Department of Energy: Additional Opportunities Exist for Reducing Laboratory Contractors' Support Costs
Published: 2005-09-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2004, about two-thirds of the Department of Energy's (DOE) $26.9 billion in spending went to 28 major facilities--laboratories, production and test facilities, and nuclear waste cleanup and storage facilities. DOE spent about $2.9 billion in fiscal year 2004 to support the mission of its five largest laboratories. GAO was asked to examine (1) recent trends in indirect and functional support cost rates for these five laboratories, noting key differences in how contractors classify costs, and (2) the efforts of DOE and its contractors to reduce indirect and other support costs and identify additional opportunities for savings.
section_title: What GAO Found
paragraphs: For fiscal years 2000 through 2004, laboratory-reported rates for indirect costs--those not charged directly to a specific program--increased at two laboratories and decreased at three. However, indirect cost rates cannot be compared across laboratories because contractors classify different portions of support costs as indirect. To facilitate analysis, DOE requires the laboratories to report what it called "functional support costs," or costs that support missions, regardless of whether they are classified as direct or indirect costs. Using this measure, three laboratories' rates--that is, functional support costs divided by total costs--increased and two laboratories' rates decreased over the 5-year period. While functional support cost rates improved comparability, several DOE and contractor officials said that the definitions for some categories of support costs, such as "facilities management," are unclear, leading to confusion and inconsistent reporting. DOE and its contractors have initiated several steps to reduce indirect and other support costs but can take additional actions to improve their implementation. First, DOE's laboratory contracts have increasingly included incentives to encourage cost reductions. In fiscal year 2004, for example, the National Nuclear Security Administration began an "award-term" pilot program that allows a contractor to earn extra contract years based on performance and cost-saving achievements. However, DOE is expanding use of this incentive without evaluating it. Second, DOE requires its contractors to benchmark employee benefits and to reduce benefits if they exceed the benchmark, but DOE did not promptly enforce these requirements at one laboratory and exempted two others. Third, DOE has begun to address a $1.9 billion backlog of deferred maintenance to reduce long-term costs. However, without a more rigorous approach, the backlog will persist well into future decades. Lastly, while some laboratories have used process improvement programs to streamline business processes and reduce costs, others do not have such programs, nor are they required to have them.

section_title: Letter
paragraphs: In fiscal year 2004, about two-thirds of the Department of Energy’s (DOE)  $26.9 billion in spending went to 28 major facilities, including laboratories,  nuclear weapons test and production facilities, and nuclear waste cleanup  and storage facilities. DOE primarily uses contractors—industrial firms  and nonprofit organizations, including educational institutions—to manage  and operate these facilities. DOE oversees these contractors’ activities  through its headquarters program offices—primarily the National Nuclear  Security Administration (NNSA), the Office of Environmental Management,  and the Office of Science—and site offices located at each facility.
DOE reimburses its contractors for the costs incurred in carrying out the  department’s missions. These include costs that can be directly identified  with a specific DOE program (known as direct costs) and costs of activities  that indirectly support a program (known as indirect costs), such as  administrative activities, utilities, and building maintenance. To ensure that  DOE programs are appropriately charged for incurred costs, contractors’  accounting systems assign the direct costs associated with each program  and collect similar types of indirect costs into pools and allocate them  proportionately among the programs.
Historically, DOE obtained information on contractors’ overall indirect cost  rates—the ratio of indirect costs to total operating costs—as a basis for  assessing contractors’ efficiency in performing their missions. However,  the indirect cost rates of different facilities cannot readily be compared (1)  because cost accounting standards and federal regulations provide  contractors with flexibility regarding the extent to which they identify  incurred costs directly with a specific program and how they collect similar  costs into indirect cost pools and allocate them among programs and (2)  because of differences in the facilities’ missions, corporate structures, and  accounting systems. As a result, contractors’ methods for accumulating  and allocating indirect costs vary—that is, a cost classified as an indirect  cost at one laboratory may be classified as a direct cost at another. For  example, electricity and other utility costs are usually classified as indirect  because they are not associated with a single program; however, electricity  costs could be charged directly if, for example, a laboratory installs a meter  to track the electricity consumption in a building used solely by one  program.
In the mid-1990s, DOE’s chief financial officer (CFO) created 22 standard  categories of “functional support costs” to obtain more consistent  information about the support costs at DOE’s major contractor-operated  facilities. These categories include, for example, executive direction,  information services, procurement, maintenance, and facilities  management. Each of the 22 categories is defined to cover all related costs,  irrespective of whether contractors classify them as direct or indirect.  Beginning in fiscal year 1997, the CFO and the Financial Management  Systems Improvement Council, composed of DOE and contractor financial  officials, have required the department’s primary contractors to annually  report these costs. To oversee the quality of these data, contractors’  financial personnel generally peer review the data for each facility once  every few years. In fiscal year 2004, functional support costs accounted for  $7.2 billion, or nearly 40 percent, of the contractors’ $18.1 billion total  costs. The functional support costs for the five largest DOE laboratories  were $2.9 billion.
You asked us to examine (1) recent trends in reported indirect and  functional support cost rates at the largest DOE contractor-operated  laboratories, noting any key differences in how the contractors determine  which costs are indirect and how these rates compare with those of similar  laboratories in other federal agencies, and (2) the efforts of DOE and its  laboratory contractors to reduce indirect and other support costs,  identifying additional opportunities for potential savings. In response, we  reviewed DOE’s five laboratories with the greatest total operating costs— NNSA’s Lawrence Livermore National Laboratory, Los Alamos National  Laboratory, and Sandia National Laboratories; the Office of Science’s Oak  Ridge National Laboratory; and the Office of Nuclear Energy’s Idaho  National Laboratory. The total costs of these five laboratories, $7.5 billion,  accounted for more than a quarter of DOE’s total fiscal year 2004 budget.  For purposes of comparison with other federal laboratories, we identified  two similar large, contractor-operated laboratories—the Jet Propulsion  Laboratory, located in Pasadena, California, and operated by the California  Institute of Technology for the National Aeronautics and Space  Administration; and Lincoln Laboratory, located in Lexington,  Massachusetts, and operated by the Massachusetts Institute of Technology  for the Department of the Air Force. We determined that the selection of  these seven laboratories was appropriate for our design and objectives and  would generate valid and reliable evidence to support our work.
