DEPARTMENT OF 

ENERGY

Additional 

Opportunities Exist to 

Streamline Support 

Functions at NNSA 

and Office of Science 

Sites

Report to Congressional Requesters

January 2012

GAO-12-255

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-255, a report to 

congressional requesters 

January 2012 

DEPARTMENT OF ENERGY

Additional Opportunities Exist to Streamline 

Support Functions at NNSA and Office of Science 

Sites

Why GAO Did This Study

The Department of Energy (DOE) 

spends 90 percent of its annual 

budget—which totaled $27 billion in 

fiscal year 2011—on the contractors 

that carry out its diverse missions and 

manage its sites. These management 

and operating contractors also provide 

sites’ support functions, such as 

procuring goods, managing human 

resources, and maintaining facilities. 

With a unique contractor at each site, 

support functions have traditionally 

been managed in a decentralized, or 

fragmented, manner. In light of today’s 

pressures to trim budgets and find 

efficiencies, GAO was asked to review 

support functions at the 17 National 

Nuclear Security Administration 

(NNSA) and Office of Science sites 

and determine (1) the costs of 

providing support functions for fiscal 

years 2007 through 2011; (2) efforts 

undertaken during that period to 

streamline sites’ support functions, as 

well as additional opportunities and 

challenges, if any; and (3) the extent to 

which cost savings from streamlining 

efforts can be quantified. GAO

reviewed data and documents and 

spoke with DOE, NNSA, and Science 

officials and with contractors at eight 

sites—the four largest by budget from 

NNSA and Science.

What GAO Recommends

GAO recommends that DOE (1) fully 

implement a quality control system for 

cost data on sites’ support functions, 

(2) ensure that all appropriate 

streamlining steps are being taken at 

the 17 sites and that challenges are 

addressed, and (3) clarify guidance on 

estimating cost savings from 

streamlining efforts. DOE agreed with 

the recommendations.

What GAO Found

Support function costs at NNSA and Science sites for fiscal years 2007 through 

2011 are not fully known because DOE changed its data collection approach 

beginning in 2010 to improve its data and, as a result, does not have complete 

and comparable cost data for all years. In fiscal years 2007 through 2009, total 

support costs for NNSA and Science sites grew from $5 billion to about $5.5 

billion (nominal dollars). Costs for fiscal year 2010 are unknown because DOE 

was pilot-testing its new reporting system and only collected data from some

sites. For fiscal year 2011, the data are more complete, but changes to DOE’s 

definitions for support functions make it difficult to compare costs across all 

years. DOE has taken some steps to ensure the quality of the data in its new 

system and plans to fully implement a quality control process, such as peer 

reviews, to ensure data can be compared across sites, but has not yet done so. 

DOE and contractors have undertaken various efforts since 2007 to streamline 

and improve the efficiency of sites’ support functions. Streamlining efforts 

reported by officials from DOE and the eight NNSA and Science sites GAO 

reviewed focused mainly on procurement; human resources, including employee 

benefits; and facilities and infrastructure. Some efforts were part of larger 

initiatives involving multiple sites, while others were initiated at the site level. To 

streamline procurement and leverage the buying power of multiple sites, for 

example, NNSA began operating a central Supply Chain Management Center to 

negotiate with vendors for lower prices on goods and services, such as 

laboratory supplies and equipment. To streamline human resources, contractor 

officials from the eight NNSA and Science sites reported automating various 

processes, such as for hiring and training employees. Furthermore, DOE and 

contractors identified opportunities to expand these efforts and undertake new 

ones but also identified challenges to further streamlining. In August 2010, for 

example, the Deputy Secretary of Energy cited further opportunities to leverage 

DOE and sites’ buying power through a more centralized, and less fragmented, 

approach. Similarly, NNSA is considering centralizing certain human resource 

tasks at its sites, currently provided by individual contractors. DOE and contractor 

officials, however, said that centralizing functions can be challenging. 

DOE and its contractors have estimated savings for some streamlining efforts, 

particularly in procurement, but it is difficult to compare or quantify total savings 

across sites because DOE’s guidance for estimating savings is unclear and the 

methods used to estimate savings vary. For example, one laboratory estimated a 

$9 million savings from a software purchase in 2010 using its preferred 

estimation method. By other methods used elsewhere in DOE, however, the site 

estimated that its savings could have been as high as $35 million. DOE recently 

issued guidance on acceptable methods for estimating procurement cost 

savings, but the guidance is unclear and could lead to widely varying savings 

estimates. The guidance identifies some estimation methods that sites can use—

such as comparing the price paid for goods or services with a previous price—

but does not specify which methods are preferred when multiple options are 

available. Furthermore, the guidance allows sites to use any other methods 

approved by DOE officials. For support functions other than procurement, sites 

also have flexibility in cost savings estimation methods, potentially leading to 

widely varying estimates for similar efforts to streamline these functions. 

View GAO-12-255. For more information, 

contact Gene Aloise at (202) 512-3841 or 

aloisee@gao.gov. 
Page i GAO-12-255 Support Functions at DOE Sites

Letter 1 

Background 5

Sites’ Support Costs since 2007 Are Not Fully Known 9

DOE and Site Contractors Have Been Streamlining Support 

Functions and Identifying Additional Opportunities, as well as 

Challenges 13

Difficulties Exist in Quantifying Cost Savings because Guidance for 

Estimating Savings Is Unclear and Methods Used Vary 24

Conclusions 29

Recommendations for Executive Action 31

Agency Comments and Our Evaluation 31

Appendix I Comments from the Department of Energy 33

Appendix II Contact and Staff Acknowledgments 36

Figures

Figure 1: NNSA’s Laboratories and Nuclear Production and Testing 

Sites and Science’s Laboratories 7

Figure 2: Example of the Effect of Using Different Cost Savings 

Estimation Methods for a 2010 Software Purchase at 

Pacific Northwest National Laboratory (PNNL) 27

Contents
Page ii GAO-12-255 Support Functions at DOE Sites

Abbreviations

DEAR Department of Energy Acquisition Regulation

DOE Department of Energy

GSA General Services Administration

M&O management and operating 

NNSA National Nuclear Security Administration

OMB Office of Management and Budget

PNNL Pacific Northwest National Laboratory

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-12-255 Support Functions at DOE Sites

United States Government Accountability Office

Washington, DC 20548

January 31, 2012

The Honorable Fred Upton

Chairman

The Honorable Henry A. Waxman

Ranking Member

Committee on Energy and Commerce

House of Representatives

The Honorable Cliff Stearns

Chairman

The Honorable Diana DeGette

Ranking Member

Subcommittee on Oversight and Investigations

Committee on Energy and Commerce 

House of Representatives

The Honorable John D. Dingell

House of Representatives

The Department of Energy (DOE) spends a major portion of its annual 

budget—which totaled $27 billion in fiscal year 2011—to carry out 

groundbreaking scientific research and technology development to 

increase knowledge about fundamental physics, provide efficient and 

secure energy, and ensure the safety and reliability of the nation’s nuclear 

weapons stockpile. This research and development work is performed by 

contractors—corporations, universities, and others—that manage and 

operate the 7 national laboratories and nuclear production and testing 

sites overseen by the National Nuclear Security Administration (NNSA),1

 

1

Congress created NNSA as a semiautonomous agency within the Department of Energy 

in 1999 (Title 32 of the National Defense Authorization Act for Fiscal Year 2000, Pub. L. 

No. 106-65, § 3201 et seq.). 

a separately organized agency within DOE, and the 10 national 

laboratories overseen by DOE’s Office of Science. With DOE oversight, 

these management and operating (M&O) contractors also organize and 

carry out the support functions at these 17 sites, such as procuring 

needed goods and services; recruiting and hiring workers; managing 

health and retirement benefits; maintaining facilities and infrastructure; 

and providing day-to-day accounting, information technology, security, 

 
 

Page 2 GAO-12-255 Support Functions at DOE Sites

and other support functions.2 Because each NNSA or Science site has 

historically had its own unique M&O contractor—as part of DOE’s longstanding model for conducting research and nuclear production at 

multiple locations—the sites have also differed in how support functions 

are organized and carried out.3

DOE reimburses its M&O contractors for costs incurred in carrying out the 

department’s missions and providing sites’ support functions. These 

include costs that can be directly identified with a specific DOE program 

(direct costs) and costs that support multiple programs (indirect costs). 

Federal Cost Accounting Standards and federal regulations allow DOE’s 

M&O contractors flexibility in how they classify incurred costs as direct or 

indirect.4

We have previously reported on DOE’s support costs and related issues. 

In September 2005, we reported that definitions for some of the functional 

support costs were unclear and that M&O contractors’ reporting of these 

Because sites classify these costs differently, in the mid-1990s, 

DOE’s Chief Financial Officer began requiring M&O contractors at the 

sites to report on 22 categories of these costs—known as functional 

support costs—to provide more comparable data on the costs of sites’ 

support functions.

