Department of Energy: Mission Support Challenges Remain at Los Alamos and Lawrence Livermore National Laboratories
Published: 2004-02-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The University of California (University) operates the Los Alamos and Lawrence Livermore National Laboratories for the Department of Energy's National Nuclear Security Administration (NNSA). The two research laboratories, with a combined fiscal year 2003 budget of $2.3 billion, have had problems in such mission support areas as managing projects, conducting business operations, and ensuring safe nuclear operations. GAO was asked to describe the actions taken to address mission support problems identified in 2001, as well as problems that have since emerged, and to assess the main challenges to sustaining mission support improvements.
section_title: What GAO Found
paragraphs: For the three mission support areas with problems as of 2001--managing construction and other major projects, maintaining and managing existing facilities, and ensuring safe operations of nuclear facilities--actions are basically complete in the first two areas but not in the third. For all three areas, NNSA incorporated new requirements into the contracts, developed new performance measures, and increased its oversight. The University of California has strengthened oversight of the laboratories by, among other things, establishing a new position of vice president for laboratory management. The laboratories will not fully comply with new requirements for providing a safety analysis of each nuclear facility until mid-2005. The actions taken by NNSA and the University to correct problems in project, facilities, and nuclear safety management were not systemic enough to keep problems from developing in other mission support areas after 2001. At the Los Alamos laboratory, emerging problems centered on business operations, including inadequate controls over procurement, purchase cards, and property management. The laboratory now has extensive corrective actions underway and expects to have most of the new measures in place by the end of 2005. At the Lawrence Livermore laboratory, the problems centered on emergency planning and preparedness, in that the laboratory had made little progress in developing an emergency management program that complied with NNSA requirements. The laboratory has taken steps over the past 2 years to improve in this area, and NNSA now estimates that the laboratory will have an approved emergency management program by the end of fiscal year 2004. NNSA and the University face three main challenges to sustaining improvements in mission support performance over the long term. The first challenge is for the laboratories to ensure that actions taken to address mission support problems translate into effective performance of mission support activities. A past lack of emphasis on mission support activities was a major factor when problems surfaced, particularly at the Los Alamos laboratory. Ensuring that mission support activities are effective will require sustained leadership, resources, and effective internal controls. The second challenge is ensuring appropriate and effective oversight of mission support activities, which has been inadequate in the past. In particular, a draft NNSA policy that calls for relying primarily on contractors' management controls raises concerns about the future adequacy of NNSA oversight. The third challenge is ensuring that the laboratories follow best practices in developing any future improvement initiatives. In its efforts to improve business systems, the Los Alamos laboratory did not follow best business practices for managing such improvements. Not doing so lessens the laboratory's ability to ensure that the efforts will achieve the desired results.

section_title: Letter
paragraphs: For more than 50 years, the University of California (University) has  operated the Los Alamos National Laboratory in New Mexico and the  Lawrence Livermore National Laboratory in California for the Department  of Energy (DOE). These two research laboratories, with a $2.9 billion fiscal  year 2003 budget, have a science and technology mission that focuses on  maintaining the nation’s nuclear weapons, preventing nuclear proliferation,  and furthering scientific knowledge in chemistry, structural biology, and  mathematics. Besides conducting this research and development work,  managing and operating the two sites encompasses a broad range of  mission support functions, such as maintaining roads and providing  communications, managing facilities to ensure that needed repairs are  done to buildings, purchasing and accounting for products and services,  and ensuring good relations with local communities.
The two laboratories have a reputation for conducting world-class science  and technology work. Starting in the 1990s, however, performance  problems in various mission support areas have been reported at both  laboratories. These areas include project management (managing projects  to ensure they are completed on time and within budget and achieve their  intended purpose) and nuclear safety (conducting operations and activities  in a way that ensures the safety of workers, the public, and the  environment). Problems in these areas included cost and schedule  overruns on major projects, such as the National Ignition Facility at the  Lawrence Livermore laboratory, and violations of nuclear safety rules that  resulted in overexposure of some workers to radiation at both laboratories.
Another mission support area—facilities management—had also become  an area of concern, as buildings continued to age and the need for  maintenance and repairs increased.
