National Nuclear Security Administration: Key Management Structure and Workforce Planning Issues Remain As NNSA Conducts Downsizing
Published: 2004-06-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy (DOE), is responsible for the management and security of the nation's nuclear weapons, nonproliferation, and naval reactor programs. NNSA oversees contractors that operate its facilities to ensure that activities are effective and in line with departmental policy. In December 2002, NNSA began implementing a major reorganization aimed at solving important long-standing organizational issues. GAO reviewed NNSA's overall reorganization efforts to assess (1) the extent to which it is addressing in practice the past problems concerning the unclear delineation of authority and responsibility, (2) workforce planning, and (3) its impact on federal oversight of contractor activities.
section_title: What GAO Found
paragraphs: NNSA's reorganization has addressed some past problems by better delineating lines of authority and improving communication; however, NNSA has not formalized a program management structure that identifies program managers or details their responsibilities and qualifications as they relate to the direction and oversight of contractor activity under the new organization. Without first resolving such key management issues, NNSA cannot, among other things, ensure the improved discipline and accountability it seeks in managing its programs. NNSA's reorganization is not likely to ensure that the agency has sufficient staff with the right skills in the right places because NNSA downsized its federal workforce without first determining the critical skills and capabilities needed to meet its mission and program goals. Consequently, NNSA will not know the composition of its workforce until it completes the 17 percent workforce reduction on September 30, 2004--the deadline specified in the reorganization plan--and then determines the knowledge, skills, and capabilities of its remaining employees. Without a functional long-term workforce plan, NNSA runs the risk of facing further, more serious staff shortages or skill imbalances, thereby diminishing its ability to adequately oversee its contractors. NNSA's implementation of a proposed risk-based approach to rely more on contractors' assurances and self-assessments and less on NNSA's direct oversight may be premature because it has not yet established a program management structure or long-term workforce plan for ensuring sufficient staff with the right skills in the right places. Under this proposal, contractors will develop comprehensive assurance systems, or systems of management controls, and NNSA will primarily rely upon these contractor systems and controls to ensure that contractors properly execute their work. Although the overall concept of a risk-based approach to federal oversight has merit, NNSA's proposed transition to conduct less direct federal oversight could be compromised by outstanding reorganization issues.

section_title: Letter
paragraphs: For years, the Department of Energy (DOE) has experienced long-standing  management problems with its nuclear weapons programs, including  unclear delineation of management authorities and responsibilities that  have contributed to significant cost overruns on major projects and  security problems at the national laboratories. In 1999, the Congress  created the National Nuclear Security Administration (NNSA) under Title  32 of the National Defense Authorization Act for Fiscal Year 2000 to  correct the problems that plagued DOE. NNSA, a separately organized  agency within DOE, is responsible for the management and security of the  nation’s nuclear weapons, nonproliferation, and naval reactor programs.  Since its inception, however, NNSA has experienced its own management  and security problems.
NNSA conducts nuclear weapon and nonproliferation-related national  security activities in research and development laboratories, production  plants, and other facilities. Specifically, NNSA operates three national  nuclear weapon design laboratories—Lawrence Livermore National  Laboratory, California; Los Alamos National Laboratory, New Mexico; and  the Sandia National Laboratories, New Mexico and California—and four  nuclear weapons production sites—the Pantex Plant, Texas; theY-12 Plant,  Tennessee; the Kansas City Plant, Missouri; and the Savannah River Site,  South Carolina, as well as the Nevada Test Site. To implement its  programs, NNSA relies on site contractors to manage the day-to-day site  operations and to adhere to DOE policies when operating the laboratory,  production, or other facilities within the complex. Because many NNSA  sites handle special nuclear material, including nuclear weapons,  plutonium, and highly enriched uranium, effective federal oversight is  critical to ensuring that national security, human health and safety, and the  environment are not adversely affected.
For the last several years, we have monitored NNSA’s efforts to implement  Title 32. In April 2001, we testified that NNSA’s efforts to establish a new  organization looked promising. However, among other things, we  highlighted the need for NNSA to clearly define the roles and  responsibilities of headquarters and field staff, and to establish clear lines  of authority between NNSA and its contractors. In May 2001, in response  to a series of external and internal studies detailing persistent  management problems, NNSA announced plans to reorganize its  headquarters operations. In December 2001, we noted that NNSA had set  several important goals for its overall reorganization efforts, including  establishing clear and direct lines of communication, clarifying the roles  and responsibilities of NNSA’s headquarters and field offices, and  integrating and balancing priorities across NNSA’s missions and  infrastructure. However, we found that NNSA’s headquarters  reorganization did not contain a clear definition of the roles and  responsibilities of the headquarters organizational units.