To examine recent trends in the indirect cost rates of the five DOE  laboratories, we obtained indirect cost rates from each laboratory for fiscal  years 2000 through 2004 and identified cost-rate trends, reviewed  differences in what types of costs the laboratories included in their indirect  cost pools and how they allocated these costs, and reviewed the  laboratories’ indirect cost rates and those of the Jet Propulsion Laboratory  and Lincoln Laboratory. We did not include indirect cost rates in this report  because some of these data are proprietary. We also examined the fiscal  years 2000 through 2004 data that DOE’s CFO published in its Fiscal Year  2004 Support Cost by Functional Activity Report to compare these costs  for the five DOE laboratories. To examine the efforts of DOE and its  laboratory contractors to reduce indirect and other support costs, we  reviewed contractual provisions, key cost-saving initiatives, and audits.  Specifically, we reviewed the management and operating contracts for each  of the five laboratories, including clauses focused on reducing functional  support costs; analyzed several key initiatives that DOE and its contractors  have undertaken to reduce costs and the initiatives’ applicability to other  DOE facilities; and examined reports of DOE’s Office of Inspector General  and the contractors’ internal audit teams. We performed our work between  January 2005 and August 2005, in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: The Federal Acquisition Regulation and Cost Accounting Standards  provide overall requirements for allocating incurred costs either directly to  a program or indirectly to pools of similar types of costs that are allocated  proportionately among the programs. For example, to avoid double  counting and ensure that DOE programs and other federal agencies pay an  appropriate share of indirect costs, the standards require that a contractor  use consistent methods for estimating costs for each project or activity.  That is, if the laboratory charges one project $8 per square foot for  maintenance, it must charge other projects in the same manner.  Contractors submit for DOE approval accounting policy statements  describing how they will classify costs as direct or indirect.
DOE improved its ability to compare laboratories’ costs in fiscal year 1997,  when it began requiring contractors to report all functional support costs,  regardless of how they were classified. Functional support cost data  facilitate comparisons of laboratories’ costs because they are intended to  include all costs that support laboratory missions, regardless of whether a  particular laboratory has classified the support costs as direct or indirect.  However, functional support costs have limitations in that they cannot  account for differences in the mission, size, age, or location of DOE  facilities. Facility comparisons need to factor in the differences, for  example, in (1) maintenance costs for a 50-year-old manufacturing facility  as compared with those of a modern research facility or (2) safety and  health costs at a facility that uses nuclear materials as compared with a  facility with no nuclear materials.
section_title: Some Laboratories’ Cost Rates Have Increased While Others Have Decreased, but Not All Rates Are Comparable
paragraphs: From fiscal years 2000 through 2004, indirect cost rates increased at two of  the five DOE laboratories we examined and decreased at the other three  laboratories. A laboratory’s indirect cost rates are generally comparable  over time, but the indirect cost rates of different laboratories are not  comparable because contractors often categorize costs differently.  Regarding functional support costs, three of the five laboratories’ rates  increased, while rates of two laboratories decreased during the same 5-year  period. While functional support cost data help DOE to compare rates  across laboratories, several DOE and contractor officials told us that the  definitions for some categories are unclear, leading to confusion among  categories. Finally, because of the differences in how DOE contractors  categorize direct and indirect costs, and because other federal, non-DOE  contractors do not collect and report functional support costs, the rates at  DOE’s laboratories cannot be compared with those of the Jet Propulsion  Laboratory or Lincoln Laboratory.
subsections: section_title: Two DOE Laboratories’ Indirect Cost Rates Have Increased and Three Have Decreased, but These Rates Are Not Comparable across Laboratories
paragraphs: From fiscal years 2000 through 2004, indirect cost rates increased at two  laboratories operated by DOE contractors and decreased at three. Los  Alamos had the largest increase—10.4 percent. Nearly all of this increase  occurred during the 4th quarter of fiscal year 2004 and, according to Los  Alamos officials, was attributable to the “stand down” of activities that the  laboratory director ordered in July 2004 in response to a series of safety  and security incidents. In particular, the Los Alamos officials told us that  the stand down resulted in lower program costs without similarly lower  indirect costs. For example, $8 million in staff costs for the stand down’s  first 2 days was treated as indirect costs as laboratory managers developed  plans for assessing and resolving the safety and security issues. Once risk  assessment and mitigation activities began, stand-down costs were charged  directly to benefiting programs. Los Alamos officials stated that general  and administrative costs, especially costs in the “executive direction”  category, were higher than expected, while direct program costs were  lower. The indirect cost rate for Lawrence Livermore increased as well by  2.9 percent from fiscal years 2000 through 2004 because of additional costs,  such as those related to facilities safety, maintenance, environmental  protection, and hazard control.
In contrast, Idaho National Laboratory’s indirect cost rate decreased by  32.1 percent during the 5-year period, mainly because the contractor  reclassified a large portion of its costs associated with environmental  cleanup operations from indirect to direct in fiscal year 2004. According to  contractor officials, these costs were reclassified in response to DOE’s  decision to split the management and operating contract, which expired  during fiscal year 2005, into two parts by awarding separate contracts for  laboratory operations and the environmental restoration of the site.  Laboratories can make changes in how they account for indirect costs, and,  when they do, they are required to document these changes in their  disclosure statement for DOE approval. The indirect cost rates for Oak  Ridge and Sandia decreased by 7.3 percent and 2.2 percent, respectively,  between fiscal years 2000 and 2004. According to Oak Ridge contractor  officials, the decrease resulted from several factors, including  management’s decision to limit the growth of indirect costs while the  laboratory’s total spending grew—when total costs increase at a higher rate  than indirect costs, the indirect cost rate will decrease because the rate  equals the indirect costs divided by total costs.
Indirect cost rates cannot be meaningfully compared across laboratories  because one contractor may track costs more closely, allowing the  contractor to classify a higher proportion of the cost of a support activity,  such as administration, as a direct cost than another contractor does. For  example, from fiscal years 2000 through 2003, Oak Ridge and Sandia  classified administrative support costs as both indirect and direct costs,  while Idaho classified all administrative support costs as indirect. Similarly,  Idaho classified road and ground maintenance as direct costs, while  Lawrence Livermore and Oak Ridge treated them as indirect costs. Two  contractor officials provided other examples of costs that laboratories are  likely to classify differently: subcontract administration, any type of fringe  benefit, program management, organizational management and  administration, facility management and maintenance, and information  technology functions. A Lawrence Livermore official noted, for example,  that one contractor may treat desktop software used by many programs as  a direct cost, while another contractor may bundle these software  purchases into a common site license that is paid from an indirect account.   The indirect cost rate may be higher in the latter case, but the goods may be  obtained at a lower cost. Thus, higher indirect costs do not necessarily  equate with less efficiency.