 

2

DOE and its M&O contractors’ relationships are defined in federal and DOE acquisition 

regulations and in DOE’s M&O contracts. M&O contracts are agreements under which the 

government contracts for the operation, maintenance, or support, on its behalf, of a 

government owned or controlled research, development, special production, or testing 

establishment wholly or principally devoted to one or more major programs of the 

contracting federal agency. Federal Acquisition Regulation, 48 C.F.R. § 17.601.

3

In a July 2011 draft solicitation to industry, DOE and NNSA proposed altering this longstanding approach by having a single contractor manage and operate two of NNSA’s 

nuclear production sites that have historically had their own M&O contractors. DOE and 

NNSA estimated that the new approach would save around $895 million (nominal dollars), 

largely through efficiency gains and other improvements to the sites’ business systems 

and support functions. In September 2011, however, we reported that the anticipated cost 

savings were uncertain. See GAO, Modernizing the Nuclear Security Enterprise: The 

National Nuclear Security Administration’s Proposed Acquisition Strategy Needs Further 

Clarification and Assessment, GAO-11-848 (Washington, D.C.: Sept. 20, 2011).

4

Cost Accounting Standards are promulgated under chapter 99 of Title 48, U.S. Code of 

Federal Regulations, by the U.S. Cost Accounting Standards Board—a statutorily 

established board (41 U.S.C. § 1501) within the Office of Management and Budget’s 

Office of Federal Procurement Policy. The standards are mandatory for use by all 

executive agencies and federal contractors in estimating, accumulating, and reporting 

costs.
 

Page 3 GAO-12-255 Support Functions at DOE Sites

costs was inconsistent. We recommended that DOE take further actions 

to improve the comparability of its data by clarifying its definitions for its 

support costs.5 In 2010, DOE replaced its functional support costs with a 

new system called Institutional Cost Reporting, which was pilot-tested 

that year and fully implemented in 2011. Also in the 2005 report, and an 

April 2004 report,6 we recommended that DOE take actions to manage 

the long-term cost growth in certain support functions, such as facility 

maintenance, as well as pension or other costs at sites. Since that time, 

DOE has taken actions to control these costs, but some of them have 

continued to grow. For example, in April 2011 we reported that DOE 

reimbursed M&O contractors departmentwide for $750 million in pension 

costs in fiscal year 2009—more than double the amount reimbursed in 

fiscal year 2008—following financial market declines.7

Against the backdrop of growing federal deficits and uncertainty over 

future federal budgets, DOE and its M&O contractors at NNSA and 

Science sites have been evaluating areas that could be streamlined or 

provide cost savings. In this context you asked us to examine support 

functions at NNSA and Science sites. Our objectives for this report were 

to examine (1) the costs of providing support functions at NNSA and 

Science sites for fiscal years 2007 through 2011; (2) efforts undertaken 

during that period to streamline sites’ support functions and additional 

streamlining opportunities and implementation challenges, if any; and (3) 

the extent to which cost savings from streamlining efforts can be 

quantified.

To address the first objective, we analyzed DOE’s data on support 

function costs at the 17 NNSA and Science sites for fiscal years 2007 

through 2011 and interviewed DOE officials who oversee these cost data 

for DOE’s Office of the Chief Financial Officer. We took steps to assess 

the reliability of the cost data, including interviewing representatives from 

 

5

GAO, Department of Energy: Additional Opportunities Exist for Reducing Laboratory 

Contractors’ Support Costs, GAO-05-897 (Washington, D.C.: Sept. 9, 2005).

6

GAO, Department of Energy: Certain Postretirement Benefits for Contractor Employees 

Are Unfunded and Program Oversight Could Be Improved, GAO-04-539 (Washington, 

D.C.: Apr. 15, 2004). 

7

See GAO, Department of Energy: Progress Made Overseeing the Costs of Contractor 

Postretirement Benefits, but Additional Actions Could Help Address Challenges, 

GAO-11-378 (Washington, D.C.: Apr. 29, 2011).
 

Page 4 GAO-12-255 Support Functions at DOE Sites

the chief financial officers’ organizations in DOE, NNSA, Science, and 

M&O contractors. We noted the limitations of these data in our report but 

found the data sufficiently reliable for our purposes. We reviewed federal 

Cost Accounting Standards and federal and DOE acquisition regulations 

for requirements on reporting support function costs. We spoke with M&O 

contractor officials responsible for financial management at a 

nonprobability sample of 8 sites—the 4 largest (by budget) NNSA sites 

and 4 largest Science sites—and discussed trends in the sites’ support 

function costs since 2007.8 Because a nonprobability sample is not 

generalizable, what we found at these 8 sites cannot be projected to all 

17 sites; however, the sites provide examples of issues related to 

management of support functions.9 We visited 3 of these sites—Los 

Alamos, Sandia, and Pacific Northwest national laboratories—and 

contacted the others by phone.10

 

8

The four largest NNSA sites—Los Alamos, Lawrence Livermore, and Sandia national 

laboratories and the Y-12 National Security Complex—accounted for about 79 percent of 

the budget for NNSA’s sites in fiscal year 2010. The four largest Science sites—Oak 

Ridge, Brookhaven, Pacific Northwest, and Lawrence Berkeley national laboratories—

accounted for about 66 percent of the budget for that office’s sites in that year.

To address the second and third 

objectives, we reviewed DOE’s policies on procurement, human 

resources, facility maintenance, and other support functions. We also 

spoke with headquarters and field-based officials who oversee support 

functions for DOE, NNSA, and Science about DOE’s policies and efforts 

to oversee M&O contractors’ performance in carrying out and 

streamlining support functions at sites, as well as additional streamlining 

opportunities and challenges. We also reviewed studies, cost reports, 

strategic plans, and other documentation on recent or proposed efforts to 

streamline NNSA and Science sites’ support functions. We spoke with 

M&O contractor officials who plan and oversee the 8 sites’ support 

functions and discussed their sites’ streamlining efforts since 2007, as 

well as any cost savings from those efforts. We reviewed documentation 

on sites’ recent and planned streamlining efforts and associated cost 

savings. We also discussed additional streamlining opportunities and any 

9

Furthermore, some of these issues may be relevant for sites overseen by other DOE 

organizations, such as the Office of Environmental Management. Our scope, however, did 

not include DOE organizations other than NNSA and Science.

10We visited both NNSA and Science sites, as well as larger and smaller sites among the 

8 in our nonprobability sample. Furthermore, Pacific Northwest National Laboratory was 

involved in developing DOE’s new Institutional Cost Reporting system and the associated 

pilot test.
 

Page 5 GAO-12-255 Support Functions at DOE Sites

related challenges. Furthermore, we collected, through document 

requests and interviews with DOE and contractor officials at sites in our 

sample, information on how cost savings were estimated. The amount 

and level of detail of this information varied greatly across streamlining 

efforts. Because it was not the purpose of this report to assess the 

anticipated or actual success of efficiency efforts and because the 

amount and quality of data on how estimated and actual savings were 

determined varied so much across efforts, we did not attempt to 

independently verify the reliability of these data or estimates. As a result, 

data on reported estimated or actual cost savings and efficiencies are of 

undetermined reliability.

We conducted this performance audit from December 2010 through 

January 2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

DOE is responsible for a diverse set of missions, including nuclear 

security, energy research, and environmental cleanup. These missions 

are managed by various organizations within DOE and largely carried out 

by M&O contractors at DOE sites. NNSA and Science are among the 

largest (by budget) of these DOE organizations, overseeing important 

missions at 17 sites.11

• With a $10.5 billion budget in fiscal year 2011—nearly 40 percent of 

DOE’s total budget—NNSA is responsible for providing the United 

Specifically:

 

11In addition, some of the work for NNSA and Science missions is conducted by M&O 

contractors at sites overseen by other DOE organizations. For example, NNSA funds 

nuclear production and reprocessing work conducted by the M&O contractor at DOE’s 

Savannah River Site in South Carolina, a site that is primarily overseen by DOE’s Office of 

Environmental Management. Furthermore, some of the work carried out at NNSA and 

Science sites is funded by non-DOE entities, including other federal agencies or private 

firms. This work, known as “work for others,” can comprise very little of the work at NNSA 

and Science sites, or in the case of Sandia National Laboratories in New Mexico and 

California, over 40 percent of a site’s research budget in some years. In addition, NNSA 

and Science fund work at non-DOE organizations, such as universities.

Background 
 

Page 6 GAO-12-255 Support Functions at DOE Sites

States with safe, secure, and reliable nuclear weapons in the absence 

of underground nuclear testing and maintaining core competencies in 

nuclear weapons science, technology, and engineering. NNSA’s 7 

sites, including 3 national laboratories and 4 nuclear and production 

and testing sites support these activities (see fig. 1).