In addition to reorganizing its headquarters, in February 2002, NNSA  proposed a reorganization of its entire operation aimed at solving  important long-standing organizational issues. Specifically, NNSA  proposed a new organizational structure that would (1) remove a layer of  management by making existing operations offices into support offices,  (2) locate NNSA operational oversight close to laboratories and plants by  strengthening its site offices, and (3) streamline federal staff and hold  federal staff and contractors more accountable. In February 2002, we  testified that with the proposed new organizational structure, resolution of  NNSA’s long-standing organizational issues appeared to be within NNSA’s  grasp. However, we noted that NNSA’s lack of a long-term strategic  approach to ensure a well-managed workforce precluded it from  identifying its current and future human capital needs, including the size  of the workforce, its deployment across the organization, and the  knowledge, skills, and capabilities needed to fulfill its mission. Finally, in  December 2002, the Administrator of NNSA directed the implementation  of the overall reorganization proposed in February 2002. Specifically,  NNSA began implementing a new organizational structure that would   (1) remove a layer of management by abolishing its three Operations  Offices; (2) locate NNSA operational oversight close to laboratories and  plants by strengthening its site offices; (3) consolidate business and  technical support functions, such as procurement and contracting, in a  single service center organization located in Albuquerque, New Mexico;  and (4) adopt a challenging staff reduction target of about 17 percent to be  achieved by the end of fiscal year 2004.
You asked us to review NNSA’s overall reorganization efforts to assess   (1) the extent to which NNSA’s reorganization is addressing in practice the  past problems concerning the unclear delineation of authority and  responsibility, (2) the likelihood that NNSA’s reorganization will result in  sufficient staff with the right skills in the right places to meet its mission  and program goals, and (3) how NNSA’s reorganization will impact its  proposed plan for federal oversight of contractor activities.
To assess the extent to which NNSA’s reorganization addressed past  problems concerning the unclear delineation of authority and  responsibility, we visited NNSA headquarters, the new Albuquerque  Service Center, and four of the eight NNSA site offices and interviewed  officials and reviewed pertinent documents on the effect of the  reorganization on NNSA’s delineation of authority and responsibility. We  developed a general list of interview questions—i.e., a semi-structured  interview guide—to assist with our interviews of each NNSA site office  manager. To assess NNSA’s efforts to ensure that NNSA had sufficient  staff with the right skills in the right places to meet its mission and  program goals, we reviewed NNSA workforce planning documents and  interviewed NNSA officials, including using the interview guide for site  office manager interviews, to determine if its plans had sufficient  information to address NNSA’s future staffing needs and to identify  emerging skill gaps. In addition, we reviewed our reports on human capital  management and workforce planning. To assess NNSA’s proposed plan  for federal oversight of contractor activities under the new reorganization,  we interviewed NNSA headquarters officials, site office managers (using  the interview guide), and contractor officials, and reviewed documents  pertaining to the ongoing implementation of this proposed oversight  approach at Sandia National Laboratories. We focused our review on  NNSA’s Office of Defense Programs because, according to NNSA officials,  it was most affected by the December 2002 reorganization, and because  the Office of Defense Programs, which manages weapons activity  programs, accounts for about 73 percent of NNSA’s Fiscal Year 2005  budget request.
We conducted our review from June 2003 through April 2004 in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: NNSA, a separately organized agency within DOE, is responsible for the  management and security of the nation’s nuclear weapons,  nonproliferation, and naval reactor programs. To conduct these activities,  NNSA’s fiscal year 2005 request is about $9 billion, with about $6.6 billion  targeted for nuclear weapons programs managed by NNSA’s Office of  Defense Programs. For many years, various external studies have found  problems with the organization of NNSA’s principal activity—the Office of  Defense Programs. For example, one such study found a dysfunctional  management structure with convoluted, confusing, and often  contradictory reporting channels,  while another study cited ambiguities  and overlaps in the roles of headquarters and the Albuquerque Operations  Office as a primary source of inefficiencies and conflict within the  program.  In December 2000, we reported organizational problems at  three levels—within the Office of Defense Program’s headquarters  functions, between headquarters and the field offices, and between  contractor-operated sites and their federal overseers. These problems  resulted in overlapping roles and responsibilities for the federal workforce  overseeing the nuclear weapons program and confusion and duplication of  effort for the contractors implementing the program at sites within the  nuclear weapons complex.
In December 2002, NNSA formally announced the beginning of an overall  reorganization and workforce reduction intended to enhance its  operational efficiency and programmatic effectiveness. Prior to its  December 2002 reorganization, NNSA’s organization consisted of multiple  layers. In particular, under the Office of Defense Programs—NNSA’s  largest program—seven area offices reported to three operations offices  that in turn reported to the Deputy Administrator for Defense Programs.  The Deputy Administrator then reported to the Administrator. Figure 1  shows NNSA’s prior organization.
To remove a layer of management, NNSA closed the Albuquerque,  Oakland, and Nevada operations offices. The new organization consists of  eight site offices located at each of NNSA’s major contractors, one service  center located in Albuquerque, New Mexico, and headquarters program  offices that all report directly to the Administrator. NNSA headquarters  sets requirements, defines policies, and provides high-level guidance. Site  office managers are the designated contracting officers responsible for  delivering federal direction to the contractor at each site and for ensuring  the site’s safe and secure operation. The site office managers also manage  each NNSA site office. Under the realignment, a single service center has  been established in Albuquerque, New Mexico, to provide business and  technical support services to the eight site offices and headquarters  programs. Prior to the reorganization, about 200 staff provided these  services in the Oakland and Nevada operations offices and in offices in  Germantown, Maryland, and Washington, D.C. These services are now  being consolidated in the new service center, resulting in the reassignment  of the 200 staff to the Albuquerque service center. Figure 2 shows NNSA’s  new organization structure. NNSA plans to staff the service center with  475 employees, down from 678 in December 2002.