Further, the five DOE contractors use different methods to classify support  activities—that is, they differed in how indirect costs are collected and  distributed. For example, one contractor used 4 major indirect cost pools  while another contractor used 12 indirect cost pools for distribution among  programs. Similarly, the number of major service centers at the five DOE  laboratories ranged from 6 to 14. Service centers are accounts where costs  of specific services are accumulated and charged on the basis of services  rendered, either to a program or to other indirect cost pools. Common  service centers are telecommunications and computing centers.
section_title: Functional Support Cost Rates Provide More Comparability than Indirect Costs, Although the Definitions for Some Categories Are Unclear
paragraphs: Table 1 shows that for fiscal years 2000 through 2004, three laboratories’  functional support cost rates increased and two laboratories’ decreased.  These rates are the functional support costs as a percentage of total costs  without capital construction. Again, Los Alamos had the largest increase,  8.1 percent, and Idaho had the largest decrease, 11.8 percent.
Functional support costs were primarily developed to facilitate the analysis  of each facility’s costs. While not intended for comparison purposes, they  provide more comparability across laboratories than indirect costs because  they are developed on the basis of standard, defined cost categories.  However, detailed analysis is required to determine whether rate  differences are the result of inefficiencies or other factors, such as  differences in each facility’s mission, activities, location, or size. For  example, costs for safety and health, maintenance, and utilities at Los  Alamos are higher than costs at other sites because, according to DOE  officials, the laboratory has 2,224 facilities on 27,800 acres of mesas and  canyons. Also, Los Alamos uses plutonium and other hazardous materials,  which require added safety procedures, and accelerator facilities, which  consume large amounts of electricity.
While functional support cost rates facilitate improved analysis of  laboratory costs, several DOE and contractor officials told us that the  definitions for some categories are somewhat unclear, leading to confusion  in how to categorize certain costs. Notably, the “facilities management” and  “maintenance” categories are somewhat ambiguous and, hence, are not  fully comparable across laboratories. Peer reviewers checking for accuracy  of classification of costs have found that several laboratories have  misclassified costs between the two categories. In July 2003, peer  reviewers found that Sandia had classified $1.1 million of facilities  management costs as maintenance and $8.8 million in maintenance costs  as facilities management. In June 2004, peer reviewers found that Los  Alamos had classified $550,000 in maintenance costs as facilities  management. In addition, in fiscal year 2003, a Lawrence Livermore  internal review found that the laboratory had categorized plant facility  engineering costs as maintenance, while other laboratories had categorized  these costs as facilities management. In 2004, after discussing the  categories with DOE and contractor officials involved in reviewing  functional support cost data, Lawrence Livermore moved $15 million from  the fiscal years 2002 and 2003 maintenance category to the facilities  management category. Most of the peer reviews for the DOE laboratories  and other facilities found difficulties with which cost elements were placed  in or omitted from “facilities management” and “maintenance,” according  to our analysis. In addition, peer reviews at Los Alamos and Oak Ridge  found over $2 million of legal or information services costs that was  misclassified in the “executive direction” category, another example of a  category whose definition may be unclear. Idaho officials reported that  discrepancies in executive direction cost data between Idaho and other  sites resulted from uncertainty about how many levels of management or  what type of site development and strategic planning costs are to be  included in the executive direction category.
Differences in interpretation result from insufficiently detailed guidance  for developing functional support costs. The guidance primarily consists of  10 pages of 22 support category definitions. DOE’s Web site does not have  more detailed instructions that contractors can turn to when they are  uncertain whether a cost should be classified under one category or  another. Contractor officials developing cost data often turn to different  DOE or contractor officials with responsibility for these data for help,  increasing the likelihood of getting different advice, despite the fact that  consistency is key to data quality. Several DOE and contractor officials  with responsibility for these data agreed that more specific guidance would  cost little to develop and would increase consistency in reporting. For  example, some officials said they could post a list of common laboratory  errors on the Financial Management Systems Improvement Council’s Web  site, based on peer review findings of the past few years.
section_title: DOE Laboratories’ Cost Rates Cannot Be Compared with Those of Other Federal Laboratories
paragraphs: Because comparisons of indirect cost rates are not very meaningful and  non-DOE contractors do not report functional support costs, the cost rates  for DOE’s laboratories cannot be compared with those of the Jet  Propulsion Laboratory or Lincoln Laboratory. The Jet Propulsion  Laboratory, operated by the California Institute of Technology, is the lead  center for robotic exploration of space. Virtually all of the work it performs  is under a single National Aeronautics and Space Administration  agreement, which states that all of the laboratory’s costs are direct,  according to laboratory officials. Lincoln Laboratory, located on Hanscom  Air Force Base, conducts applied research to develop advanced technology  in remote sensing, space surveillance, missile defense, battlefield  surveillance and identification, communications, air traffic control, and  biological and chemical defense for the Department of Defense and other  federal agencies. The laboratory’s indirect cost rate cannot be compared  with those of DOE laboratories without a detailed understanding of  differences in (1) contract provisions and other requirements; (2) how  contractors classify costs as direct or indirect; and (3) research missions  and activities, such as the added costs at the DOE laboratories associated  with safety requirements for handling radioactive and other hazardous  materials. Lincoln Laboratory's indirect cost rate increased by 13.9 percent  between fiscal years 2000 and 2004 because of a new enterprisewide  accounting and management reporting system and infrastructure  improvements for laboratory test facilities, according to laboratory  officials.
section_title: DOE and Its Contractors Have Taken Actions to Reduce Indirect and Other Support Costs, but Opportunities Exist for Further Reductions
paragraphs: DOE and its contractors have numerous efforts under way to reduce  indirect and other support costs; however, we identified several efforts that  could be strengthened to further reduce costs. First, DOE is including  incentives in its contracts to encourage indirect cost reductions. DOE  officials stated that one of these incentives, a pilot to award additional  contract years for performance, had produced cost savings. DOE is  expanding this incentive to additional laboratories, although it has not  evaluated its effectiveness. Second, DOE generally requires contractors to  offer employee benefits that are similar in value to those of comparable  organizations, but the department has done little to enforce this  requirement. Third, DOE has begun requiring contractors to address a  backlog of maintenance projects while they also manage current  maintenance needs. Although this effort will involve costs in the near term,  it could reduce support costs in the long term. However, only Lawrence  Livermore and Sandia have programs that have been shown to be  sustainable over several years and appear to be promising models. Finally,  while DOE and some contractors have reduced costs through process  improvement programs, consolidated procurement actions, and audits by  DOE’s Inspector General and DOE contractor audit groups, opportunities  exist for further cost savings through these activities.
