increased the number of 
audits dramatically (for example, at the Los Alamos National Laboratory 
we had roughly 160 audits in 1992) and put more and more of its federal 
employees on site to oversee operations. The roles, responsibilities, 
and authorities of federal overseers and contractor personnel became 
confused, often leading to an adversarial relationship.
    The DOE Tiger Team inspections were symptomatic of the change 
attention focused on regulatory compliance that was mostly process and 
paperwork oriented instead of outcome driven. These changes led to a 
great proliferation of DOE employees in the audit chain at the 
laboratories. The laboratories responded by staffing up their own 
auditing staffs and functions, even creating new internal organizations 
to respond to the requirements imposed by the DOE. In addition, the 
laboratories were trying to balance programmatic requirements with 
newly imposed environmental, safety, and health requirements without 
adequate financial support from the government. Moreover, they were 
trying to make all these changes in facilities and infrastructures that 
were old and often beyond repair. For example, the CMR Building in 
which I began my career was nearing the end of its useful life, yet we 
were not able to get DOE approval for a replacement facility at this 
time.
    Consequently, much of the trust that formed the basis of the GOCO 
relationship between the DOE and the contractor was lost. The 
Department's relationship with the laboratories, driven to a large 
extent by pressure from Congress, changed from one of owner/operator to 
policeman/operator. The relationship changed from one of partnership to 
an arms-length government procurement. Congress insisted on greater 
``accountability'' from the Department and its contractors, but it too 
often measured success by how well the Department or the contractors 
fared during government audits, rather than by how well they 
accomplished their missions. Virtually every audit by the Government 
Accounting Office (GAO) of the DOE complex concluded that the 
``insufficient DOE oversight'' was a major contributing factor to 
whatever problems were cited.
    It was no surprise then that with each contract renewal, the DOE 
further dismantled the GOCO partnership to make the contracts more like 
standard government procurements. The Department began to take away 
many of the special procurement practices built into the GOCO contracts 
that allowed flexibility and speed. Yet, it was these special 
contractual provisions that allowed the laboratories to emulate private 
sector practice, rather than cumbersome federal procurement 
regulations. It began to impose federal personnel policies and business 
practices on the contractors. It began to chip away at the 
indemnification provisions offered to GOCO contractors since the 
inception of the concept. It began to shift the risks of operations of 
its nuclear facilities increasingly to the contractors, offering 
financial incentives to those who were willing to compete in this new 
contractual environment. Consequently, the DOE either lost or fired 
many of the stellar American companies that agreed to step in after the 
Manhattan Project to help create and manage the nuclear complex. In the 
early 1990s, AT&T, which had operated Sandia National Laboratories 
since its inception, declined to consider continuation of its 
management role when the DOE decided not to renew its presidential 
indemnification (first approved by President Truman) for operation of 
the Sandia laboratories. Lost to the DOE complex for a variety of 
reasons were such stellar companies as DuPont, General Electric, Dow, 
Union Carbide, and Rockwell. These changes may have made it easier to 
audit the laboratories, but they did not make them more effective. In 
fact, these changes very negatively affected the operational 
environment. It also made it more difficult to recruit the best 
scientists and engineers, and it discouraged qualified individuals from 
taking on scientific leadership/management positions. Over time, it 
diminished the laboratories' ability to accomplish their technical 
missions effectively.
    These problems were noted by the Galvin Task Force, which reviewed 
the governance of the DOE laboratories and issued its report on 
Alternative Futures for the Department of Energy Laboratories in 
February 1995. The Task Force lamented the fact that the GOCO 
relationship between the DOE and the contractors had deteriorated to 
the point where the laboratories look essentially like GOGO 
(government-owned, government-operated) institutions. The report 
states: ``. . . wherever we turn we see evidence of nothing but a 
government owned and more government operated system.'' The report 
pointed out that both DOE and Congress must shoulder the responsibility 
for this erosion. The Task Force further observed: ``. . . the 
Department is driven both to honor the prescriptions from Congress and 
to over-prescribe in order not to be at risk of failing to be super 
attentive to the Congress's intentions. The net effect is that 
thousands of people are engaged on the government payroll to oversee 
and prescribe tens of thousands of how-to functions. The laboratories 
must staff up or reallocate the resources of its people to be 
responsive to such a myriad of directives; more and more of the science 
intended resources are having to be redirected to the phenomenon of 
accountability versus producing science and technology benefits.'' The 
Task Force indicated that productivity at the DOE laboratories could be 
enhanced by 20 to 50 percent. It concluded that the system of 
governance was broken, having veered significantly from its GOCO 
practices.
    At this point, most of the contractors and their laboratories 
looked to the private sector to attempt to re-engineer the 
laboratories. We at Los Alamos began a ``productivity initiative'' in 
the early 1990s to apply the lessons learned by the private sector in 
the 1980s to make our operations more productive while ensuring safety 
and environmental responsibility. We brought in private-sector 
consultants, we went to school at the private industrial universities 
(such as Motorola University) to learn quality principles, we began the 
Baldrige Quality Award assessment process, and we co-opted the DOE 
leadership to join us in these endeavors. We began to re-engineer our 
business systems and our work processes, to implement an integrated 
safety management system, and we restructured the laboratory. These 
changes began to improve our productivity. The University of California 
also negotiated a performance-based contract with the DOE. 
Unfortunately, the DOE did not change its management system or 
oversight practices; nor did it adequately support the changes at the 
laboratories and the University. For example, at Los Alamos we did not 
get the necessary backing and cooperation of the DOE when we had to 
make difficult manpower decisions that were necessary to enable our 
productivity initiative. Unfortunately, the bottom line was that 
neither DOE nor the Congress was prepared to make the type of changes 
we were implementing, cutting short our ambitious re-engineering 
efforts. A great opportunity to fundamentally improve the laboratory's 
operations and its overall productivity was lost.

Strong Mission Support From the Government and the Role of the 
        University of California
    I would like to add a success story that ran counter to our 
disappointing experience in trying to change the operating environment 
for the better at the laboratories. In the 1990s, the DOE and the 
laboratories together successfully dealt with the changing mission 
requirements that accompanied the end of the Cold War. The collapse of 
the Soviet Union was as remarkable as it was unexpected. With the 
backing of Charles Curtis, then DOE Under Secretary, the laboratory 
directors established successful threat reduction efforts with their 
counterparts in Russia. Most of the early cooperative nuclear programs 
with Russia were initiated by laboratory personnel with the explicit 
support of DOE. Under the leadership of then DOE Assistant Secretary 
for Defense Programs, Dr. Victor Reis, the laboratories helped to forge 
the nuclear weapons stewardship program. The laboratories also began an 
effort in the mid-1990s to help the country develop technologies 
necessary to deal with terrorism and weapons of mass destruction. These 
changes were profound and essential to our national security. The 
programs and changing missions were strongly encouraged and supported 
by Congress. Unfortunately, the same was not true of helping us deal 
with the deteriorating operational environment at the laboratories.
    I had the fortune of leading the Los Alamos National Laboratory 
during these historic times. I began to increasingly appreciate the 
role of the University of California in dealing with these complex 
issues. The University not only provided a technical peer review system 
for all of our laboratory's technical activities to make sure they 
remained world class, but it also had the convening power to engage 
high-level advisors that helped me and our laboratory management to 
think through the necessary mission and operational changes. With the 
strong backing of the University and its advisory council, then 
director of the Lawrence Livermore National Laboratory, John Nuckolls, 
and I visited the Russian nuclear weapons laboratories in February 
1992, less than two months after the dissolution of the Soviet Union. 
We initiated many cooperative activities that helped to lessen the 
dangers inherent in the Russian nuclear enterprise faced with a sudden 
and dramatic breakdown of its government and its economy. We received 
the University's backing in spite of the fact that these initiatives 
were very risky and that liability issues had not been directly 
addressed. The University's own public service orientation and the 
special nature of the GOCO contract that still prevailed at that time 
made this possible.
    During the 1990s, the DOE and the laboratories also faced some 
difficult decisions with respect to arms control agreements, nuclear 
weapons safety, nuclear testing, and the evolution of stockpile 
stewardship. It was essential that the laboratory directors provided 
the best technical advice to the government, regardless of its 
political correctness. The directors, in spite of the fact that they 
did not work for the federal government, had to act as public servants 
because these issues were of an inherently governmental nature. 
Beginning in 1996, the directors of the three DOE weapons laboratories 
were asked to certify the nuclear stockpile with letters to the 
secretaries of Defense and Energy (who then advised the President). To 
sign the letter that states: ``I certify the nuclear weapons in the 
stockpile that our laboratory has designed to be safe and reliable, 
without nuclear testing at this time,'' the directors should not be 
motivated by personal salaries, corporate fees or corporate profits. 
The directors can do this job responsibly only by acting as an 
extension of the Department--as ``public servants.'' It is the very 
nature of the GOCO partnership that allowed the directors to do so. 
Furthermore, the regents and the president of the University of 
California made it clear that they expected me to place the national 
interest above all. They provided the backing and the confidence for me 
to make the tough decisions we faced during this time. Over the years, 
the presence of the University of California in the nuclear weapons 
complex also enriched the debate about the role of nuclear weapons and 
their stewardship.

Political Turmoil and Serious Setbacks for the Laboratories
    I left the directorship at Los Alamos in November 1997 to return to 
my research interests and to spend more time on the threat reduction 
activities with the Russian nuclear complex. I remained at Los Alamos 
because I believed this was the best way to serve my country. My 
principal research interest is plutonium metallurgy. Potential problems 
with the re-manufacture of plutonium pits for weapons or problems with 
the aging of existing pits are at the heart of the challenge of 
stockpile stewardship that is, keeping our nuclear weapons safe, 
secure, and reliable. I helped to craft the concept of science-based 
stockpile stewardship--now I wanted to help it succeed. I wanted to 
attract the best young talent to this task and I hoped to help restore 
a productive work environment for plutonium research. I knew that the 
working environment at the laboratory was no longer the nirvana that I 
experienced when I first arrived, but I found that it had deteriorated 
even more than I had realized as director.
    Unfortunately, two unfortunate events caused even more severe 
damage to the work environment at Los Alamos--the Wen Ho Lee security 
affair that came to light in 1999 and the missing hard drive incident 
in 2000. Both incidents raised serious questions about security 
practices at Los Alamos and at DOE. However, instead of careful 
analysis of how to correct the cyber and counter-intelligence 
weaknesses that the case exposed, the politically charged environment 
resulted in reactions in Congress and by the DOE leadership that proved 
devastating for the laboratory and the entire system of laboratories. 
Additional security measures were enacted at the laboratories that were 
not well thought out and that could have disastrous long-term 
consequences for the laboratories and the ability to fulfill their 
missions. For example, polygraph testing was implemented in spite of 
substantial scientific evidence that it is unreliable (a view recently 
confirmed by a study by the prestigious National Academies). 
Insufficient consideration was giving to the down side of polygraph 
testing; that is, not only what to do about false positives and false 
negatives, but also how to deal with the overall damaging effect such 
testing has on recruitment and retention). In the case of the hard-
drive incident, the security frenzy led to an FBI investigation that 
utilized strong-armed tactics in one of the most sensitive divisions of 
the laboratory, resulting in the creation of a hostile work 
environment.
    The concerns about the government's reaction to the security 
incidents at Los Alamos are shared by others, who perhaps can view 
these incidents more dispassionately than I. John Hamre, chair of the 
Commission on Science and Security established by the Secretary of 
Energy in October 2000, recently summarized his concerns based on the 
Commission's report in Issues in Science and Technology, Summer 2002. 
Hamre stated: ``The commission concluded that DOE's current policies 
and practices risk undermining its security and compromising its 
science and technology programs. The central cause of this worrisome 
conclusion is that the spirit of shared responsibility between the 
scientists and the security professionals has broken down.'' Hamre 
continued: ``The damaging consequences of this collapse of mutual trust 
cannot be overstated. It is not possible either to pursue creative 
science or to secure national secrets if scientists and security 
professionals do not trust each other.'' He also pointed out that to 
fix these problems the DOE must confront the long-standing management 
problems in the Department. Donald Kennedy echoed many of the same 
concerns about the Department's approach to security in his editorial 
in the 23 May 2003 issue of Science.
    Unlike the security environment, the operational environment in the 
laboratory's experimental facilities (especially the plutonium 
facilities) suffered no catastrophic event, but instead faced 
continuing erosion in our ability to do experimental work. The safety 
and environmental regulations continued to become increasingly 
prescriptive. In spite of our progress in implementing integrated 
safety management systems and improving our nuclear operations, more 
DOE oversight was prescribed and approval through the DOE maze became 
increasingly cumbersome. More and more, the key safety decisions were 
moved from knowledgeable engineers and scientists to overseers with 
little hands-on nuclear experience. I realize that DOE must provide 
oversight of our operations; after all it is the owner and has a 
responsibility to the public. However, for the reasons discussed 
before, DOE oversight has evolved over the years to become so intrusive 
and counterproductive that it has diminished our scientific quality and 
productivity.
    Let me provide you with one of the most egregious examples of an 
approval system gone awry. It is the tale of a colleague who had an 
experience far removed from that I experienced when I started at Los 
Alamos as a student. In early 1992, he began to design and build a 
full-scale hydriding test facility for plutonium pits at our TA-55 
plutonium facility. In spite of the fact that his project was of great 
importance and significant urgency for stockpile stewardship, he was 
not able to run his first experiment until December 1999, almost eight 
years later. The Tiger-Team atmosphere slowed down initial approvals 
and the paperwork became excruciatingly cumbersome. In spite of 
excellent design and engineering work, the project suffered repeated 
delays due to additional reviews and approvals required by DOE. The 
flammable gas issue associated with hydrogen alone required three and a 
half years approval through DOE Los Alamos Office, DOE Albuquerque, and 
DOE Headquarters. In spite of some 18 to 20 reviews of the system and 
eight years in preparation, only two minor physical changes were made 
to the system. How can we meet our mission requirements and how can we 
prevent our scientists and engineers from giving up in frustration in 
this type of an environment? In addition, changes in indemnification 
now threaten laboratory employees working directly with nuclear 
materials with Price Anderson violations, which presents an additional 
impediment to getting people to do experimental nuclear work.
    During this time we also experienced increasing micro-management 
and a loss of flexibility in the laboratories' technical and 
programmatic activities. Over the years, DOE provided the programmatic 
requirements and broad budgetary flexibility, whereas technical 
decisions were made at the laboratories. Now, both congressional 
committees and DOE insisted on budgeting and managing programmatic 
activities at an increasingly finer scale to achieve greater 
accountability. Unfortunately, this shifted more of the technical 
decision making to DOE Headquarters and limited the flexibility at the 
laboratories to do the best possible job. So, although today the 
overall budgets are sufficient to get the job done, the 
compartmentalization of the budget diminishes our ability to do so 
effectively.
    These problems and the conclusions of the Hamre Commission and the 
Galvin Task Force paint a very different picture from that of numerous 
governmental audits and investigations by offices such as the GAO or 
the Inspector General. These audits consistently fault the DOE for lack 
of sufficient oversight. None of these reports laments the lack of 
trust and flexibility, or the fact that an environment has been created 
in which we cannot get our work done productively. Instead, trusting a 
contractor is treated more like an offense than a necessity. Moreover, 
the GAO and IG reports become ammunition for congressional hearings, 
which often lead to further admonition of DOE practices. DOE officials, 
in turn, become more prescriptive in their management and oversight. 
This cycle has repeated itself many times during the past dozen years, 
resulting in the loss of trust and the loss of the partnership concept 
that made the laboratories successful over the years. Moreover we lost 
many good people who gave up in frustration.
    In an effort to improve the ability of the government to conduct 
its nuclear national security mission, Congress created the semi-
autonomous National Nuclear Security Administration to carry out the 
national security responsibilities of the Department of Energy, 
including maintenance of a safe, secure and reliable stockpile of 
nuclear weapons and associated materials capabilities and technologies; 
promotion of international nuclear safety and nonproliferation; and 
administration and management of the naval nuclear propulsion program. 
The NNSA officially began operations on March 1, 2000. In my view, the 
previous DOE administration resisted the autonomy of the new 
administration and hampered its effective implementation. In General 
John Gordon and Ambassador Linton Brooks, the NNSA has had the type of 
competent, nonpolitical leadership that Congress envisioned. Ambassador 
Brooks has made some positive changes such as the organizational 
changes he announced on Dec. 18, 2002. However, the difficulties in the 
structure and operational environment run deep in the organization. I 
believe that he will need encouragement and help from the Congress to 
make additional operational improvements in the NNSA.

           THE CURRENT CONTRACTING CRISIS AND A PATH FORWARD

    The latest crisis in governance and contracting was triggered by 
concerns over poor procurement and property management practices at Los 
Alamos. Although many of the initial accusations and headlines have 
proven incorrect or misleading, much needs to be and is being done to 
improve business practices at the laboratory. These concerns brought 
into question the University of California's ability to manage the 
laboratory, and they triggered several congressional hearings. At the 
end of April, Secretary Abraham decided to compete the Los Alamos 
contract for the first time in its 60-year history. Quite naturally 
this decision is causing serious concern and unrest within the Los 
Alamos workforce.
    The regents of the University of California have not yet decided 
whether or not to compete for this contract. In my opinion, the 
University has served the nation with distinction by operating the 
nuclear weapons laboratories at Los Alamos and at Livermore since their 
inception. However, that success was made possible by the very nature 
of governance and the partnership inherent in the GOCO contracting 
model. As pointed out, this model has been effectively dissolved over 
the past dozen years, and the University has come under increasing 
criticism for its management of the laboratories. Unless the next 
contract begins to restore the partnership between the government and 
the contractor, it may not be in the University's or the nation's best 
interest to continue with UC management. Moreover, I believe that no 
contractor will succeed unless the governance model is fixed.
    Mr. Chairman, your hearings are designed to examine governance and 
contracting. As I have pointed out, the GOCO M&O contract was designed 
as a partnership to steer between the alternatives of a completely 
federal operation and a procurement-oriented, contract operation. As 
missions evolved and as public expectations of these institutions 
changed, the laboratories were often slow to make the necessary 
changes. However, rather than working with the laboratories to 
institute the necessary changes in the spirit of the GOCO partnership, 
the DOE typically responded to public criticism and congressional 
pressure with new orders, rules, and contract terms that fundamentally 
shifted governance away from the GOCO partnership toward a hybrid 
federal operation and procurement contract operation. The lines of 
responsibility and authority between the DOE and the contractors have 
become blurred, with more and more of the operational decisions made by 
federal employees, but more accountability and liability shifted to the 
contractors. Consequently, it has become increasingly difficult for 
contractors to take the public-service approach required for nuclear 
weapons stewardship, to nurture world-class science, to deal with the 
risk of nuclear operations, to provide a buffer from political 
pressures, and to provide the continuity necessary for stewardship. 
These changes were made not by design with the best governance in mind, 
but rather resulted from the accumulated reactions of the DOE to 
government audits and congressional pressure. The net result has been 
to significantly diminish the ability of the laboratories to accomplish 
their missions and to dramatically reduce their productivity. The 
laboratories are on the cusp of being irreparably damaged as scientific 
institutions in service to the nation.
    Now one must make a clear choice. On one hand, one can follow that 
path that is, respond to every problem by increasing federal oversight, 
increasing the presence of federal on-site employees, writing more 
rules, stepping up audits, and increasing penalties and fees for 
noncompliance. This approach has led us in the direction of making the 
laboratories look and act increasingly like federal institutions with a 
major toll on scientific productivity. On the other hand, one can try 
to revitalize the GOCO partnership to ensure that we are able to 
continue to attract the best scientific and management talent to the 
nation's nuclear weapons enterprise and to bring the best practices 
from the private sector to bear on their operations.
    I mentioned that the GOCO concept as originally conceived was 
deliberate, innovative, and successful. I believe that the current 
situation is none of the above. The current system of governance is not 
deliberate. The GOCO partnership has been effectively dissolved by a 
series of piece meal actions mostly in response to the crisis de jour, 
not by design. The current system is bureaucratic not innovative. The 
organizational lines of authority have become blurred and ineffective. 
It leans heavily toward a GOGO mode of operation, which has not 
distinguished itself in practice in the rest of the government. And the 
current system is not successful. The prescriptive mode of operations 
and the enormous burdens of federal oversight and micromanagement have 
taken an unacceptable toll on the scientific quality and productivity 
of the laboratories. Moreover, it is becoming so difficult to get work 
done at the laboratories that it will be very difficult to attract the 
talent required for the demanding missions. I believe that the best way 
to redesign the system of governance and to reestablish a productive 
work environment is to charter a high-level Blue Ribbon Task Force, one 
that would follow up on the previous Galvin Task Force and Hamre 
Commission and help to design a vastly improved system of governance 
and contracting for the future.
    Based on my experience at Los Alamos, I view the following as 
necessary ingredients of a successfully redesigned system of 
governance:

   Partnership based on trust between government and 
        contractors. The inherently governmental nature of the nuclear 
        weapons enterprise requires rebuilding a partnership based on 
        trust and a long-term contracting commitment. Congress should 
        steer governance back toward a partnership and away from 
        emulating federal operations or a procurement-oriented contract 
        model. Although the government must verify trust, it must 
        concurrently nurture it to ensure safe, secure, 
        environmentally, and cost-effective operations of the nuclear 
        weapons enterprise.
   Scientific excellence and integrity. Fostering creativity, 
        innovation, and freedom of expression, in a highly classified 
        environment, is essential to providing and certifying a 
        reliable, safe, and secure nuclear deterrent. Hence, the 
        contractor of a nuclear weapons design laboratory should have a 
        strong tradition of scientific excellence in research 
        management and unwavering technical integrity. It should also 
        have the reputation and convening power to attract the best 
        talent and the best advisors to the laboratory. The two design 
        physics laboratories at Los Alamos and Livermore should be 
        managed by the same contractor to foster competition for ideas 
        rather than for corporate profits or market share.
   Public service in the nation's interest. The directors of 
        the laboratories must discharge their duties, especially the 
        certification of the nuclear stockpile, to be in the best 
        interest of the nation, and not be motivated by personal 
        benefits, corporate fees, or corporate profits. This requires 
        institutions steeped in public service and a special contract 
        with indemnification provisions to deal with the high risk of 
        nuclear operations. Recent changes in contracting have made it 
        increasingly unattractive for not-for-profit organizations such 
        as universities to operate the laboratories in spite of the 
        fact that it is precisely these institutions that have a 
        distinguished history of public service.
   Safe, secure, and effective nuclear operations. To deal with 
        the inherent risks of nuclear operations requires a contractual 
        relationship with special indemnification provisions, a risk-
        based approach to both safety and security, and clearer lines 
        of authority within the government. Those functions that 
        require regulatory oversight and compliance should be made 
        independent of the Department.
   Best business practices. Encouraging business reforms based 
        on quality approaches as used by U.S. industry rather than 
        forcing compliance with federal procurement, personnel, and 
        business practices are necessary to make the laboratories more 
        productive and to attract best business and management talent. 
        Such reforms will require substantial changes to current 
        contracting language, which has increasingly forced practices 
        into the federal mold. Contracts should be performance based, 
        focused on outcomes. The DOE should return to specifying what 
        the contractors are required to do, then hold them accountable 
        for delivering results, and not prescribe how it should be 
        done.
   Government reform. Providing for an organizational structure 
        in the DOE that provides clearer lines of authority, and 
        garners bipartisan political support, is essential for the 
        future of the nuclear weapons enterprise. The establishment of 
        the new National Nuclear Security Administration was a step in 
        that direction, but more needs to be done. This will require 
        strong backing of Congress.