As part of its reorganization, NNSA decided to reduce the size of its federal  staff. Originally, NNSA set an overall staff reduction target of 20 percent.  However, in August 2003, NNSA reduced the target to 17 percent. The  current target includes a 26 percent reduction at headquarters and a   30 percent reduction at the service center. Three site offices—Kansas City,  Nevada, and Savannah River—are experiencing reductions, although  overall staff size at all eight site offices will increase by 16 employees.  NNSA is relying on a combination of buyouts, directed reassignments, and  attrition to achieve these targets by its September 30, 2004, deadline.
Standards that we have developed require federal agencies to establish  and maintain an effective system of internal controls over their  operations. Such a system is a first line of defense in safeguarding assets  and preventing and detecting errors. Under our standards, managers  should, among other things, ensure that their staffs have the required skills  to meet organizational objectives, that the organizational structure clearly  defines key areas of authority and responsibility, that progress be  effectively measured, and that operations be effectively monitored.
In addition to these internal control standards, in January 2001, and again  in January 2003, we identified strategic human capital management as a  governmentwide, high-risk area after finding that the lack of attention to  strategic human capital planning had created a risk to the federal  government’s ability to perform its missions economically, efficiently, and  effectively. In that context, we have stated that strategic workforce  planning is needed to address two critical needs: (1) aligning an  organization’s human capital program with its current and emerging  mission and programmatic goals and (2) developing long-term strategies  for acquiring, developing, and retaining staff to achieve programmatic  goals. There are five key principles that strategic workforce planning  should address irrespective of the context in which the planning is done. It  should  involve top management, employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan;   determine the critical skills and competencies that will be needed to  achieve current and future programmatic results;   develop strategies that are tailored to address gaps in number,  deployment, and alignment of human capital approaches for enabling and  sustaining the contributions of all critical skills and competencies;   build the capability needed to address administrative, educational, and  other requirements important to support workforce planning strategies;  and   monitor and evaluate the agency’s progress toward its human capital goals  and the contribution that human capital results have made toward  achieving programmatic results.
In light of shortcomings in strategic human capital management reported  by us, the President’s Management Agenda identified strategic  management of human capital as a governmentwide initiative. Established  in August 2001, the President’s Management Agenda identified a strategy  for improving the management and performance of the federal  government. The agenda included five governmentwide initiatives: the  strategic management of human capital, competitive sourcing, improved  financial performance, expanded electronic government, and budget and  performance integration.
Regarding strategic management of human capital, two principals are  considered central to its success. One, people are assets whose value can  be enhanced through investment. As with any investment, the goal is to  maximize value while managing risk. Two, an organization’s human capital  approach should be designed, implemented, and assessed by the standards  of how well they help the organization achieve results and pursue its  mission. Effective strategic workforce planning is considered an essential  element of strategic human capital management. Also called human capital  planning, it focuses on developing long-term strategies for acquiring,  developing, and retaining an organization’s total workforce (including full-  and part-time federal staff and contractors) to meet the needs of the  future.
section_title: NNSA’s Reorganization Has Delineated Lines of Authority, but More Clarification Is Needed for Specific Program Management and Oversight Functions
paragraphs: NNSA’s reorganization has resulted in some progress in delineating lines  of authority between NNSA headquarters and its field offices, thus  addressing some past problems; however, at the working level, NNSA has  not formalized a program management structure that identifies its  program managers or what their responsibilities and qualifications should  be, particularly regarding their role in directing and overseeing contractor  activity under its new organization. Furthermore, the reorganization has  created gaps in the responsibility for important safety oversight that need  to be addressed. Without first clarifying such key management issues,  NNSA cannot, among other things, ensure the improved discipline and  accountability it seeks in managing its programs.
By delineating lines of authority between NNSA headquarters and its field  offices, NNSA’s reorganization has addressed past problems, such as  communications problems resulting from overlapping roles and  responsibilities of the federal workforce overseeing the nuclear weapons  program. For example, according to NNSA site office managers, the  streamlined structure has improved vertical communication because  communication channels between headquarters and the field are more  direct and do not involve an extra layer of management in the operations  offices. Site office managers also state that by now reporting directly to  the NNSA Administrator’s office, the time required to make decisions has  been reduced. In addition, the realignment provides NNSA site office  managers with additional authority to manage contractors and assigns  them responsibility for the day-to-day security and safety of contractor  operations. As a result, it has strengthened the hand of local NNSA site  office managers who now have the authority to shut down operations at  the sites, if necessary, due to security or safety concerns.