• With a $4.9 billion budget in fiscal year 2011—18 percent of DOE’s 

total budget—Science has been the nation’s single largest funding 

source for basic research in the physical sciences, supporting 

research in energy sciences, advanced scientific computing, and 

other fields. Science funds research at its 10 national laboratories, 

which also house cutting-edge scientific facilities and equipment, 

ranging from high-performance computers to ultrabright X-ray sources 

for investigating fundamental properties of materials. These resources 

are often made available, on a temporary basis, to members of the 

broader scientific community outside of DOE for their own research, 

sometimes in collaboration with laboratory staff.
 

Page 7 GAO-12-255 Support Functions at DOE Sites

Figure 1: NNSA’s Laboratories and Nuclear Production and Testing Sites and Science’s Laboratories

Note: Sandia National Laboratories has locations in New Mexico and California. Only its primary 

location in New Mexico is depicted. Both locations are considered to be part of a single site among 

the 7 NNSA laboratory and nuclear production and testing sites.

Under DOE’s long-standing model of having unique M&O contractors at 

each site, management of its sites has historically been decentralized 

and, thus, fragmented. Since the Manhattan Project produced the first 

atomic bomb during World War II, DOE and its predecessor agencies 

have depended on the expertise of private firms, universities, and others 
 

Page 8 GAO-12-255 Support Functions at DOE Sites

to carry out research and development work and efficiently operate the 

facilities necessary for the nation’s nuclear defense.12 DOE’s relationship 

with these entities has been formalized over the years through its M&O 

contracts—contracts of a special type that give DOE’s contractors unique 

responsibility to carry out major portions of DOE’s missions and apply 

their scientific, technical, and management expertise. Currently, DOE 

spends 90 percent of its annual budget on M&O contracts, making it the 

largest non-Department of Defense contracting agency in the 

government. The contractors at DOE’s 17 NNSA and Science sites have 

operated under DOE’s direction and oversight but largely independently 

of one another.13

Requirements for providing support functions at sites are set out in 

federal and DOE acquisition regulations, DOE policies, and M&O 

contracts. In particular, M&O contracts define performance requirements 

for the support functions provided at each site. These range from 

requirements that apply to contractors at all 17 sites—such as a 

Furthermore, M&Os are set up as separate entities with 

their own missions, parent organizations, and organizational structures. 

For example, the M&O contractor at Science’s Oak Ridge National 

Laboratory is a private, not-for-profit company, established for the sole 

purpose of managing and operating that laboratory for DOE. Formed in 

2000 as a limited liability partnership between the University of 

Tennessee and Battelle Memorial Institute, the M&O contractor 

organization is uniquely set up to provide that laboratory’s scientific 

research and necessary support functions. M&O contractors typically 

allocate the costs of support functions across the site and charge 

research or other divisions that benefit from those functions.

 

12The Manhattan Project, under the U.S. Army Corps of Engineers, maintained control 

over American atomic weapons research and production until the formation of the United 

States Atomic Energy Commission in 1946. The commission became the Energy 

Research and Development Administration in 1974, which in turn became DOE in 1977.

13M&O contractors in NNSA and Science interact regularly to share best practices or 

coalesce around topics of mutual interest. Examples include the National Laboratory 

Director’s Council—in which representatives from NNSA, Science, and other DOE 

laboratories meet regularly to coordinate around issues and concerns of broad interest to 

laboratory managers—and DOE’s newly formed Contractor Integrated Supply Chain 

Management Council, in which DOE and contractor officials will discuss issues related to 

procurement. In addition, sites’ mission work is sometimes interrelated. For example, 

programs to refurbish nuclear weapons typically rely on NNSA’s laboratories to design the 

refurbished weapon, which NNSA’s production and testing sites will manufacture. 

Similarly, experts from various NNSA and Science laboratories have coordinated some of 

their sites’ research in areas such as materials science and high-performance computing.
 

Page 9 GAO-12-255 Support Functions at DOE Sites

requirement that M&O contractors’ systems of accounts comply with 

generally accepted accounting principles—to site-specific requirements, 

such as those pertaining to security at sites that house special nuclear 

material. Some M&O contracts also include provisions encouraging 

contractors to reduce sites’ support function costs. For example, M&O 

contracts at some sites allow the contractors there to redirect—to mission 

work or contractor-directed research—dollars saved through reductions in 

support function costs. Also, contracts may include annual performance 

goals for cost savings that are tied to the contractors’ annual performance 

fees, which are monies paid to them based on their annual performance.

Various headquarters and field-based organizations within DOE, NNSA, 

and Science develop policies or oversee M&O contractors’ performance 

in providing support functions at sites. DOE, NNSA, and Science chief 

financial officers, for example, oversee requirements for contractor 

reporting on sites’ support function costs. Other offices oversee particular 

support functions, such as procurement, facilities and infrastructure, and 

human resources. DOE’s Office of Procurement and Assistance 

Management and NNSA’s Office of Acquisition Management, for 

example, establish policies and oversee procurement activities at NNSA 

and Science sites. In addition, NNSA and Science site offices, colocated 

with the 17 sites, conduct day-to-day oversight of the M&O contractors 

and evaluate the contractors’ performance in carrying out the sites’ 

missions and providing support functions.

The costs of support functions at NNSA and Science sites for fiscal years 

2007 through 2011 are not fully known because DOE changed its data 

collection approach beginning in 2010 to provide improved data and, as a 

result, does not have complete and comparable year-over-year cost data 

for all 5 years. For fiscal years 2007 through 2009, total support costs for 

16 of the 17 NNSA and Science sites grew from $5 billion to about $5.5 

billion (nominal dollars) and generally accounted for about 40 percent of 

Sites’ Support Costs 

since 2007 Are Not 

Fully Known

Support Cost Data for 2007 

through 2011 Are Not 

Complete or Comparable 

because DOE Changed Its 

Data Collection Approach
 

Page 10 GAO-12-255 Support Functions at DOE Sites

the sites’ annual budgets for those years, according to DOE’s data.14 The 

proportion of total costs that support costs represented, however, differed 

between NNSA and Science sites in those years. For the NNSA sites, 

DOE’s data show that support costs made up from 43 to 45 percent of 

sites’ annual budgets for fiscal years 2007 through 2009. For the Science 

sites, the data show that support costs made up from 32 to 33 percent of 

the sites’ annual budgets during those years. Differences in missions may 

account in part for NNSA’s somewhat higher support costs. In particular, 

NNSA sites are more likely than Science sites to house nuclear material 

and classified information, which can result in higher security, training, or 

other costs. We did not, however, attempt to analyze costs for specific 

support functions. According to a DOE report on its sites’ support function 

costs and previous GAO work,15

In fiscal year 2010, DOE changed its data collection approach to improve 

its ability to oversee sites’ support function costs, according to DOE 

officials, and, as a result, it does not have complete and comparable data 

for all fiscal years from 2007 through 2011.

the data are appropriate for 

understanding sites’ support function costs in aggregate but not for 

comparing costs of sites’ individual support functions.

16

 

14Over the same period, the sites’ total annual support function costs increased from 

about $5.0 billion to about $5.3 billion in constant 2007 dollars. DOE’s data did not include 

information for one Science site, the Thomas Jefferson National Accelerator Laboratory. 

Excluding that site, however, would likely have had little impact on the total support costs 

for fiscal years 2007 through 2009 because the site’s budget ranged from about $94 

million to about $130 million and represented only about 1 percent of the total budget in 

those years for all 17 sites.

DOE does not have 

complete data for 2010 because DOE and some of its contractors were 

pilot-testing the new system, and only 11 of the 17 NNSA and Science 

sites provided support cost data for that year. The data for 2010 are also 

incomplete because—unlike previous years’ data—the sites only reported 

on the indirect costs of their support functions, leaving out direct costs,

which could account for potentially large portions of their support costs. 

15GAO-11-848. 

16According to DOE’s Office of the Chief Financial Officer, additional insight into sites’ 

support function costs was needed in order to improve comparability with DOE’s Standard 

Accounting and Reporting System, which came online after DOE initially started collecting 

support cost data. Also, the support cost data under the old reporting system did not 

differentiate between direct and indirect support costs. Furthermore, costs were reported 

annually under the old system, but are being reported quarterly under the new reporting 

system.
 

Page 11 GAO-12-255 Support Functions at DOE Sites

For example, officials from Los Alamos National Laboratory in New 

Mexico told us that because just 15 percent of that site’s $145 million in 

annual security costs are indirect, reporting only the indirect costs would 

exclude $125 million in direct costs, or more than 85 percent, of the site’s 

total security costs.

The data were more complete for fiscal year 2011—DOE’s first year for 

implementing the new system after the pilot test; however, the 2010 and 

2011 data for individual support functions are not comparable with older 

data because the definitions for some support functions changed from the 

old system to the new one. The new system retained many of the support 

function categories of the old system, but it changed the definitions for 

some categories and added new ones, such as cyber security, 

technology transfer, and internal audit. For example, the new system 

retained the safeguards and security category of the old system; 

however, it changed the definition for that category to exclude cyber 

security costs, which were made into a new cyber security category. 