subsections: section_title: DOE Is Increasingly Using Contractual Incentives to Encourage Cost Savings but Is Expanding a Key Program without Evaluating Its Effectiveness
paragraphs: Recently, NNSA has taken several actions to improve business operations  and achieve support cost savings through contractual incentives. For  example, Sandia’s management and operating contract that NNSA  extended to the Sandia Corporation, a subsidiary of Lockheed Martin  Corporation, in October 2003 gives higher priority to improved  performance and greater efficiency in business operations. Specifically, 40  percent of the contract’s annual award fee in fiscal years 2004 and 2005 is  based on Sandia’s performance in areas such as information technology,  procurement, human resources, and maintenance. Similarly, NNSA’s  management and operating contracts for Lawrence Livermore and Los  Alamos have given greater emphasis to improved performance and greater  efficiency in business operations. For example, the Los Alamos contract’s  performance measures that focused on business operations increased from  about 28 percent in fiscal year 2002 to 40 percent in fiscal year 2005. NNSA  also has added provisions to some of its contracts to allow the laboratories  to reinvest cost savings in other activities considered to be indirect costs.
In addition, the Sandia contract initiated a pilot award-term program under  which an additional year may be awarded to the life of the contract for each  year the contractor achieves an overall outstanding performance rating. A  key performance target is finding sufficient cost savings to be applied to  unfunded projects. In fiscal year 2004, the first year of the pilot program,  Lockheed Martin earned a 1-year extension on its contract and documented  $38 million in cost savings, which it spent on agreed-upon projects, such as  the following:  $14 million for reprogramming security and safeguards to meet the new   $9.8 million for investing in computer clusters for defense projects,   $3 million for purchasing equipment to refurbish the pulsed power   $2 million for enhancing the classified network,   $2 million for cleaning up beryllium contamination, and  $0.3 million for negotiating an agreement with Russia on polymer  research.
Although Sandia and NNSA officials stated that they believe the award- term program emphasizes improved performance and cost savings better  than provisions in prior contracts, NNSA has not evaluated the nearly  2-year-old pilot. Such an evaluation could compare the benefits of  redirecting funds for better mission uses with the costs of forgoing  recompetition of the contract and examine whether the cost savings  resulted in any negative effects on reduced work quality. The evaluation  also could determine whether award-term incentives need to be revised in  other contracts to improve their effectiveness and sustainability,  particularly since the mission and level of performance among contractors  vary. By expanding the incentive without evaluating it, DOE does not know  if it is receiving benefits commensurate with awarding extra years to the  contract term. Despite the lack of evaluation, DOE’s Office of Science  extended the award-term incentive to Lawrence Berkeley National  Laboratory, and NNSA plans to extend it to Los Alamos and the Nevada  Test Site later this year when it awards new contracts. As a result,  Lawrence Berkeley’s contractor, the University of California, can  potentially earn up to 15 additional years on its recently awarded 5-year  contract; the request for proposals for the Nevada Test Site states that the  contractor can potentially earn up to 5 additional years on its 5-year  contract; and the request for proposals for Los Alamos states that the  contractor can potentially earn up to 13 additional years. (See app. I for  more information on this topic.)
section_title: DOE Has Not Always Enforced Its Requirement That Contractors’ Employee Benefits Be Comparable with Those of Similar Organizations
paragraphs: To ensure that the value of each contractor’s employee benefits are  comparable with its competitors and that costs are reasonable, DOE Order  350.1 requires its management and operating contractors to periodically  benchmark the value of their employee benefit packages—including  retirement pensions, health care, death, and disability—with those of  organizations with whom the contractors compete in hiring employees.  The DOE order requires that if the value of a contractor’s benefits exceeds  the average benchmarked value by more than 5 percent, the contractor will  provide DOE with a plan to adjust the benefits so that they fall within 5  percent of the benchmarked value. DOE must ensure that the contractor’s  proposed adjustments are acceptable and reasonable. More specifically,  the DOE order requires that the contractors use a professionally  recognized measure to compare the value of their benefits with those of  other organizations. The contractors can use a nationally recognized  consulting firm with expertise in benefit value studies to perform such a  study every 3 years or perform an annual employee benefit comparison  survey through the U.S. Chamber of Commerce. A benefit value study  determines the average of each benefit for 15 organizations with similar  workforces. The average value of the benefits becomes the benchmark  against which the contractor’s benefits are assessed.
The benefit value studies conducted for Lawrence Livermore, Los Alamos,  and Sandia in 2004 show that the value of employee benefits for these  laboratories exceeded the benchmark by more than 5 percent in several of  the four primary categories of benefits. More importantly, the studies  showed that the overall benefits for those three laboratories exceeded the  allowable 5 percent variance for the overall benefits (see table 2).  Lawrence Livermore and Los Alamos both had benefit values that far  exceeded the benchmark and, in many categories, both laboratories  exceeded all comparators. For example, pension benefits for both  laboratories exceeded those of all 15 comparators and were nearly twice  those of the benchmarked value. Lawrence Livermore, Los Alamos, and  Sandia were highest or second highest in most benefit categories. Sandia’s  defined benefit pension was second highest of all 15 comparators and  exceeded the benchmarked value by 68 percent. In contrast, the value of  benefits for Idaho and Oak Ridge did not exceed the 5 percent allowable  range.
DOE did not require prompt action to adjust benefits at the three  laboratories that exceeded the benchmarked value. Initially, DOE and,  later, NNSA exempted Lawrence Livermore and Los Alamos from the DOE  benchmark because the contract with the University of California, which  manages the laboratories, allowed the university to extend its own benefits  package to laboratory employees. When the DOE order was issued in 1996,  the existing contract with the university took precedence, according to a  university document. DOE did not request a benefit value study until 2004,  after it was determined that the Los Alamos and Lawrence Livermore  contracts were scheduled to be competed and DOE became concerned  about long-term liabilities for employees’ postretirement costs. DOE has no  short-term liability for the pension benefits because the pension plan is  fully funded and is projected to remain fully funded for at least the near  term, according to university officials. However, DOE’s liability for long- term pension benefits for these laboratories remains undetermined. In an  effort to reduce this liability, NNSA is requiring a stand-alone pension plan  for the winning bidder of the Los Alamos contract, which DOE plans to  award at the end of this year.