Mission support problems led congressional committees and others to call  on DOE to open these two contracts to competitive bidding. Instead, in  January 2001, DOE’s National Nuclear Security Administration (NNSA)   decided to extend the University’s contracts through September 2005.  NNSA officials believed they could successfully address the laboratories’  mission support problems using contract mechanisms such as setting  clearer performance expectations and requiring the contractor to meet  those expectations in order to earn incentive fees. However, mission  support problems continued to occur at the laboratories in areas such as  business operations (accounting, procurement, and property management)  and emergency management (identifying possible hazards and threats and  developing plans and procedures to address the hazards). In December  2003, the Congress enacted legislation to require NNSA to compete the  contracts for both laboratories when the current terms expire in 2005.
You asked us to identify the steps that NNSA and the University have taken  to improve contractor performance in mission support activities at the  laboratories and to assess whether any improvements can be sustained  over time. Our report (1) describes the actions taken to address the major  mission support problems identified when NNSA extended the contracts in  2001,  (2) describes the actions taken to address additional mission  support problems that have emerged or become more significant since the  contracts were extended in 2001, and (3) assesses the major challenges  NNSA and the University face in sustaining improvements in mission  support activities at the two laboratories.
subsections: section_title: Background
paragraphs: NNSA carries out its nuclear weapons research missions at research  laboratories located in two states—California and New Mexico. NNSA and  DOE have traditionally relied on contractors to carry out the department’s  missions. However, the department’s history of inadequate management  and oversight and failure to hold its contractors accountable for results led  GAO in 1990 to designate DOE contract management as a high-risk area  vulnerable to fraud, waste, abuse, and mismanagement. As of February  2004, this high-risk designation was still in effect.
At the Los Alamos and Lawrence Livermore laboratories, about 200 NNSA  personnel at laboratory site offices are responsible for oversight of the  work performed under contract by over 16,000 employees of the University  of California. The contracts with the University provide for reimbursement  of all allowable costs plus a fee that is in addition to the allowable costs.  The total fee available to the University includes a base or fixed amount  that is guaranteed and an “at-risk” amount that is tied to performance  measures in the contract.  (See table 1.)
For more than a decade, GAO and others have reported on problems with  the mission support activities at the two laboratories, including project  management, nuclear safety management, and facilities management. The  problems have included cost and schedule overruns on major projects such  as the Dual-Axis Radiographic Hydrodynamic Test Facility at Los Alamos;  lack of adequate safety documentation for nuclear facilities; and a deferred  maintenance backlog of about $318 million at Lawrence Livermore and  $564 million at Los Alamos. In addition, in the early 1990s, we reported on  poor controls over business operations such as procurement and property  management at the Lawrence Livermore laboratory.
For several years, NNSA has chosen to address these performance  problems using contract mechanisms. For example, when DOE extended  the Los Alamos contract in October 1997, it included a special provision in  the contract that would allow DOE to terminate the contract if the  University failed to make improvements in several mission support areas— ensuring that workers, the public, and the environment are protected;  cleaning up radioactive and hazardous wastes; and maintaining a good  relationship with the local community. The department subsequently  decided to continue the contract after the Los Alamos laboratory made  improvements in these three areas. However, when NNSA extended the  contracts for both of the laboratories in January 2001, it included additional  requirements to improve project management, facilities management, and  nuclear safety management.
Oversight of the laboratories occurs at several different levels. NNSA  provides direct oversight of the two laboratories through its site offices. In  addition, NNSA headquarters staff offices, such as the Offices of Defense  Programs and Nonproliferation, provide funding and program direction to  the site offices. DOE’s Offices of Independent Oversight and Performance  Assurance and Price-Anderson Enforcement also oversee laboratory  activities. Finally, the Defense Nuclear Facilities Safety Board, an  independent oversight organization created by the Congress in 1988,  provides advice and recommendations to the Secretary of Energy to ensure  adequate protection of public health and safety at all of the department’s  defense nuclear facilities, including the Los Alamos and Lawrence  Livermore laboratories.
section_title: NNSA and University’s Actions Taken to Address Mission Support Problems Identified in 2001 Have Not Been Fully Implemented
paragraphs: NNSA and the University have taken a number of steps to address the  major mission support problems that were known when NNSA extended  the University’s contracts in 2001, but all actions will not be complete until  mid-2005. When NNSA decided to extend the contracts for the two  laboratories, concerns had emerged in three areas: project management,  facilities management, and nuclear safety. For its part, NNSA incorporated  into the two contracts new agencywide requirements related to each area,  developed performance measures focusing on these activities, and changed  its overall structure and approach for overseeing the actions taken at the  laboratory level. In response, the University has implemented many of  NNSA’s requirements at the two laboratories, particularly in project and  facilities management, but progress has been slower for nuclear safety. The  University also has taken steps to improve its oversight of the two  laboratories and to foster coordination and collaboration between them.