Furthermore, DOE’s definition for the new cyber security category 

identified specific activities, such as purchasing and maintaining security 

software, that are not described under the old system. DOE also added a 

technology transfer category to the new reporting system, which includes 

costs from various categories under the old system. Because the 

definitions changed in these and other instances, costs that were in one 

category under the old system were defined differently under the new 

system. As a result, costs of individual support functions from the two 

systems cannot be readily compared.

DOE has taken some steps to ensure the completeness of support cost 

data under its new data collection approach, but officials and documents 

described the need for additional steps to ensure that support cost data 

collected under the new approach are comparable across DOE sites. 

DOE has taken steps to ensure the completeness of data under the new 

approach, which requires M&O contractors to verify they are capturing all 

relevant costs by comparing their support costs with cost information from 

DOE’s central accounting system.17

 

17Support function costs are compared with data from DOE’s Standard Accounting and 

Reporting System. Specifically, sites check that their combined direct and indirect costs 

are equal to the total costs in that system.

DOE’s Office of the Chief Financial 

Officer, however, plans to take additional steps, such as peer reviews, to 

DOE Has Not Yet Taken All 

Planned Steps to Ensure 

Data Are Complete and 

Comparable 
 

Page 12 GAO-12-255 Support Functions at DOE Sites

ensure that the new data are comparable. Under the previous approach 

for collecting support function costs, DOE used peer reviews to help 

ensure that sites identified the relevant costs and assigned them to the 

correct categories. Specifically, the accuracy of sites’ reporting—including 

whether the relevant costs were being included in the correct 

categories—was reviewed every 3 years by representatives from other 

M&O contractors. The reviews found instances of sites classifying costs 

incorrectly, which were reported to DOE and corrected by the contractor. 

In fiscal year 2011 guidance for the new system from the Office of the 

Chief Financial Officer, DOE stated that it planned to implement peer 

reviews by the end of fiscal year 2011. In September 2011, officials 

responsible for DOE’s support cost data told us that the peer reviews had 

not been implemented because of other priorities, but more recently, the 

department said it plans to implement peer reviews in fiscal year 2012. 

Until these reviews have been implemented, it is difficult to know if the 

data collected under the new system are reliable or useful for comparing 

sites’ support costs.

Complete and comparable data on support costs at NNSA and Science 

sites are not available for all years since 2007, but M&O contractor 

officials at the 8 sites we reviewed discussed trends in support function 

costs at each individual site. Because each site is different and M&O 

contractors have discretion in how they classify costs, contractors’ own 

data systems may capture support costs differently than DOE’s reporting 

systems discussed earlier. Contractor officials responsible for financial 

management at most of the 8 sites told us that support function and other 

costs at their sites, including pensions, had increased overall for fiscal 

years 2007 through 2011. These overall costs increased during that 

period, but some types of support costs generally decreased or remained 

stable relative to the total costs of managing and operating the sites, 

according to these officials. The costs that decreased generally included 

human resources administration, financial management systems, and 

other support costs that some officials said are easier to control. 

Contractor officials at the 8 sites said they used reductions in some 

support costs to help offset increases in support costs that can be more 

difficult to control, such as pensions and facility costs. For example, on 

the basis of information provided by Sandia National Laboratories, the 

site expects to contribute nearly $2 billion to its pension plan over the next 

10 years, $400 million of which officials expect to fund through reductions 

in that site’s support function costs. M&O contractor officials responsible 

for financial management at Brookhaven National Laboratory told us they 

plan to leverage the funds resulting from decreases in some support 

function costs in order to help fund ongoing efforts to upgrade the site’s 
 

Page 13 GAO-12-255 Support Functions at DOE Sites

aging facilities and infrastructure, which had grown more costly to 

maintain. Specifically, rather than lowering the rates charged for the 

support functions, the M&O officials opted to continue charging the same 

rates and then use the additional funds to help pay for the upgrades.

DOE and M&O contractors have undertaken various efforts since 2007 to 

improve the efficiency of, or streamline, sites’ support functions. 

Streamlining efforts that officials reported were focused mainly on three 

broad areas: (1) procurement; (2) human resources, including employee 

benefits; and (3) facilities and infrastructure.18

To streamline procurement, DOE and M&O contractors at NNSA and 

Science sites said that they have undertaken various efforts to obtain 

better pricing on goods and services and make their procurement 

processes more efficient. Some of the efforts were aimed at reducing 

fragmentation among sites by using a more centralized approach. For 

example:

Some streamlining efforts 

were part of larger initiatives involving multiple sites from among the 17 

NNSA and Science sites, while others were initiated at the site level.

• To better leverage its 7 sites’ purchasing power, in 2007 NNSA began 

operating its central Supply Chain Management Center. According to 

NNSA, this center applies “strategic sourcing” techniques, coordinated 

 

18The discussion below provides examples of streamlining efforts but is not meant to be 

comprehensive. 

DOE and Site 

Contractors Have 

Been Streamlining 

Support Functions 

and Identifying 

Additional 

Opportunities, as well 

as Challenges

Streamlining since 2007 

Has Mainly Focused on 

Procurement, Human 

Resources, and Facilities 

and Infrastructure
 

Page 14 GAO-12-255 Support Functions at DOE Sites

through a central organization, that private companies and, more 

recently, government agencies have used to improve efficiency and 

effectiveness of procurement.19

• Individual sites from the 8 we reviewed have undertaken efforts on 

their own to streamline procurement and reduce costs. In addition to 

agreements they negotiated on their own, M&O contractor officials at 

7 of the sites said they purchased goods or services through 

agreements negotiated by their M&Os’ parent organizations to obtain 

better pricing. For instance, contractor officials from Lawrence 

Berkeley National Laboratory told us the site expanded its employees’ 

access to scientific journals significantly at no additional cost by using 

the University of California’s subscriptions to those journals. Officials 

at Pacific Northwest National Laboratory said their site leverages its 

M&O’s parent organization’s agreements with airlines, rental car 

companies, and banks to obtain better pricing on airfares, rental cars, 

and purchase cards. A senior official at that site also said, however, 

The center aggregates and analyzes 

NNSA sites’ procurement spending data to identify opportunities to 

coordinate sites’ purchases and negotiate better prices for goods and 

services. For example, center officials conducted one analysis that 

revealed that the 7 sites were purchasing most of their laboratory 

supplies and equipment from the same set of 38 vendors through 

individual contracts negotiated by each site. The center was able to 

negotiate a single contract for all the sites, resulting in an estimated 

savings of $22 million over the contract’s 3-year term, according to the 

M&O contractor official who manages the center. The official said the 

center has negotiated agreements for other goods and services, such 

as electrical supplies and equipment. Furthermore, NNSA’s center 

supplements its own strategic sourcing agreements with ones 

negotiated by DOE’s Integrated Contractor Purchasing Team for 

goods such as office supplies and personal computers. These 

agreements are similar to agreements negotiated by NNSA’s center 

but, unlike the NNSA agreements, are available to M&O contractors 

across DOE. In addition, NNSA’s central Supply Chain Management 

Center provides automated tools, including electronic catalogs, to help 

sites streamline their purchasing activities and carry out “reverse 

auctions,” in which vendors competitively bid down their prices for 

goods and services to win contracts at NNSA sites.

 

19For additional information on strategic sourcing, see GAO, Best Practices: Using Spend 

Analysis to Help Agencies Take a More Strategic Approach to Procurement, GAO-04-870 

(Washington, D.C.: Sept. 16, 2004).
 

Page 15 GAO-12-255 Support Functions at DOE Sites

the site uses agreements negotiated by DOE’s Integrated Contractor 

Purchasing Team for some purchases. In addition, contractor officials 

at 6 of the sites told us they made their procurement process more 

efficient by switching from paper-based procurement transactions to 

electronic ones, including electronic catalogs, which allow their sites’ 

employees to make frequent small-value purchases without involving 

the site’s procurement organization.

To streamline human resources, sites from the 8 we reviewed merged 

certain human resource functions to reduce administrative costs, 

according to M&O contractor officials, as well as automated some human 

resource services and reduced contractor employee benefits. For 

example:

• M&O contractor officials at Los Alamos and Lawrence Livermore 

national laboratories said they took steps to merge certain services, 

mainly in human resources. For example, Los Alamos National 

Laboratory provides employee benefits accounting and other services

for both sites, according to the officials. Similarly, contractor officials at 

Y-12 National Security Complex—an NNSA site that manufactures 

uranium and other components for nuclear weapons—told us they 

took steps to merge their site’s hiring, compensation, benefits 

administration, and other services with NNSA’s Pantex Plant. 

According to the officials and documents describing the effort, the 

sites now use a common approach to planning and providing the 

services. 

• Contractor officials from the 8 NNSA and Science sites told us they 

automated various human resource activities, such as hiring and 

training of employees or managing employee records. Officials told us 

that automation has helped their sites reduce the time needed to carry 

out the activities and, in some cases, directly lowered their costs. 