Similarly, after a benefit value study in 2001 showed that the value of  Sandia’s benefits exceeded the benchmarked value, NNSA did not require  Sandia to adjust its benefits. In this case, an actuarial study showed that  NNSA had minimal risk that it would have to contribute to Sandia’s pension  plan for at least 5 years. However, the amount of long-term liability is again  undetermined because the study could not reliably determine the risk of  NNSA having to contribute beyond 5 years. When a new benefit value study  was completed 3 years later, in May 2004, NNSA required Sandia to submit  a corrective action plan to adjust the benefits. NNSA received Sandia’s plan  for making adjustments in June 2005, but officials are requiring  modifications before approving the plan.
Finally, while benchmarking the value of benefits is a step in the right  direction, DOE does not require contractors to benchmark the costs of  their benefits. NNSA officials stated that cost studies are needed because  the value of benefits may not be directly proportional to their costs. For  example, while value and cost are generally highly correlated, it is possible  that a contractor may negotiate high-value benefits that have a low cost, or  low-value benefits that have a high cost. DOE has not yet finalized the  revisions to DOE Order 350.1, which includes a draft provision to require  benchmarking of costs, in addition to benefits. In commenting on this  report, DOE officials stated that, since late 2004, DOE solicitations and  awards for management and operating contracts required contractors to  conduct benefit value and cost studies. In addition, our April 2004 report  (1) noted that DOE should review postretirement costs because they have a  continuous and compounding effect as they are paid out for each year of  retirement and (2) recommended that DOE strengthen its oversight of  postretirement benefits by focusing more attention on long-term costs.
section_title: DOE Has Begun to Focus on Deferred Maintenance, but Efforts at Some of the Laboratories Are Not Sustainable
paragraphs: For more than 2 decades, DOE orders and policies have required that  contractors’ maintenance programs ensure the safe, reliable, and efficient  operation of buildings and equipment. They have also required that these  programs be adequately funded to ensure that the design requirements of  the buildings and equipment are met or exceeded for their operating lives,  and that industry standards for maintenance are applied. Industry  standards, for example, require that maintenance budgets be developed  using historical and other information on the resources required to  maintain the structure or equipment in good repair. Industry standards and  the National Academy of Sciences have recommended that day-to-day  maintenance requires continuous annual funding of about 2 percent to 4  percent of the replacement plant value.
Despite requirements, for many decades, DOE and its contractors have  neglected the routine maintenance of buildings and equipment—including  inspection of fire alarms, upgrades to electrical systems, and testing of  equipment critical to the nuclear weapons program. DOE and contractor  officials stated that the mission always took priority for resource  allocations. This practice has resulted in a maintenance backlog that will  cost an estimated $1.9 billion for the five laboratories, excluding deferred  maintenance for unused buildings. Maintenance that continues to be  deferred, particularly on older structures and equipment, will contribute to  an increasing growth in deferred maintenance costs, including replacement  costs for certain equipment parts. For example, Lawrence Livermore  reports that its deferred maintenance costs continue to escalate each year  because of the higher probability of failure in the operability of aging  structures and equipment. In fiscal year 2004, Los Alamos reported that it  had the oldest structures of the three weapons laboratories, with an  average structure age of 33 years. Los Alamos also reported that it had the  highest level of deferred maintenance of the five laboratories, accounting  for about one-third, or $547 million, of the backlog for the five laboratories.
The backlog could also jeopardize the safe, reliable, and efficient operation  of the buildings and equipment. At Los Alamos, for example, the backlog  put at risk the safety of some workers. Officials inspecting the fire  protection system in early fiscal year 2004 reported that the fire sprinklers  were not properly winterized to protect them from freezing, as required by  fire codes and standards. The inspectors reported that at least three fire  sprinkler pipes had frozen since November 2003, creating a safety concern  in the event of a fire. At Idaho, the backlog has placed reliable operation of  the Advanced Test Reactor at risk. Specifically, the deferral of maintenance  and recapitalization for several key systems—including the waste control  system and the digital monitoring system—has resulted in the reliance on  an outdated computer system for which technical support is no longer  available and replacement parts can only be found in used parts markets.  Loss of any these key systems could require Idaho to temporarily shut  down the Advanced Test Reactor, hindering test plans and DOE’s nuclear  energy mission. Idaho plans to continue replacing failing parts in the  computer system until it can fund a full system replacement.
DOE has begun to focus on deferred maintenance in an effort to reduce the  backlog and long-term costs. DOE’s Defense Programs, the predecessor to  NNSA, first began to address the maintenance backlog in fiscal year 2000.  Defense Programs required the nuclear weapons facilities to develop 10- year plans to evaluate short- and long-term maintenance needs and develop  long-term efforts to better manage the maintenance backlog. At about the  same time, the Congress began providing funding for certain maintenance  programs, such as NNSA’s Readiness in Technical Base and Facilities  Program. Some DOE laboratories also are using different types of indirect  costs, such as space charges, to help address maintenance. Additionally, in  fiscal year 2002, the Congress began funding the Facilities and  Infrastructure Recapitalization Program to reduce long-term deferred  maintenance for NNSA facilities. The program can also be used to demolish  certain structures. Demolishing or consolidating structures can help  reduce maintenance and other operating costs. Between fiscal years 2002  and 2005, the Congress provided about $1 billion for this program and, in  fiscal year 2005, NNSA requested an additional $1.7 billion for fiscal years  2006 through 2009. When established, the program had two key goals. First,  contractors are to stabilize deferred maintenance by the end of fiscal year  2005 so that there is no further growth in backlog. NNSA informed the  Congress that contractors have met this goal of stabilizing deferred  maintenance. The second goal is for contractors to reduce the maintenance  backlog so that the backlog for mission-critical and nonmission-critical  structures is less than 5 percent and less than 10 percent, respectively, of  replacement plant value by fiscal year 2009. However, an NNSA official  stated that most of NNSA’s contractors will not be able to meet this goal  because the $1.7 billion budget request for fiscal years 2006 through 2009  was reduced by $574 million.