subsections: section_title: NNSA Set New Requirements and Moved to Strengthen Its Oversight
paragraphs: One step NNSA took to improve laboratory performance in mission  support activities was to incorporate into the contracts new agencywide  requirements related to all three of the identified problem areas. In general,  these new requirements call for the laboratories to be more disciplined and  businesslike in carrying out their management responsibilities.
Project Management. In October 2000, DOE approved Order 413.3,  which set agency wide standards for managing projects, including NNSA  projects. The order is intended to help ensure that projects are delivered  on schedule and within budget and are fully capable of meeting mission  requirements as well as environmental, safety, and health standards. It  requires that all projects costing more than $5 million go through five  decision checkpoints, such as approving mission need and approving  the start of operations. At each checkpoint, NNSA must make a formal  determination to allow the project to proceed.
Facilities Management. Many of the facilities at NNSA sites are  decades old and in poor condition. For fiscal year 2003, NNSA required  each nuclear weapons site to develop a 10-year comprehensive site plan  for facilities management that incorporated NNSA’s strategic goals. The  main objective of the plans is to restore, rebuild, and revitalize the  physical infrastructure of the nuclear weapons complex. Two of NNSA’s  specific goals are to stabilize the deferred maintenance backlog by the  end of fiscal year 2005 and to reduce the amount of deferred  maintenance to within industry standards by the end of fiscal year 2009.
Nuclear Safety. DOE has always required that the contractors  responsible for a nuclear facility analyze the facility, the work to be  performed, and the associated hazards. Contractors use this information  to identify the conditions, safe boundaries, and hazard controls  necessary to protect workers, the public, and the environment from  adverse consequences. Finally, the contractors document the safety  requirements and operating procedures for each facility, referred to as  the safety basis. Although DOE included these steps in an order for  contractors to follow, the laboratories had not consistently done a  thorough and quality analysis of their nuclear facilities. In January 2001,  DOE finalized a revised nuclear safety rule, requiring that contractors  responsible for nuclear facilities establish and maintain a safety basis.   Contractors may be subject to civil penalties for failing to comply with  this requirement. This revised rule strengthened NNSA’s ability to hold  contractors accountable for the safety of nuclear facilities In addition to incorporating new agencywide requirements into the two  contracts, NNSA established new contract mechanisms and performance  measures to help ensure that the laboratories put in place management  improvements for mission support activities. These measurements have  changed over time. Initially, NNSA added a number of specific  improvement initiatives in a new appendix (appendix O) to the contract,  established to address known problems areas and provide a framework for  improved results. For the first 2 years of the contract, the laboratories had  to meet all of the requirements in appendix O on a pass/fail basis in order to  qualify for performance incentive fees. NNSA phased out appendix O at the  end of fiscal year 2002 after determining that the laboratories had met all of  the provisions and requirements.
Starting in fiscal year 2003, NNSA shifted to assessing a “critical few”  broadly defined performance objectives. In prior fiscal years, the two  laboratory contracts contained dozens of individual performance  objectives, and poor performance in one of these individual objectives  would have minimal impact on NNSA’s evaluation of overall contractor  performance or the amount of fee that could be earned by the contractor.  In fiscal year 2003, NNSA narrowed the number of performance objectives  in the two contracts to nine objectives that define the mission of the  laboratories, including two objectives that cover mission support  activities—achieving successful completion of projects and maintaining  secure, safe, environmentally sound, effective, and efficient operations and  infrastructure in support of mission objectives. In fiscal year 2004, NNSA  added a third mission support objective—improving or maintaining  effective business systems and practices that safeguard public assets and  support mission objectives.