Contractor officials at the Y-12 National Security Complex told us their 

site’s automation of its employee records eliminated the timeconsuming management of paper records. Contractor officials at 

Lawrence Livermore and Los Alamos national laboratories said they 

moved more of their employee training online, reducing the travel or 

other costs of providing in-person training. Contractor officials at some 

sites told us that automation of such functions became necessary 

after, or in anticipation of, significant cuts in the numbers of support 

staff, including at one site where officials said over one-third of staff 

for some support functions were cut to address a budget shortfall. In 

other cases, contractor officials said that their sites automated human 
 

Page 16 GAO-12-255 Support Functions at DOE Sites

resource activities after evaluating the efficiency and effectiveness of 

existing policies and processes. Contractor officials at Lawrence 

Berkeley National Laboratory reported they took steps to standardize 

and automate the site’s hiring, after an evaluation revealed that the 

laboratory’s 14 scientific and 6 support divisions had widely varying 

policies and processes, requiring hiring decision approval from one 

official or as many as seven different officials. According to these 

officials, the laboratory’s automated tool helped standardize hiring 

processes and reduce the amount of time for bringing on new staff.

• To reduce sites’ costs for providing health and pension benefits to 

contractor employees and retirees, all NNSA and Science sites we 

reviewed reported making reductions in their benefit programs. In the 

area of health benefits, contractor officials at the 8 sites told us they 

increased the share of health benefit costs that contractor employees 

or retirees pay, for instance, by narrowing the number of health plan 

options and moving to plans with higher out-of-pocket expenses. 

Contractor officials at 3 of the sites said they eliminated 

postretirement medical benefits for newly hired contractor employees, 

and at two sites began requiring such employees to obtain their 

prescription medications from lower-cost mail-order pharmacies. In 

the area of pensions, contractor officials at 6 of the 8 sites said they 

made changes to their plans, reducing the overall amount of future 

pension benefits current contractor employees may receive in 

retirement. For instance, contractor officials from 3 of the sites told us 

they closed their traditional defined-benefit pension plans to newly 

hired contractor employees, and some sites made changes affecting 

future benefits to current employees’ pensions. According to 

documents, Sandia National Laboratories changed its pension 

formula to reduce the amount of the annual retirement benefit that 

current contractor employees will be eligible to receive on future 

earnings. Another site, Brookhaven National Laboratory, reduced, 

from 10 percent to 9 percent of employee salaries, the amount it 

contributes to its newly hired contractor employees’ definedcontribution pensions, according to documents.

To streamline facilities and infrastructure and reduce costs, DOE and 

contractors have undertaken various efforts to reduce the number of 

facilities and the amount of space they must maintain, lower the 

maintenance and operating costs of existing buildings and space, and 

improve how sites modernize and upgrade their facilities and 

infrastructure. For example:
 

Page 17 GAO-12-255 Support Functions at DOE Sites

• In 2007, Science adopted a more centralized approach to upgrading 

facilities and infrastructure at its laboratories to reduce costs and 

improve the quality of the research facilities. According to documents 

outlining this approach and Science officials, many facilities at 

Science’s sites are aging, have grown more costly to maintain, and 

cannot easily support the equipment needed for modern scientific 

research, which may require environments free from vibrations or 

other special conditions. Until recently, Science’s M&O contractors 

have largely been responsible for prioritizing and funding major 

improvements to sites’ facilities and infrastructure, according to 

Science officials. To better leverage these funds, however, Science 

implemented a new approach, in which a centrally managed process 

is used to prioritize funding for modernizing facilities and infrastructure 

at all 10 Science sites, in many cases replacing the fragmented 

approach used previously. According to Science officials, the new 

approach has helped Science tie modernization efforts more closely 

to mission needs while bringing down the costs and lead times of 

these efforts. In one such effort, Oak Ridge National Laboratory was 

able to replace two outdated research facilities with a modern 

laboratory building at a lower cost and more quickly than would have 

been feasible under the former approach. Construction of the new 

building took about 2 years and was completed in 2011 for 

approximately $96 million. This building was completed more quickly 

and at less than half the cost of renovating the outdated facilities, 

which, according to Science officials, was the most likely 

modernization option under the previous funding approach. Also, 

according to project documentation, estimated energy costs for the 

new building are 40 percent less than for the renovated facilities.

• Individual sites also took various steps to streamline facilities and

infrastructure. Officials at the 8 NNSA and Science sites we reviewed 

told us that they had consolidated staff and equipment into less 

space, reducing the costs of maintaining and operating space at their 

sites. In some cases, sites were able to repurpose the vacated space 

or demolish buildings to reduce the sites’ overall footprint. In other 

cases, sites vacated inactive nuclear facilities—which can be costly to 

maintain, even if not inhabited—to prepare for their eventual cleanup 

and removal. Contractor officials at 3 of the 8 sites also told us they 

made better use of existing work space by changing how that space is 

allocated to staff and improved the quality of facility and infrastructure 

services through improved strategic planning for facilities and by 

changing how these services are organized and carried out. For 

example, contractor officials from Pacific Northwest National 

Laboratory reported that in 2011 they began relocating infrequently 
 

Page 18 GAO-12-255 Support Functions at DOE Sites

used laboratory equipment to a central storage facility, freeing up an 

additional 7,000 square feet of work space. In addition, some sites 

took steps to lower their energy costs. Officials at 3 of the sites we 

reviewed said they did so by negotiating with their utilities for better 

rates. Through contract negotiations between DOE and New York 

state, for instance, Brookhaven National Laboratory significantly 

lowered its utility costs by purchasing excess hydropower from New 

York state through a local utility, according to documents describing 

the effort and laboratory officials. Similarly, contractor officials at Oak 

Ridge National Laboratory said DOE negotiated with the utility for a 

less expensive rate that applies to manufacturing facilities, lowering 

electricity costs for the lab and adjacent DOE facilities.

Streamlining efforts described by DOE and officials at the NNSA and 

Science sites we reviewed appeared to incorporate many of the key 

practices for streamlining and improving efficiency in federal programs 

and functions identified in our September 2011 report.20 These key 

practices include examining the efficiency and effectiveness of 

organizational structures and processes, targeting both short-term and 

long-term efficiency gains, and building capacity for further streamlining. 

Some of the efforts implemented by DOE and M&O contractors at the 8 

sites involved Lean Six Sigma,21

 

20GAO, Streamlining Government: Key Practices from Select Efficiency Initiatives Should 

Be Shared Governmentwide, 

or targeted short-term and long-term 

efficiency gains. To build capacity for further streamlining, NNSA created 

a Business Management Advisory Council in 2009 to improve 

collaboration among its sites and encourage continuous streamlining of 

sites’ support functions. Likewise, contractor officials at individual sites 

said processes are in place to promote continuous improvement at their 

sites. For example, a contractor official at the Y-12 National Security 

Complex said the site’s productivity improvement initiative encourages 

staff to identify streamlining and cost-savings opportunities for mission 

activities and support functions. In fiscal year 2010, the site identified 244 

streamlining initiatives—ranging from improvements to how the site’s 

vehicle fleet is managed to the creation of an apprenticeship program for 

GAO-11-908 (Washington, D.C.: Sept. 30, 2011).

21Lean Six Sigma is a data-driven approach used in the private sector and government for 

analyzing work processes based on the idea of eliminating defects and errors that 

contribute to losses of time, money, opportunities, or business. See GAO-11-908. 
 

Page 19 GAO-12-255 Support Functions at DOE Sites

training new facility maintenance workers—which were tracked internally 

and shared with NNSA.

DOE and contractor officials identified opportunities to expand existing 

streamlining efforts to additional sites and undertake new efforts in 

procurement, human resources, facilities and infrastructure, and other 

support functions, such as information technology. The DOE and 

contractor officials also noted opportunities in other support functions, 

including DOE-led opportunities involving multiple sites and opportunities 

considered by individual sites from among the 8 NNSA and Science sites 

we reviewed. For example:

• To further streamline procurement, the Deputy Secretary of Energy 

called on DOE organizations and M&O contractors to expand 

strategic sourcing to leverage DOE’s buying power more effectively 

and achieve significant cost savings. In an August 2010 

memorandum, the Deputy Secretary noted that successful expansion 

would require close collaboration among DOE and its M&O 

contractors and cited NNSA’s central Supply Chain Management 

Center as a possible model for other organizations in the department. 

Since this memorandum was issued, other organizations in DOE, 

including Science, have been evaluating options for expanding 

strategic sourcing at the sites they oversee. In addition, individual 

sites among the 8 we reviewed identified further opportunities to 

streamline procurement. For instance, according to contractor 

officials, Oak Ridge National Laboratory plans to increase its use of 

strategic sourcing agreements and, by 2014, reduce by half the time 

needed to conduct its site’s procurements.