Furthermore, in fiscal year 2003, DOE adopted NNSA’s lead by addressing  maintenance in 10-year plans to better manage maintenance overall,  including deferred maintenance. As with NNSA’s long-term planning  requirements, DOE Order 430.1B requires that all DOE facilities develop  10-year plans to assess, among other things, their short-term and long-term  maintenance needs. Although the order does not have specific time lines  associated with reducing deferred maintenance, DOE’s headquarters  program offices are responsible for approving the 10-year plans and for  tracking the performance of the facilities against the plans. DOE’s Office of  Engineering and Construction Management has general oversight over  DOE Order 430.1B, including the review of the 10-year plans and the  tracking of program office performance.
Despite all of these efforts, DOE contractors report that deferred  maintenance will continue to be a significant problem in the short term and  long term. Of the five laboratories, Lawrence Livermore has demonstrated  the most sophisticated and sustainable approach that fully funds  maintenance needs and reduces deferred maintenance over the long term.  Lawrence Livermore’s plan, first implemented in 1998, relies on a  combination of funding, including two directly funded NNSA programs— the Readiness in Technical Base and Facilities Program and the Facilities  and Infrastructure Recapitalization Program—and an indirect cost pool  established for its Maintenance Management Program. The Maintenance  Management Program collects funds ($8 per square foot) from all users of  its buildings—including NNSA and other DOE and non-DOE programs.
About 20 percent of the collected funds are spent on deferred maintenance  at the laboratory, in accordance with the program. The program identifies  the most critical needs for maintenance on the basis of a matrix balancing  “mission-essential” and “probability of failure” criteria. In addition, the  charge itself encourages more efficient use of space and the return of  unneeded space for use for other purposes or demolition. Also, other  Lawrence Livermore cost pools, such as the Institutional General Plant  Project, help fund capital improvements that can help address maintenance  by upgrading structures and equipment. By managing the various elements  of its maintenance effort, Lawrence Livermore stopped the growth of its  maintenance backlog by fiscal year 2002. Despite the anticipated  reductions in the Facilities and Infrastructure Recapitalization Program,  Lawrence Livermore projects that it can reduce its deferred maintenance to  within NNSA’s industry standards by 2011.
Sandia has an approach similar to Lawrence Livermore’s, relying on a  combination of funds for addressing its maintenance and deferred  maintenance costs. Using an established methodology, a committee sets  maintenance priorities and determines how to spend funds collected from  an internal cost recovery pool. Sandia charges building users $12 per  square foot and expects to initiate increases to space charges over the next  4 years to compensate for expected cuts in maintenance funding. As a  result, despite the anticipated reductions in the Facilities and  Infrastructure Recapitalization Program, Sandia projected in March 2005  that it would reduce its deferred maintenance to within NNSA’s industry  standards by 2011.
Los Alamos officials acknowledge that they cannot achieve NNSA’s goals  for reductions in deferred maintenance given the expected cuts in the  Facilities and Infrastructure Recapitalization Program in the foreseeable  future. Contractor and NNSA officials acknowledge that Los Alamos’  maintenance program is not sustainable, particularly given its current level  of funding for maintenance. Any reductions in backlog as a result of the  Facilities and Infrastructure Recapitalization Program would reaccumulate  when that funding ended. Similarly, even though Oak Ridge provides  additional support for maintenance by charging for space used, officials  report that without additional infrastructure renewal or recapitalization  funds to address aging facilities, the charge is insufficient to fully fund its  maintenance needs. Without this additional funding, Oak Ridge reports that  its maintenance backlog will continue to grow. Finally, Idaho has passed  many of its deferred maintenance liabilities on to another contractor  responsible for cleaning up part of the laboratory site; nevertheless, Idaho  reports that without additional funding, its maintenance backlog will  continue to grow.
section_title: DOE and Some Contractors Have Reduced Support Costs through Process Improvement Programs, Audits, and Procurement Consolidation
paragraphs: Idaho, Lawrence Livermore, and Sandia have reduced support costs  through programs to improve business and other processes, while Los  Alamos and Oak Ridge do not have such programs. In addition, DOE and  some of the laboratories we reviewed have some efforts under way to  consolidate procurement actions. Finally, DOE’s Inspector General and  contractors’ internal audit groups have contributed to some cost savings by  auditing support functions.
subsections: section_title: Three Laboratories Have Reduced Costs through Process Improvement Programs, While Two Laboratories Do Not Have Such Programs
paragraphs: Process improvement is the practice of taking an analytical look at  different steps that go into developing a product or delivering a service and  assessing how those processes could be conducted better. In a process  improvement initiative, participants may define the process and metrics,  measure performance, analyze root causes of problems, improve areas of  low performance, and develop controls for the process. Typically, the  process improvement initiative involves iterative cycles of identification  and improvement, fueled by employee participation in identifying problem  areas and recommending steps to improve them. It is generally recognized  that process improvement is a good business practice. Process  improvement programs can increase product or service quality, while  decreasing costs. Public and private organizations have reported  significant returns on investment through process improvement programs.
Several DOE laboratories and production facilities, including Idaho,  Sandia, and Lawrence Livermore, have used process improvement  methods, such as Six Sigma and Lean Six Sigma, to reduce costs. Six  Sigma and Lean Six Sigma are rigorous and disciplined methodologies that  use data and statistical analyses to measure and improve the performance  of a company’s operations by identifying and eliminating defects in  manufacturing and service-related processes. Idaho used Six Sigma to  reduce the average cost of 16 Safety Assessment Reports for a total savings  of $907,000 from fiscal years 2002 through 2003. Sandia used Lean Six  Sigma to streamline its accounts payable purchase order process,  potentially leading to savings of more than $1 million over a 5-year period.
Finally, Lawrence Livermore used Six Sigma and other methods to improve  processes in the areas of safety, security, resource management, and  property management. For example, the laboratory reduced security staff  overtime by increasing the workday to 12 hours and reported a $2.3 million  annual savings. The laboratory also standardized the hours of the perimeter  security gates and closure of redundant gates in an effort to save $300,000  annually. Lawrence Livermore plans to train 400 managers by the fall of  2006 in a new process improvement method based on a combination of  Lean Six Sigma and a method used at the United Kingdom’s Atomic  Weapons Establishment, which provides warheads for nuclear deterrence.