                           CONCLUDING REMARKS

    Mr. Chairman, the fact that you are holding a series of hearings to 
examine the system of governance and contracting practices at the 
laboratories gives us hope that these issues will receive the attention 
they deserve. At stake is nothing less than restoring the scientific 
productivity of the laboratories and the successful execution of the 
nation's stockpile stewardship mission. In addition, congressional 
actions over the past several years and your tireless efforts on behalf 
of our nation's defense preparedness have also sent a clear signal that 
these laboratories are needed more than ever. Thanks to you and your 
colleagues, we have an important mission, we have financial support, we 
are upgrading our facilities (that includes replacing the CMR Building, 
which last year turned 50 years old), but the system of governance is 
broken and our operational environment is not productive and not 
conducive to attracting and keeping the best talent to do this 
important job for the nation. Sixty years ago our country devised an 
innovative concept, the GOCO partnership model, to bring science to 
bear to the nation's defense. This concept helped to end the most 
devastating war in history. It helped end the Cold War in our favor and 
to the benefit of all of mankind. Now we area not threatened by a 
similar external enemy, but instead we have ourselves brought on a 
crisis in the effectiveness of our laboratories and, consequently, in 
the nation's nuclear weapons stewardship. These internal problems are 
often more difficult for the United States to overcome than defeating 
an external adversary. However, this time the stakes are too high not 
to act. I know that all of my colleagues at the laboratories and the 
University of California are prepared to do our part.

    The Chairman. Thank you very much, Sig.
    Dr. Peoples.

 STATEMENT OF DR. JOHN PEOPLES, JR., DIRECTOR EMERITUS, FERMI 
          NATIONAL ACCELERATOR LABORATORY, BATAVIA, IL

    Dr. Peoples. Mr. Chairman, thank you for giving me the 
opportunity to comment on the evolution of the relationships 
between the Department of Energy and its M&O contractors that 
operate the Department of Energy laboratories.
    When I became Director of Fermilab in 1989, the Department 
was struggling to deal with problems in the clean-up of old 
weapons production facilities and the downsizing of then-
existing production facilities. The public and Congress were 
very critical of the Department's management of those 
facilities.
    In response to those criticisms, the Department chose to 
address these problems with a very prescriptive, compliance-
driven management system that was applied to all departmental 
facilities, including the national laboratories. Now, 
typically--at least in the Office of Science--a consortium of 
universities or a single university operates one or more 
laboratories. Exceptions which were in the weapons program were 
Sandia National Laboratories, which was operated by AT&T, and 
Oak Ridge, operated by Martin Marietta. URA manages Fermilab. 
That represents 83 universities, and it is essentially all the 
major universities that are interested in the high energy 
business.
    The contractors that operated these laboratories did so as 
a service to the Nation on the principle of no loss, no gain. 
This has served the Nation very well since World War II. I 
think it still serves the Nation very well. The universities 
were also motivated by the desire to give their facilities and 
students access to large facilities such as accelerators and 
reactors that only the Federal Government could afford. In 
1971, that is what got me to go from Cornell, where I was a 
happy university professor, to work on an experiment. I have 
not gone back yet.
    Now, the management of these laboratories, as my 
predecessors have said, began as a set of long-term 
partnerships between the contractors and the AEC. However, by 
the mid-1980's the partnerships had begun to degenerate into 
buyer-seller relationships for research, and the Department was 
seriously questioning the value of M&O contracts. Some people 
in the Department looked on long-term partnerships with 
universities as an unfortunate consequence of the past, or 
rather, an accident of the past.
    Now, the Packard Panel in 1983, the Grace Commission in 
1985, the Galvin Committee in 1995, looked at the governance of 
these laboratories. They all more or less came to the same 
conclusion. Since their findings are similar, I just want to 
comment on the Galvin Committee. That report found that DOE 
oversight of M&O contractors that managed the laboratories had 
become an expensive compliance management system. It was 
compliance-driven. It brought little value for the costs that 
it imposed upon the labs.
    They found the M&O contractors were subject to excessive 
regulation and management by many organizations: the field 
offices, the site offices, the various headquarters, ES&H 
offices, the program offices. I could go on. There were some I 
did not realize existed, but they could create orders. They 
found little value in this burden. On top of this, the M&O 
contractors had to comply with appropriate Federal, State and 
local laws and regulations. Now, I said ``had to.'' It really 
is the appropriate thing to comply with Federal, State and 
local regulations. At the time, DOE orders had become so 
prescriptive and detailed that laboratory scientists and 
engineers had to set aside a significant amount of time to 
navigate and to comply with the orders, particularly those 
orders relating to environmental safety and health.
    Also, those orders at the time were becoming unpredictable, 
partly because the machinery to create new orders was so well 
oiled that it appeared accountable to no one, and it could 
create conflicting orders.
    Initially, there was no provision for review by the 
laboratories. When the laboratories were finally allowed to 
comment on new orders, the comments were largely disregarded. 
By 1996, the system had steadily become worse, in spite of the 
commitments of Secretaries Watkins and O'Leary to reform the 
system. The Galvin Committee believed that the situation was so 
out of control that they had recommended a totally different 
model of governance for the laboratories. The Galvin Committee 
recommendations were never adopted--and I think that is 
actually appropriate--although Secretary O'Leary made a valiant 
effort to bring the process under control.
    Now, prior to the Galvin report, Secretary Watkins produced 
the tiger teams in 1990 to bring about change in the ES&H 
culture in the laboratories. At the time, Congress and the 
public discovered that there were serious, well-publicized 
problems in the weapons production facilities such as Rocky 
Flats and Savannah River and the clean-up sites such as 
Hanford.
    Secretary Watkins felt the problem was endemic to all DOE 
facilities, and that the tiger teams were his way to bring 
about change in the culture. The tiger teams were clearly 
rather controversial, but I think in the end they served a very 
good purpose. The directors of the laboratories understood what 
had to be done, we understood our problems, and we moved 
forward.
    However, the Department used the opportunity to impose 
detailed, standardized, one-size-fits-all, et cetera, et 
cetera. It is not surprising that the Galvin Committee was 
critical of the DOE order system.
    Now, in my written testimony I comment on two things: 
integrated safety management, which is also the necessary 
condition that gave the laboratories and the site offices in 
the field some latitude to work on these problems. It restored 
a bit of partnership. I also commented on something called Work 
Smart standards, where again a notion of partnership was 
brought back between at least the field and the site offices.
    These things led to a substantial improvement in DOE safety 
record. It wasn't that bad before, but there were aspects of it 
that needed improvement. It is now outstanding. I have 
commented on two areas of oversight and control in my written 
testimony, but I would like to go to one other thing that I 
think was rather important. Both Secretary Watkins and 
Secretary O'Leary had promised line management. It is a very 
simple concept, it is a very powerful concept. The problem with 
the Department from its inception is that the business side, 
the administrative side, the safety side, went up probably to 
the Deputy Secretary and there it disappeared; not that the 
Deputy Secretary did not work hard, but the Deputy Secretary 
and Under Secretary have a lot of other very important things 
to worry about.
    On the program side, it went to the Director of the Office 
of Science, at least in the Office of Science, so basically 
there was a disconnect. We know that that is being restored. 
The Office of Science seems to have the responsibility for all 
parts of the program, including management. Management is very 
important. I trained as an engineer, with an avocation as a 
scientist, I tell people I am genetically an accountant. I find 
this very interesting. I really like that part of the business, 
as well as the science part. I think by concentrating on these 
very different mission organizations--the ability to manage the 
entire program, including the business side, is extremely 
important.
    Let me just close by stating I am very proud to have worked 
for more than 30 years in the Department of Energy laboratory 
systems. I have a very high regard for the Department and what 
it can do for the Nation's research enterprise, and I have a 
very high regard for the people in the Department who helped 
make it happen. I am afraid that Congress has an awful lot to 
do with some of the disconnects. Now, it is important to have 
oversight. And I think oversight is important, and it ought to 
be carried out carefully, thoughtfully. But because of the way 
DOE laboratories are structured, the partnership aspect is very 
important.
    In my written testimony, I hope I show that that 
partnership can be made to work and work for safety and work 
for administrative things.
    I hope that you are successful in outlining a plan, as 
Martha had described, because I think the future of these 
laboratories is with the GOCO concept. All other methods have 
been tried in DOE and the Defense Department, and I don't think 
they work very well. Contact with universities is extremely 
important. As I said, that is why I wound up being a director.
    Thank you for letting me speak.
    [The prepared statement of Dr. Peoples follows:]

    Prepared Statement of Dr. John Peoples, Jr., Director Emeritus, 
           Fermi National Accelerator Laboratory, Batavia, IL

    Mr. Chairman thank you for giving me the opportunity to comment on 
the evolution of the relationships between the Department of Energy and 
the Management and Operating (M&O) contractors that operate the 
national laboratories for the Department and the impact that the 
changes in those relationships have had on the ability of scientists to 
respond to national missions. Since I gained my knowledge of these 
relationships through my work with the laboratories that are directed 
by the Office of Science and its predecessor, the Office of Energy 
Research, I will limit my comments to those laboratories.
    When I became the Director of Fermilab in 1989, the Department was 
struggling to deal with problems in the cleanup of old weapons 
production facilities and the downsizing of the then existing 
production facilities. The public and Congress were very critical of 
the Department's management of those facilities, and in response to 
these criticisms, the Department chose to address these problems with a 
very proscriptive, compliance driven management system that was applied 
to all Department facilities, including the National Laboratories. 
Typically, a consortium of universities or a single university operated 
one or more of the laboratories. The exceptions were Sandia National 
Laboratory, which was operated by the American Telephone and Telegraph 
Company, and Oak Ridge National Laboratory, which was operated by the 
Martin-Marietta Corporation. These contractors operated the 
laboratories as a service to the Nation on the principle of ``no gain-
no loss,'' which had served the Nation very well since World War II.
    The universities were also motivated by the desire to give their 
faculties and students access to large research facilities, such as 
accelerators and reactors, that only the Federal Government could 
afford. The management of these laboratories had begun as a set of 
long-term partnerships between the contractors and the AEC. However, by 
the mid 80's the partnerships had begun to degenerate into buyer-seller 
relationships for research and the Department was seriously questioning 
the value of M&O contracts. Some people in the Department looked on the 
long-term partnership with universities as an unfortunate accident of 
the past. The Department's governance of the laboratories was reviewed 
by the Packard Panel (1983), the Grace Commission (1985), and the 
Galvin Committee (1995). Since their findings were similar, I will just 
comment briefly on the findings of the Galvin Committee.
    The Galvin report found that the DOE oversight of the M&O 
contractors that managed their laboratories had become an expensive, 
compliance driven management system that brought little value for the 
cost that it imposed on the laboratories. They found that the M&O 
contractors were subject to excessive and unnecessary regulation and 
micromanagement by many Department organizations; the field offices, 
the site offices, various headquarters management and ES&H 
organizations, and the program offices. They found little value in this 
burden. On top of this the M&O contractors had to comply with 
appropriate federal, state, and local laws and regulations. At the time 
DOE orders had become so proscriptive and detailed that laboratory 
scientists and engineers had to set aside a significant amount of time 
to navigate and comply with DOE orders, particularly those orders 
related to Environment, Safety and Health. The orders were rapidly 
becoming unpredictable since the machinery to create new conflicting 
orders was well oiled and appeared to be accountable to no one. 
Initially there was no provision for review by the laboratories and 
when laboratories were finally allowed to comment on new orders the 
comments were largely disregarded. By 1996 the system had steadily 
become worse in spite of commitments from Secretaries Watkins and 
O'Leary to reform the system. The Galvin Committee believed that the 
situation was out of control, and they recommended a totally different 
model of governance for the laboratories. The Galvin Committee 
recommendations were never adopted, although Secretary O'Leary made a 
valiant effort to bring the process under control.
    Prior to the Galvin Report Secretary Watkins introduced the Tiger 
Teams in 1990 to bring about a change in the ES&H culture in the 
Laboratories. At the time Congress and the public discovered that there 
were serious, well publicized ES&H problems in the weapons production 
facilities, such as Rocky Flats and Savannah River, and the cleanup 
sites, such as Hanford. Secretary Watkins felt that the problems were 
endemic to all DOE facilities and the Tiger Teams were his way to bring 
about change in the culture. The value of the Tiger Teams was very 
controversial among the laboratory directors because each laboratory 
had to devote all of its resources to dealing with the three week sixty 
to eighty-person Tiger Team visit for two months. These visits got the 
attention of the directors, and in spite of the disruption that they 
caused they accepted the process. After each visit each director and 
his staff recognized what needed to be changed and they set about 
making the necessary changes. However, DOE headquarters used the 
opportunity to impose detailed and standardized ``one size fits all'' 
orders and this led to the aforementioned proliferation of proscriptive 
orders. It is not surprising that the Galvin Committee was critical of 
the system of DOE orders.
    One major flaw in the Department's management was the attempt by 
headquarters to craft orders that would apply uniformly to every 
contractor operated facility in the system; dedicated program 
laboratories, multiprogram laboratories, weapons laboratories, weapons 
production facilities and so forth. The orders were issued to the field 
and then to the laboratories without regard to what each facility did. 
ES&H orders dealing with radiation were particularly ill suited since 
they seemed to be written for reactors that produced material for 
nuclear weapons, as opposed to accelerators for particle and nuclear 
physics, synchrotron light sources, and research reactors. Ultimately 
this bad situation was corrected when the Office of Science was allowed 
to develop procedures for radiation safety and operations for these 
facilities with the help of the DOE field offices. While the new 
procedures are still largely compliance driven, they address issues 
that are appropriate for these facilities. This has certainly helped to 
ease the burden on the scientists and engineers.
    I am not aware of any DOE order that has gone away, although some 
may have. My ignorance about this should not be surprising since I have 
worked as a scientist for the past four years. Provisions that allow 
the site office and the laboratory that it oversees to determine which 
of the many orders to apply have eased this very difficult situation 
for some laboratories. The orders were not ignored. Specific orders 
were replaced by existing industrial standards that were appropriate 
for the type of work that a laboratory was performing. This made it 
possible to remove DOE orders from a particular M&O contract that did 
not add value. There is still plenty of oversight from the appropriate 
operations office, the management offices in headquarters, and the 
oversight groups in the Office of Science to ensure that each 
laboratory is in compliance with the appropriate orders and external 
regulations. This has allowed the Fermilab management team and the DOE 
site office to work out a sensible plan for their site. I believe that 
this was a consequence of Secretary O'Leary's committment. Another 
consequence of the Secretary's commitment was the implementation of a 
successful pilot program in management, which is called Work Smart 
Standards. Several laboratories were allowed to participate in this 
experiment. The process began by defining the criteria for necessary 
and sufficient standards. People from the Office of Science, the field, 
and the laboratory who were knowledgeable in safety and administration 
developed these criteria. Subsequently each participating laboratory 
defined its work processes and the appropriate regulations pertaining 
to each process in writing. Before the laboratory was allowed to 
implement these processes the appropriate field office and the Office 
of Science reviewed them. After adjustments, they were approved and the 
laboratory was allowed to implement them. In return, they were relieved 
of complying with those DOE orders that had been inappropriately 
applied to these work processes. The site office monitors compliance 
with Work Smart Standards. I believe that this is a very successful 
process that has helped to reduce the burden of compliance and that has 
lead to a dramatic improvement in the safety performance.
    Some time around 1997, DOE introduced the Integrated Safety 
Management program. While it started out as a proscriptive process, the 
field offices and the site offices gave the laboratories some latitude 
to implement it. The principles were sensible and the process 
straightforward. It was full of good common sense. It worked and it is 
another one of the reasons that the safety performance of the Office of 
Science laboratories went from average to excellent. The Department's 
Integrated Safety Management program is a partnership between the field 
and the laboratories. The Department defines what is expected, the 
laboratories prepare a plan for their work and after the site office 
approves it the laboratory implements the plan. Finally the site 
office, the field office and the Office of Science oversee the 
Laboratory's performance. This process works quite well and I believe 
that it has been extended to other laboratories.
    I have commented on two areas of oversight and control of M&O 
contracts, the management practices of the contractors and DOE and the 
compliance with ES&H standards and DOE orders in general, that have 
improved since the Galvin report. In each case the improvement is a 
consequence of a partial return to a partnership between an M&O 
contractor and the Office of Science. It is also a consequence of the 
creation of a clear line of authority that extends from the Secretary 
to the Director of the Office of Science through the program and site 
offices that report to the Director of the Office of Science and then 
to the contractor responsible for operating an Office of Science 
Laboratory. The oversight of the contractor's performance in 
administration, safety and management as well as the contractor's 
performance in fulfilling the missions of the Department is now the 
responsibility of the Office of Science. This arrangement provides a 
continuity of management that has been missing since the creation of 
DOE. Before the introduction of line management, these functions did 
not come together and as a result the functions were fragmented. It is 
a fragile arrangement since there are forces in the Department that 
want to return to the clearly discredited past. Line management is a 
simple, but powerful concept that provides clear accountability. The 
Department will have this accountability in the Office of Science if it 
is able to complete the consolidation of program direction and 
oversight of the Office of Science facilities and the M&O contractors 
that manage them within the Office of Science.
    I did not comment on the attempts to revise M&O contracts by trying 
to introduce metrics for performance based management into the 
contracts. As I understand the situation, very little progress was made 
on this very difficult matter in the past fifteen years. However, I 
have been told that there are efforts underway with several of Office 
of Science laboratories to try to introduce these principles in a 
meaningful way into M&O contracts again. Since most of the effort on 
performance measures was introduced after my tenure as Director, I 
cannot provide much first hand insight.
    Let me close by stating that I am proud to have worked for more 
than thirty years in the Department of Energy laboratory system. I have 
a very high regard for what the Department can do for the Nation's 
research enterprise, and I have a very high regard for the people in 
the Department who have helped to make it happen. I hope that these 
hearings can give you insight on how the Department could better manage 
its programs to the benefit of the Nation.