Despite this progress NNSA’s reorganization still suffers from two  shortcomings. First, the reorganization plan does not yet fully delineate  the authority and responsibility of program managers, who are responsible  for ensuring that program goals and requirements are met, or reconcile  these responsibilities with the mutual responsibilities of contracting  officers and their designated representatives who manage the contract.  Specifically, under the new reorganization, the contracting officer is  responsible for appointing contracting officer representatives to carry out  specific functions, such as monitoring, inspection, and other functions of a  technical nature not involving a change in the scope, cost, or terms and  conditions of the contract. These contracting officer representatives then  assist in directing and overseeing the contractor for the programs that they  represent. NNSA is attempting to improve program management  accountability and discipline by requiring program managers to direct all  work to the contractors through a contracting officer or a designated  contracting officer representative instead of through the now defunct  operations offices or by bypassing the formal contract administrators and  informally directing the contractor, as was done in the past.
NNSA’s policy on program management, however, is still being developed.  NNSA’s Assistant Deputy Administrator for the Office of Program  Integration told us that the exact number of program managers within the  Office of Defense Programs has yet to be determined because  disagreement exists within the program about who currently is or is not a  program manager. Furthermore, NNSA has not yet articulated its  qualification standards for program managers. These standards are  important to program success. As we noted in our report on NNSA’s  Stockpile Life Extension Program, problems with the W-87 refurbishment  were caused, in part, because the assigned program manager was not  qualified to perform all required tasks and was not enrolled in DOE’s  project management qualification program. Senior NNSA officials in  headquarters expect NNSA’s policy to be issued by May 2004, and  implementation plans for this policy to be developed by summer 2004.  NNSA officials told us that even after the policy is issued, its  implementation is expected to take some time because it will likely require  a change in the behavior and culture of program managers and the manner  in which they operate.
NNSA’s delay in issuing program management policy and appointing  program managers is currently creating confusion. According to NNSA’s  existing policy concerning the appointment of contracting officer  representatives, headquarters-based program officials must first be  designated as program managers before they can be designated as  contracting officer representatives for a site. As a result, any uncertainty  surrounding the number of program managers and their responsibilities  has the potential to disrupt the appointment of contracting officer  representatives. However, despite the present uncertainty surrounding the  designation of program managers, site offices are appointing contracting  officer representatives. For example, the Sandia Site Office appointed 25  of its 36 contracting officer representatives using available NNSA  headquarters staff, as of June 2003. However, NNSA provided us with a list  of its designated program managers as of December 2003 (the latest date  for which data were available) that did not officially recognize 21 of the 25  headquarters-based contracting officer representatives that had been  formally appointed by the Sandia Site Office. Until NNSA fully implements  its policies to delineate program management authority and responsibility,  it remains unclear under the new reorganization and management  structure how program management authorities and responsibilities will  be exercised in the day-to-day management of contractors and site  operations and NNSA cannot ensure that the full discipline and  accountability it seeks through its reorganization is fully achieved or that  its long-standing organizational structure problems are corrected.
The second outstanding problem with NNSA’s reorganization is that it has  created gaps in the responsibility for safety oversight that need to be  addressed. For example, managers at NNSA’s Pantex Site Office, which  oversees the contractor operating the Pantex Plant—an  assembly/disassembly plant for nuclear weapons in Amarillo, Texas— stated that authority and responsibility for certain safety-related oversight  is unclear. Specifically, according to the Pantex Site Office manager, when  the realignment abolished the Albuquerque Operations Office, it left a void  regarding who would take over certain nuclear explosive safety oversight  activities previously performed by that office. Among other things, nuclear  explosives safety oversight includes activities such as evaluating the  adequacy of controls associated with tooling, testers, and operational  processes to prevent and/or minimize the consequences of an accident  involving nuclear explosives. While NNSA’s Assistant Deputy  Administrator for Military Application and Stockpile Operations—an  NNSA program—assumed overall responsibility for nuclear explosive  safety, NNSA has not resolved exactly who is to provide the day-to-day  oversight previously conducted by the Albuquerque Operations Office. In  this regard, the Pantex Site Office manager stated that there is no clear  procedure for conducting oversight to ensure the prevention of deliberate,  unauthorized use of a nuclear weapon—an important goal of NNSA. The  Pantex Site Office manager—the risk acceptance official for the site— stated that he would therefore not authorize the continuation of certain  work related to one current weapon system requiring use of a particular  safety process. Furthermore, in October 2003, NNSA issued its safety- oriented “Functions, Responsibilities, and Authorities Manual” intended  to clarify issues concerning delineation of authority. However, according  to the Assistant Manager for Nuclear Engineering at the Pantex Site Office,  the manual still does not clarify the authority and responsibility of nuclear  explosives safety oversight. Senior NNSA headquarters officials stated that  they are aware of problems concerning nuclear explosive safety oversight  and that corrective action plans have been recently developed and are  scheduled to be implemented through 2006.