The third main step NNSA took was to revise its approach to overseeing the  laboratories. NNSA moved additional oversight staff, which had previously  been in operations offices located in distant cities, to the laboratories  themselves to bring more oversight staff closer to the laboratory’s day-to- day operations. NNSA also began regular meetings with senior managers at  the University and the two laboratories to identify and resolve emerging  issues or areas that need improvement. Finally, NNSA designated the  senior on-site NNSA representative—the site office manager—as the  contracting officer for the laboratory. The contracting officer is the main  point of contact and the single point of accountability for the contract.  Before this change, the contracting officer was located in the procurement  division at the operations office and did not report to the NNSA site office  manager. NNSA believed this organizational change would clarify roles and  responsibilities, eliminate a layer of management, and provide more  effective federal oversight.
section_title: University Strengthened Management and Began Implementing New Requirements
paragraphs: The University made several changes designed to strengthen management  of mission support activities. The first was to redefine the relationship  between the two laboratories, making their efforts at managing mission  support more collaborative and interactive. Previously, the laboratories  had operated more autonomously and competitively—an approach the  University fostered as the best means for achieving world-class science.  The recent onset of mission support problems convinced University  officials that increased coordination in mission support activities would be  beneficial. According to University officials, they wanted to create an  environment in which the laboratories would identify problems, share  solutions, create best practices, and be more consistent in their approaches  to laboratory management.
Specific steps the University took to develop a more collaborative  relationship between the two laboratories included creating a position of  vice president of laboratory management, loaning staff between the two  laboratories and from the University as needed, and creating standardized  policies. For example, after the Lawrence Livermore laboratory developed  a model for a risk-based approach to facilities management, the Lawrence  Livermore staff visited Los Alamos to help that laboratory apply the  approach to its facilities management. In addition, when the University  determined that the two laboratories had different security policies  regarding foreign nationals and different definitions of “sensitive property”  for property management, it required the laboratories to work out the  differences and devise one best practice.
The second major change by the University was to provide more outside  assistance to the laboratories. The University contracted with firms from  private industry for expertise and advice on nuclear facility safety at the  Los Alamos laboratory and on project management at both laboratories. In  addition, since the early 1990s, a University President’s Council supported  by five different panels had been in place to make University expertise  available to the laboratories in such areas as project management and  environment, safety, and health. In 2001, the University increased the  interaction between the Council, the panels, and the laboratories, for  example, by assigning a mentor from the project management panel to  each of the major projects at the laboratories. In November 2003, the  University also created two additional oversight groups to strengthen  management and oversight of the two laboratories and to make more  expertise available from outside the University.
section_title: Laboratories’ Actions Are in Various Stages of Completion
paragraphs: Although NNSA had substantially completed its efforts at incorporating  new requirements into the contracts, establishing new performance  measures, and modifying its oversight approach, the laboratories’ efforts to  implement the new requirements are in various stages of completion.
Project management. By June 2002, both laboratories had completed  planned actions, including implementing new DOE procedures for  managing projects, providing improved training for project managers,  and providing improved assistance to project teams. In addition, both  laboratories had standardized the formats for monthly reporting on cost  and schedule for major projects to make it easier to identify negative  performance trends.
Facilities management. By October 2002, both laboratories had  completed 10-year strategic plans detailing how the laboratories will  restore, rebuild, and revitalize their physical infrastructures. The plans  incorporated NNSA’s goals of stabilizing deferred maintenance by fiscal  year 2005 and reducing deferred maintenance to industry standards by  fiscal year 2009. According to the Los Alamos 10-year plan, industry  standards set maintenance costs at about 2 to 4 percent of the estimated  replacement value of the entire facility. To achieve this goal, Los Alamos  plans to increase maintenance funding and implement the corrective  actions necessary to create a more efficient program. Los Alamos and  NNSA officials noted that some of the actions would involve long-term  efforts spanning several years. In contrast, since 1998, the Lawrence  Livermore laboratory has had a risk-based facility maintenance program  to prioritize facility maintenance requirements. In addition, the  laboratory began to assess a “laboratory facility charge” per square foot  to building occupants, both to fund facility maintenance and to  encourage users to give up unnecessary space.  As a result, the  Lawrence Livermore laboratory has already met NNSA’s fiscal year 2005  goal of stabilizing the deferred maintenance backlog.