    The Chairman. Thank you very much. Thanks to each one of 
you for your excellent testimony, not only here today but your 
written testimony, which will be looked at carefully.
    I noted that each of you in some ways are equal scientists 
because you each violated the 5-minute rule about equally. I 
said nothing about it, but you each took about 2\1/2\ to almost 
3 minutes in excess, and that is splendid.
    Our first votes will start occurring at 11 o'clock. Senator 
Lamar Alexander indicated he would return after the votes, so 
you are going to have to stick around for a while, even if we 
are finished, for him to ask some questions.
    I'm going to start first, if you are ready, with you, 
Senator Craig. I yield to you.
    Senator Craig. Mr. Chairman, I largely came to listen today 
to this panel, and to all of you, because of your expertise and 
experience. I am not going to suggest that I am an expert on 
any of this, although I have spent a good deal of time over the 
last number of years trying to understand and to cause by our 
efforts laboratories to operate openly and to have the 
flexibility to do what needs to get done, and to try to find 
the right missions that really challenge us in areas where only 
our laboratories--only you can do the work and the private 
sector cannot; nor, in many instances, will not. I have taken 
some notes today and listened. Mr. Chairman, I don't have 
specific questions, except for one. The governance thing 
obviously we will work on, the relationships with the 
Department in ensuring the leadership and stability and talent 
that is all a part of it. But tied to that, the longevity of a 
good partnership and contract appears to be awfully important 
to laboratories.
    I believe, Dr. Postma, you mentioned contracts--and 
possibly, Martha, you did, also--as it relates to the 5 and 5 
versus long-term contracts with the appropriate--not harsh, but 
appropriate--effective oversight.
    Would any of you care--those of you who did not speak to 
that issue--I think, Dr. Peoples and Dr. Hecker, you did not--
would you express the value you see in contracts? I am 
suggesting maybe not a 5 and 5, maybe a 10, or maybe a 5-year 
contract, obviously with the appropriate oversight that occurs 
by effective mileposts and being able to, obviously, from our 
standpoint, observe, as the Department would, the effectiveness 
of that kind of contract.
    The Chairman. Sig; and Dr. Peoples, you are second. Would 
you answer his question, please?
    Dr. Hecker. Yes. I would like to comment on that.
    As far as the issue of continuity, of course it is 
especially important in the nuclear weapons business. At Los 
Alamos we have had the same contractor for 60 years, the 
University of California, so we can't say that continuity has 
been a problem. The bigger problem has been that every 5 years 
we go through significant turmoil in looking at the basis of 
the contract itself. There are changes made that in the end, 
through these reactions that I have mentioned, I think have 
actually degraded these relationships.
    Senator Craig. Much like a rebid, then? Is that the kind of 
turmoil?
    Dr. Hecker. It is interesting. In the case of the 
University of California at Los Alamos, it has actually never 
been rebid, even. But the Government, of course, each time it 
formulates the contract, can make the contract terms whatever 
it wants to, so it is in that process that the relationship has 
degenerated.
    I would say that the 5 years have been tight. I would feel 
more comfortable with, let's say, a reasonable 10-year cycle. 
But the continuity aspect is important. However, more important 
is the nature of the contract itself.
    Senator Craig. Okay.
    Dr. Peoples.
    Dr. Peoples. I will make two comments. One is the one Sig 
has just addressed, the rebidding contract. It is not so much 
rebidding, but there is a contract renegotiation every 5 years. 
The Department has used this process to introduce--or at least 
to try to shift risk--to university consortia. They don't have 
any particular way of handling the risk, and it seemed to me 
this is just an ineffective way of proceeding.
    If one wants to work with universities, and this is the 
case of the very basic science laboratories, then one has to 
realize what you are working with. Certainly, the trustees are 
not going to allow to have their endowments set at risk. I 
think the problems the laboratories run into are relatively 
small.
    I suppose if you wanted to you could allow insurance to be 
an allowable cost. These relatively small things, which are 
what the people are talking about, could be handled that way.
    The other thing is, what about the length of the contract? 
The 2002 names of the major contracts, CDF and the DO--one will 
probably end in 2008 or 2009, and the other one started years 
later--these are very long-term enterprises. The main purpose 
of contractor is to provide oversight, select a director, and 
to make sure that the laboratory carries out its business 
properly. The Department of Energy really determines with the 
scientific community what type of research projects will be 
undertaken. That is through KEYPAD and whatnot.
    I don't know what you would do to replace a URA. You would 
still want to have this kind of influence from the 
universities, but it is probably useful to at least make sure 
that there is a process that would allow rebidding. But I don't 
think the 10 years is particularly long for the work that has 
to be done.
    Senator Craig. Dr. Krebs.
    Dr. Krebs. Two comments. I think what has happened--and Dr. 
Hecker raised this--is if you were to look--and it might be an 
interesting thing as background for part of this hearing 
series--if you were to have somebody to look at how the 
contract, the individual contracts for, say, one or two or 
three labs, have changed over the last 20 years, it is 
significant.
    The character--you can actually peg them to different 
things that have happened, along with different kinds of 
oversight, over the last few years.
    I think that the committee needs to look at that and ask 
the question, does it really make for better management? The 
contract also has become a vehicle for adversarial interactions 
as opposed to cooperative interactions. Part of the complexity 
of the negotiation is to facilitate, from the Department's 
point of view, this adversarial interaction. That is mostly 
driven by people outside of the programs, in DOE but outside of 
the programs. That argues for Dr. Peoples' interest in seeing 
the programmatic and managerial issues all given to a program 
officer.
    Senator Craig. Would you wish to comment on this, Dr. 
Postma?
    Dr. Postma. I have been involved with a number of 
transitions of contracts, with Union Carbide, in which they had 
indicated it was not within the corporate mission anymore and 
they gave up the contract. They were not kicked out. Then 
Lockheed Martin, or Martin Marietta first and then Lockheed 
Martin when they merged, became the contractor. Then later the 
University of Tennessee and Batelle became the contractor in 
Oak Ridge.
    They were not all that traumatic, actually. There were good 
things that happened as a result of the change. In the 
eagerness to please the Department of Energy in the contract, 
each of these people made rather large concessions towards 
improvement of certain capabilities. In fact, the University of 
Tennessee Batelle enterprise came in and actually committed a 
large amount of State funds to build buildings that should have 
been built 20 years ago and leased them from third parties, 
backing it up with State Government funds. Also, Batelle put 
its corporate funds at risk to do this. That is tremendously 
innovative. That would never have happened had the contract 
remained as it had been.
    There are good circumstances that result from changing 
contractors, and I just didn't want it to happen too often. 
When things spin around too fast, people don't really know 
where they are, and nothing settles down to the point where you 
really achieve things as well as if there is a view of 
continuity.
    Senator Craig. Thank you all.
    Mr. Chairman, thank you.
    The Chairman. Senator Bingaman.
    Senator Bingman. Thank you very much, Mr. Chairman.
    This may just be sort of paraphrasing or restating some of 
what several of you have said, but when I came to the Senate 20 
years ago, my strong impression was at that point the 
preference within the Department of Energy was to renew 
contracts, maintain the current contractors, and--at least that 
was my strong sense with regard to the two laboratories we have 
in New Mexico.
    Now it seems as though the bias is the other way. The bias 
is towards competing when contracts come up. We are going to 
compete, unless someone can demonstrate a reason we shouldn't.
    To me, the most obvious example of what I am talking about 
is the decision the Secretary just made a month or a couple of 
months ago to compete the contract at Los Alamos in 2005. I 
think the contract comes up for renewal in September 2005, and 
he decided 2 months ago, well over 2 years in advance of the 
end of that contract, that he was going to compete it when it 
comes up. He announced that. It didn't make any difference what 
the current director or his management team was able to do by 
way of improvements at the laboratory, he was still going to 
compete the contract.
    It seemed to me that is an example of the bias towards 
competing these contracts, which I think strengthens the case 
for going to longer contracts, for taking some other action to 
reestablish the stability between the Department and the 
laboratories themselves.
    I do think that--I think, Dr. Krebs, you made the point 
very well. You used the phrase, we need to create an 
environment where creative science can happen in the 
laboratories, and where we can attract the very best scientists 
and engineers and retain them there to work on these important 
national priorities.
    But as I say, it seems to me that this change in bias 
towards competing these contracts every time they come up does 
cause us--cause me to think we need to rethink this whole 
process.
    I don't know if any of you have comments about that, as to 
whether you agree or disagree.
    Dr. Hecker.
    Dr. Hecker. Yes, I would like to make a couple of comments. 
Certainly, you know, competition is the American way, so it is 
awfully difficult to just argue against competition for its 
sake. But if it is the American way, competition should result 
in something better. We at Los Alamos and the University of 
California, of course, cannot claim that this has all worked 
against us since we have been there for 60 years, which is a 
long, long time. So competition by itself is not bad, 
particularly the example you just brought up.
    However, I think what concerns us, my colleagues and myself 
at the laboratory, it was done in such a political environment 
that we have no faith at all that this competition will 
actually produce something that is better for the country, 
rather than just taking care of the political burrs that were 
there at the time.
    I think it is awfully important when we structure that and 
compete these contracts to make sure that not only you get the 
sense that you will get something better, but that the people 
at the laboratory also have some faith in the system that 
competition is being conducted for the best of what is in the 
national interest.
    The Chairman. Dr. Hecker, how do you equate the atmosphere 
going on at Los Alamos when this decision was made to a 
political decision when the air was filled with accusations 
regarding malfeasance? Are they the same, accusations of 
malfeasance equals political?
    Dr. Hecker. No. I didn't mean it in that sense, Senator 
Domenici. If you look at the competition issue, I think if 
sometime ago the Secretary would have said that, look, when the 
next contract comes around, we are going to seriously look at 
this competition issue. But instead, the decision was made, 
after, indeed, some accusation, in this particular case, of 
purchasing or procurement fraud, et cetera. To make at that 
time a decision so momentous as the competition of the 
laboratory, I personally didn't think that was commensurate 
with the issue that was there.
    As these issues have played out, the major accusations that 
were made I think have proven not to be true. So I think if 
that would have played out in the proper arena and then the 
government come back and say, look, this has been done by the 
same contractor for 60 years and it is time to reexamine that, 
I think all of us would have to say, well, that is a reasonable 
thing to do.
    The Chairman. Dr. Krebs, did you have a comment?
    Dr. Krebs. Yes. Reflecting on both what Sig has said and 
your comment, I think that it would be worth recounting the 
experience that I had when I was in the Office of Science with 
the Brookhaven renewal, or competition.
    Perhaps you remember that it was found that there was a 
radioactive contamination that occurred as a result of the 
research reactor on the Brookhaven site. It was a very minimal, 
determined to be non-dangerous to either on-site personnel, and 
it had not reached off-site. But there was a huge public outcry 
on Long Island, and there were difficulties. That was 
exacerbated by some of the management issues within the 
laboratory, I would say.
    But the Secretary at that time decided that not only would 
they compete the contract, but they would compete it 
immediately. So the length of a contract does not necessarily 
preclude a Secretary from making such a decision to recompete 
immediately. In fact, I think one of the good things that was 
done at Los Alamos was at least to give a reasonable amount of 
time and not recompete until the end of this current contract.
    But it is the case that certainly, because of the character 
of the infraction and the speed with which--or the timing that 
the decision was made to recompete the Brookhaven contract, 
there is no question that within Brookhaven and even outside of 
Brookhaven it was viewed as a political decision essentially 
driven by political considerations, whatever they may have 
been.
    That is one of the difficulties that I think--with what the 
Department does and how it looks by not just the leadership of 
the laboratories, but by the people who really accomplish the 
work at the laboratories.
    Senator Bingman. Thank you very much.
    The Chairman. Thank you. We have a vote. I'm going to come 
back.
    Senator, before you leave, and maybe this would be of 
interest to you also, I asked my staff to see if they could 
acquire a copy of the Los Alamos contract. That is the Los 
Alamos contract when it was first entered into. As a matter of 
fact, Senator, it is marked ``secret.'' At that point it was a 
secret document. I looked at it. It was 29 pages. That was the 
whole document that governed the relationship with that great 
laboratory. This is the most current. It makes references to 
library documentation, which we cannot bring because it is so 
voluminous.
    I only make that point that somehow or other this Secretary 
is struggling as to how he is going to--the reason for this 
hearing--he has been struggling on what kind of criteria is he 
going to use for the next contract. I guess this proposes a 
couple of words. Can you govern it with a simple contract that 
is not very lengthy, or are you supposed to have one like this 
that covers, I assume--every 4 or 5 years, perhaps when 
something went wrong--there are 15 or 20 pages added here; or 
maybe every 5 years, I don't know.
    This clearly indicates--it might look like 60 years of one 
contract, but it sure looks to me like something much more than 
one contract in that 60-year period. That doesn't conclude 
anything except that they are having a heck of a time managing 
when there are malfeasance accusations and when things don't go 
right.
    I am obligated to come back for a few minutes because I 
have some questions. So if you will wait, we will vote and come 
back.

    [Recess from 11:16 a.m. to 11:45 a.m.]