• To further streamline human resources, NNSA’s Business 

Management Advisory Council is considering whether to consolidate 

human resources and other services, such as payroll and finance, at 

all NNSA sites. In a March 2011 white paper, NNSA concluded that a 

centralized approach to providing these services is technically feasible 

and could lead to cost savings, but it would require further study of 

potential barriers, such as the need to standardize information 

systems and work processes across NNSA’s M&O contractors. 

Individual sites also identified further streamlining opportunities. A 

contractor official at 1 site said the site was considering outsourcing 

certain human resource functions, such as employee counseling 

services. In the area of retirement benefits, contractor officials at 2 of 

the 8 sites said their sites were considering closing postretirement 

Additional Streamlining 

Opportunities
 

Page 20 GAO-12-255 Support Functions at DOE Sites

medical benefit programs to new contractor employees, while officials 

at another site said they were considering changing their definedbenefit pension plan to reduce the amount of pension benefits new 

employees may be eligible to receive.

• To further streamline facilities and infrastructure, both NNSA and 

Science officials identified opportunities to improve facilities and 

infrastructure planning and reduce infrastructure, energy, and other 

costs at multiple sites. In December 2008, NNSA selected its 

preferred approach for transforming its nuclear weapons sites—

including sites’ facilities and infrastructures—which it outlined in an 

October 2008 Environmental Impact Statement.22 In particular, special 

nuclear material, including plutonium and highly enriched uranium, 

would be consolidated into fewer locations among NNSA sites, 

enabling sites to reduce security, infrastructure, or other costs 

associated with storing and safeguarding the nuclear material. At least 

one site, Lawrence Livermore National Laboratory, plans to remove 

significant stockpiles of special nuclear material from the site by the 

end of fiscal year 2012 and, according to M&O contractor officials 

there, reduce the size and cost of its security forces. Under a separate 

effort, NNSA is considering adopting a more centralized and strategic 

approach to modernizing its sites’ facilities and infrastructure, as well 

as removing unneeded buildings and reducing sites’ footprints. 

According to NNSA officials who oversee facilities and infrastructure, 

a more centralized and strategic approach is needed to ensure that 

improvement efforts are more closely tied to long-term mission needs. 

To further streamline at Science’s sites, Science and its contractors 

determined that additional collaboration among sites could help DOE 

achieve governmentwide energy efficiency requirements, set by the 

President in Executive Order 13514.23

 

22See Record of Decision for the Complex Transformation Supplemental Programmatic 

Environmental Impact Statement—Operations Involving Plutonium, Uranium, and the 

Assembly and Disassembly of Nuclear Weapons, Dec. 19, 2008 (73 FR 77644); Record of 

Decision for the Complex Transformation Supplemental Programmatic Environmental 

Impact Statement—Tritium Research and Development, Flight Test Operations, and Major 

Environmental Test Facilities, Dec. 19, 2008 (73 FR 77656); and Complex Transformation 

Supplemental Programmatic Environmental Impact Statement, Oct. 24, 2008 (DOE/EIS0236-S4).

In a January 2011 proposal, 

23Exec. Order No. 13514 (Oct. 5, 2009), 74 Fed. Reg. 52117, Federal Leadership in 

Environmental, Energy, and Economic Performance, directs federal agencies to set 

energy efficiency goals for their facilities and operations, including specific targets for 

reducing their production of greenhouse gases, such as carbon dioxide.
 

Page 21 GAO-12-255 Support Functions at DOE Sites

Science and contractor officials identified various approaches that 

Science’s 10 laboratories could take on their own or collaboratively to 

improve DOE’s overall energy efficiency.

In addition, officials at NNSA and Science sites reported that there were 

opportunities to streamline and reduce fragmentation in other support 

functions, such as information technology, safety, and security. Proposals 

for additional streamlining in these support functions involved DOE-led 

efforts at multiple sites, as well as opportunities identified by contractor 

officials at individual NNSA and Science sites from the 8 we reviewed. 

For example, NNSA is in the early planning stages of an organizationwide 

effort to upgrade its sites’ information technologies and improve the 

security of the sites’ networks, according to NNSA officials. Under a key 

component of this effort, wireless technologies would be used to remotely 

monitor potentially dangerous conditions in nuclear environments, helping 

contractors improve safety and reduce costs by shortening the amount of 

time workers need to spend in these environments, according to DOE 

documents. NNSA is currently testing the feasibility of using wireless 

technologies at Livermore and Los Alamos national laboratories; another 

site, Sandia National Laboratories, has already been using these 

technologies to improve the safety and efficiency of operations. Under 

another key component, NNSA sites’ current patchwork of network 

technologies and architectures would be replaced with standardized 

technologies and architectures, reducing the need for site support 

personnel and improving NNSA’s ability to secure its sites’ networks, 

according to NNSA officials.24 A related component would reduce the 

need for technology and support personnel at sites by relocating a

number of site-supported computer applications to a “cloud” computer—

an emerging model in which computer services are provided centrally 

through the Internet.25

 

24For more information on network architecture, see GAO, Organizational Transformation: 

A Framework for Assessing and Improving Enterprise Architecture Management (Version 

2.0), 

The officials also reported that providing wireless 

technologies and upgrading sites’ networks through a coordinated effort 

would allow NNSA to leverage its purchasing power more effectively than 

through fragmented efforts at sites. In addition, contractor officials at 3 of 

the Science sites we reviewed also told us they were considering cloud 

GAO-10-846G (Washington, D.C.: Aug. 5, 2010). 

25For more information, see GAO, Information Security: Additional Guidance Needed to 

Address Cloud Computing Concerns, GAO-12-130T (Washington, D.C.: Oct. 5, 2011).
 

Page 22 GAO-12-255 Support Functions at DOE Sites

computing for their sites. Officials at the 4th Science site, Lawrence 

Berkeley National Laboratory, said their site has been using cloud 

computing since 2010 for certain tasks, such as employees’ e-mail and 

calendar, which an offsite vendor remotely manages for the laboratory.

DOE and contractor officials also cited a variety of challenges that could 

hinder implementation of additional streamlining efforts. One such 

challenge is the potential difficulty of getting M&O contractors to 

coordinate and adopt a more centralized, and less fragmented, approach. 

DOE and contractor officials told us that in some cases, the sites were 

reluctant to adopt a centralized approach to providing support functions 

because such an approach may not always be more effective. For 

example, in response to the Deputy Secretary’s August 2010 memo 

calling for an expansion of strategic sourcing, Science expressed 

reluctance to implement a more centralized approach to procurement, 

citing efficiencies of its sites’ current procurement approach. In July 2011, 

Science reported that after assessing options for centralizing sites’ 

procurement—including options for joining NNSA’s central Supply Chain 

Management Center or establishing a center of its own—it concluded that 

the benefits of these options would not exceed the costs. Despite its less 

centralized approach, Science concluded that its sites already benefit 

from key aspects of strategic sourcing—including analysis of sites’ 

spending and leveraged buying through contractors’ parent organizations 

and DOE’s Integrated Contractor Purchasing Team—and have achieved 

significant and potentially greater savings through their own procurement 

activities. In a September 2011 study, an outside consultant hired by 

Science also concluded that Science’s laboratories would not achieve 

further cost savings by joining NNSA’s central Supply Chain Management 

Center but could benefit from methods used there.26

 

26The study—“Use of Supply Chain Management Center by Department of Energy Office 

of Science National Laboratories,” McCallum-Turner, Sept. 16, 2011—compared 

procurement cost savings in fiscal year 2010 between Science laboratories and NNSA’s 

Supply Chain Management Center. The report concluded that joining with NNSA’s center 

would not benefit Science, because “major” Science laboratories are achieving greater 

savings on their own. Other Science laboratories, however, which are achieving 

comparable or less savings, could benefit from some of the tools used by NNSA’s center. 

The report also, however, identified potential limitations to its analysis, including difficulty 

with comparing data from multiple sites that may not be comparable.

Challenges Could Hinder 

Additional Streamlining 

Efforts 
 

Page 23 GAO-12-255 Support Functions at DOE Sites

We did not evaluate Science sites’ savings potential under a more 

centralized approach to procurement, but procurement officials in DOE 

told us that Science likely has additional opportunities to leverage its 

laboratories’ buying power, because Science has not comprehensively 

analyzed its sites’ spending. Moreover, DOE and contractor officials said 

that barriers to adopting a more centralized approach can potentially be 

overcome, despite DOE and sites’ long-standing fragmentation. For 

example, according to NNSA’s procurement director and a senior 

contractor official at NNSA’s central Supply Chain Management Center, 

NNSA’s M&O contractors were initially reluctant to participate in the 

supply chain center because they were concerned about losing their 

autonomy over procurement activities. In addition, because DOE 

competes its M&O contracts, they were reluctant to release potentially 

sensitive information about those activities. Officials said they were able 

to address these issues, in part by securing the NNSA Administrator’s 

support for the new center and by requiring contractors to participate in 

the effort. Similarly, contractor officials at Los Alamos National Laboratory 

and Y-12 National Security Complex told us that their respective efforts to 

merge certain human resource activities with those of other NNSA sites 

were helped by the fact that the contractors involved in the efforts have 

common parent organizations.