Neither Oak Ridge nor Los Alamos have process improvement programs,  although some DOE and laboratory officials agreed that such programs can  help reduce costs. When laboratories do not have some type of process  improvement program, DOE has little assurance that managers are  identifying and addressing inefficient or ineffective processes.
section_title: Many of the DOE Inspector General’s Reports Have Reviewed Support Activities
paragraphs: Many of the DOE Inspector General’s reports have examined support  activities at DOE laboratories and other facilities, including security,  procurement, property management, information resources, financial  management, and financial controls. The Inspector General has found  opportunities for reducing indirect and other support costs. For example,  in 2003, the Inspector General’s audit of central office expenses for the  Thomas Jefferson National Accelerator Facility questioned $4.6 million in  costs claimed by and paid to the contractor for central office expenses  from November 1999 to September 2002. These questioned expenses  included costs that were not allowable, such as alcoholic beverages, and  costs that were not adequately supported or documented. The audit  resulted in $3.5 million in savings to DOE. In 2003, an audit of Los Alamos  reported support and other costs of $14.6 million that were potentially  unallowable, including meals, excessive travel costs, and an internal audit  function that did not meet DOE requirements. DOE officials are in the  process of determining allowability of the questioned amount. In addition  to the Inspector General audits, contractors’ internal auditors annually  perform an audit of the allowability of costs as claimed by contractors.  This audit addresses both indirect and direct costs, identifying whether or  not costs are allowable under the terms of the contract. For example, one  such audit, conducted at Sandia in fiscal year 2003, projected $112,000 in  unallowable costs—DOE is in the process of determining the precise  amount.
section_title: DOE Has Consolidated Some Procurement Actions
paragraphs: DOE and its management and operating contractors have reduced support  and other costs by consolidating their procurements of computer  equipment, office supplies, and other bulk items into single contracts that  result in volume discounts and the need for fewer purchasing resources. In  particular, DOE established an Integrated Contractor Procurement Team  that pursues buying opportunities and has negotiated over 40 purchasing  agreements with vendors to reduce procurement staff time and obtain  favorable prices, according to a DOE official. The team, composed of  contractor purchasing agents, surveys sites to determine what contractors  are paying for a product and whether they can negotiate a better price. A  contractor that wants to purchase goods (e.g., paper) can review a list of  agreements and supplier contact information on the Integrated Contractor  Procurement Team’s Web site and use its Basic Order Agreement. This  saves contractors and suppliers time because they do not need to  renegotiate all the terms of the contract. Contractors do not track savings  resulting from the use of Integrated Contractor Procurement Team, but  they have collected some examples of savings that total about $12 million  to $15 million, annually.
Other efforts to save time and money through consolidation of  procurement actions include the following:  NNSA has required Lawrence Livermore, Los Alamos, and Sandia to  begin analyzing their spending using similar software so that  opportunities for consolidated purchases among the three laboratories  can be identified.
Lawrence Livermore has hired a specialist who is focused full-time on  analyzing the laboratories’ spending patterns and identifying  opportunities for consolidation. As a result of opportunities being  identified, the procurement office expects to reduce the number of  subcontracts by 10 percent, saving procurement staff time. The  laboratory also has developed 13 Electronic Ordering System  agreements through which suppliers provide electronic catalogs with  over 2 million commercial items (e.g., computers, electrical and  plumbing supplies, and chemicals) that laboratory employees can  purchase online. The purchases are automatically routed through an  approval system.
Oak Ridge consolidated its new radio system, which is used by security  and maintenance staff, with other DOE facilities in the area, reportedly  saving $900,000 on purchase prices plus $475,000 in annual costs.
Laboratory officials told us that opportunities exist for further cost savings  through reduced staff time and better prices by consolidating  procurements with each contractor’s parent organization, other DOE  facilities, or other federal agencies’ facilities in the same region. Idaho  officials cited the potential for reducing costs for using consolidated  procurements with nearby military bases and other facilities. An NNSA  procurement official noted that laboratories could save through increased  use of Integrated Contractor Procurement Team agreements, noting that  some procurement officials may not be aware of available opportunities.
section_title: Conclusions
paragraphs: In an era of federal budget constraints, it is crucial to efficiently manage  support costs at DOE laboratories, thereby maximizing funds available for  laboratory missions. DOE and its contractors have taken steps to reduce  support costs, but additional opportunities exist. To help decision makers  analyze support costs across the laboratories, several years ago DOE began  to require laboratories to report functional support costs. However, peer  reviews have revealed some problems with these data and challenges  remain in comparing costs, in part because of ambiguity in the definitions  for some categories of support costs. To encourage contractors to reduce  support costs, DOE also piloted a program to award contract years for  performance improvement and cost savings. However, by expanding the  pilot incentive program without evaluating it, DOE does not know if it is  receiving benefits commensurate with awarding extra years to the contract  term. In another effort to save money, DOE developed requirements to  ensure that contractors’ employee benefits are comparable with those of  similar organizations with whom they compete for critically skilled staff.  However, DOE has not always required its contractors to reduce employee  benefits that substantially exceed the value of their competitors’ benefits  and has not required contractors to benchmark the costs of their benefits,  potentially adding billions of dollars in long-term costs. Furthermore, while  DOE has begun to address the $1.9 billion backlog of deferred maintenance  to reduce long-term costs and improve the safe, efficient, and reliable  operation of equipment and buildings, only Lawrence Livermore and  Sandia have demonstrated sustainable approaches that successfully  reduced their backlogs. Lastly, process improvement programs are  generally considered a good business practice, and three laboratories have  reduced costs through their own programs. DOE, however, does not  require laboratories to have such programs, and some laboratories have  not instituted one. Overall, while DOE has made progress, without  additional attention to these initiatives, the department may miss the  opportunity to produce significant savings.
section_title: Recommendations for Executive Action
paragraphs: To improve the quality and comparability of DOE facilities’ support cost  data, we recommend that the Secretary of Energy direct the CFO to work  with the Financial Management Systems Improvement Council to clarify  definitions of functional support cost categories.
To determine whether the department receives benefits commensurate  with awarding 1 or more extra years to the contract term, we recommend  that the Secretary of Energy direct NNSA to evaluate the effectiveness of  its pilot award-term program at Sandia National Laboratories, particularly  the nature and extent of work quality improvements, prior to extending the  program to other laboratories.