    The Chairman. Back on the record. Our second vote was 
called off. I am not sure Senator Bingaman can return. 
Nevertheless, he is on the floor.
    Senator Alexander, it is your turn, if you would like to 
inquire, please.
    Senator Alexander. I would. First, I want to thank the 
witnesses and commend the chairman. This is a subject that 
interests me a lot. I know it interests Senator Domenici, 
because this has been a passion of his for a long time. I look 
forward to the subsequent hearings, Mr. Chairman, and being 
actively involved in them, and hearing from the witnesses.
    I apologize for missing your testimony, but I have read it. 
And I have been hearing Herman. I am delighted to hear Dr. 
Postma here, one of our distinguished Tennesseans. I just want 
to say a word and then I have a question.
    I come at this from this background. As a Governor, I 
worked with Oak Ridge and the University of Tennessee. As 
president of the University of Tennessee, I worked with the 
same situation. I was also on the board of Martin Marietta. I 
remember the negotiating of the contracts at that time. Then, 
as Energy Secretary, I saw a chance to put in perspective the 
contributions our national labs have made. This is a good time 
to be thinking about that as we look to the near future.
    The National Academy of Sciences says half of our new jobs 
have come from our investment in the physical sciences and what 
we have tried to do, our great secret weapon in the United 
States, I believe, in science and technology, has been our 
great research universities and our national laboratories since 
World War II. No other country in the world has anything that 
comes close to the combination of those resources.
    Given the challenges we face in keeping good jobs in this 
country over the next 10, 20, 30 years in the world 
marketplace, that edge in science and technology, a significant 
amount of which comes from our national labs, as well as from 
the universities, is a very important part of any national 
strategy.
    So I have a whole lot of interest in this because of my own 
background, because of the contribution--the effect it has on 
Tennessee, and because of the effect it can have on our 
country. Now, in the comments, I also agree with the direction 
of many of the comments. I know what an academic environment 
is. Academic institutions are sometimes arrogant and they are 
sometimes messy, but basically they are set up to create little 
areas of autonomy where very talented people can do their best 
work. When government comes in too heavily on that kind of 
environment, that is exactly antithetical to that sort of 
environment.
    When, for example, we have environmental problems and we 
have to send in government teams to deal with the problems, I 
guess that is something we have to do, but it takes the eye off 
the ball of what most of the people are there to do and what we 
most need done in this country. We want the clean-up, of 
course, but we want the continued research and technology.
    When micromanagement--the Federal Government, as has been 
noted in some of your testimony, never undoes anything. 
Whatever layer it lays on just lays on, and then here comes 
another layer. There is never any consistent force up here. And 
we can provide one in these hearings, one that examines all the 
layers and says, let us start over, or unpeel some layers and 
look at what can be done in the future.
    Just the combination of the environmental clean-up efforts 
and the 60 years of layers of micro-management are just bound 
to be at odds with what the most effective direction of the 
national labs should be, just bound to. Human nature should 
tell us that.
    The chairman is exactly right to take a look at this and 
ask the question if we are greatly challenged for the near 
future in terms of jobs and our standard of living, how can the 
labs make their greatest contribution, and what should the 
governance structure be?
    I am very interested in this and want to be a part of it. I 
have one question that I think has not been covered as much, so 
I have heard. Let me ask this. Dr. Postma suggested that the 
university relationship with a lab is a good thing, not a bad 
thing. I used to wonder about that. Universities are not such 
well-managed organizations, by and large. I didn't know a 
university could be part of a partnership that met some of the 
more exacting requirements of lab management.
    I would gather that the other part of that, the good part 
of the university involvement, goes to my question, which has 
to do with continuity. The university does have a culture and 
an attitude. I think of the distinguished scientists that we 
have at the University of Tennessee and the Oak Ridge 
Laboratory, with the State paying part and the Federal 
Government paying part, that has been wonderful for both 
institutions and good for the country, so you have that culture 
and the attitude and the opportunity for continuity.
    My question is this: Rather than come to the end of 5 years 
and say, okay, this is all over, this contract, between the 
private manager and the Federal Government, if someone is doing 
well in managing a lab, could we not have another option? Could 
we not decide just to continue the contract for 5 years with 
minor adjustments, instead of going through a laborious 
renegotiation? Or could we introduce other elements into the 
relationship that would permit what is judged to be an 
outstanding relationship to continue, rather than to say, okay, 
that is done, let us throw it up in the air and start over 
again?
    Dr. Postma?
    Dr. Postma. Currently, DOE procurement rules allow for one 
extension of a 5-year extension. That doesn't mean they do it 
automatically, but it is sort of understood that if things go 
well, then there will be an extension of about 5 years.
    One of the cases I pointed out, even though a contractor 
that I know that is doing well, DOE has decided to extend it 1 
year. Nobody understands that. Nobody involved really 
understands why.
    Senator Alexander. Which example was that, Dr. Postma?
    Dr. Postma. There is one at Oak Ridge with Batelle, as a 
matter of fact, in clean-up activity, a 1-year extension. It 
doesn't really make sense. They have been given a lot of kudos 
about how well they have done. Normally, I think----
    Senator Alexander. It got an outstanding rating, I believe, 
for that management, if I am not mistaken?
    Dr. Postma. Yes. That is why no one understands. But the 
expectation is for one renewal of 5 more years. After that, it 
is almost a hard line about competition. Now, in essence, there 
is nothing to say that if you do well the second 5 years, why 
shouldn't you get 5 years more? Why does there have to be a 
hard line? Well, in part there is the old saying about, when 
you see the guillotine, it sharpens your mind a bit. If you 
really want that contract, you would be quite willing to 
compete for it again on that second term. A lot of contractors 
have said, oh, no. If you recompete it, I'm not going to play. 
They always do end up playing, but they have lost a fair amount 
of activity in the process.
    Some universities, to go back to that, don't pay or have 
not paid as hard attention to the contract-customer relations 
window as have some of the industrial contractors. I remember 
Martin Marietta's theme was, you'd better please the customer. 
There was always, as a laboratory director, very important 
oversight by a board from the corporation that oversaw 
everything we did and asked terrible questions. You were part 
of those, I think. And we had to keep our guard up to make sure 
that we were doing exactly the right things.
    Most universities are not quite that strong in their 
management of it. As a matter of fact, a few years ago the 
University of California president's office did a 5-year review 
of the directors of Livermore, and of Sig. I was part of that 
committee, along with a number of others, in trying to help 
them reach a judgment about that. That is a university way of 
doing things. They should be able to do that themselves, 
frankly. They should be enough on top of what goes on, on top 
of the management, and asking questions and participating 
enough in the key issues so they should not really require an 
outside review like they do of deans and Department heads, et 
cetera.
    Generally, most universities don't do it. They do it the 
university way, which may be all right, but it is not a way 
that I personally think results automatically from some other 
kinds of contracts. That is my summary.
    The Chairman. Let me change subjects for a minute and ask a 
couple of preliminary questions. First, are all of you familiar 
with the assessment process that the DOE takes on a regular 
basis and says--for instance, Sandia National Laboratories is 
given a rating because they have looked at them and they are 
given this evaluation. There is an evaluation that is the best 
evaluation, one not quite as good, one less good, and an 
evaluation that is pretty poor.
    I am thinking that before we are finished with these 
hearings we have to find out a little bit more about that, 
because that kind of thing seems to me to create some very 
false hopes and some situations that seem terribly irrelevant. 
For instance, Lockheed recently was given a contract extension 
again, but you might know it was in the air that all these 
people were waiting to take it over. Of all the laboratories 
that the DOE had, it had the highest evaluation over a 10-year 
period.
    Consistently, it was the best of all. Yet, it was going to 
go out to bid, while the rumbles were that Los Alamos is not 
going out to bid, and it wasn't the highest.
    What do we do about that? Are those things of any 
consequence? Should we stop them? Are they valuable? If they 
are valuable, should they be used--how should they be used? 
Sig? First of all, do they do it right? Do you know how they do 
it? Maybe you have some observations.
    Dr. Hecker. The current assessment process I believe was 
brought about when one of the contract modifications that you 
had indicated that has been made was a contract modification 
towards what is called the performance-based contract. Then the 
University of California put in place a self-evaluation process 
that utilized people from across the country to evaluate those 
programs. Then the Department of Energy was to make its final 
evaluation, taking into account the university's self-
evaluation and then its own.
    I believe that that process actually is the one that brings 
some hope to doing things right, because if the contractor and 
the labs understand what is expected, if that is put in the 
contract, and then in the end it is essentially graded on that, 
that is the best overall assessment of performance.
    Now, is it being done right? I think generally any of those 
things can be improved somewhat, but I think that is on the 
right track. It gets you away from essentially what I would 
call management by anecdote. That is that whatever the latest 
problem that crops up is, that actually determines your 
assessment, in the eyes of the government.
    If you have an overall performance assessment, that should 
come into play. In the case of Sandia National laboratories, 
clearly there the records showed that it was doing what the 
Government wanted it to do. I think that is very valuable.
    The Chairman. Doctor, let us make sure we understand the 
second part of that. At the same time you have told us today--I 
think you have said that you thought it was very good that Los 
Alamos was run by the University of California for 60 years, 
did you not?
    Dr. Hecker. That is correct.
    The Chairman. I think you told us that you were not so sure 
that the way it was given word that it was not going to get--
next time around it was going to have to compete--it was not a 
very good process.
    But you do know that for a while Lockheed was up for grabs, 
and finally, with a lot of people putting their oar in the 
water, it got extended, principally on the basis that they had 
been number one all along. Los Alamos was not number one. That 
rating system you referred to had placed Los Alamos in a less-
than-superior position vis-a-vis the performance of other labs 
in their work. So why should Los Alamos should not have been 
graded on the basis that they were beginning to falter in terms 
of that evaluation? What is wrong with using that against Los 
Alamos?
    Dr. Hecker. I think that is fair enough. I did not say that 
competition is a bad thing; I did say that competition is a 
good thing. If one has, you know, sufficient concern about 
whether the laboratory is actually doing its job, then I think 
one should examine that.
    My own sense is--and I think I made that clear in my 
testimony--I believe we at Los Alamos are not as effective, not 
as productive, as we ought to be. That it is a combination of 
two things. One is, let's say, our own performance. Two is that 
we have a system of governance that in the end is broken. It is 
a combination of those two things.
    The Chairman. Dr. Krebs.
    Dr. Krebs. I agree with Dr. Hecker that the movement 
towards performance-based management and the interpretation of 
that in terms of the self-assessment process that DOE and the 
university undertakes, or actually any contractor now 
undertakes, actually has added--has improved the understanding 
of how the contractor manages, especially on the business side.
    I think there is a danger that it could become too 
prescriptive, too detailed, and that is always something that I 
think one has to be careful about. If you trust each other, 
then you get to the right balance of at what level of detail 
you are going to ask for accountability.
    Relative to Los Alamos and the question you just asked, my 
principle is this: In self-assessment, the laboratories are 
asked to make a judgment about their business practice 
management and their program management. As I said in my 
testimony, I think technical excellence, technical judgment, 
has to be primary. Without that, there is no point in having 
excellent business management practices.
    So the question I would ask is, you know, how is the 
balance there, not just the business management?
    The Chairman. I want to close by asking you to each comment 
on this one observation that I have. Since I have been here, 
every time we have had a crisis with reference to the 
laboratories--let me just think to make sure I am saying this 
right--we have never had a crisis that said they are 
performing, in terms of their primary mission, poorly. The 
crisis was that they weren't doing something that some people 
thought they ought to be doing in exercising their mission 
quite right.
    The big one is since we have been engaged with Russia so 
many years, the principal one has always been security. I 
wonder if you might just talk with me. Is it not possible that 
one could say that the laboratory's performance should be 
judged differently with reference to mission accomplishment as 
compared with some other aspects that are part and parcel of 
managing an institution?
    Would one dare give Los Alamos back to the University of 
California if they are doing the absolute best work on nuclear 
deterrent and are found faltering in terms of security leaks 
and the like? How would you address that if you are coming up, 
now, with a new way of setting the prescription for contracts 
and the like? Either of you that have any feel for that, could 
you discuss it?
    Dr. Hecker. If you don't mind, Senator, I would like to 
comment. It also makes me reflect back on your previous 
question about the way that the contract is currently being 
administered and judged. The performance-based contract 
actually is supposed to have this mission element in it, but as 
you just said, it never gets the play. If you go back and you 
look at our performance ratings on mission, they have been 
exceptional the whole time of the period that you discuss. So 
yes, of course the mission is the important thing. My great 
concern is that with the focus on these other aspects--which 
have to be done well--we have to do things safely, we have to 
be environmentally responsible--but we do have to conduct our 
mission. We have done that well.
    I am concerned that the current process has driven us in a 
direction where the mission matters less and less. As you 
change out the contractors, what you are going to wind up doing 
is getting somebody that might be very efficient at doing the 
wrong thing.
    The Chairman. Dr. Krebs.
    Dr. Krebs. I would say something in my testimony to this 
effect. I believe that part of what has happened--first of all, 
I think that the management of security, particularly in a 
weapons laboratory, may not--may be more than simply business 
practices; it is part and parcel of the mission. Basically, you 
need--it does establish, then, a requirement on these 
laboratories to think about that in an integrated fashion.
    Having said that--and I don't know from my experience--I 
don't know exactly what that right way to do it is. Having said 
that, what I observe, I believe, is that the Department has 
tended to split off judging security management at these 
laboratories as a business practice, as something that is 
separate and apart from the mission, that can be described and 
prescribed in a way that allows you to make judgments 
independently of the mission. That is my comment.
    The Chairman. Dr. Postma.
    Dr. Postma. I'm going to differ a bit with my colleagues.
    Just as in the corporate world you don't judge a CEO purely 
by how well they produce a certain product--it has to include 
accounting practices, it has to include ethics, it has to 
include a multitude of things--and we have known in the last 
couple of years how disastrous it can be to a corporation if 
not everything is attended to properly.
    It is also true with a laboratory, that a really top-notch 
management will pay attention to everything that is important. 
Sandia is an example, in my mind, of one who has that balance 
in very good order. They have to pay very good attention to the 
mission, they pay very good attention to the security, to the 
employer relations, to diversity, to ethics, and to everything 
that is important in accomplishing a mission. So I don't see 
them as being all that separate.
    If you have got great management, great management will 
take care of all of those things. The emphasis that the 
performance appraisals put on it can be misleading, but so long 
as you have got good management, they aren't going to be much 
different.
    The Chairman. Dr. Peoples.
    Dr. Peoples. I am not really qualified to speak about 
security, but let me look at a business practice, an impact 
thing. One of the things that sort of came out of the mixture 
of the Galvin report and what Secretary O'Leary did was 
adopting credit cards, all right? What this did is it allowed 
one to get rid of a large number, 95 percent, of all 
procurements. These were done primarily by clerks. Costs were 
saved. At Fermilab we were able to reduce the staff by 17 
people.
    But that process you understand introduces a risk. I am not 
sure the Department understands the balance between cost and 
risk. It is very important, because if you are going to do 
that, you have to expect a little of that. The way to judge it 
is to look at how much money was saved, how much money was 
lost, and compare those things. In a business, you would do 
that.
    As I told you, I am genetically an accountant. I was 
brought up that way by my father who was an accountant, a 
famous one, and my brother. I understand that. That is what the 
Department does. Unfortunately, it is embarrassment that turns 
out to be the major quotient. We will get a new rule. I think 
the credit card thing was enormously successful, but one has to 
be prepared for something to go wrong, a little bit.
    So $120 million of procurements and a few hundred thousand 
dollars going wrong is not bad. Compare that to Enron, where 
30,000 or 40,000 people lost their whole living. I'm going to 
disagree with Mr. Postma, this was pretty substantive in Enron. 
They were off-balance partnerships. That was nothing subtle, 
not like keeping track of credit cards; that was fundamental to 
the thing. I believe laboratories can take care of the 
fundamental business performance, but the DOE has to be 
prepared to work with them to do it.
    The Chairman. I want to close this, unless Senator 
Alexander has any more questions, by making this observation. 
Frankly, every time we have run into a major scandal, that is 
what we call it around here--either an accounting scandal or a 
security scandal, sometimes a combination of the two--we set 
about to set up a new order for things and we put in place some 
new Federal bureaucracy.
    We thought that it was getting so bad and so obvious that 
we ought to pull the nuclear defense work out of the Department 
and put it into a semi-autonomous entity which we created. I 
was the lead person on it. We drew up a statute. We created it, 
NNSA. It has gotten to where some people remember it now, NNSA.
    We just received a criticism that is going on this morning 
in the House that NNSA is not working. It was set up so we 
would not be setting up a new entity each time we had a crisis 
of security, but that this semi-autonomy would divest that part 
of the Department from some of the dysfunctionalness that came 
with the overlapping of bureaucracy that ran both parallel and 
perpendicular to each other, running into each other. It has 
not been implemented. Either we didn't write it right, or they 
didn't implement it right.
    What I have discovered, to my chagrin, is that Secretaries 
really don't want to get rid of the authority. So that NNSA has 
a hard time succeeding because it was intended that it be as 
crazy an idea as if the Secretary has too many strings 
attached, then the head of the NNSA should go rent a building 
somewhere else in town and move his whole operation elsewhere. 
That was said in open hearing by me that that is what the 
Director of the NNMA ought to do; that if they were too 
controlled by the Secretary, they ought to leave. It is not 
happening. In fact, it is getting closer. The latest report is 
that it is unsuccessful.
    I have concluded that--Dr. Peoples summed it up. you would 
be a great manager to the extent that we were looking at 
anything to do with auditing, bookkeeping, credit cards, not 
because the contract of agreement between the U.S. Government 
and your laboratory was very much different than the contract 
with Dr. Postma, but because of who you are as a manager.
    As a consequence, we are going to get great-managed 
laboratories if it is going to be, to a great degree, the 
quality of the management and not the details of the contract. 
But I am not sure that is going to be a good answer when we try 
to help the Secretary with some ideas about how the next Los 
Alamos contract should be entered into; although I would think 
we ought to have that very, very high on the list, that it is 
going to be important when you pick a company, an institution, 
an entity, that you know who you are getting to be the manager 
of the institution called Los Alamos.
    Maybe my fond recollections of your early days and of the 
days that your prior predecessor--two predecessors, including 
the one I fondly remember, who was in fact only the second 
laboratory director of the whole laboratory; I knew him well--
somehow it just seemed like we didn't have the problems of 
today. Maybe it is just the people; maybe it is just that we 
left them alone; maybe it is that we've got way too many people 
that go in and look at every little detail. I don't know. But 
it surely is getting more difficult.
    We have a situation at Sandia, to close this hearing, where 
you have just praised them heavily, and across the hall in the 
House there is a subcommittee hearing saying how terrible they 
have conducted their security work and how they have failed to 
respond to the contentions of Senator Grassley's office, even 
though an independent study by a former U.S. Attorney in New 
Mexico has said everything was fine. So it is really a pretty 
difficult situation with a lot of politics.
    Senator Alexander, we can be assured that as we look 
forward to who is going to get Los Alamos, there will be more 
politics than we like in terms of how universities are going to 
qualify. I hope we can at least write that out as we set some 
criteria for them so that it won't--it really will be 
institutions that are going to give it high caliber, as it was 
when Sig joined them, or as the university was when Dr. Peoples 
joined it. I hope that is what we end up doing with Los Alamos.
    Having said that, we are going to convene as scheduled. We 
thank you all very much for your time. We will pay close 
attention to your recommendations. Thank you.
    [Whereupon, at 12:17 p.m. the hearing was recessed, to be 
reconvened on Tuesday, July 17.]

                  DEPARTMENT OF ENERGY LAB MANAGEMENT

                              ----------                              

                        THURSDAY, JULY 17, 2003

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.

    The committee met, pursuant to notice, at 9:34 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Pete V. Domenici, 
chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMENICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. Senator Bingaman will be right along, I 
understand, and we're going to get started because there's a 
lot of things going on here and I'm afraid every minute we 
delay here risks our chance of hearing the witnesses today, so 
let us proceed, and we're going to take the witnesses--first, 
thanks to all of you, exceptional, powerful panel, great 
experience. I just hope that we can benefit from your thoughts 
and in turn pass on to the administration better ways to set 
management of these laboratories in place in the future.
    We're going to start with Vic Reis, senior vice president 
of Hicks & Associates in Washington, D.C. This is the second in 
a series of hearings devoted to the Department of Energy's 
management of its laboratories--good morning, Senator 
Bingaman--and other facilities.
    I want to start by thanking the witnesses for adjusting 
their schedules. For today's hearing we selected those whose 
careers and knowledge encompasses both the laboratories and at 
least one other major lab system. In their testimony and in our 
questions we will consider whether successful laboratory 
operations in another system, Federal or private, provides 
useful examples for improving the management of the DOE labs.
    In future hearings we will hear from the leaders of some of 
the studies that have explored the productivity of the DOE 
laboratories and ways to increase productivity. In addition, we 
plan to hear testimony on the various contract models that are 
now used in the Department in the hope of exploring best 
practices that might be applicable.
    Today, we have four of you, each with very important 
experience. Dr. Jack Gibbons served the Nation as President 
Clinton's science advisor from 1993 to 1998. Prior to his 
service, he directed the Congressional Office of Technology 
Assessment for over 13 years. He has also held senior positions 
with the Academy of Engineering and the Department of State. He 
began his distinguished career at Oak Ridge National Laboratory 
in Tennessee.
    Dr. Bill Spencer, I remember him when he first came as an 
aide to then Senator Buckley years ago, and directed some of 
the Nation's premier private technical ventures at Xerox--
correct that, sorry. Dr. Bill Spencer, I'll come back to you in 
a moment.
    Bill Schneider, chairman of the DOD Defense Science Board, 
and many other roles, including Under Secretary of State for 
President Reagan and the Associate Director for National 
Security at OMB, served for 10 years as a staff member in both 
the House and the Senate, and Vic Reis is currently, as I 
indicated, at Hicks. He served as Assistant Secretary of Energy 
for Defense Programs, Director of Defense Research and 
Engineering for the DOD, and in these and many other roles he's 
interacted with many other laboratories in DOD.
    Bill Spencer directed some of the premier private technical 
mentors at Xerox, SEMATECH, and Bell Labs, senior manager of 
Sandia National Laboratory operations in both California and 
New Mexico, where he directed their microelectronics and 
systems development programs. He also has chaired a key part of 
the Galvin Study on the National Laboratories.
    All right, with that, Dr. Gibbons. Dr. Gibbons, I've 
already introduced you, and indicated your background. We're 
delighted to have you here. We're going to proceed now. We'll 
start our testimony on this side with you Dr. Reis, and we'll 
move right on through, with Bill Schneider wrapping up this 
morning. Please proceed. The testimony from each of you will be 
made a part of the record right now, so we don't have to worry 
about it, and you abbreviate it as best you can.
    Dr. Reis.

STATEMENT OF DR. VICTOR H. REIS, SENIOR VICE PRESIDENT, HICKS & 
                        ASSOCIATES, INC.

    Dr. Reis. Thank you for the opportunity to testify in this 
hearing. How our national weapons laboratories are managed is a 
critical national security issue. I have been involved with 
every type of government research laboratory for most of my 
career. I have worked in them, funded and guided them from 
various government positions, and have advised them, their 
parent organization, and the Government on how they should 
operate, so today I will briefly discuss what I have learned 
about lab management that might be useful to the current 
situation in the Department of Energy weapons laboratories and 
make a few specific recommendations.
    I should add that the opinions I express are my own, and do 
not necessarily represent my employer or any of the 
organizations for which I consult.
    Management begins with strategic planning, and the first 
question of strategic planning is to ask, what is the specific 
purpose of the organization? The purpose of any national 
laboratory is to attack a vital national mission that contains 
complex scientific and technical problems that can best be 
solved using large, integrated experiments and associated 
computations. Stockpile stewardship, the current primary 
mission of the national weapons laboratories is obviously such 
a mission.
    Within the national lab complex, the FFRDC model of 
government-owned, contractor-operated facilities has proven to 
be the best operational model. FFRDC's have an inherent and 
significant operational flexibility and advantage over an 
equivalent government-owned, government-operated facility. The 
DOE weapons laboratories are FFRDC's and should remain so.
    So what is the problem with the management of the DOE 
weapons laboratories, and how might they be fixed? Dr. Sig 
Hecker hit the nail on the head in testimony to this committee 
on June 24, when he concluded that the root cause of management 
difficulties at the DOE weapons laboratories is a lack of trust 
between the Department of Energy and their laboratories.
    However, I do not subscribe to Sig's recommendation that a 
blue ribbon panel should be created by the Congress to solve 
the DOE weapons management issue. You don't establish trust by 
blue ribbon panels, any more than you build trust by 
inspection, security and safety rules, audits, and external 
reviews, even though all these items are essential to good 
management practice. We all know from a lifetime of personal 
experience that trust is developed from a shared sense of 
values and working together as a team toward a common goal.
    Dr. Hecker points out that after the cold war ended the DOE 
was not sure what they wanted the weapons laboratories to do, 
other than stop testing, downsize, and help U.S. industry, but 
that uncertainty ended with the creation of the stockpile 
stewardship program, and while it took a few years for 
stockpile stewardship to catch on, stockpile stewardship is now 
a core mission for the DOE and the weapons laboratories. 
Indeed, Congress recognized this by creating the National 
Nuclear Security Agency, NNSA.
    When I joined the DOE back in 1993, there was a deep 
cultural divide between the DOE managers and their laboratory 
counterparts. My approach to closing this breach of trust was 
to install senior folks with extensive laboratory experience as 
my operational deputies and give them the freedom to lead. 
Because of their lifetime accomplishment at the labs, the labs 
trusted them, and because of their obvious management expertise 
they soon developed a similar trust among the key DOE staff. 
Working together, the labs and defense programs collectively 
developed stockpile stewardship. Since I believe DOE lab trust 
will be an issue in the foreseeable future, I would recommend 
this practice be continued and extended by assigning a 
significant number of DOE personnel to labs to participate 
directly in programs.
    My second recommendation has to do with the use of boards 
of directors at FFRD's. The DOE's Lincoln Laboratory provides 
an example of an effective use of a board. Lincoln uses a joint 
advisory council, JAC. The director of Defense Research and 
Engineering, the DDR&E, who is joined by the senior managers of 
the services, DARPA, NRO, and the BMDO, shares this council.
    The function of JAC is to provide the strategic discipline 
to ensure that the lab is working on those national problems 
that fit the lab's talents and mode of operation. Every JAC 
member has a critical stake in the lab's success and long-term 
well-being. Trust is maintained at the executive level. One can 
imagine an analogous board for DOE weapons laboratories, 
including not just the defense programs, but the NNSA, the DOD, 
other parts of the Department of Energy, Homeland Security, and 
the National Security Council.
    Finally, let me comment on the impending competition for 
the Los Alamos and possibly Livermore National Laboratories. 
Given all the issues whirling around the labs, I am for it. I 
do not believe that new management is necessary to improve 
outmoded business practices, or safety, or security. Pete Nanos 
and Mike Anastasio can do that very well, thank you. But I 
think this competition can be used to refocus the labs on their 
mission, and to continue to sharpen their strategic vision.
    If it is done effectively, it will require the DOE to 
fashion a request for proposal that focuses on how well the 
potential management team, their contractors, rather, can 
deliver on their mission, not just how well they can count 
paper clips. I would add that I believe it is vital to have a 
great research university be central to the management of these 
laboratories, not because of any particular management 
expertise, but because only a great university creates a 
culture of scientific learning, and scientific learning is 
critical to science-based stockpile stewardship. If it's 
location, location, location in real estate, it's mission, 
mission, mission in national laboratories.
    Mr. Chairman, I would be remiss if I missed an opportunity 
to thank the members and staff of this committee, and you in 
particular, for all your help during my stint at the Department 
of Energy and, more important, for your extraordinary service 
to our Nation and to the world at large.
    Thank you very much.
    [The prepared statement of Dr. Reis follows:]

   Prepared Statement of Dr. Victor H. Reis, Senior Vice President, 
                        Hicks & Associates, Inc.

    Mr. Chairman, thank you for the opportunity to testify in these 
hearings. There are few things more important to national security than 
the viability of our national weapons laboratories and how they are 
managed is critical to their success.
    As you can see from my biography, I have been involved in 
laboratories most of my career: private industrial labs, government 
labs and Federally Funded Research & Development Centers (FFRDC's). I 
have worked in them, funded and guided them from a variety of 
government positions, and advised them, their parent organizations and 
the government on how they should operate. So today I will briefly 
discuss what I have learned about lab management that might be useful 
to the current situation in the Department of Energy and the weapons 
laboratories in particular. I should add that the opinions I shall 
express are my own and do not necessarily represent my employer or any 
of the organizations with whom I consult.
    Management begins with strategic planning, and the first question 
of strategic planning is to ask what is the specific purpose of the 
organization? The purpose of any national laboratory is to attack a 
vital national mission that contains complex scientific and technical 
problems that can best be solved using large, integrated experiments 
and associated computation. Stockpile stewardship, the current primary 
mission of the national weapons labs, is obviously such a mission.
    If the job to be done can be done better, or even equally well, in 
academia or private industry, academia or private industry should have 
preference. Government-owned laboratories should not compete with 
private industry or academia.
    Within the national lab complex the FFRDC model of government-
owned, contractor- operated facilities has proven to be the best 
operational model primarily because of the inherent and significant 
operational flexibility advantage that an FFRDC has over an equivalent 
government-owned, government-operated facility. The DOE weapons labs 
are FFRDC's and should remain so.
    So what is the problem with the management of the DOE labs, and in 
particular the DOE weapons labs? And how might they be fixed?
    Dr. Sig Hecker diagnosed the DOE lab management problem in his 
testimony to this committee on June 24th. Sig hit the nail on the head: 
the root cause of the management difficulties (and they are real) is 
the lack of trust between the Department of Energy and their 
laboratories. Dr. Hecker provided numerous, poignant examples of how 
that mistrust developed. But with all due respect, I believe, Sig's 
recommendation that a Blue Ribbon Panel is required to solve the 
management issues is not one I would subscribe to. You don't establish 
trust by Blue Ribbon Panels, any more than you build trust by 
inspection, security and safety rules, audits, and external reviews, 
even though all these items are essential to good management practice. 
We all know from personal experience that trust is developed from a 
shared sense of values and a common goal, and working together to reach 
that goal, no matter how difficult it is and how long it takes.
    Dr. Hecker points out that after the Cold War ended, the DOE was 
not sure what they wanted the weapons labs to do, other than stop 
testing, downsize and help U.S. industry. But that uncertainty ended 
with the creation of the stockpile stewardship program, and while it 
took a few years for stockpile stewardship to catch on, there is no 
doubt now as to the centrality of stockpile stewardship to the DOE or 
the weapons labs. Indeed, Congress recognized this by creating the 
National Nuclear Security Agency (NNSA).
    I was faced with this ``trust'' problem in spades when I joined the 
DOE back in 1993. There was a deep cultural divide between the DOE 
managers and their laboratory counterparts. My approach to solving the 
problem was to bring in senior folks with laboratory experience to 
become my operational deputies. Because of their lifetimes of work 
experience at the labs, the labs trusted them. And because of their 
obvious management expertise, they soon developed a similar trust among 
the key DOE staff. Working together through ups and downs, we 
collectively developed stockpile stewardship. While this practice 
raised some eyebrows within the DOE, it is my strong belief that this 
step was absolutely key to getting stockpile stewardship off the 
ground.
    Since I believe DOE/lab trust will be an issue for the foreseeable 
future, I would recommend this practice be continued and I would 
further recommend extending this practice by assigning a significant 
number of DOE personnel to the labs, to participate directly in 
programs.
    My second recommendation has to do with the use of ``Boards of 
Directors'' at FFRDC's. Lincoln Laboratory provides an example of an 
effective use of a ``Board.'' Lincoln uses a Joint Advisory Council 
(JAC) which is chaired by the Director of Defense Research & 
Engineering (DDR&E) and who is joined by the senior R&D managers of the 
Services, DARPA, NRO and the BMDO. It brings real value added to the 
operation goals are shared and priorities chosen. Most important, it 
provides a strategic discipline ensuring the Lab is working on those 
national problems that fit the lab's talents and mode of operation. 
Everyone on the JAC has a critical stake in the lab's success and long-
term well being. It is not too hard to imagine an analogous board for 
the DOE weapons labs, including not just Defense Programs, but the 
NNSA, the DoD, other parts of the DOE, Homeland Security and the 
National Security Council.
    Finally, let me comment on the impending competition for the Los 
Alamos and possibly Livermore National Labs. Given all the issues 
whirling around the labs, the DOE and the international situation, I'm 
for it. Not because I believe that new management is necessary to 
improve outmoded business practices, or safety or security--Pete Nanos 
and Mike Anastasio can do that very well, thank you--but because I 
think this competition can be used to refocus the labs on their 
mission, and continue to sharpen their strategic vision. If it is done 
effectively, it will require the DOE to fashion an RFP that focuses on 
how well the potential management team contractors can deliver on the 
mission not just on how well they count paper clips.
    I would add that I believe there is significant value in having a 
great research university be integral to the management of these labs. 
Not because of any particular management expertise--what university 
ever built a plutonium factory--but because the university creates and 
sustains a culture of scientific learning, and that is truly what 
science based stockpile stewardship is all about.
    Mr. Chairman, I would be remiss if I missed the opportunity to 
thank the members and staff of this committee and you in particular for 
all your help during my stint at DOE, and more importantly your 
extraordinary service to our Nation and to the world at large.