In addition to the potential difficulty of getting contractors to coordinate 

and adopt a more unified approach, DOE and contractor officials cited 

other challenges to further streamlining, including the long lead times or 

high up-front costs that can sometimes precede cost savings or other 

streamlining benefits. Officials from Sandia National Laboratories, for 

example, told us the anticipated cost savings from eliminating new 

contractor employees’ postretirement health benefits in 2009 would not 

materialize for many years because the affected employees are years 

from retirement. Similarly, in the March 2011 white paper evaluating 

options to merge sites’ human resource support services, NNSA cited 

potentially long lead times and high expected up-front costs, which it 

estimated could range from $500 million to $1 billion, before the 

anticipated cost savings and other benefits would result. Also, according 

to contractor officials or documentation from several sites, efforts to 

automate support functions and improve facilities and infrastructure can 

require long lead times or costly investments up front but can also save 

on costs down the road, because they improve efficiency or require fewer 

staff.

In addition, according to DOE and contractor officials, while reducing 

employee benefits or laying off staff can reduce costs, these steps could 
 

Page 24 GAO-12-255 Support Functions at DOE Sites

also hinder contractors’ ability to recruit and retain a high-quality 

workforce. Officials said that such steps can affect morale at the site and 

make it more difficult to recruit scientists, engineers, and other highly 

trained staff. They can also exacerbate existing challenges related to the 

geographic isolation of some NNSA and Science sites and competition 

from other industries. Officials at Sandia National Laboratories, for 

example, said that they had to achieve dramatic reductions in the site’s 

pension liability while ensuring the site retained adequate numbers of 

experienced staff for its highly technical and specialized nuclear 

weapons-related workload, which they said would likely increase in the 

coming years. Other officials told us, however, that reductions in 

employee benefits may not always have adverse effects on sites’ ability to 

recruit and retain a high-quality workforce because some benefits offered 

at NNSA and Science sites, such as defined-benefit pension plans, may 

be more generous than those offered by competing industries.

DOE and its M&O contractors at NNSA and Science sites have estimated 

savings for some of the streamlining efforts undertaken since fiscal year 

2007. It is difficult, however, to compare savings or quantify total savings 

across sites because DOE’s guidance for estimating savings is unclear 

and the methods used to estimate savings vary. Several streamlining 

efforts for which DOE and M&O contractors estimated cost savings were 

in the area of procurement. Examples of estimated savings reported by 

DOE or its contractors included the following:

• According to NNSA documentation, NNSA estimated that in fiscal 

year 2011 its seven sites saved $106.6 million on purchases using its 

central Supply Chain Management Center.

• Individual sites also reported savings. For example, contractor officials 

at Pacific Northwest National Laboratory estimated that in fiscal year 

2010 the lab saved about $35 million in procurement costs through its 

direct negotiations with suppliers, purchases through agreements 

negotiated by its parent organization, and other means.

DOE’s guidance for how to estimate procurement savings, however, is 

not consistent and clear in all cases. As a result, the methods used to 

estimate these cost savings can vary widely across sites. For some 

procurements, standardized methods for estimating cost savings are 

used. For example, guidance by NNSA’s central Supply Chain 

Management Center specifies that NNSA’s seven sites use the center’s 

Difficulties Exist in 

Quantifying Cost 

Savings because 

Guidance for 

Estimating Savings Is 

Unclear and Methods 

Used Vary
 

Page 25 GAO-12-255 Support Functions at DOE Sites

preferred method for estimating cost savings from purchases made 

through the center, in which the price paid for goods or services is 

subtracted from the previous price paid. If no previous price is available or 

would not provide a useful comparison, the guidance identifies two other 

approved methods. Similarly, for purchases made through DOE’s 

Integrated Contractor Purchasing Team agreements, the team estimates 

cost savings by subtracting the price paid through its agreements from 

the General Services Administration (GSA) price,27

For other procurements, DOE has not historically had guidance for 

estimating cost savings. In September 2011, to help improve consistency 

across the department, and comply with a governmentwide effort to 

measure procurement cost savings, DOE issued guidance outlining 

approved methods for calculating these savings. The guidance was one 

part of DOE’s efforts to revise the department’s metrics for evaluating the 

performance of its M&O contractors’ procurement functions, in response 

to recommendations from M&O contractors.

if available, or the 

vendor’s list price, according to the contractor official who coordinates the 

team’s activities.

28

 

27This price is from GSA’s Multiple Award Schedule program, in which GSA negotiates 

contracts with a variety of vendors and allows federal agencies and contractors, including 

DOE’s M&O contractors, to make purchases at the negotiated prices.

M&O contractor 

representatives from DOE’s newly formed Contractor Integrated Supply 

Chain Management Council identified the need for greater consistency in 

reporting of sites’ procurement cost savings. Also, according to an official 

from DOE’s Office of Procurement and Assistance Management, DOE’s 

effort to develop guidance was responding to Office of Management and 

Budget (OMB) direction that agencies governmentwide, including DOE, 

report on their procurement cost savings. The council suggested various 

methods for estimating procurement cost savings, which it recommended 

DOE adopt as acceptable methods. These methods include determining 

procurement cost savings by subtracting the price that a site paid for 

goods and services from a comparison price, such as the previous price 

paid at the site or an independent estimate. DOE incorporated these

methods into a new performance metric for evaluating M&O contractors’ 

28Contractors report procurement performance to DOE annually using the Contractor 

Purchasing System Balanced Scorecard. The balanced scorecard requires contractors to 

report on a variety of procurement metrics, which DOE then uses to oversee the 

contractors’ procurement functions.
 

Page 26 GAO-12-255 Support Functions at DOE Sites

procurement functions, which will require M&O contractors to report their 

annual procurement cost savings to DOE starting in fiscal year 2012.

The guidance for the new metric, however, does not specify when it is 

appropriate to use each method and consequently could lead to wide 

variations in the cost savings reported by contractors. The guidance also 

does not identify a preferred method for estimating cost savings; rather, it 

allows contractors to use any one of the methods recommended by the 

Contractor Integrated Supply Chain Management Council as well as any 

other method approved by local DOE site offices. A variety of methods 

may be appropriate for calculating procurement cost savings, but we 

found that different methods could lead to wide variations in estimated 

cost savings, making it difficult for DOE to oversee contractors’ 

performance in streamlining and reducing the costs of site procurement 

functions. For example, the official who oversees procurement at Pacific 

Northwest National Laboratory said his division used the site’s preferred 

method to estimate the cost savings resulting from negotiations with a 

vendor over the price of a new software package. Using this method—in 

which the price paid was subtracted from the vendor’s opening offer—the 

official cited a savings of $9 million, which he considered to be an 

accurate estimate of the savings. According to the official, however, other, 

less conservative methods for estimating procurement cost savings—

including those used elsewhere in DOE—would have led to higher 

savings estimates, including savings as high as $35 million (see fig. 2).
 

Page 27 GAO-12-255 Support Functions at DOE Sites

Figure 2: Example of the Effect of Using Different Cost Savings Estimation Methods for a 2010 Software Purchase at Pacific 

Northwest National Laboratory (PNNL)

According to an official from DOE’s Office of Procurement and Assistance 

Management, the new guidance provides a first step to addressing these 

inconsistencies, but DOE expects to further clarify the guidance. He also 

noted that, despite the governmentwide requirement to report 

procurement cost savings, DOE developed the guidance with little 

specific instruction from OMB on the appropriate methods for measuring 

procurement cost savings.

29

For cost savings estimates for support functions other than procurement, 

we also found that there is considerable flexibility in how savings may be 

calculated, which could lead to wide variations in savings estimates. For 

example, a contractor official at Brookhaven National Laboratory reported 

that the estimated savings during the first few months of the site’s 

agreement with its utility to purchase hydropower varied, depending on 

the estimation method. The estimated savings totaled either $1 million or

 

29In November 2011, we reported that OMB guidance issued as part of its effort to reduce 

procurement spending and increase agencies’ reporting of procurement cost savings was 

broad and led to inconsistent interpretations by agencies as to what constituted savings. 

We therefore recommended that OMB’s Office of Federal Procurement Policy clarify its 

guidance related to measuring procurement cost savings. See GAO, Federal Contracting: 

OMB’s Acquisition Savings Initiative Had Results, but Improvements Needed, GAO-12-57 

(Washington, D.C.: Nov. 15, 2011).
 