The Defense Nuclear Facilities Safety Board recently expressed broader  concerns in a December 8, 2003, letter to NNSA’s Administrator that many  orders, directives, standards, supplemental directives, and site office  procedures, which had been issued to help ensure the safe operation of  NNSA’s defense nuclear facilities, have not been modified to reflect  current roles and responsibilities within NNSA. The board further stated  that in some cases, particularly those involving supplemental directives  that the now-defunct Albuquerque Operations Office had issued, the  documents may no longer have a clear owner within the NNSA  organization, and deviations from the processes that these directives  prescribed are now becoming more frequent within NNSA.
section_title: NNSA’s Reorganization Will Not Ensure Sufficient Staff with the Right Skills in the Right Places to Meet the Agency’s Mission and Program Goals
paragraphs: NNSA’s reorganization is not likely to ensure that it has sufficient staff  with the right skills in the right places because NNSA chose to downsize  its federal workforce without first determining what critical skills and  capabilities it needed to meet its mission and program goals.  Consequently, NNSA will not know the composition of its workforce until  it completes the 17 percent workforce reduction on September 30, 2004— the deadline specified in the reorganization plan—and then determines the  knowledge, skills, and capabilities of its remaining employees. Without a  functional long-term workforce plan, NNSA runs the risk of facing further,  more serious staff shortages or skill imbalances, thereby affecting its  ability to adequately oversee its contractors.
In December 2001, in addressing NNSA’s use of its excepted service  authority, we reported that NNSA did not have the coherent human capital  and workforce planning strategies it needed to develop and maintain a  well-managed workforce over the long run. As a result, we recommended  that NNSA not allocate any additional excepted service positions until it  developed comprehensive human capital and workforce planning  strategies. Subsequently, in February 2002, we testified that NNSA’s lack  of a long-term strategic approach to ensure a well-managed workforce  precluded it from identifying its current and future human capital needs,  including the size of the workforce, its deployment across the  organization, and the knowledge, skills, and abilities needed to fulfill its  mission.
Despite these earlier recommendations to develop thorough human capital  and workforce planning strategies, NNSA embarked on a major initiative,  expected to span nearly 2 years, not only to reorganize, but also to reduce  the size of its workforce. NNSA’s December 2002 reorganization plan  called for a reduction in its federal workforce from 1,695 to 1,356 staff, or  a reduction of about 20 percent, by September 30, 2004. The planned 20  percent reduction involved a 29 percent reduction in headquarters staff, a  26 percent reduction in administrative support staff through the closure of  the three operations offices and the consolidation of administrative  support staff in a new Service Center, and a 6 percent reduction in Site  Office staff. A senior NNSA official stated that “getting things done” was a  primary factor in deciding to quickly implement the reorganization and  workforce reduction. As such, NNSA officials stated that the staff  reduction targets were based more on judgment than a rigorous workload  analysis. A senior NNSA official explained that NNSA managers knew that  there was work overlap and redundancy in the organization, but were  concerned that a more formal, rigorous analysis of requirements or  workload could hamper what they believed was an urgent need to achieve  organizational realignment and workforce reduction results. The official  also said that NNSA management had decided that if and when staffing  changes became necessary, such adjustments would then be made.
The NNSA Administrator implemented what it termed a managed staffing  process soon after the workforce reduction target was announced in an  effort to focus on its short-term staff reduction targets and deadline. He  asked NNSA headquarters, service center, and site office managers to  report their organization’s existing functions and staff in 2003, their  anticipated changes to functions and associated staff requirements by the  end of fiscal year 2004, and any staff surplus or deficit. Based on regular  updates of this information, the NNSA Administrator has adjusted the total  staff reduction target twice since December 2002, once in April 2003 and a  second time in August 2003, to its current 17 percent target—primarily to  accommodate an increase of 38 positions. This new target is to be  accomplished by an increase of 23 positions in headquarters and 40  positions in the site offices, respectively, and a decrease of 25 positions at  the Albuquerque Service Center. A February 2004 status report stated that  NNSA created and staffed the 38 new positions to perform functions not  previously identified, or for which original staffing targets were not  adequate for mission accomplishment.
NNSA is progressing towards its staff reduction targets and deadline  primarily through buyouts, directed reassignments, and attrition combined  with a freeze on hiring and promotions, although exceptions can be  allowed to fill critical positions. A total of 174 staff have thus far taken the  buyout, which could be as high as $25,000 per person depending on such  factors as length of federal service and grade level. NNSA human capital  managers report that 99 of the 200 administrative support staff in Oakland,  Las Vegas, Germantown, and Washington, D.C., offices have formally  stated that they would relocate to the Albuquerque Service Center.  However, officials are not sure how many staff will actually relocate  because, for example, they believe that some staff do not really want to  relocate and are seeking alternative employment. As of March 6, 2004,  NNSA is 13 staff short of achieving its 17 percent staffing reduction target.
NNSA has also begun a number of specific workload reduction initiatives  intended to accomplish its mission with fewer federal personnel. However,  the outcome of these initiatives may not be known for some time so their  affect on NNSA’s workforce capabilities both in the short-term and long- term cannot be predicted. For example, in the area of safety, NNSA  reduced the number of Site Office Facility Representatives from 68 in  December 2002 to 53 in December 2003. Site Office Facility  Representatives are typically responsible for day-to-day oversight of  contractor operations to ensure that the contractor’s work practices and  performance are being completed in a safe and environmentally  responsible manner. NNSA is pursuing changes to the Facilities  Representative Program, among other things, to allow for greater coverage  in areas of higher risk to the public, such as nuclear safety, and reduced  coverage of standard industrial hazard facilities. NNSA is also considering  shifting federal responsibility for employee safety to the contractor.