    The Chairman. Thank you very much.
    Dr. Spencer, please proceed.

             STATEMENT OF DR. WILLIAM J. SPENCER, 
           CHAIRMAN EMERITUS, INTERNATIONAL SEMATECH

    Dr. Spencer. Thank you, Senator, and I appreciate you and 
Senator Bingaman inviting me to participate in this and to 
comment on the governance of the national laboratories. I'm 
going to focus on the weapons labs. That's where I think I know 
a little bit, and not a lot in the other areas.
    I have the highest regard for these institutions and the 
people who have been there. I think they're dedicated, and the 
service they have rendered to the Nation is something we all 
deserve to give them a vote of thanks for.
    As you know, my career has been entirely in the entire 
private sector. Even when I was at Sandia I was a Bell Labs 
employee assigned to Sandia for a number of years, so the views 
I'm going to give you today, the biases which you're going to 
hear from me, are influenced by a career in the private sector, 
things I learned at AT&T and Xerox and later at Sandia and 
SEMATECH.
    I read the previous testimony and your comments after that. 
Some of the things I'm going to say today you've already heard. 
I'm going to try and focus on those areas where I know a bit 
and give you some recommendations and hopefully some ways maybe 
to implement some of those recommendations.
    I strongly believe that the better management of the 
weapons laboratories can be done by private corporations. This 
was earlier said by Herman Posner, and I agree with his 
assessment on that. However, believe that the current GOCO 
system is broken, and is broken, it seems to me, for two 
reasons. One is changes in the Government. You've heard a lot 
about that over the last sessions and I'm not going to talk 
much about it today, but the other is the changes that have 
occurred in industry.
    Many of the problems which you've heard were identified in 
the study we did in 1994 or 1995 on alternatives for the future 
of the DOE national laboratories, the Galvin report. I was 
chair of the national security section on that, looking at the 
weapons labs, and I think the issues that were identified then 
are still there today, and perhaps they're even worse, but how 
about the private sector? I'd like to go back for a minute and 
look at the start of the Bell System and their management of 
Sandia in the late forties.
    You probably remember that President Truman asked Mervin 
Kelley, who was the president of Bell Labs at that time, how 
the AEC facilities should be managed, and Kelley said, let's do 
it with private management, but don't include AT&T. You 
remember, Mr. Truman was able to convince him that it was a 
good idea for the Bell System to take over the management of 
Sandia, and I think that was a successful collaboration from 
1949 to 1989, 5 years after the breakup of the Bell System, and 
at the time that AT&T dropped out of managing Sandia. All the 
reasons for their joining and then dropping out you know better 
than I do.
    However, if we look at companies today, AT&T doesn't exist 
as it did in the late forties, and all of the companies in the 
United States have changed dramatically since the late forties 
and the fifties. We came out of the Second World War with 
preeminent companies on a worldwide basis. We had very little 
competition, and that doesn't exist today.
    Companies like AT&T, which had very large in-house research 
laboratories, either have closed those labs or restructured 
them or redirected them so that the focus today is on much 
shorter term projects. Even the laboratory which I was a 
director of for many years, which has been given credit for 
developing a lot of the personal computer effort, Xerox's Palo 
Alto Research Center, has been spun out as a separate company. 
It's no longer an internal research lab for Xerox.
    Now, with these changes, how are you going to get U.S. 
corporations to come in and be wiling to direct or manage 
national laboratories, and especially the weapons laboratories? 
I believe you're going to have to think about a whole new set 
of incentives. If you look at U.S. corporations today, the 
things that they compete with are getting the best talent, 
intellectual property, and determining a market which they can 
get into to use these capabilities for an advantage in a global 
situation, competition that they didn't have in the past, so 
it's essential, I think, to get these companies to tell you 
what they need to get into, to get into management of the 
weapons laboratories.
    I agree with Vic that a board of directors as an oversight 
is the right way to go for these companies. However, I would 
make that a hard-nosed, knowledgeable, involved set of business 
people with very few representatives from the Government or the 
company that's managing a particular facility.
    I think when we went back to set up SEMATECH in the mid-
eighties we had two studies. One was done by industry, led by 
Charlie Spork. One was done by the Defense Science Board, led 
by Norm Augustine. Those two studies looked at what it would 
take for industry to help solve the semiconductor problem in 
the mid-eighties. Norm Augustine looked at what the Government 
wanted. After those two studies were done, they got together 
and formed SEMATECH, which many of you have been involved with, 
and you know as well as I do what it did and what it didn't do.
    I thought it was a good model, and one we might consider as 
we look at management for the weapons laboratories in the 
future.
    Thank you.
    [The prepared statement of Dr. Spencer follows:]

   Prepared Statement of Dr. William J. Spencer, Chairman Emeritus, 
                         International SEMATECH

    These notes and my comments on July 17, 2003 are focused on 
governance of the three DOE Weapons Laboratories; Los Alamos National 
Lab, Lawrence Livermore National Lab and Sandia National Lab. The 
primary mission of the three laboratories, as I understand it, is the 
maintenance of a safe, secure and reliable nuclear weapon stockpile in 
the absence of testing. This mission has not changed over the last 
several years and is of great importance to the nation. The performance 
of these three laboratories over the previous decades was a major 
factor in the successful conclusion of the cold war and the current and 
former members of these organizations deserve a vote of thanks from a 
grateful nation. Every effort must be made to insure the success of 
their mission in the future. This is especially true in the area of 
governance.
    The attention of Congress to maintaining effective governance of 
these key national resources is to be commended and I am appreciative 
of the opportunity to comment.
    These notes and my comments are certainly biased by my experience. 
I had the opportunity to work at two of the world's premier research 
laboratories, Bell Labs and Xerox' Palo Alto Research Center, serving 
as the Director of the latter. Also, as the Director of 
Microelectronics and Weapon Systems at Sandia National Lab and as the 
Chief Executive of SEMATECH. In 1994-5, I was the chair of the National 
Security portion of the study for the Secretary of Energy on 
``Alternative Futures for the Department of Energy National 
Laboratories''. Many of the recommendations of that study, chaired by 
Robert Galvin of Motorola, are applicable to the governance of the 
Weapons Labs today.
    The recommendation that I will propose and hope to substantiate is 
the three laboratories are better managed by private organizations, 
with proper incentives and minimal government oversight. This was the 
situation three decades ago and a return to something similar to that 
mode of management is in the best interests of the country. However the 
current GOCO process is broken and must be replaced.
    It may be informative to look briefly at the history of the Bell 
System involvement with the management of Sandia Labs as one successful 
example. These are personal recollections. There is a complete history 
of the establishment of Sandia Labs, the involvement of Mervin Kelley, 
the President of Bell Labs in the late 40's, and the recruitment of the 
Bell System to be Sandias first managers. President Truman had asked 
Kelley to chair a study to determine the management of the Nuclear 
Weapons program of the Atomic Energy Commission (AEC). Kelley 
recommended private management (the GOCO model) and Truman convinced 
AT&T to take the responsibility for Sandia over the companies early 
reluctance.
    This arrangement continued until 1989, five years after the break-
up of AT&T into multiple companies. The arrangement had several 
advantages for Sandia and the Government. First, AT&T accepted the 
responsibility for no fee and was extremely vigilant about insuring 
that no government funded technology was returned to AT&T. Second, AT&T 
supplied a series of excellent senior managers principally from Bell 
Labs and Western Electric. Most of the individuals were on an 
assignment to Sandia for a few years and returned to executive 
positions within AT&T. Additionally, Sandia was able to obtain access 
to new technologies from AT&T, especially from Bell Labs, of importance 
to its role in the nuclear weapons program.
    One example of technology acquisition occurred in the mid 70's, 
when a facility for designing and producing small quantities of 
radiation-hard silicon integrated circuits was established in 
Albuquerque. The design software and early semiconductor processes were 
based on Bell Labs technology, Sandia provide the radiation hardening 
capability. The transfer of technology was enhanced by the assignment 
of several key technologists from Bell Labs to Sandia. This exchange of 
personnel, both management and technical, was a benefit to the 
Government. The Bell System individuals were often those destined for 
broader responsibility upon their return.
    The importance of exchange of personnel cannot be over emphasized. 
The successful realization of the mission of any organization 
ultimately rests on the few key employees of that organization. It is 
usually not possible for any organization, public or private, to hire 
all of the talent that it needs to meet its mission. The Bell System 
was rich in talent and could share personnel without jeopardizing its 
own success. The choice of a future management organization should 
consider the availability and willingness of that management 
organization to share key personnel.
    This has not been the situation in the two University of California 
managed laboratories and I think to the detriment of those 
laboratories. It appears to me that the exchange between Sandia and its 
management partner today is lower than with the Bell System, 
particularly with regard to technical talent.
    Are there issues with the current situation in the management of 
the three laboratories? There have certainly been many high-lighted in 
the recent press. These seem to be symptoms of a major problem and not 
the problem itself. The underlying problems identified by the 1994 
study of the DOE National Laboratories are still there and perhaps even 
more serious today than a decade ago. These are detailed in the 1995 
report and deserve being reviewed. Some of the major issues raised 
were: high overhead costs, too much focus on compliance, a scramble to 
establish ``new mission'' areas, lack of good business practices and 
one too many nuclear design facilities. Most importantly, the principal 
problem identified was ``the micromanagement of the laboratories by 
Congress and the excessive oversight by the Department''.
    This has lead to what I would call the ``Photon Model of 
Management'' of the Laboratories. You may recall that a photon is a 
small packet of energy with wave-like characteristics. It is usually 
formed by action within an atom or molecule, than the photon travels at 
the speed of light until it is absorbed by another atom or molecule. 
Traveling at the speed of light between collisions (or meetings) means 
that time elapsed on the photon between these events is zero, there is 
no time between collisions. The same thing is occurring with management 
in the laboratories. There is zero time between meetings (or 
collisions), meetings usually called by Congress or the Department and 
often requiring several pre-meetings to prepare for this often 
redundant review. Thus for senior management, and usually cascading 
throughout the organization, there is zero time for contemplation, or 
strategic thinking or long range planning. I do not believe this is in 
the best interest on the nation. The problem will only be resolved with 
the installation of competent management and the establishment of trust 
with Congress, the Department and the Nation. This means choosing an 
organization with the talent and motivation to perform this important 
task. It cannot be resolved by additional Government constraints on the 
laboratories.
    Do such organizations exist? Are they in the private sector or 
elsewhere? My bias is that the private sector is best qualified to 
manage the laboratories with an involved and knowledgeable Board 
oversight. Making this choice will mean private levels of salary and 
other benefits for the laboratory employees. For the current mission, 
the surety of the nuclear weapon stockpile, the better choice would be 
a private US corporation. It might also be possible to find the right 
person to head the Weapon Laboratories and to have an oversight Board 
made up of representatives from several of the US's leading companies 
to advise and evaluate that individual and his/her team. The particular 
choice of a corporation(s) should depend on the details of the mission 
of the laboratories. How important is research versus development or 
production of weapons? What sort of management and technical talent are 
required? Is it available and will it be shared? Answering these 
questions may require an appropriate in-depth study. However, there are 
some guidelines on how to identify and motivate private organizations 
to take up the task. The key will to be finding the right leader, 
giving that person and his/her team the freedom to manage the 
laboratory for a period of five years with proper private Board 
oversight and judge the success or failure by results. This might be 
considered an experiment in a completely new way to manage the Weapons 
Labs and ultimately other GOCO facilities.
    In my view, the model of the Bell System management of Sandia is 
the better of the known models for government laboratories. AT&T was a 
corporation with a large and prestigious in-house research organization 
and broad business experience and knowledge. There is not a counterpart 
to AT&T today and other US corporations have undergone major change 
since the late 1940's. Therefore the proposal to consider a consortium 
of companies to be involved in the management of the Weapon Lab if a 
single corporation is not found. The change in US corporations is due 
in some part to government actions and in other cases loss of a 
monopoly position or global competition. There is a bright side to this 
global competition in that managers of global corporations develop 
talent that make them better able to handle difficult and complex 
situations that are inherent in the DOE labs today. Global competition 
usually also leads to slimming down employment and companies with large 
talent pools are rarer today. Therefore, a method must be found to 
locate or expand promising corporations with the appropriate resources 
that might be candidates to manage the three laboratories.
    Appealing to patriotism may not have the same effect as 60 years 
ago. US corporations are often in a battle for survival. Giving them 
opportunities to improve their competitiveness would be a better 
incentive. Access to better or more talent, new ideas, longer range 
research or a level playing field with respect to their foreign 
competitors would be attractive. The better incentive would depend on 
the company and its market. Convincing any company that the government 
can be a good partner will be difficult.
    An example of a successful partnership between Government and 
industry is the initial formation and operation of SEMATECH. The 
funding and structure of SEMATECH was the result of independent studies 
by both Industry and Government. As a result of these studies, the 
Government supplied money and some minimal oversight and left the 
management and direction of the consortium up to the private sector. 
This cooperation lead to the consortium meeting its goals and the 
ultimate withdrawal of government funds after the US industry regained 
market share. The result was characterized by the GAO ``as an example 
of private management of government money to the benefit of both''. 
Certainly the management of the nuclear weapon stockpile is of greater 
importance than national market share in a technology. A method to give 
responsibility to the private sector, perhaps modeled on earlier 
successes, to properly manage government funds can be found.
    A summary of the recommendations;

   Insure that the surety of the nation's nuclear stockpile is 
        the primary mission of the three laboratories;
   Focus on private corporate management of the weapon 
        laboratories, either a single corporation or a consortium;
   Completely eliminate the current management and oversight 
        policies;
   Treat the management of LANL or the next Weapon Lab to be 
        competed as an experiment to be judged by agreed upon results 
        in five years;
   Initiate discussions similar to that used to set up SEMATECH 
        to determine the details of Weapon Labs management; what 
        industry wants, what the government wants.

    The Chairman. Thank you, Dr. Spencer.
    Dr. Gibbons, nice to have you here.

     STATEMENT OF DR. JOHN H. GIBBONS, PRESIDENT, RESOURCE 
                           STRATEGIES

    Dr. Gibbons. Senator, I appreciate it very much. I spent a 
little over 3 hours this morning coming 45 miles, so I think 
when I was told, why don't you retire and slow down, I did this 
morning, but not of my own volition. Thank you for letting me 
in the door. I'm sorry I'm late. I had intended to get here 
about an hour early to prepare a timeless 2-minute summary, but 
since I got here so late, it's going to be shorter and not so 
timeless.
    I think we all understand that scientific research and the 
merging of disciplines is probably the greatest hope for the 
future of any industrial country. It becomes more so with the 
passing days, and the link of that process of research and 
technology development to higher education is also a terribly 
important activity. Both of these fit, I believe the kinds of 
activities that the national laboratories and the kinds of 
resources we have there which we should be constantly 
moderating and changing to meet the new opportunities and 
needs.
    Clearly, DOE is an energy laboratory in its manifest ways, 
but energy is also about as ubiquitous an issue as we can think 
of in this world, so we need many disciplines, disciplines that 
not only are excellent, but know how to work with each other, 
speak each other's languages, focus on the same problem from 
different perspectives, as was so eloquently stated by Harold 
Varmus when he talked about the need for all kinds of science 
and engineering in order to do medicine.
    One of the things I have problems with, and you have my 
vitae before you, so you know I've been in these laboratories 
in a variety of ways, is that I've always been worried about 
the growth of layering of administrative oversight over the 
years. What began as probably a reasonable thing in the forties 
and fifties, it seems to me must be seen as more than a little 
anachronistic these days, and so we find an issue before us not 
so much of a good science and good technology coming from these 
laboratories, but the layering of administrative oversight that 
can confuse the researchers and, I believe, not be the best use 
of resources. I believe that needs continuing work. It's not as 
though it was bad, but it's getting worse all the time, because 
we're not changing with the needs.
    Another need is an increasing focus on devising 
partnerships in order to solve problems, partnerships that 
reach between the laboratories. For example, there was an 
excellent partnership developed in the DOE labs in designing 
and constructing the advanced neutron source in Oak Ridge. 
Several laboratories were deeply involved in that process, and 
it has worked beautifully by combining those resources. The 
whole is greater than the sum of the parts.
    Another example is the work between the National Renewable 
Energy Lab and Oak Ridge on biomass and energy from biomass 
resources, whereas the best of the capabilities in these two 
labs have been merged in a virtual laboratory, so the freedom 
of moving between the laboratories in terms of the division of 
the work, and the construction of solutions, is a very 
important need.
    That reflects on the way we need to think about 
administering these labs and fostering this kind of 
interaction, rather than the natural proclivity to move towards 
relative isolation one from the other. Even within DOE I get a 
sense that some parts of DOE feel that this lab is theirs, and 
that lab is someone else's, and that's not good. That's not 
productive.
    Partnerships that go beyond the work between the 
laboratories, between DOE and other Federal laboratories is 
important, and also between, of course, the DOE laboratories 
and industry. In the work we did in the nineties on the 
partnership for a new generation of vehicles the DOE labs 
formed a virtual partnership by the directors. I think it was 
six of those labs. Their people began to learn much ore 
intimately the language of their own counterparts in science 
and technology in the automobile industry, in the automotive 
industry. They began to speak each other's language and 
understand the different perspectives. That led to much more 
productive ways of both the industry and the laboratories 
working together.
    So we have an imperative for a measure of leadership and 
management that understands these emerging and growing needs in 
the way they not only run the laboratories and encourage these 
kinds of interactions, but also in the way the laboratories' 
progress is judged, and the way the capabilities and progress 
of the people is judged.
    I would only add that I think the national labs, the DOE's 
labs are extremely important. They have been time and again 
judged as being outstanding national resources, and we must be 
careful not to get so overfocused on administrative problems 
that we lose sight of those jewels that are out there that are 
constantly in need of encouragement and support.
    That means that we should hearken back to Senator Dirksen, 
who once said--Senator Dirksen said, I'm a man of principle, 
and my first principle is flexibility, so I think we should 
face the future of these laboratories' management in the same 
way. We must have principle, but also be flexible in the way we 
move to the future.
    Thank you, sir.
    [The prepared statement of Dr. Gibbons follows:]

         Prepared Statement of Dr. John H. Gibbons, President, 
                          Resource Strategies