To provide competitive but economical employee benefits, we recommend  that the Secretary of Energy complete the revision of DOE Order 350.1 and  ensure that the order (1) extends the requirement to benchmark the value  of employee benefits to all contractors; (2) requires prompt corrective  action if the value of benefits exceeds the allowable range; and (3) extends  the benchmarking requirements to include the costs, as well as the values,  of the benefits.
To reduce long-term maintenance costs at contractor-operated facilities,  we recommend that the Secretary of Energy develop a long-term  sustainable approach that meets day-to-day maintenance requirements,  reduces the maintenance backlog, and minimizes its reaccumulation.
To facilitate the further reduction of support costs, we recommend that the  Secretary of Energy require that each DOE management and operating  contractor implement a process improvement program that routinely  assesses the efficiency and effectiveness of business practices and other  operations.
section_title: Agency Comments
paragraphs: We provided DOE with a draft of this report for its review and comment. In  written comments, DOE generally concurred with our recommendations.  (See app. II.) DOE also provided a number of technical comments, which  we incorporated in this report as appropriate.
section_title: Scope and Methodology
paragraphs: To examine indirect cost-rate trends at each of the five largest DOE  laboratories, we analyzed each laboratory’s indirect cost-rate data for fiscal  years 2000 through 2004. Specifically, we interviewed laboratory financial  officials and analyzed documents to determine how each laboratory  calculated its overall indirect costs rate by (1) classifying costs as direct or  indirect and (2) collecting indirect costs into pools and distributing them  among other cost pools or directly to program sponsors. Furthermore,  because DOE and its management and operating contractors use functional  support cost data to help assess certain activities, we analyzed these rates  for the five laboratories for fiscal years 2000 through 2004, along with the  results of peer reviews performed at each laboratory.
We surveyed laboratory financial officials on the reliability of the indirect  and functional support cost data, covering issues such as data entry access,  quality control procedures, and the accuracy and completeness of these  data. Follow-up questions were added whenever necessary. In addition, we  reviewed all data provided by the laboratories, investigated instances  where we had questions regarding issues such as categories or amounts,  and made corrections as needed. On the basis of this work, we determined  that the financial data provided were sufficiently reliable for the purposes  of our report. We presented percentage changes in the overall indirect cost  rates for fiscal years 2000 through 2004 that the five laboratories reported.  However, because of limitations discussed in this report, analyses of  increases or decreases in these rates mean little without a careful analysis  of how a contractor classifies costs, and one contractor’s rates cannot be  compared with those of others. Moreover, we analyzed changes in  classification of costs or changes in mission over time to determine if these  data were comparable over several years at a single laboratory. We noted in  our report when we found changes in classification that affected the  comparability of data at a single location over time.
To assess the efforts of DOE and its laboratory contractors to reduce  support costs and identify additional opportunities for savings, we visited  each of the five laboratories to interview senior managers and obtain  supporting documentation, interviewed DOE officials, and examined prior  GAO and DOE Inspector General reports. In the course of this work, we  identified opportunities for further potential cost savings. We then  interviewed cognizant laboratory and DOE officials about actions taken to  address each opportunity and reviewed supporting documentation.  Specifically, to review DOE’s contract provisions, we interviewed DOE  contracting officers and obtained information about recent contractual  provisions that emphasized potential cost savings or improved efficiency.  To address DOE’s liabilities related to employee benefits, we analyzed  benefit value studies for each of the laboratories and compared the results  of our analysis with the department’s requirements. We also interviewed  DOE, NNSA, and contractor officials to clarify the results of the studies and  to provide us with documentation on proposed resolutions, as appropriate.  It was not our intent to verify, nor would we have been able to  independently verify, the accuracy of actuarial calculations, assumptions,  or data used in the comparison studies due to the proprietary nature of  benefits that consulting firm databases used to conduct the studies.
To address the maintenance backlog, we analyzed data from DOE’s Office  of Engineering and Construction Management, which collects information  on deferred maintenance. We also analyzed each laboratory’s 10-year plan  and related documents and compared the results of our analysis with  NNSA’s and the department’s requirements. We spoke with cognizant  officials at DOE headquarters and its site offices and with laboratory  managers to verify the results of our analysis and to determine the actions  being taken to address the backlog. To examine the laboratories’ use of  process improvement programs, we reviewed examples that the three  laboratories provided of improved effectiveness and of reduced costs for  their business operations and interviewed senior managers at the other two  laboratories regarding what they had done to improve business operations.
As agreed with your offices, unless you publicly announce the contents of  this report, we plan no further distribution of it until 30 days from the date  of this letter. At that time, we will send copies to the Secretary of Energy;  the Director, Office of Management and Budget; and other interested  parties. We will also make copies available to others on request. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staffs have any questions about the report, please contact me  at (202) 512-3841. 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 key contributions to this report are listed in appendix III.
section_title: Award-Term Provisions at Four DOE Sites
paragraphs: The Department of Energy (DOE) introduced award-term incentives as a  pilot program to Sandia in fiscal year 2004, and then expanded the use of  the incentives to the Lawrence Berkeley contract and to the final request  for proposals for Los Alamos and the Nevada Test Site, as shown in table 3.  The language in the final request for proposals for Los Alamos, if placed in  the contract, would award additional years to the contract term if the  contractor (1) achieves a certain level of performance to be determined by  the DOE contracting officer and (2) meets other conditions, such as finding  cost savings and using these savings to adequately perform approved work.  As shown in table 3, Los Alamos can earn 13 additional years on its 7-year  contract.
Key differences between the Los Alamos final request for proposals and the  Sandia contract are as follows:  The level of performance required to receive additional contract years  can be determined by the contracting officer for Los Alamos, but  Sandia’s contract requires outstanding performance. NNSA officials  stated that the recent history of performance at Los Alamos may take  several years to reverse, and the contractor may not be able to achieve  overall “outstanding” ratings in the initial years of the contract. The  officials also noted that the flexibility may allow the contracting officer  to focus on certain areas for improvement, such as business operations.
The contract term for Los Alamos could be 20 years, rather than the  10 years allotted to Sandia. The 20-year term for Los Alamos requires a  deviation from DOE Acquisition Regulation 970.1706-1, which limits  DOE contracts to 10 years.
section_title: Comments from the Department of Energy
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Richard Cheston, Beverly  Peterson, Robert Sanchez, James Espinoza, and Cynthia Norris made key  contributions to this report.  Also contributing to this report were Chuck  Bausell, Virginia Chanley, Nancy Crothers, Alison O’Neill, and Omari  Norman.