While continuing to pursue its short-term workforce reduction goals,  NNSA began to develop a framework to determine its long-term human  capital needs. In December 2003, NNSA issued a workforce plan designed  to comprehensively meet the requirements of DOE’s Human Capital  Management Improvement Program and the strategic workforce planning  aspect of the President’s Management Agenda. The framework specifically  identified strategic workforce planning as a means to mitigate the impact  of losing a large percentage of the NNSA workforce and as the process for  ensuring that the right people with the right skills are in the right place at  the right time. The workforce planning model for the longer term— Workforce Plan 2004—called for the analysis of present workforce  competencies, the identification of competencies needed in the future, a  comparison of future needs with the present workforce in order to identify  competency gaps and surpluses, the preparation of plans for building the  workforce needed in the future, and an evaluation process to ensure that  the workforce planning model remains valid and that mission objectives  are being met.
Despite this effort, NNSA’s workforce plan is of limited usefulness  because it depends on workforce data that are either already obsolete or  not yet available. For example, the number, skill, position, and location of  employees are a moving target and subject to continuous change until the  downsizing effort is completed in September 2004. Furthermore, several  NNSA site office managers acknowledged that their workforce focus has  been on their short-term downsizing objective. A senior NNSA official  agreed that the agency’s workforce planning needed to be more long-term,  but added that under the circumstances of NNSA’s organizational  downsizing, management primarily focused on meeting short-term needs.  NNSA human capital officials also told us that NNSA’s decreased reliance  on DOE for practically all human capital management, resulting from  NNSA’s creation as a separately organized agency under DOE in 2000,  required the building of a human resource structure, staff, and operation,  which has taken some time to get up and running. NNSA plans to update  information in its workforce plan, including its workforce composition  and skills, as well as determine workforce needs for the long-term. With  this information, NNSA can then conduct a skill gap analysis that is  necessary to target recruitment, hiring, and training programs long-term.
As we have found in other government agencies, by carrying out  downsizing without sufficient consideration of the strategic consequences,  NNSA runs the risk of not having the right skills in the right place at the  right time, thereby affecting its ability to adequately oversee its  contractors and ensure the safety and security of its various facilities in  the future. The situation may be further exacerbated by the fact that,  according to NNSA estimates, 35 percent of NNSA employees will be  eligible to retire in the next 5 years. The lack of adequate strategic and  workforce planning in the course of downsizing efforts can negatively  affect the agency’s ability to provide quality service and lead to such  negative effects as the loss of institutional memory and an increase in  work backlogs. The impact of gaps in the numbers and skills of staff used  to carry out its contractor oversight mission is already becoming apparent.  For example, NNSA site offices are 39 staff short of their targets and some  site offices, namely Pantex, Y-12, and Los Alamos, are having some  difficulty filling critical skills in safety and security. At the Albuquerque  Service Center, significant skill gaps exist for accountants and contract  specialists. For example, the service center has only 26 of 54 contract  specialist positions filled. NNSA’s preoccupation with more short-term  downsizing objectives and staffing strategy without the benefit of a  strategic human capital plan may have contributed to the workforce  imbalances it now is experiencing.
section_title: NNSA’s Proposed Transition to Less Direct Federal Oversight Could Be Compromised by Outstanding Reorganization Issues
paragraphs: NNSA’s implementation of its proposed risk-based approach to rely more  on contractors’ assurances and self-assessments and less on NNSA’s direct  oversight may be premature because NNSA’s reorganization has not yet  established a program management structure or long-term workforce plan  for ensuring that it has sufficient staff with the right skills in the right  places. Others and we have reported on a number of problems over the  years related to NNSA’s performance of effective federal oversight of its  contractors. Against this backdrop, NNSA has begun taking steps to  accommodate implementation of the new contractor oversight approach  in parallel with its reorganization. Under this new approach, contractors  will develop comprehensive contractor assurance systems, or systems of  management controls, and NNSA will primarily rely upon these systems  and controls to ensure that contractors properly execute their missions  and activities. Although the overall concept of a risk-based approach to  federal oversight has merit, the unresolved issues stemming from NNSA’s  major ongoing reorganization may compromise its ability to effectively  carry out this approach while successfully meeting its responsibility for  safe and secure operations.
NNSA’s reliance on contractors to operate its facilities and carry out its  missions makes effective oversight of contractor activities critical to its  success. Over the years, we have reported on problems related to NNSA’s  performance of effective federal oversight of its contractors. For example:  In May 2003, we reported on problems with NNSA’s oversight, particularly  regarding assessing contractors’ security activities. We noted that,  without a stable and effective management structure and with ongoing  confusion about security roles and responsibilities, inconsistencies had  emerged among NNSA sites on how they assessed contractors’ security  activities. Consequently, we stated that NNSA could not be assured that all  facilities are subject to the comprehensive annual assessments that DOE  policy requires.
Weaknesses in NNSA oversight also occurred at the Lawrence Livermore  National Laboratory. Specifically, in our May 2003 report on a new waste  treatment facility at the laboratory, we concluded that a delay in initiating  storage and treatment operations at the new facility occurred because  NNSA managers did not carry out their oversight responsibilities to  provide clear requirements and ensure contractor compliance with these  requirements.