    Mr. Chairman and Members of the Committee:
    I am pleased to appear before you today and appreciate your 
invitation for me to share my perspective on management and support of 
science and technology in the nation's interest. It has been said that 
education is the progressive discovery of one's ignorance. I've been 
involved with physics, energy, and environmental studies at various 
national laboratories for fifty years, so that amount of ``education'' 
has left me knowledgeably ignorant about the issues you are addressing. 
I won't belabor my personal record but do want to be explicit about my 
background and current connections. For your information I presently 
serve as consultant to the Lawrence Livermore National Laboratory and 
the National Renewable Energy Laboratory.
    After my Ph.D. and post-doc work in physics at Duke University, I 
joined the Oak Ridge National Lab (November '54) and enjoyed many years 
of research in nuclear structure, including many interactions with 
colleagues at Los Alamos National Laboratory, Argonne National 
Laboratory, and Brookhaven National Laboratory. Other than expected 
differences in security constraints I perceived little difference in 
the administration, quality of work, or mode of working among these 
four labs. The labs had developed a separate institutional culture that 
seemed to be semi-independent of the particular contractor/operator. I 
recall one incident at a social function in Oak Ridge where I 
challenged an official about paucity of the contractor's attention to 
the community's needs in the arts, recreation and economic 
development--whereupon he responded, ``. . . if you don't like working 
for `x' corporation then you can go find another job. . . .'' I 
instinctively responded that ``I don't work for `x' corporation, I work 
for the Oak Ridge National Laboratory.''
    This incident highlights the challenge of organizational 
management--how to be a part of the organization while also exercising 
wise management by maintaining the critical condition of being apart 
from it. Frequent change of management (philosophy, mode of 
administration, . . .) can be disruptive and counterproductive, often 
resulting in poorly performing service contracts. On the other hand, 
without enlightened and innovative management an organization can 
become stagnant and sloppy over time--especially in the absence of the 
discipline of the marketplace.
    A second theme I encountered was the sense of ``layering'' of 
administration of the labs between Agency Headquarters, Field 
Operations Offices, and lab management. I understand the original 
rationale for this way of doing business, but without clear demarcation 
of responsibility and authority I was persuaded many years ago that 
administrative streamlining remains an important opportunity.
    A third theme is that the culture of a basic research organization 
can be quite different from one engaged in advanced development and 
production. The profound success of AT&T Bell Laboratories reflects the 
power of successfully intertwining the two, but it requires special 
circumstances to enable it to work. For the U.S. Department of Energy 
and other mission-oriented federal agencies, this presents a great 
challenge: how to simultaneously do world class research relevant to 
DOE's mission, connect effectively between research and application, 
and work effectively with academia, sister labs and private industry. 
The multi-agency, public-private sector work initiated in 1993 under 
the Clinton-Gore Administration's Partnership for a New Generation of 
Vehicles (PNGV) made important strides in learning how to effectively 
address highly complex socio-technical challenges by marshalling and 
integrating the collective R&D assets toward a common national purpose. 
With the Department of Energy, the national laboratory directors formed 
a PNGV virtual partnership to maximize their contributions rather than 
focus on competing with each other for projects. Similarly, the 
division of labor among the national labs in design, development, and 
construction of the Advanced Neutron Source accelerator has been 
sensible and highly meritorious.
    A lesson from this experience is that the managers of the labs need 
to treat such collaboration as vital in making the ``whole greater than 
the sum of the parts.'' Measures of success of labs need to include 
such activities as these in addition to more traditional measures of 
efficiency and progress called for under the Government Performance and 
Results Act (GPRA).
    Mr. Chairman and Members of the Committee, I believe that science 
and technology are absolutely essential in addressing today's needs and 
providing options to enable the kind of future we seek. The various 
U.S. agencies have a rich experience in organization and management 
styles; so does the private sector. In the case of DOE, I believe that 
the different organizational modes being used-GOGO, FFRDC, GOCO, and 
Reserve Contracts to universities and industry-all have demonstrated 
successes. The choice of management model should be matched to the 
nature of the work intended to be carried out. Continuation of a 
contractor should be judged on output performance, and this inherently 
requires a long-term perspective. In all cases it is imperative to have 
periodic peer reviews, not only of the quality of R&D but also of its 
relevance to national interest.
    Finally, there are other lessons to be learned from experiences at 
government agencies such as NSF, NIH, EPA, and NASA. It is their 
collective experience as well as that of research-intensive industry 
that we should seek and apply. Different agencies require different R&D 
management structures, but there is much in common, and there is 
increasing need to integrate their work, especially in energy, health, 
the environment, and national security.
    It would be great if the U.S. Congressional Office of Technology 
Assessment were still around to help the appropriate Congressional 
committees sort this out. Sadly that is not an option. Perhaps the 
National Academies or the President's Committee of Advisors on Science 
and Technology could assist in devising a thoughtful and independent 
assessment of science and technology management. For anyone undertaking 
an assessment of this important issue, I recommend a careful reading of 
John W. Gardner's monographs on Excellence (1960) and Self-Renewal: The 
Individual and the Innovative Society (1964).
    I would be pleased to respond to your questions.
    Thank you.

    The Chairman. Thank you very much.
    Bill Schneider.

       STATEMENT OF DR. WILLIAM SCHNEIDER, JR, CHAIRMAN, 
          DEFENSE SCIENCE BOARD, DEPARTMENT OF DEFENSE

    Dr. Schneider. Thank you, Mr. Chairman, and it's a 
privilege to have an opportunity to be here. I am Chairman of 
the Defense Science Board, which was founded in 1956 as a 
Federal advisory committee, and the Defense Science Board has 
been particularly concerned about the health of the technology 
base and the institutions that support that technology base, 
and my testimony goes into some detail about some of the prior 
Defense Science Board studies, and with your permission, Mr. 
Chairman, I have three of these studies which I'd like to 
provide to the committee for use, and I'll include them with 
the full text of my testimony.
    The Chairman. We'll be glad to accept them.
    Dr. Schneider. Thank you.
    What I will focus on is more narrowly what I believe to be 
the near-term lessons from some of the DOD experience on the 
management and governance of its laboratories that might be 
pertinent to this committee's considerations of the governance 
of the DOE national laboratories.
    The cold war era division of labor between the DOD 
laboratories that serve defense needs and the laboratories of 
the nuclear weapons complex that uniquely serve that 
specialized requirement no longer reflect the reality of the 
21st century. The national security laboratory structure of the 
U.S. Government, to include those that are funded within the 
budget function 050, NASA, the DOE, and NSA laboratories and 
DOD, need to be considered in a more holistic manner to 
optimize their ability to support U.S. national security, 
rather than as individual entities of these agencies. The 
institutional barriers, especially between the Department of 
Defense and the DOE NNSA laboratories, are a particular burden 
on the ability of the national security science and technology 
sector to make the best use of the aggregate resources made 
available through appropriated funds throughout the Federal 
Government. In the category of work for others, which is the 
area where the national laboratories do work for other 
agencies, including the Department of Defense, they do nearly 
$1 billion worth of work for the Department of Defense, but my 
testimony has a number of specific examples of how this 
reflects an underutilization of the capacity of these 
laboratories, and I've suggested some specific measures for 
reform, which I won't go into now.
    I would like, however, to draw some of the lessons DOD has 
learned, particularly about laboratory governance, that may be 
pertinent to modernizing the governance in the national 
laboratories. The DOD provides R&D services to the military 
departments and defense-wide institutions through a variety of 
institutional forums, including civil service laboratories, 
federally funded research and development centers, university 
affiliated research centers, government-owned contractor-
operated, and many others. Many of these have been highly 
successful for decades, while others have enjoyed a period of 
success followed by a decline in performance over time. For 
purposes of illustration, I will focus on one form of 
institutional governance, FFRDC's, and some of the observations 
that have emerged from the DOD's experience.
    The Federal Government currently supports 36 FFRDC's in the 
field of aviation, defense, energy, health, space, and tax 
administration. The DOD sponsors nine of these FFRDC's. These 
organizations support the DOD in scientific research, systems 
development and acquisition, and related tasks. They are 
organized as independent, not-for-profit entities.
    A defense Science Board Study of the FFRDC's in 1997 
affirmed their value to national defense, and identified four 
characteristics that accounted for their success. First, they 
have unique competence and quality, second, the FFRDC's are 
closely integrated with their sponsor, third, they adhere to 
strict constraints to minimize institutional conflicts of 
interest and to promote objectivity and to ensure independence 
from interests that may conflict with sponsor interests, and 
fourth, the FFRDC's maintain a continuity of relationships 
sufficient to establish a corporate memory in topics of 
critical interest to the sponsor.
    Two of the nine FFRDC's are also associated with a 
university. One of these university-affiliated FFRDC's, MIT's 
Lincoln Laboratory, which Vic Reis mentioned, is among the 
oldest of the FFRDC's, and recently celebrated the 50th 
anniversary of its founding. In this respect, it is perhaps the 
closest parallel to the NNSA labs that are associated with the 
university, in this case the University of California 
laboratories of Los Alamos and Lawrence Livermore Laboratory.
    There are two important distinctions between the DOD 
experience with university-affiliated laboratory governance and 
the DOE/NSA practice pertinent to this committee's inquiry. The 
first pertains to the relationship between the laboratory and 
the user. The linkage between Lincoln Laboratory and the user 
committee is both direct and very close. Vic Reis commented on 
the closeness of this in the supervision from their advisory 
body.
    There is very little intermediation and micromanagement by 
the administrative apparatus of the Department of Defense 
between the laboratory and the users of its services. The 
university environment provides an environment where human 
capital can be developed and accessed by the laboratory, 
assuring a strong cadre of professionals conversant with the 
most advanced technology in the laboratory's sphere of 
responsibility as an FFRDC. A user committee, Lincoln 
Laboratory's Joint Advisory Committee, provides close coupling 
to the user.
    The second aspect is the relationship between the 
laboratory and the university itself. Lincoln Laboratory has an 
extremely close relationship with the university, in this case 
MIT, in physical, intellectual, financial and managerial terms. 
This close relationship creates a virtuous circle that produces 
a high quality professional staff and intellectual output as 
well as close supervision of the laboratory by the university 
on fiscal and safety matters. The DOD practice contrasts 
sharply with the two DOD NNSA university-affiliated national 
laboratories.
    Extensive fiscal, contractual, security, and administrative 
requirements of both agencies are cascaded down to the 
laboratories, often overwhelming the university presence. The 
relationship for the ultimate user is indirect, and filtered 
through both organizations. This practice diminishes the 
benefits of the university affiliation, since day-to-day 
relationships with the two government agencies dominates the 
process of executing the contract with the university.
    Moreover, the dominant role of the two agencies and day-to-
day operations of the two laboratories prevails over their 
relationship with the ultimate users of their scientific and 
technical services. As a result, the national laboratories are 
increasingly isolated, rather than integrated with the user. 
These circumstances produce a very slow rate of adaptation by 
the laboratories to the needs of the user. In an environment 
where user requirements are subject to fast-breaking major 
policy changes such as the implementation of the nuclear 
posture review, this slow pace of adaptation is not helpful to 
the national leadership.
    The nature of the managerial arrangements with the 
university-affiliated national laboratories is compounded by 
the pricing practices of the laboratory's work for others that 
limits the abilities of the laboratory users, both the 
Department of Defense and the intelligence community, to 
rationalize their own science and technical effort. On this 
point, there is some good news. It is reported that some 
significant concessions on the pricing of laboratory services 
have been made to the Department of Homeland Security in its 
use of the national laboratories for science and technical 
research, though the relationship to the user remains indirect.
    I believe in the short term there is substantial scope to 
improve the management of the laboratories and yet retain their 
university affiliation. In the longer term, I think we need to 
consider perhaps some more sustainable relationship between the 
national laboratories and the defense user, but I go into some 
greater length in my testimony on that point.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Schneider follows:]

      Prepared Statement of Dr. William Schneider, Jr., Chairman, 
              Defense Science Board, Department of Defense

    Mr. Chairman and Members of the Committee:
    It is a privilege to have an opportunity to appear before this 
subcommittee. I am William Schneider, Jr., Chairman of the Defense 
Science Board (DSB) in the Department of Defense. Founded in 1956, the 
DSB is a Federal advisory committee that advises the Secretary of 
Defense on matters of science and technology. Issues pertaining to the 
health of the technology base and the scientific and engineering 
institutions that maintain that technology base have been an enduring 
interest of the DSB. The ability of the nation's scientific and 
engineering institutions, especially those primarily involved in 
supporting the U.S. government's national security function, are 
crucially dependent on the structure of governance in which they 
operate. The U.S. National Laboratories operated by the National 
Nuclear Security Administration (NNSA) and the Department of Energy 
(DoE), and especially the two nuclear weapon design laboratories (Los 
Alamos and Lawrence Livermore National Laboratories) face immediate 
issues of governance as the underlying model--a university-affiliated 
government-owned, contractor operated (GOCO) entity--has become a 
subject of a debate. In the longer term, the question of governance of 
the laboratories and the associated industrial complex supporting the 
nation's nuclear weapons program may need to be considered in light of 
evolving role of nuclear weapons in the U.S. national security 
strategy.
    In my remarks, I will address four issues pertinent to 
considerations of governance both with respect to immediate as well as 
long-term issues before the U.S. government derived from observation of 
laboratory governance in the DoD.

   Changes in the sources of science and technology for 
        national defense.
   Recent studies by the DSB on the modernization of the DoD 
        laboratories.
   Implications for changes in near-term NNSA laboratory 
        governance.
   Longer term implications for governance of the nuclear 
        weapons complex.

 CHANGES IN THE SOURCES OF SCIENCE AND TECHNOLOGY FOR NATIONAL DEFENSE

    The Defense Science Board conducted a study of the impact of the 
globalization of technology on national defense in 1999. A copy of this 
study, Final Report of the Defense Science Board Task Force on 
Globalization and Security, is provided to the Subcommittee for its 
use. This study took note of changes underway for more than a decade in 
the source of the technologies that produce superior military 
capabilities for the Department of Defense. The technologies that 
create the enabling features of advanced military capabilities are now 
emerging primarily from the civil sector, especially in information 
technology, materials, and software engineering. In the past, 
technologies used for military applications were developed in secret, 
and integrated into modern weapon systems by the defense industrial 
sector. In the 1950s and '60s, the defense industrial sector was often 
embedded in conglomerate industrial firms, hence contributing to a 
``trickle down'' approach to the transfer of defense technology to the 
civil sector.
    During the 1980s and '90s, technologies developed in the civil 
sector for civil applications in information technology, materials, 
software engineering and other disciplines, when adapted for military 
applications began to produce new and revolutionary gains in military 
performance. These new capabilities in turn became the enabling factor 
that permitted the use of new concepts of operation built around weapon 
systems operating in a network rather than independently that became 
such an important contributor to coalition success in the recent 
Afghanistan and Iraq campaigns.
    During the past two decades, the defense sector became of user of 
diminishing economic importance to the advanced technology civil 
sector, contributing to the growing divergence between the civil and 
the defense sectors. The latter became increasing specialized in the 
defense market, while institutional, financial, and legal barriers to 
entry abetted by DoD acquisition practices discouraged direct civil 
sector participation in the defense market.
    The defense industry's role has become increasingly focused on 
creating unique military advantages for the U.S. defense establishment 
from technologies that are, with but a few exceptions, are largely 
derived from a global technology base that is accessible to ally and 
adversary alike. The defense industrial sector must apply its skills in 
systems engineering and integration to produce superior military 
capabilities.
    The underlying change in the sources of technology has converged 
with the need to recognize the impact of the proliferation of advanced 
technology and the changes in international security affairs since the 
collapse of the Soviet state in 1991. The centrifugal forces sweeping 
international politics that have affected much of the world in the past 
decade combined with nearly universal access to advanced technology 
since the end of the Cold War have produced an environment where the 
U.S. can no longer forecast who its adversaries will be. As a result, 
the U.S. cannot optimize its military posture against its most likely 
adversaries as it could do throughout most of its history. For the 21st 
century, it must transform its military establishment to one that is 
composed of highly adaptive and flexible forces able to be reconfigured 
without recapitalization to meet future needs. The military 
applications of science and technology will be crucial to the prospects 
for our diplomatic, economic, and military future. More recently, the 
role of S&T in homeland security and defense have added to the urgency 
of transformation. The government's S&T infrastructure needs to be 
modernized to incorporate the fundamental changes in the international 
environment, particularly that portion directed primarily at the 
national security function.

 RECENT STUDIES BY THE DSB ON THE MODERNIZATION OF THE DOD LABORATORIES

    The application of science and technology for national defense has 
been a core concern of the DSB since its founding in the 1950s. During 
the past decade, the DSB has conducted a number of studies concerning 
various aspects of the science and technology function in the DoD. In 
Section 913 of the National Defense Authorization Act for Fiscal Year 
2000, the DoD was directed to conduct a study of defense laboratories 
and test facilities. The DSB was involved in supporting the Department 
in meeting that requirement. The DSB produced a report that assessed 
and summarized its studies over the past decade on the subject. The 
study was led by a senior member of the DSB, Walter Morrow of MIT's 
Lincoln Laboratory. Subsequent to Dr. Morrow's report, the DSB's 2001 
Summer Study addressed the need to refocus the DoD science and 
technology function to meet the needs of transformation. Copies of Dr. 
Morrow's Task Force report, Report of the DSB Task Force on Efficient 
Utilization of Defense Laboratories (2000), and the Defense Science 
Board 2001 Summer Study on Defense Science and Technology are provided 
for the subcommittee's use.
    I will not attempt to reproduce the DSB's observations and 
recommendations here, but will take this opportunity to focus on one 
aspect of the problem--human capital--that is a cross-cutting issue 
between the DoD and NNSA laboratories, and goes directly to the issue 
of governance. The problem of recruiting and managing scientific and 
technical personnel in the Federal government is a long-term problem. 
Apart from a few exceptional institutions within the DoD, maintaining 
professional excellence in scientific and technical fields is difficult 
because government service is not competitive with other career choices 
in many circumstances. The DSB has recommended a number of reforms, but 
many are difficult to implement in a governmental setting.
    Some are, however, quite practical. For example, propagating the 
recruitment practice of DARPA which is able to avoid most of the 
bureaucratic impediments in recruiting scientists and engineers from 
the private sector is a relatively simple option to implement. Among 
the most successful S&T institutions in the defense establishment are 
those closely affiliated with external organizations including 
universities and other centers of excellence. As will be discussed 
elsewhere in my testimony, such an environment can provide a 
particularly supportive professional environment for S&T personnel--
even in a governmental or quasi-governmental setting.

      IMPLICATIONS FOR CHANGES IN NEAR-TERM LABORATORY GOVERNANCE

    The Cold War-era division of labor between DoD laboratories that 
serve defense needs, and the laboratories of the nuclear weapons 
complex that uniquely serve the this specialized requirement no longer 
reflect the reality of 21st century national defense needs. As 
previously noted, the human capital dimension of the nation's science 
and technology effort is the decisive factor in its success. The 
difficulties facing the U.S. government in general, and the DoD in 
particular in maintaining the its scientific and technical expertise 
has been a preoccupation of the DSB for many years, and proposals to 
mitigate the decline in the S&T competence in the DoD have figured 
prominently in DSB recommendations.
    The national security laboratory structure of the U.S. government 
to include those funded within Budget Function 050--NASA, DoE/NNSA, and 
the DoD--need to be considered in a ``holistic'' manner to optimize 
their ability to support U.S. national security rather than as entities 
of individual agencies. The institutional barriers, especially between 
the DoD and DoE/NNSA laboratories are a particular burden on ability of 
the national security science and technology sector to make best use of 
the aggregate resources made available through appropriated funds.
    The DoE/NNSA national laboratories are an important, but 
underutilized source of S&T competence in the national security sector. 
The manner in which the laboratories are governed is an important 
source of this underutilization. The national laboratories, especially 
those involved in the nuclear design and weaponization functions, Los 
Alamos, Lawrence Livermore, and Sandia are thought to be ``science'' 
laboratories when in fact they are both science and applied engineering 
laboratories. This orientation reflects the fact that the ``science'' 
surrounding nuclear weapons is highly empirical rather than 
theoretical. This characteristic has made it necessary for the three 
nuclear weapon design and weaponization laboratories to develop an 
extraordinary capability for applied engineering in addition to their 
core competence in fundamental science. The capability of these 
laboratories--both human and material--to support the Department of 
Defense and the Intelligence Community, and more recently, the 
Department of Homeland Security is widely recognized.
    Under the category of ``work for others'' the three laboratories 
perform nearly $1 billion annually in S&T services for the DoD and IC. 
Nevertheless, the effective utilization of these laboratories leaves 
much to be desired.

          1. The manner in which ``work for others'' is procured by the 
        DoD and the IC is inefficient because there is no opportunity 
        to rationalize user requirements with the capabilities of the 
        NNSA laboratories. Instead, the ``work for others'' is 
        accomplished by episodic arrangements between the DoD/IC and 
        the national laboratories during the course of a given fiscal 
        year. In many cases these arrangements reflect emerging or 
        unanticipated the needs of the DoD and IC to acquire the 
        services of individual scientific and engineering specialists 
        to supplement in-house capabilities. The process is repeated 
        anew at the start of the fiscal year. These practices do not 
        permit the efficient allocation of S&T services and 
        establishing priorities to meet DoD and IC requirements, and 
        undermines effective S&T resource use in the national 
        laboratories.
          2. The cost structure of the national laboratories does not 
        differ significantly from that of the DoD or Intelligence 
        Community. Nevertheless, interagency pricing practices created 
        by the intermediation of the DoE and NNSA cause services 
        provided to the DoD and the IC from the national laboratories 
        to be significantly more costly than either the DoD or the 
        Intelligence Community. These pricing practices governing the 
        acquisition of personnel and services from the national 
        laboratories inhibit the rational allocation of national 
        security resources within the Federal government.
          3. In its 2001 Summer Study, the DSB identified four 
        transformational challenges biological warfare defense, finding 
        difficult targets, making timely and accurate decisions, and 
        enabling high-risk operations. The national laboratories are at 
        best, marginal participants in these programs despite their 
        formidable capacity to contribute to them. Similarly, other 
        important programs such developing effective defenses against 
        cruise and ballistic missiles do not have the participation 
        from the national laboratories proportional to their underlying 
        strength. This is so for institutional, not scientific or 
        technical reasons.