Nuclear safety. The two laboratories did not submit all required safety  analysis documentation by the April 2003 milestone date, and they may  not be fully in compliance until mid-2005. Federal regulations required  that by April 10, 2003, the laboratories must have provided assurance  that they could meet new and enhanced nuclear safety requirements.  The Los Alamos laboratory initially reported that it had met the deadline  for providing that assurance, but later disclosed to NNSA that some  radioactive waste sites were not included in the original analyses  submitted to NNSA. In December 2003, NNSA and the laboratory agreed  that 11 radioactive waste sites were subject to the nuclear safety  requirement. NNSA expects the laboratory to provide the safety basis  documentation on these sites by April 2004. In addition, NNSA reported  in its fiscal year 2003 assessment for the Los Alamos laboratory that the  quality of 7 of the 12 safety analyses submitted on time had been  unsatisfactory and required revision. As for the Lawrence Livermore  laboratory, it completed 5 of the 9 required safety analyses by the  April 10, 2003, deadline and requested and received extensions for  submitting the remaining analyses. NNSA has granted an extension until  April 2005 for the laboratory to submit the safety analysis for the final  facility. Lawrence Livermore laboratory officials said they did not meet  the original deadline because of resource constraints and changes in the  work activities at some of the facilities.
section_title: After 2001, Additional Mission Support Problems Developed at the Laboratories, and Further Corrective Actions Are Underway
paragraphs: Despite the steps taken in 2001 to address mission support problems at the  two laboratories, the laboratories have encountered additional problems in  mission support activities and are taking further actions to address those  problems. New problems in business operations, such as controls over  purchase cards and property, emerged at the Los Alamos laboratory in  2002, while developing an emergency management program that complied  with NNSA requirements continued to be a problem at the Lawrence  Livermore laboratory.
subsections: section_title: Problems Surfaced with Business Operations at Los Alamos
paragraphs: Beginning in the summer of 2002, a series of problems with business  operations at the Los Alamos laboratory surfaced, raising questions about  the effectiveness of controls over government purchase cards and property.  These events included allegations of fraudulent use of government  purchase cards and purchase orders by a few Los Alamos employees,  questions about the adequacy of property controls over items such as  computers, and disputed rationales for the laboratory’s firing of two  investigators who were working on some of these cases. In an April 2003  report on the problems with business operations at Los Alamos, the  department identified multiple causes, including (1) the University’s  supervision of business processes at the laboratory was ineffective, (2)  NNSA’s oversight was narrowly focused on specific performance measures  in the contract rather than on overall effectiveness, and (3) both the  University and NNSA may have ignored warning signs of problems because  other evaluations of contractor performance did not identify significant  weaknesses. The report concluded that the actual loss to the federal  government could have been far greater than it actually was, and the  business practices in place in 2002 would not have been able to prevent or  detect such losses. In addition, the report concluded that the firing of the  two investigators was inappropriate and demonstrated the degree to which  the laboratory’s management was out of touch with activities at the  laboratory.
In January 2001, when NNSA extended and modified the contract for the  Los Alamos laboratory, NNSA officials were not aware of the problems  with business operations at the laboratory. NNSA did not consider business  operations at Los Alamos to be an area of concern to include in the ongoing  mission support improvement efforts. Furthermore, even after the  problems with business operations at Los Alamos emerged in the summer  of 2002, NNSA did not include any performance measures for business  operations at the start of fiscal year 2003. It was not until February 2003  that NNSA added performance measures to the contract to address the  business operations problems. NNSA also modified its method of assessing  contractor performance in fiscal year 2003 to provide a more integrated  evaluation of performance in business operations.
Once the significance of the problems with business operations at the Los  Alamos laboratory was known, the University responded with corrective  actions. The University made sweeping changes in the Los Alamos  management team, replacing, among others, the laboratory director,  principal deputy director, chief financial officer, and laboratory auditor. In  addition, the University commissioned a series of internal and external  reviews to identify further problems and control weaknesses in  procurement and property management. These reviews resulted in more  than 300 findings and recommendations to improve controls. The  laboratory is in the process of implementing more than 600 corrective  actions to respond to these recommendations and implement other  laboratory initiatives and expects to complete these corrective actions by  June 2004.
As a fuller understanding of the scope of the problem emerged, managers  at the Los Alamos laboratory decided to address the problems with  business operations in three phases. Initially, the laboratory is taking  hundreds of specific actions in response to identified problems and  recommendations. These actions included changing procedures and  strengthening internal controls. According to the laboratory managers, the  second phase involves a more comprehensive change to business systems  by designing and implementing an improved, integrated business computer  system that will facilitate both more efficient and more effective business  operations. Laboratory officials most recently estimated the cost of this  system, currently under development, at about $150 million. Laboratory  management said the last phase will involve developing and implementing  a set of performance goals and measures for business operations so that  laboratory management can better track and sustain results in this  important area. The laboratory plans on having these additional measures  in place by the end of 2005.