In July 2003, we reported on problems with NNSA’s oversight, particularly  with regard to cost and schedule, of the Stockpile Life Extension  Program. In particular, we found that Life Extension Program managers  used reports that contained only limited information on cost growth and  schedule changes against established baselines. We also found that  program managers believed that they had not been given adequate  authority to properly carry out the life extensions.
In February 2004, we reported on problems with NNSA’s oversight with  regard to business operations at the Los Alamos National Laboratory.  Beginning in the summer of 2002, a series of problems with business  operations surfaced at the Los Alamos National Laboratory, raising  questions about the effectiveness of controls over government purchase  cards and property. Among the questions raised were allegations of  fraudulent use of government purchase cards and purchase orders,  concerns about the adequacy of property controls over items such as  computers, and disputed rationales for the laboratory’s firing of two  investigators. DOE and NNSA identified multiple causes for these business  operations problems, one of which was that NNSA’s oversight was too  narrowly focused on specific performance measures in the contract rather  than on overall effectiveness.
In addition to these concerns, DOE ‘s Office of Inspector General has  raised broader concerns about the adequacy of oversight. For example, in  November 2003, DOE’s Office of Inspector General released its annual  report on management challenges, including oversight of contracts and  project management as two of three internal control challenges facing the  department.
Against this backdrop and in the midst of a major reorganization and staff  reduction effort, NNSA is proposing to change its contractor oversight  approach. NNSA’s August 2003 draft Line Oversight and Contractors’  Assurance System policy would rely more on contractor self-assessment  and reporting, among other methods, and less on NNSA’s direct  oversight. The proposal would require a comprehensive contractor  assurance system, or system of management controls, to be in place and  would primarily rely upon these systems and controls to ensure that its  missions and activities are properly executed in an effective, efficient, and  safe manner. NNSA would use a risk-based, graded approach to its  oversight and tailor the extent of federal oversight to the quality and  completeness of the contractors’ assurance systems and to evidence of  acceptable contractor performance. NNSA’s oversight functions would  include review and analysis of contractor performance data, direct  observations of contractor work activities in nuclear and other facilities,  annual assessments of overall performance under the contract, and  certifications by the contractor or independent reviewers that the major  elements of risk associated with the work performed are being adequately  controlled. NNSA stated in its draft policy and in public meetings before  the Defense Nuclear Facilities Safety Board that the department plans to  phase in this new oversight approach over the next few years.
NNSA has already begun taking steps to accommodate implementation of  the new contractor oversight approach in parallel with its reorganization.  For example, the new contract effective October 1, 2003, between Sandia  Corporation and NNSA’s Sandia Site Office describes 10 key attributes for  its assurance system, such as having rigorous, risk-based, and credible  self-assessments, feedback, and improvement activities, and using  nationally recognized experts and other independent reviewers to assess  and improve its work process and to carry out independent risk and  vulnerability studies. Sandia’s contractor plans to implement “assurance  systems” beginning with its low-risk activities in fiscal year 2004, and  medium- and high-risk activities in fiscal year 2005. Once satisfied that the  contractor’s assurance system is effective and results in an improvement  in the contractor’s performance in key functional areas, NNSA will  consider conducting oversight at the assurance systems level rather than  at the level of individual transactions. At the time of our review, NNSA  officials at the Sandia Site Office did not know how they would assess or  validate the contractor assurance system or what level of assurance they  would require before they would shift from “transactional” oversight to  “systems level” oversight.
Although the overall concept of a risk-based approach seems reasonable,  we are concerned about NNSA’s ability to effectively carry it out. For  example, considerable effort is needed at the Los Alamos and Lawrence  Livermore National Laboratories to successfully implement a risk-based  approach to laboratory oversight. According to the Associate Director for  Operations at the Los Alamos National Laboratory, the laboratory’s ability  to manage risk is at a beginning level of maturity. Other officials at the Los  Alamos laboratory, including officials from the Performance Surety  Division and the Quality Improvement Office, said that the laboratory and  NNSA have different perceptions of risks at the laboratory and how to  manage those risks. In our February 2004 report, we expressed concerns  about NNSA’s oversight approach and warned that such autonomy for the  laboratories was inadvisable this soon into the process of recovery from a  string of embarrassing revelations. We recommended that NNSA needs to  maintain sufficient oversight of mission support activities to fulfill its  responsibilities independently until the laboratories have demonstrated  the maturity and effectiveness of contractor assurance systems and the  adequacy of the contractor’s oversight have been validated. NNSA  disagreed with our view of its proposal to rely more on a contractor’s  system of management controls and less on NNSA’s own independent  oversight, but acknowledged that there have been problems with oversight  in the past. NNSA officials remained convinced that the proposed risk- based approach will be successfully implemented, resulting in improved  contractor oversight.