    There are some lessons to be learned from DoD experience in 
laboratory governance that may be pertinent to modernizing governance 
in the national laboratories. The DoD provides R&D services to the 
Military Departments and defense-wide institutions through a variety of 
institutional forms including civil service laboratories, Federally 
Funded Research and Development Centers (FFRDCs), University Affiliated 
Research Centers (UARCs), Government-owned/Contractor-Operated (GOCO), 
and many others. Many of these have been highly successful for decades, 
while others have enjoyed a period of success followed by a decline in 
performance over time. For purposes of illustration, I will focus on 
one form of institutional governance--FFRDCs and some of the 
observations that have emerged from DoD's experience.
    The Federal government currently supports 36 FFRDCs in the fields 
of aviation, defense, energy, health, space, and tax administration. 
The DoD sponsors nine of these FFRDCs. These organizations support the 
DoD in scientific research, systems development, and acquisition, and 
related tasks. They are organized as independent non-for-profit 
entities. A DSB study of the FFRDCs in 1997 affirmed their value to 
national defense, and identified four characteristics that accounted 
for their success:

   They have unique competence and quality.
   The FFRDCs are closely integrated with their sponsor.
   They adhere to strict constraints to minimize institutional 
        conflicts of interest to promote objectivity, and to ensure 
        independence from interests that may conflict with sponsor 
        interests.
   The FFRDCs maintain a continuity of relationship sufficient 
        to establish ``corporate memory'' in topics of critical 
        interest to the sponsor.

    Two of the nine DoD FFRDCs are also associated with a university. 
One of these university-affiliated FFRDCs, MIT's Lincoln Laboratory is 
among the oldest of the FFRDCs, and recently celebrated the fiftieth 
anniversary of its founding. In this respect, it is perhaps the closest 
parallel to the NNSA laboratories that are associated with a university 
(the University of California in the case of the Los Alamos and 
Lawrence Livermore National Laboratories).
    There are two important distinctions between the DoD experience 
with university-affiliated laboratory governance and DoE/NNSA practice 
pertinent to the committee's inquiry. The first pertains to the 
relationship between the laboratory and the user. The linkage between 
Lincoln Laboratory and the user committee is both direct and very 
close. There is very little intermediation and micromanagement by the 
administrative apparatus of the Department of Defense between the 
laboratory and the users of its services. The university environment 
provides an environment where human capital can be developed and 
accessed by the laboratory ensuring a strong cadre of highly trained 
professionals conversant with the most advanced technology in the 
laboratory's areas of responsibility as an FFRDC.
    A ``user committee''--Lincoln Laboratory's Joint Advisory 
Committee--includes the Director of Defense Research and Engineering as 
its Chairman, with membership including service Assistant Secretaries 
for R&D as well as the Directors of DARPA, the NRO, and MDA. This close 
coupling with the user at the leadership level provides timely insight, 
guidance, and oversight to the Laboratory.
    The second is the relationship with the university itself. Lincoln 
Laboratory has an extremely close relationship with the University (in 
this case, MIT) in physical, intellectual, financial, and managerial 
terms. This close relationship creates a ``virtuous circle'' that 
produces a high quality professional staff and intellectual output, as 
well as close supervision of the laboratory by the University on fiscal 
and safety matters.
    The DoD practice contrasts sharply with the two DoE/NNSA 
university-affiliated national laboratories; Los Alamos and Lawrence 
Livermore. Extensive fiscal, contractual, security, and administrative 
requirements of both agencies are cascaded down to the laboratories, 
often overwhelming the university presence. The relationship with the 
ultimate user is indirect and filtered through both organizations. This 
practice diminishes the benefits of university affiliation since the 
day-to-day relationship with two government agencies dominates the 
process of executing the contract with the university.
    Moreover, the dominant role of the two agencies in the day-to-day 
operations of the two laboratories prevails over their relationship 
with the ultimate users of their scientific and technical services. As 
a result, the national laboratories are increasingly isolated rather 
than integrated with the user. These circumstances produce a very slow 
rate of adaptation by the laboratories to the needs of the user. In an 
environment where user requirements are subject to fast-breaking major 
policy changes (e.g. the implementation of the Nuclear Posture Review), 
this slow pace of adaptation is not helpful to the national leadership.
    The nature of the managerial arrangements for the university-
affiliated national laboratories is compounded by the pricing process 
for laboratory ``work for others'' that limits the ability of the 
laboratory users (the DoD and the IC) to rationalize their own S&T 
effort. On this point there is some good news. It is reported that some 
significant concessions on pricing of laboratory services have been 
made to the Department of Homeland Security in its use of the national 
laboratories for S&T research though the relationship with the user 
remains indirect.
 longer term implications for governance of the nuclear weapons complex
    The governance of the nuclear weapons complex is an important long-
term issue. In my view, the current structure of a semi-autonomous 
entity levitated between two cabinet departments is not a sustainable 
approach to the management of the nuclear weapons function. When the 
Congress created the current structure, the immediate post-Cold War 
euphoria relegated the nuclear weapons responsibilities of the national 
laboratories to the rather narrow preservationist role of ``stockpile 
stewardship.'' The diagnostic and experimental facilities created to 
support the ``stockpile stewardship'' mission have much broader 
application to national security than is implied by their application 
to the stewardship role.
    National policy--as reflected in the President's The National 
Security Strategy of the United States (September 2002), National 
Strategy to Combat Weapons of Mass Destruction (December 2002)--has 
been reinforced by the Nuclear Posture Review (January 2002). These 
documents significant broaden the scope for the national laboratories 
in support of the national security, and more recently, the homeland 
security function. Although the role of nuclear weapons has changed 
drastically since the end of the Cold War, a strictly preservationist 
posture is insufficient to meet national needs. Two studies are 
underway this summer--including one by the U.S. Strategic Command, and 
a separate, but related effort by the Defense Science Board--will help 
to further understanding of how the nation's nuclear weapons posture 
could evolve to meet policy requirements. However, it is possible to 
deduce several implications from the characteristics of the change in 
national policy that are likely to require revisiting the governance of 
the national laboratories, and the associated industrial complex 
supporting the nation's nuclear weapons program.

          1. Nuclear weapons are likely to retain a vital, but much 
        narrower role in U.S. national security policy than was the 
        case during the Cold War.
          2. Cold War era concepts and metrics that supported the 
        calculus of deterrence in the Soviet-American competition may 
        not be sufficient in all cases to cope with the phenomena of 
        the widespread proliferation of weapons of mass destruction and 
        their means of delivery.
          3. The instruments deterrence or dissuasion of the threat or 
        use of weapons of mass destruction (including both nuclear and 
        advanced conventional weapons) are likely to be more integrated 
        with other diplomatic and advanced conventional national 
        defense capabilities than was the case during the Cold War. The 
        integration of the nation's post-Cold War nuclear posture is 
        aimed a providing the President with a more abundant set of 
        responses to threats than existed in the past.
          4. The legacy Cold War nuclear weapons stockpile--even if 
        their underlying safety and reliability can be preserved--may 
        be insufficient to meet 21st century policy requirements.
          5. The nation's nuclear weapons complex must be no less 
        flexible, responsive and adaptive to unknown future threats 
        than is the balance of the national defense establishment.

    These circumstances suggest that the nuclear weapons complex will 
need to be much closely coupled and more responsive to the user (the 
DoD, the Combatant Commanders, and the Military Departments) than was 
the case in the past. However, it seems unlikely that the existing 
institutional arrangements are unlikely to produce a national 
laboratory and manufacturing complex that is responsive to the speed of 
adaptation required to meet 21st century security threats. Addressing 
this issue here is beyond the scope of this hearing. However I believe 
it to be important that efforts to resolve near-term issues of 
governance for the national laboratories be carried out with a view 
toward achieving an effective and sustainable system of governance for 
the laboratories in the long-term.
    I will be pleased to respond to questions from the Committee.