Page 28 GAO-12-255 Support Functions at DOE Sites

$7 million, depending—respectively—on whether the cost of hydropower 

was compared with the site’s previous price for electric power or the 

utility’s market rate. Similarly, contractor officials from Los Alamos 

National Laboratory reported saving $200,000 annually in travel-related 

costs by encouraging site employees to use video teleconferencing in lieu 

of attending meetings or training sessions in person. The laboratory 

officials told us that they could have included other cost savings in their 

estimate—such as costs (productivity losses) avoided when staff spend 

more time on their regular duties rather than travel offsite—but wanted a 

more conservative savings estimate. In contrast, in their savings estimate 

for another type of process improvement, contractor officials at the Y-12 

National Security Complex included savings from needing fewer staffhours to complete tasks. In this case, the site automated its process for 

counting its inventory of personal property, such as computers, which 

officials estimated saved $1 million in fiscal year 2011.

DOE guidance relevant for cost savings in other support functions does 

not clearly define appropriate methods for estimating cost savings. DOE’s 

acquisition regulations include provisions that give M&O contractors an 

opportunity to earn a share of the cost savings, paid out as fee, resulting 

from streamlining efforts.30 Guidance in the regulations outlines the 

process for identifying and verifying savings but does not clearly define 

appropriate methods for estimating the savings in order to award 

additional fee. In May 2011, NNSA revised these provisions and 

incorporated them into its sites’ M&O contracts. The revised version 

defines more clearly what types of streamlining efforts may result in 

additional fee for contractors—specifically, efforts that reduce sites’ 

bottom-line operating costs—but it does not define estimation methods for 

cost savings.31

 

30Department of Energy Acquisition Regulation (DEAR) 48 C.F.R. § 970.5215-4 Cost 

Reduction.

Instead, both the original and revised versions of the 

guidance allow the contractor to use any estimation methods approved by 

the local site office, which could lead to wide variations in savings 

estimates for similar efforts and make it more difficult to oversee 

contractors’ performance in streamlining and reducing support function 

costs. 

31NNSA Deviation to DEAR 48 C.F.R. § 970.5215-4 Cost Reduction, authorized pursuant 

to the authority of FAR 48 C.F.R. § 1.404.
 

Page 29 GAO-12-255 Support Functions at DOE Sites

Absent clear DOE guidance, at least one site has developed its own 

instructions to standardize savings estimates from its streamlining efforts. 

The Y-12 National Security Complex identified specific methods that site 

employees should use to estimate cost savings under its sitewide 

productivity improvement initiative. The instructions outline which 

elements should be used to estimate the cost savings and, because 

some savings span multiple years, the time period for recognizing efforts’ 

cost savings. Furthermore, an online system is used at the site to track 

streamlining efforts and includes a template for estimating cost savings, 

used to help ensure that savings are being calculated consistently. 

Savings estimates are reviewed at the site and, for efforts resulting in 

significant savings, by local NNSA officials. If applied consistently, this 

guidance would standardize estimates within the Y-12 site but not other 

sites. 

Given the uncertainty of measuring cost savings from streamlining, DOE 

and site officials told us they do not always measure cost savings. For 

example, contractor officials at Brookhaven National Laboratory told us 

they took a number of steps to improve the efficiency of processes at the 

site—including streamlining the process for admitting visitors and guests 

to the laboratory—but did not attempt to measure the cost savings 

because the process improvements did not reduce the laboratory’s 

bottom-line operating costs. Even when streamlining efforts may result in 

reductions to bottom-line costs, however, anticipated savings can be 

difficult to estimate accurately. For example, some contractor officials told 

us that, in order to estimate savings from changes to contractor 

employees’ pension or health care benefits, they often had to predict 

future events—such as the long-term performance of financial markets or 

employees’ expected use of health care services. Sandia National 

Laboratories expects recent changes to the site’s pension plan will save 

approximately $380 million from 2011 to 2020, but the actual amount 

saved will depend, in part, on the future performance of the plan’s 

underlying financial assets, which can be difficult to predict.

DOE spends over $5 billion dollars each year on support functions 

provided by M&O contractors at NNSA and Science sites. Growing

federal deficits and increasingly uncertain future federal budgets have 

necessitated that M&O contractors evaluate areas that could be 

streamlined or provide cost savings in support costs at these sites, 

thereby maximizing funds available for the sites’ national security, 

research, and energy development missions. DOE also has actively 

Conclusions 
 

Page 30 GAO-12-255 Support Functions at DOE Sites

sought opportunities and implemented measures to more effectively use 

federal funds.

Moving forward, DOE’s ability to oversee and facilitate additional 

streamlining of support functions provided by M&O contractors will require 

complete and comparable data on support function costs. DOE has 

implemented an improved reporting system for support costs. Moreover, 

DOE has partially implemented a quality control process to begin to 

ensure that data in the new cost reporting system are complete and 

comparable. DOE has not yet completed implementing its quality control 

process, however, and the completion date has now slipped from the end 

of September 2011 to sometime in 2012. Key steps, such as peer 

reviews, are not yet used. Until a quality control system is completely 

implemented, DOE cannot have full confidence that the support cost data 

it collects and uses to oversee contractor performance are complete, 

accurate, and reliable.

In addition to improving support cost data, DOE and its contractors have 

made substantial efforts to streamline support functions and reduce costs. 

Also, they have identified additional opportunities to expand these efforts 

and implement new approaches. Streamlining efforts undertaken at some 

sites may be appropriate at other NNSA or Science sites, and there may 

be other opportunities to streamline or reduce fragmentation that could be 

pilot-tested and implemented at sites. Some of these opportunities will 

require close collaboration between DOE and its M&O contractors to 

reduce the effects of long-standing fragmentation of site management. 

DOE has begun taking active steps to reduce the effects of 

fragmentation, such as NNSA’s creation of its Business Management 

Advisory Council to improve collaboration among its sites and encourage 

continuous streamlining of sites’ support functions. However, as DOE and 

contractor officials have pointed out, barriers to collaboration and other 

challenges could hinder further streamlining.

DOE has also undertaken efforts to better standardize its guidance on the 

appropriate methods to use when estimating cost savings. Because its 

guidance gives contractors considerable flexibility in choosing the 

appropriate methods for estimating cost savings, its estimates could still 

vary widely. Consequently, DOE’s ability to determine whether 

contractors’ efforts to further streamline costs are effective is limited.
 

Page 31 GAO-12-255 Support Functions at DOE Sites

To help reduce support costs or make more effective use of DOE and 

contractor resources, as well as to improve oversight of M&O contractors’ 

support functions at NNSA and Science sites, we recommend the 

Secretary of Energy take—or, as appropriate, direct the Administrator of 

NNSA and the Director of the Office of Science to take—the following 

three actions:

• fully implement a quality control system for DOE’s institutional cost 

system, including steps such as peer reviews, to ensure that data 

collected and used by DOE on support function costs are complete 

and comparable for monitoring sites’ support functions;

• assess whether all appropriate efforts to streamline DOE support 

functions or reduce support function costs are being taken at NNSA 

and the Science sites and ensure that necessary steps are taken to 

address challenges limiting implementation of cost savings efforts; 

and

• clarify DOE’s guidance on the preferred methods to use for estimating 

cost savings, including under what circumstances each method 

should be used, to ensure more consistency in how cost savings are 

estimated for various streamlining efforts and a more comparable 

assessment of results.

We provided a draft of this report to DOE for its review and comment. In 

written comments, NNSA’s Associate Administrator for Management and 

Budget, responding on behalf of DOE and NNSA, wrote that DOE agreed 

with the report’s findings and three recommendations. DOE provided 

additional information about its planned actions for addressing the 

recommendations that included implementing a peer review process to 

ensure the quality of its support cost data, establishing an organization in 

Science comparable to NNSA’s Business Management Advisory Council 

to verify that all appropriate streamlining opportunities are taken and 

challenges addressed, and clarifying the department’s recent guidance on 

the methods for estimating cost savings. DOE’s written comments on our 

draft report are included in appendix I. DOE also provided technical 

comments, which we incorporated into the report as appropriate.

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 32 GAO-12-255 Support Functions at DOE Sites

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Energy, the Administrator of NNSA, and 

other interested parties. The report also is available at no charge on the 

GAO website at http://www.gao.gov. 

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or aloisee@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix II.

Gene Aloise

Director, Natural Resources

and Environment
Appendix I: Comments from the Department of 

Energy

Page 33 GAO-12-255 Support Functions at DOE Sites

Appendix I: Comments from the Department 

of Energy
Appendix I: Comments from the Department of 

Energy

Page 34 GAO-12-255 Support Functions at DOE Sites
Appendix I: Comments from the Department of 

Energy

Page 35 GAO-12-255 Support Functions at DOE Sites
Appendix II: Contact and Staff Acknowledgments

Page 36 GAO-12-255 Support Functions at DOE Sites

Gene Aloise, (202) 512-3841 or aloisee@gao.gov

In addition to the individual named above, Janet Frisch, Assistant Director; 

Eric Bachhuber; James Espinoza; Daniel Feehan; Allyson Goldstein; 

Mehrzad Nadji; Alison O’Neill; Josie Ostrander; Cheryl Peterson; Jeff 

Rueckhaus; Michael Silver; and Vasiliki Theodoropoulos made key 

contributions to this report.

Appendix II: Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(361245)
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