We continue to be concerned about whether NNSA is ready to move to its  proposed system. For example, during this review, officials from NNSA’s  Nevada Site Office expressed concerns about the performance of the  management and operating contractor for the Nevada Test Site, citing  repeated problems with contractor’s compliance with basic procedures.  For example, officials from NNSA’s Nevada Site Office expressed concern  that there were repeated incidents where the contractor did not follow  lock-out/tag-out procedures, resulting in, for example, the contractor  drilling holes into wires that would cause power systems to shut down.  Furthermore, the Defense Nuclear Facilities Safety Board, in recent public  meetings, has expressed concerns about nuclear safety under the  proposed NNSA contractor assurance policy and said that NNSA should  not delegate responsibility for such an inherently high-risk area of  operations. Finally, because NNSA has not fully determined (1) who will  give program direction to its contractors and (2) through a comprehensive  workforce plan, that it has sufficient staff with the right skills in the right  places, NNSA’s proposed approach to rely more on contractors’  assurances and self-assessments and less on NNSA’s direct oversight may  be premature.
section_title: Conclusions
paragraphs: NNSA is concurrently making significant and fundamental changes to its  organization, workforce composition, and contractor oversight approach  that require careful management forethought, strategy, and analysis.  Preliminary indications are that some of these changes have had a positive  effect on certain aspects of NNSA, but the final impact of these changes  will not be apparent for several years. Specifically, NNSA’s reorganization  has resulted in some progress in delineating authority and improving  communication between headquarters and the field. However, the  reorganization has not resolved confusion regarding authority over  program management. In addition, by downsizing its federal workforce  without first determining what critical skills and capabilities it needed,  NNSA’s workforce reduction targets were more arbitrary than data-driven,  contributing to short-term skill imbalances and making data-driven  workforce planning for the longer term more difficult. Specifically, NNSA  cannot begin to conduct a formal, substantive skill gap analysis to plan for  the long term until it completes the current workforce reduction and  collects critical workforce data on knowledge, skills, and competencies,  among other things. Finally, because important program management and  workforce issues still need to be resolved, NNSA’s implementation of its  proposal to rely more on contractors’ assurances and self-assessments and  less on NNSA’s direct oversight appears to be premature.
section_title: Recommendations for Executive Action
paragraphs: In order to increase the likelihood that NNSA’s reorganization will achieve  NNSA’s goal of increased management discipline and accountability in  program management and contractor oversight, we are making three  recommendations to the NNSA Administrator and the Secretary of Energy:    establish a formal program management structure, policy, and  implementation guidance for directing the work of its contractors,  especially concerning how program managers will interact with  contracting officers at site offices to help direct and oversee contractor  activity;   complete and implement data-driven workforce planning for the longer  term that (1) determines the critical skills and competencies that will be  needed to achieve current and future programmatic results, including  contractor oversight; (2) develops strategies tailored to address gaps in  number, skills and competencies, and deployment of the workforce; and  (3) monitors and evaluates the agency’s progress toward its human capital  goals and the contribution that human capital results have made toward  achieving programmatic results, and   postpone any decrease in the level of NNSA’s direct federal oversight of  contractors until NNSA has a program management structure in place and  has completed its long-term workforce plan.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided NNSA with a draft of this report for review and comment.  NNSA agreed in principle with our recommendations; however, it felt that  it already had efforts underway to address them. Specifically, with respect  to our recommendation about program management, NNSA stated that it  has established a formal process for using appropriately designated  officials to direct contractor activity and that its formal program  management policy was nearly established. We recognize in our report  NNSA’s effort to develop processes and formalize its program  management policy; however, we believe that NNSA needs not only a  policy, but also a structure and implementation guidance so that the  managers providing direction to NNSA’s contractors are clearly identified  and can be held accountable. With respect to our recommendation on  workforce planning, NNSA agreed with our recommendation, but it  disagreed that its current plan was based on short-term or arbitrary  management judgments. In this respect, our conclusions were based on  discussions with knowledgeable senior agency officials at NNSA  headquarters and site offices as well as a review of NNSA management  council minutes. More importantly, we continue to believe in, and NNSA  does not dispute, the need for a long-term data driven workforce plan that  will ensure that NNSA meets its long-term goals. Finally, regarding our last  recommendation on federal oversight of contractors, NNSA stated that it  had no intention of further decreasing direct oversight of contractors, was  hiring staff to fill vacant positions at site offices, and that its proposed  contractor assurance systems would only be implemented after a site  manager/contracting officer was convinced that the contractor’s system  would be at least as effective as the current system. While we are pleased  that NNSA has stated that it will not decrease its direct oversight, our  recommendation is intended to ensure that NNSA has the critical systems  it needs in place to perform its function—effective, direct federal  oversight.
As arranged with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after the  date of this report. At that time, we will send copies to the Secretary of  Energy and the Administrator of NNSA, the Director of the Office of  Management and Budget, and appropriate congressional committees. We  will make copies available to others on request. In addition, the report will  also be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please call me at  (202) 512-3841. Major contributors to this report are listed in appendix II.
section_title: Appendix I: Comments from the National Nuclear Security Administration
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the individual named above, Arturo Holguin, Robert Kigerl,  Jonathan McMurray, Christopher Pacheco, Anthony Padilla, Judy Pagano,  and Ellen Rubin made key contributions to this report.