    The Chairman. Thank you very much. Senators, let's proceed 
now to questions. I'll have a few and yield to Senator Bingaman 
quickly.
    Mr. Reis, one of the primary sources of the idea for the 
creation of the NNSA, and you worked closely--in fact, it is 
thought that you were removed by then-Secretary for your role 
in working to create the NNSA. I have a very serious concern 
now. We've been in existence for a short while, that is, NNSA, 
but I recall our meeting several years ago when the National 
Nuclear Security Administration was crafted. You provide 
suggestions. I thought they were good.
    Our goal was to improve the governance of the national 
security programs by simplifying rules, simplifying regulations 
and reporting structures of the Department. We tried to address 
the frequent disruptions of DOE because we talked frequently 
about the dysfunctional bureaucracy that was there for various 
reasons by freeing the NNSA from many of these constraints. We 
thought we were succeeding in creating the NNSA as a 
semiautonomous entity, but I've been concerned that the 
progress toward that original vision has been rather slow.
    I realize that the formation of the NNSA has hastened your 
departure, but I wonder if you can comment from your 
perspective on the extent to which the current operations match 
the vision that was crafted for it.
    Dr. Reis. Thank you, Mr. Chairman.
    The Chairman. Would you care to do that?
    Dr. Reis. Sure. I'll give it a shot. I should say I've 
enjoyed my time since I've left the Department of Energy quite 
a bit, and I hope it's been fairly productive as well. You 
might want to discuss that a little bit later, but these things 
take a fair amount of time, and frequently they take more time 
than one would hope would be.
    In terms of the NNSA moving towards a vision that you and I 
and, I suspect, Senator Bingaman as well, and some of the 
members on the committee shared when I helped the creation of 
that. As I recall, it was a 99 to 1 vote in the Senate, 
creating NNSA, and thinking about that, you really have to look 
at the product that's coming out at the other end.
    I recently had a chance to visit, for one reason or 
another, all three laboratories, Sandia, I had an opportunity 
to review what they're doing in homeland security, and it 
really was rather spectacular. I had an opportunity to visit 
the National Ignition Facility a few months ago, and they're 
just moving along just like gangbusters, and just several weeks 
ago I chaired the advisory panel on weapons physics at Los 
Alamos.
    And Los Alamos in particular, despite the fire, and despite 
the concerns about security, and despite the auditing issues, 
are just moving along extremely well in really understanding 
what the problems are that one has to deal with in stockpile 
stewardship in terms of connecting the science, if you will, to 
our understanding of nuclear weapons and moving ahead.
    So from that perspective, in terms of work that's actually 
getting done in the weapons program by those laboratories, 
despite everything, they're doing extraordinarily well in some 
very, very rocky times, which tells me that things are moving 
along, perhaps if you dig down, a little better, perhaps better 
than the press would necessarily have you believe.
    I also felt that as we had talked, that one of the reasons 
to have a semiautonomous agency is that you get the type of 
leadership going into those organizations that make sense at 
the top. Certainly John Gordon and now Linton Brooks I think 
have provided that type of leadership. They're really first 
rate, really first rate individuals, and the people right below 
them. I think Edward Beckner and Paul Longsworth, I mean, these 
are people who really understand what the problem is, but it 
takes time.
    Part of the reasons you're having these hearings, I think, 
and some of the discussions I think that my fellow testifiers 
have said is that you're dealing with a large, complex 
organization, and it just takes longer than one would hope, I 
think, so to answer your question, has the vision succeeded 
yet, I'd say the part that really counts in the sense of, are 
they working well, are they working better at the laboratory, I 
think the answer is yes, they're doing a very, very good job.
    Has the bureaucracy yet come around to it? I don't think it 
has yet, but I think the vector is pointing in the right 
direction, and again I've been impressed at the leadership and 
what they're trying to do.
    The Chairman. Well, Mr. Reis, let me just say, Dr. Gibbons 
mentioned some things that just popped out in my mind that 
existed when we decided to go with the NNSA, and I still see 
them. He used the word, layering.
    One of the problems with our laboratories is not only 
layering seems to be a central consequence of arrangements we 
have, but every time we've got a problem, a layer seems to me 
to be created. I used to call them boxes. You know, you get 
into a security issue and a new box is created, and they put it 
on there on a map, and they call it the security box. We 
thought we were getting rid of layering, Dr. Gibbons, when we 
did the NNSA.
    And so let me just close this question, Mr. Reis, and say 
that my own view is that NNSA requires that: one, that the man 
that heads it is extremely competent. I won't argue with you 
that perhaps we have that person, but secondly, it seems to me 
it requires a Secretary that is willing to cut the umbilical 
cord and let the NNSA run.
    I almost thought of it on some occasions as, if they can't 
get it broken, where the NNSA is running on its own, they may 
be ought to move out of the Department of Energy and physically 
get out of there and open their own headquarters. Secretaries 
don't like that. They don't even like you to think of it. 
They're supposed to be right there, with their arms around 
them, as they've always been.
    Do you have an observation? Am I right in what we ought to 
be looking for, and will that ever occur, unless and until a 
Secretary is truly willing to say, it's not mine any more?
    Dr. Reis. I think it's a question of what do you mean by 
mine?
    The Chairman. I agree.
    Dr. Reis. I mean, I was the Director of the Defense 
Advanced Research Project Agency, DARPA, within the Department 
of Defense it's always recognized as one of the more successful 
organizations. I can tell you privately, privately or now I can 
tell you what my instructions were when I took over that job. 
It was during a time of some controversy. At the time, Deputy 
Secretary of Defense Atwood said to me, he said, Vic, you can 
run it, do anything you want, just stay out of the newspapers.
    Now, I tried to do that, but what it really represented was 
that there was a close bond between myself and the Deputy 
Secretary and then the Secretary of Defense, now our Vice 
President Dick Cheney, and we would meet once a month and we'd 
discuss a few things, and that was about it. There was very 
little bureaucratic management. It was a very different 
operation. We didn't have a lot of laboratories to run, we 
didn't have to worry about a lot of safety concerns, but you 
can do it.
    NOAA, you know, is another example of an embedded agency 
within a large organization, but it requires--and I get back to 
Sig Hecker's testimony, it really requires a level of trust 
that the Secretary can come in, whoever that Secretary may be, 
and look to the Director of the NNSA and say, it's yours, you 
run it, let me know what help I can give you, not here's how 
you basically have to run it.
    But you're dealing with a Department of Energy that is, 
after some 30 years is still trying to basically work its 
situations--I think Dr. Gibbons gave some success stories.
    You know, when I was in the Department of Defense, 
everybody in the Department of Defense knew what they were 
doing. I mean, they knew what their mission was, whether they 
were doing family medical supplies or special operations. You 
don't have that yet in the Department of Energy, and when you 
have that, I believe, when that's part of it, you'll start to 
develop that trust within the Secretary--you know, within the 
Secretaries, within the Congress that says, okay, you know, we 
trust you, you're the man, the woman, as the case may be, 
here's your mission, we agree with that mission, come back and 
let us know what you're doing.
    The two specific examples I gave, and some of the other 
examples that some of the people gave, shows you how that trust 
basically can be developed. If the trust is there, the 
oversight melts away. I mean, it's very hard to remove all 
those boxes. What it requires is people doing their job on a 
day-to-day basis, and that oversight just melts away over time, 
and we're just starting to move towards that.
    The Chairman. Senator Bingaman.
    Senator Bingaman. Let me just ask a very general question 
here to start. It seems to me the focus here in Congress, and 
generally in the country, to the extent people think about 
management of the labs, they think of how do we effectively, 
efficiently, competently be sure the labs do what they are 
assigned to do, carry out their missions without any security 
lapses, without losing any hard drives, without getting in the 
newspaper, and that's sort of the focus of all of the 
management issues.
    It strikes me that the more useful focus would be, how do 
you ensure that the talents and capabilities of these 
laboratories are allowed to feed into and serve our national 
interests most effectively, and how do we structure the rest of 
government to benefit from the scientific and technological 
advancements that are possible at the labs. It's sort of a 
different perspective, and a very general question, but it 
strikes me that all of the management oversight, and layers 
upon layers of oversight, and different oversight boards, are 
all intended to just be sure no one makes a mistake, and that's 
the wrong focus. That's a very short-sighted focus, it seems to 
me.
    Dr. Gibbons, do you have any thoughts on any of that?
    Dr. Gibbons. Just that I agree with you entirely, Senator, 
one has to have an operation that's run without falling over 
itself in terms of administrative procedures, but it seems to 
me the real challenge for leadership in both the oversight from 
external review committees and the like and also the internal 
leadership of the labs, is to keep the work of the people in 
the context of overall national interests and national 
objectives. It's a little easier to do this if you have a well-
defined, sharply defined mission, as we do more so in DOD than 
we do in DOE.
    A lot of the work in the DOE labs has to do with trying to 
understand how the world works, not how to do the sorts of 
things one has to do in defense, so it seems to me that what's 
imperative on top of good, traditional management procedures is 
a capability of keeping the laboratories' professional workers, 
all the workers fully understanding and appreciative of the 
context of their work in terms of national interest, and that 
will hopefully help draw these labs together so they share and 
cooperative and work together, rather than tend to move off 
into separate universes, and it seems to me that's the great 
challenge, is leadership now within the laboratories.
    Senator Bingaman. Let me bring this down to a real 
specific, Dr. Gibbons.
    When you were Director of the Office of Technology 
Assessment's Life Sciences Division back in 1983, you directed 
a study of the polygraph as a tool for the widespread screening 
of employees. Last year, as a result of a congressional 
request, we had the National Academy of Sciences update that 
review, and look at DOE's use of the polygraph to screen about 
16,000 agency and contractor employees, and as I read their 
report, they concluded that although there may be some 
legitimate role for polygraphs in event-specific 
investigations, they could not find any justification or valid 
use of the polygraph as a screening device the way it's being 
used. Do you have any thoughts on that general issue?
    Dr. Gibbons. Senator, I was not the Director of the Health 
Division, but I was Director of the OTA at the time, and I was 
pleased at the work we did, which was early on in terms of 
polygraphs, mainly their applicability not so much in terms of 
criminal investigations, where you know a lot about the 
situation and the individual, but in terms of their 
applicability to screening, and the work we did, which was a 
relatively brief study, showed that we, the Nation, knew at 
that point almost nothing about its viability for broad 
screening, and what worried us at OTA was that there was a move 
afoot to do enormously broad screening as a means of filtering 
potential employees in the defense and intelligence sectors. 
Indeed, our concern was that one might get fooled by this kind 
of procedure, and have some undesirable people make it through 
that screen and therefore give us a lot of problems.
    That was in the early eighties, early eighties I believe, 
that we did that study. I see nothing today that invalidates 
those conclusions, and that gave me therefore great concern, 
and I believe the Academy of Sciences updated study is more or 
less in agreement with that early study. That's why I have a 
great deal of concern about the intended use of polygraphs as a 
screening thing for DOE. It honestly strikes me as more a 
political response to a problem than an analytical response to 
a problem.
    Senator Bingaman. Thank you very much.
    Dr. Spencer, your testimony seems to imply that you do not 
think universities are well-suited to manage laboratories. Am I 
reading that correctly and, if so, did you want to elaborate on 
that view?
    Dr. Spencer. I don't think the question is they're not 
well-suited. I think the University of California did a good 
job of managing the two weapons laboratories for several 
decades after the formation of Los Alamos in the 1940's. I 
think it pertains to the question you raised just a moment ago, 
and that is, focusing on what these laboratories need to be 
doing. I believe the mission for the three weapons laboratories 
is very clear. It's the safety, security, and reliability of 
our current stockpile without nuclear testing. I think that's a 
very clear mission.
    The problem that we're getting into is one that you raised. 
We're not focusing on meeting that mission, but we're 
responding to innumerable requests which often cascade down 
through the organization so that the time of the individuals in 
those laboratories today is taken up with audits and oversight 
and other issues that are not pertaining to the management 
issue.
    The difference between the university or a national 
laboratory focusing on those objectives in business is, in 
business if you don't do it, you're out of business. If you 
don't focus on what your job is, where the market is, what your 
customers want, you don't exist after a short time, and in a 
defense laboratory, or a DOE laboratory, or a university, that 
doesn't happen, and so I think that business is better 
qualified today, has the experience, and can focus on what 
needs to be done to meet objectives than universities or other 
management organizations would have for these laboratories.
    I think that in addition, if you look at a business, 
generally you've got, if it's a good business, well-managed, 
it's got an independent board, and let me give you an example, 
one of two which I personally was involved with, and I'm not 
happy with the way it was done, but if you look at IBM in the 
late eighties and early nineties, when they began to suffer 
from all of the problems of focusing on central computing, 
while PC's were taking over the world, the board recognized 
that the management at IBM was not doing the job they were 
supposed to, and they removed Mr. Akers. Now, if you had asked 
me in 1990, when they brought a cookie guy in to run IBM, I 
would have said, it's not going to succeed. However, it was a 
major, major success for them.
    On the other hand, my old company, Xerox, had a rubber 
stamp board, one individual sitting in the chairman, president, 
and CEO job, and so there was no one to blow the whistle on the 
company when it began to get into trouble.
    You can have good boards and bad boards, good business and 
bad business. I think there are some simple guidelines on how 
to choose ones that can do the job the way it should, and to 
focus on what the objectives of the organization should be. I 
would think you've got a really excellent opportunity now, as 
you think about competing the management position for Los 
Alamos and whatever you decide to do about Livermore to run an 
experiment in exactly that.
    Find a way to attract the very best corporation possible, 
or perhaps a group of corporations to manage this activity, 
choose a Director that--and there's some good models from early 
Directors at Los Alamos, at Livermore, and at Sandia, and have 
the oversight performed by an independent board with a set of 
objectives that they're going to be measured against not 
whether they met certain criteria each day, or each week that 
an oversight board would, that currently oversight boards are 
looking to.
    I think you've got an opportunity to do that and see 
whether you can set up an entirely new model for Government-
owned, corporate operated facilities.
    Senator Bingaman. Thank you very much.
    The Chairman. Thank you. Thank you very much, Doctor.
    Senator Alexander.
    Senator Alexander. Dr. Spencer, the oversight board would 
not be the board of the corporation, it would be a new entity?
    Dr. Spencer. I would think, Senator, that the oversight 
board should be chosen very similar to a corporate board would 
be, in which it would report either back to the Senate, back to 
Congress, or to the Department.
    Senator Alexander. And who would appoint it?
    Dr. Spencer. Well, I think the shareholders in these 
laboratories should have a responsibility for vetoing that and 
perhaps for identifying that board.
    Senator Alexander. And the shareholders are?
    Dr. Spencer. The people of the United States, represented 
by the people here in Washington who oversee that 
responsibility.
    Senator Alexander. I'm not sure that the political process 
has distinguished itself in appointing highly qualified board 
members.
    Dr. Spencer. I would agree with that, and I do not believe 
it should be the political process that chooses them. However--
--
    Senator Alexander. But who would choose them?
    Dr. Spencer. I think the management of that company----
    Senator Alexander. Exactly who? Oh, the company itself 
would choose them.
    Dr. Spencer. Would choose them, but I believe they should 
not be members of that company.
    Senator Alexander. So if Lockheed Martin were running Oak 
Ridge, Lockheed Martin would pick a separate oversight board?
    Dr. Spencer. That's right, but if they're not independent, 
I think you have the responsibility of saying, those who are 
not independent directors. Somebody has to decide.
    Senator Alexander. The Senate would then confirm the board, 
or something that like?
    Dr. Spencer. I think the board has to report back here. I 
don't think the board should be a part of the management 
activity, but entirely independent.
    Senator Alexander. Let me continue on that. I've been a 
university president on the faculty of the university and on 
the board of a company that managed a laboratory, and as I look 
at the list of DOE laboratories, there's one example that's a 
little different. Maybe Brookhaven is also, and I wonder what--
any of you, but Dr. Spencer, you've talked about universities. 
Dr. Gibbons, you've been at Oak Ridge. U.T. Betel manages Oak 
Ridge. There's a combination of a business and a university 
managing a laboratory.
    Now, when I first herd about that, I thought that wouldn't 
work, but the more I thought about that, I thought, well, that 
might work, and they got a good rating the other day from the 
Department.
    The idea of a university managing a laboratory is almost 
a--well, you don't manage a university. I remember when 
President Eisenhower was the president of Columbia University 
he called the faculty together for a meeting on the first day 
and said, I just wanted to get together all the people who work 
for me, and he went straight down after that. He had to just 
slip out of Columbia University, embarrassed by having been 
there.
    So universities aren't managed, yet laboratories do have 
two very separate sorts of things going on, both of which 
you've talked about. One is this whole set of very specific 
businesslike deadlines and goals and procedures, all that sort 
of thing. Businesses are very good at that. Universities are 
awful at doing that. The idea of a university managing that 
sort of a set of responsibilities is a horrifying thought, 
actually, because that's not what universities are good at.
    On the other hand, universities are good at setting up 
dozens of little fiefdoms which attract enormously talented 
people who, if they're enormously talented then go to work and 
do great things and gravitate to other interesting people and 
out come these great results, so you would want that culture in 
connection with a lab like Oak Ridge or many of the others, but 
you have the separate set of management responsibilities, and 
maybe the compromise of having a business and a university 
would recognize that there are just two very different tracks 
going on at many of these laboratories, and you want the 
university culture, but at the same time you want somebody 
there who has experience, responsibility, and a set of skills 
that deal with all these almost extraneous things to that 
environment, and I wondered especially what Dr. Gibbons and you 
thought of that model, the U.T. Betel type model.
    Dr. Spencer. Let me apologize, because I don't think I've 
answered your first question very well, and then come back to 
this. I agree with your assessment of universities. After I 
retired for the third time and flunked third time retirement I 
joined the University of California as a regents professor for 
a while. I sat in the faculty meetings in both the business 
school and the engineering school. It's frustrating for a 
businessperson to sit in those meetings, because it is very 
much like herding cats, but I think a possibility of having a 
university and a company jointly responsible is a possibility.
    I think right now the issues that the weapons laboratory 
face would be better served over the next few years by having 
that done totally by a corporate organization managing it, and 
I think that corporate entity needs the oversight of an 
independent board made up mostly of individuals not in that 
organization.
    If you look at the Sarbanes-Oxley legislation recently 
they've put a great number of restrictions on what an 
independent board member is in a private corporation. Those 
ought to fit just as well on a corporate board or an oversight 
board for the weapons laboratories. The managing organization 
might identify individuals.
    If the people who provide the money to that organization do 
not feel those are independent directors they should have the 
right to veto them, but I think you could put together outside 
directors for an organization like this that would be 
independent. They'd have to be knowledgeable. They'd have to be 
involved. They'd have to be willing to put in the time. They 
could provide an oversight in a much simpler way, getting rid 
of the layering, the boxing that we currently have and provide 
a much more efficient organization.
    Senator Alexander. Mr. Chairman, I wonder if we could see 
if Dr. Gibbons had an answer to the question about the 
corporate-university model.
    The Chairman. Sure.
    Senator Alexander. Or anyone else.
    Dr. Gibbons. Senator Alexander, I think you raise a very 
important issue here, because the labs are different in their 
missions and in their characterization, and I think the model 
of a university or a research organization like Midwest 
Research Institute and a private sector corporation are--they 
each have potential roles to play here, but one of the problems 
I've seen in my--I serve on the National Advisory Committee to 
the NREL, the National Renewal Energy Lab, which has a similar 
oversight for NREL.
    There's a question that arises about who takes the lead. If 
you have two entities serving, who, in fact, is the lead, and 
how do these two organizations merge themselves together in 
terms of an effective oversight, and I think we're in the midst 
of an experiment there, and it's worth of continuing, because 
having those two different perspectives can be terribly 
important, especially for multipurpose laboratories like Oak 
Ridge or NREL, and so I think we should watch it carefully, but 
continually ask the question, is this multiplicity of groups 
managing that place giving a better job than if only one were 
doing it and the other were subsidiary and giving advice.
    You could think of, for example, an organization having the 
managing responsibility for a multipurpose lab, but committed 
to having a strong academic presence in their oversight 
activities, but I think who takes the lead is an important 
question to ask. I don't believe there's been enough experience 
yet to say whether or not this is a major improvement, but I 
think it's worthy of continuing but also evaluating it.
    Dr. Schneider. Mr. Chairman, if I may just add a point to 
the question raised by Senator Alexander, I believe that the 
university affiliation is a decisively important aspect of the 
performance of the labs, especially in the case of the 
laboratories we've been discussing, Los Alamos and Livermore 
Labs.
    The most decisive factor in the success of these labs is 
the human capital, and the affiliation with the university is 
perhaps the most important source of renewal and engagement of 
the laboratory at the cutting edge of science.
    The experience the DOD has had with, as I mentioned, in the 
case of the Lincoln Laboratory, the work they do is just as 
sensitive as that done at Livermore Lab and the Los Alamos Lab, 
and is no less technically complex, but the intense involvement 
of the university has produced a renewal and recapitalization, 
so to speak, of the human capital that has been a decisive 
source of their success and contrasts very sharply with the 
civil service laboratories that do not have a similar mechanism 
for the renewal of the human capital in these laboratories, so 
while there may be a number of arrangements that can be made to 
deal with areas where the university competencies are not 
particularly well engaged, I think the university's affiliation 
is a decisively valuable asset for these laboratories and 
should not be ignored.
    Thank you, Mr. Chairman.
    The Chairman. Could I do this, so that we can establish a 
few basic principles in any event. It would appear to me that 
the question of how you formulate the management is one 
question, but what should be part of it is another, and I think 
we are saying, if I'm hearing you right in response to the 
Senator from Tennessee, that the laboratories of the type of 
Los Alamos and Livermore must have as part of its lifeblood the 
university system. Is that correct, Dr. Reis?
    Dr. Reis. That's correct.
    The Chairman. And do you agree, Dr. Spencer?
    Dr. Spencer. Senator, I agree. However, those ties with the 
universities can occur in a variety of ways.
    The Chairman. I didn't say that so well in my opening 
remarks, but I meant that. How they are established is up for 
discussion, but in the end, whatever we do they must be there. 
The ties must be there with the universities. You agree with 
that?
    Dr. Spencer. Yes, sir.
    The Chairman. And do you agree, Doctor?
    Dr. Gibbons. Indeed.
    The Chairman. And Bill.
    Dr. Schneider. Yes.
    The Chairman. Let me tell you what I think is happening 
now. It is an amazing paradox that if I've heard you correctly 
you've said, of late, meaning the last 7 years of the two 
nuclear laboratories, Sandia, Los Alamos, and Livermore have 
been doing remarkably well because they now have a very precise 
mission, to wit, science-based stockpile stewardship, and I 
think I heard you say they're doing that job very well, is that 
correct, Dr. Schneider?
    Dr. Schneider. Yes, sir.
    The Chairman. And Dr. Gibbons?
    Dr. Gibbons. Yes.
    The Chairman. And Dr. Spencer?
    Now, if you read the newspapers, and if you read the 
response of the University of California to what's been going 
on at the laboratories by way of scrutiny, I guess is the word, 
you would conclude the opposite, and as a matter of fact, the 
University of California has appeared so frantic of late 
because of scrutiny that one would wonder, I would anyway, I 
did, whether Los Alamos was vulnerable to an accusation that 
they weren't doing their job very well at all.
    What I believe we're suffering from that we'd better 
address in any new model is that these laboratories are going 
to live in an era of intense scrutiny that did not exist back 
in the days when Ma Bell managed Sandia, or the original people 
that we're so proud of that managed Los Alamos. The scrutiny, 
in fact the scrutinizing institutions didn't exist. I'll just 
be honest, there was no Pogo then. Have you all heard of Pogo?
    There is a Pogo now.
    Dr. Reis. You have met the enemy, right, Pogo?
    The Chairman. Yes, that Pogo really fits that one. We've 
met the enemy and it's us. As a matter of fact, it's rather 
interesting, some people are trying to find out where Pogo 
comes from, who pays for Pogo, where do they get their money, 
and some say it's nobody's business, but I think pretty soon 
it's going to be somebody's business, because they are great 
scrutinizers of the laboratories, and it would seem like, in 
some cases, it's being done altruistically. We have people 
working for Senators around here that don't even get paid, and 
they're involved in scrutinizing laboratories--did you know 
that?--work for Senators for $1 a year, scrutinizing 
laboratories. They're scrutinizing the Government, but of late 
they've seemed to focus on the laboratories.
    I guess I'm very much worried about how we make sure we 
structure, if we're gong to restructure, so that there are not 
over responses to scrutiny. Scrutiny is wonderful, but all 
scrutiny isn't equal, and all scrutiny should not require that 
you change the baby's diaper, and it would seem to me that 
we've got to have a stronger system that responds to scrutiny, 
and that scrutiny be scrutinized.
    Would you believe that I have of late spent some time 
trying to think about setting up something that would look at 
those who scrutinize the laboratories and find out whether 
their scrutiny is valid or not, as much as--I notice you're 
laughing, but for me it was no laughing matter, it's very, very 
serious, but I gave up the idea once I thought of it.
    But could any of you address that? Perhaps it has no effect 
on you, but I will tell you, the other day I brought for the 
committee what you should be interested in, the contract that 
exists between the University of California and Los Alamos when 
it started, and recently, and the contract was about this thick 
when they started it, and it's about that thick over the years, 
while we say we've maintained the same contract, and we 
understand that that one that's that thick also has a shelf 
full of regulations that are related to it.
    I guess I'm just going to lay that before you and tell you 
that I think what I've just described is an enormous problem. 
We have not much time, a couple of minutes for a few 
observations. Do any of you have an observation?
    Dr. Schneider.
    Dr. Schneider. Thank you, Mr. Chairman. I think your 
anecdote has, in fact, squarely pointed at the manifestation of 
the problem of layering and of supervision that does not add 
value to the process.
    I would be pleased to make available the resources of the 
Defense Science Board to assist the committee in working on 
examining some of the successful examples of where the needs of 
public policy have been achieved, that is, the expenditure of 
appropriated funds is made with full compliance with the law, 
compliance with the security regulations and law of the U.S. 
Government, and yet the mission is successfully undertaken. I 
think the staff would find it rewarding to look at some of 
these successful examples and perhaps derive some of them for 
the benefit of the national labs that you're dealing with.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. Please make them available.
    Dr. Gibbons, do you have any observations?
    Dr. Gibbons. Shakespeare, Richard III, Act I, first we will 
kill all the lawyers.
    [Laughter.]
    Dr. Gibbons. I think we tend to proliferate our details of 
governance, especially if we have more time on our hands than 
we should. That's beside the point, but I do believe that--I'm 
not sure, quite honestly, that the Defense Department is a good 
example for us. If DOE had the overruns that we've had in our 
military systems, DOE would be out of business, quite frankly, 
I believe.
    I think we need to look everywhere for the best advice and 
best experience we can encounter and put it all together. I'm 
not sure we have the mechanism for doing that. It's conceivable 
that the national academies could be a mechanism for providing 
that, since they have both industry and science together, but 
we lack the capability for that kind of analysis and review.
    The Chairman. Dr. Spencer.
    Dr. Spencer. I think you put your finger on the major issue 
in this. Let me give you an example of going back to the 
formation of SEMATECH in 1986 or 1987, and how that was done. 
This was a small amount of money, $100 million from the 
Government, another $100 million from private sources. You 
know, it's not the $7 or $8 billion you're talking about in the 
weapons laboratories, but that was set up, it was managed 
entirely from the private side with the Government providing 
money and a small amount of oversight. My friend here on the 
right is going to tell me how much in just a minute----
    Dr. Reis. I'll be glad to do that.
    Dr. Spencer [continuing]. Since he was involved, but at the 
end of 5 years, after the GAO sat in our laboratories in Austin 
for 5 years and watched us on a daily basis, they wrote a 
report which I thought was rather extraordinary that said, 
here's an example of private management of government funds to 
the benefit of both parties, and I think that's a model which 
might serve as a way to get where you want to be in this 
management of the laboratories.
    I believe you've got to get a clear understanding from the 
Government as to what they want in the management of these 
laboratories. I happen to believe that we had science-based 
stockpile surveillance way back in the seventies, when a few of 
us pseudo-scientists worked on weapons problems, and if that's 
what it is, the Government needs to clearly identify what that 
is, and industry has to say, we'll be involved, but these are 
things that we need, and I think if you could get those two 
ideas and then negotiate something in the spirit that SEMATECH 
was done in the mid-eighties, you might find something to meet 
all of your requirements.
    Dr. Reis. Let me come out of that, because I was the other 
person in the Government who was in charge at the time. I was 
Director of DARPA, who was given the responsibility of working 
with SEMATECH, and it really was pretty simple. I went down and 
talked to Bill, and we worked out an agreement. First my 
predecessor did, who probably did most of it, Greg Fields, and 
then I came along and said, what's this thing all about, and he 
explained to me, and we set up a series of rules and we had a 
program manager who kind of looked at what they were doing, but 
it was clear they had the full responsibility of producing what 
they said they were going to do, and we said this was going to 
last for 5 years or something, and this was the funding 
profile, and there were some bumps along the way, but because 
we trusted each other, and had clear goals, we were able to get 
through all those bumps, and I think it's fair to say that it 
was a successful operation.
    But there was a difference there, and there's a difference 
that we shouldn't forget. Nuclear weapons is not a business. It 
really is a sacred trust. It's what's keeping us out of World 
War III, and it will keep us out of World War III hopefully for 
the remainder of civilization, so it's very different.
    I had quite an experience, for example, when Lockheed, an 
excellent company, took over the Sandia Laboratories. When they 
first came over I guess it was the Martin Corporation, and they 
took over from Ma Bell. The management came in, 11 people were 
sent over from the Martin Corporation to help the manager. 
Within a year, 10 of them were gone. They really didn't add 
very much benefit.
    Why? I'll tell you why. It was because Sandia was a very 
well-run organization, and it's still a very well-run 
organization. I mean, Paul Robinson and that group of 
management he's put together is as good as any corporation in 
this country, and I'll say that flat. I mean--and they have a 
very good independent board, okay, which Lou Allen, and some of 
the other people who are on that are not, you know, pushy, 
pushovers in any way, and that's basically run for them. 
Essentially, though, they're independent, for all intents and 
purposes they're really independent of Lockheed. Lockheed lets 
them run it, but they run it very, very well.
    We talked earlier, and Bill made it--we didn't talk ahead 
of time, but our experience with Lincoln Laboratories, both 
when I worked there and then when I was on the other end of 
that, because we were able to focus on what that mission was, 
so we got the customer, in this case, the customer is the 
Government, directly involved in that board.
    But the issue we come back to, Senator, and all of you 
mentioned, is that we've got to work on the right end of the 
problem. It's not on the laboratory end, it's on the Government 
end. That's where all the oversight shows up.
    The Chairman. Would you all excuse me, I have to leave, but 
Senator Bingaman will close the meeting shortly. Thank you.
    Dr. Reis. So it's important, and the issue really comes 
back to that whole idea of who's--it's not so much who's in 
charge, but how do you trust the people, who's working for 
whom, and as Dr. Hecker gave in his testimony at the last 
meeting, that trust essentially is broken, and the way the 
Government has tried to respond to that is by more and more and 
more in oversight, and more and more in layers.
    So the board is helpful, but the board is not the whole 
problem. You've really got to work the problem from the 
Government end as well as from the laboratory end, and that's 
where the trust comes in. That's where I thought my example of 
trying to bring people from those laboratories who had real 
experience, and they could be from the Government or whoever 
your customer is as well, and from the military, into working 
those positions within the Government.
    They could be there for 4 or 5 years. They could be there 
for several years, and vice versa, and get people from the 
Government participating in the laboratories. That's the only 
way you get trust, is by working together on a common goal.
    What's different now than it was perhaps 10 years ago is 
that there really is, for the reference laboratories at least 
there's a clear mission, so everybody can work on the goal. 
That's a big help and, indeed, that's why we're being 
successful now, is because the people in the laboratories are 
focused on that mission. They really don't care that much 
about--I mean, you know, about pension systems and all the 
other things. They really care, and they're devoted to making 
that mission.
    That becomes also an issue in terms of, when do you get 
business in? You know, I'm on one of these advisory groups, and 
one of these laboratories was run by a company, and I said, 
what's your goal? What are you trying to do, and they said, 
I've been told I've got to increase my market share by 5 
percent. Now, that's not what you want in a Government 
laboratory. They're not supposed to increase market share. What 
they're supposed to do is go for the mission. In fact, if 
they're not getting that mission they should close their market 
share. They should close up business and go off and do 
something else.
    There's a real danger in trying to bring, if you will, a 
corporate culture in. It doesn't mean the corporate people 
aren't just as patriotic, or whatever, but that understanding 
what the goal is and what the mission is, and believing it, and 
having the passion to devote your career to those sorts of 
things, that's what you have at the weapons laboratories now. 
That's what's made them what they are today.
    That's what you have at places like Lincoln Laboratory, is 
you have sort of a different culture now, and that culture can 
be combined if there is a science, with the university culture, 
so it isn't really--and you don't expect to get management from 
university, right? I mean, that's the last place in the world, 
right, where you want, quote, management expertise, but you do 
get that scientific understanding. You get that asking of 
questions. You can't help it, right? They'll ask you all those 
kinds of questions.
    That's the thing that you don't want to lose as you think 
about improving the management, if that's the problem, 
particularly at the weapons laboratories.
    Senator Bingaman. Did you have any additional questions?
    Senator Alexander. No, I have two quick comments, Senator. 
One, it sounds like, still sounds like maybe the university 
culture and the corporate management, if you could borrow both 
of those at the same time, might be helpful. Everett Dirksen 
said that consistency is the hobgoblin of small minds, which he 
stole from some Englishman who was dead at the time. I don't 
know who. Do you know who it was?
    Senator Bingaman. I thought that was Emerson.
    Senator Alexander. No, I think--it wasn't an Englishman. He 
borrowed it from someone else. It may have been Emerson.
    Dr. Reis. Foolish consistency.
    Senator Bingaman. Right. Thank you all very much. I think 
it's very good testimony. There may be additional questions 
that some members want to propound in writing by the end of the 
day. If so, we'll get them to you.
    Thank you very much.
    [Whereupon, at 11 a.m., the hearing was adjourned.]

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