In April 2003, primarily because of these ongoing problems with business  operations, the Secretary of Energy announced his intention to open the  Los Alamos contract to competition for the first time, when the current  contract expires in September 2005. Although acknowledging the  University’s contribution to high caliber science at Los Alamos, the  Secretary stated that he held the University responsible for the systemic  management failures at the laboratory. The Secretary encouraged the  University to enter the contract competition, but made clear that the  laboratory’s performance in business services needed to be as good as its  performance in science.
section_title: Lawrence Livermore Continued to Have Problems with Emergency Management
paragraphs: The Lawrence Livermore laboratory has had difficulty developing an  emergency management program that complies with NNSA requirements.  Emergency planning consists of identifying hazards, threats, and ways to  mitigate hazards; developing and preparing emergency plans and  procedures; and identifying personnel and resources needed to ensure  effective emergency response. Effective emergency management has been  an issue of increasing significance since the terrorist attacks against the  United States in September 2001.
When NNSA extended the contract in January 2001, NNSA recognized that  the emergency management program at the Lawrence Livermore  laboratory was not in compliance with DOE Order 151.1, which sets out the  program requirements. For example, the laboratory had not included in its  previous assessment of hazards and risks even the possibility that a release  of materials or other incidents on site would potentially travel off site and  affect the local community outside the boundaries of the Livermore site. As  a first step toward compliance, NNSA included a requirement in the  contract for 2001 that the laboratory prepare and submit for approval  hazard assessments for each of its facilities and activities that met the  specified thresholds for such assessments. These assessments were  submitted on time in May 2001 and were reviewed and approved by NNSA.
In the fiscal year 2002 performance measures for the contract, NNSA  required the laboratory to develop and implement a plan to achieve  substantial compliance with DOE Order 151.1 by September 2003. This plan  was to include a schedule and milestones to satisfy all the elements of an  emergency management program, such as emergency preparedness  training and an emergency public information program. Although the  laboratory submitted the first draft of the plan on time early in the fiscal  year, the quality of the plan did not meet NNSA expectations, and the  laboratory received a marginal rating on this measure for fiscal year 2002.   NNSA required the laboratory to revise and resubmit its plan. In its overall  evaluation of the laboratory’s performance for that year, NNSA identified  implementing an effective emergency management program as one of the  three institutional management challenges facing the laboratory.
In July of 2002, DOE’s Office of Independent Oversight and Performance  Assurance criticized the laboratory’s lack of progress in resolving its  problems with emergency management. The review team identified a  number of important procedural and performance weaknesses. For  example, the laboratory did not have clearly defined processes for deciding  on the appropriate on-site and off-site protective actions to take. The report  concluded that the laboratory faced significant challenges in implementing  improvements in the program and that the poor quality of the documents  provided to NNSA raised serious questions about the laboratory’s ability to  meet the implementation milestones in the plan.
Starting in fiscal year 2003, NNSA officials took additional steps to help  ensure that the laboratory addressed its emergency management problems.  In the fiscal year 2003 and 2004 performance measures in the laboratory  contract, emergency management was included as one of the “critical few”  measures. According to an NNSA official, this increased the focus of senior  management attention on the activity. Prior to fiscal year 2003,  performance measures for emergency management were included as part  of the overall performance objective of environment, safety, and health and  received less emphasis and attention. The laboratory received a  satisfactory rating (one step higher than the fiscal year 2002 marginal  rating) on the fiscal year 2003 emergency management measure. NNSA  now estimates that the laboratory will have an emergency management  program that is in substantial compliance with DOE orders by the end of  fiscal year 2004.
In contrast to the Los Alamos contract, the Secretary had not signaled his  intention about whether to extend or compete the Lawrence Livermore  laboratory contract. However, in the fiscal year 2004 appropriations act for  energy and water development, the Congress required DOE to compete the  Lawrence Livermore laboratory contract when the current contract expires  in 2005. The statute provides that no appropriated funds for fiscal year 2004  or any previous fiscal year could be used for specified laboratory contracts  that had been awarded more than 50 years ago without competition, unless  the Secretary of Energy announces a decision to compete the contracts at  the end of their current terms.  In late January 2004, the Secretary  announced the decision to compete the specified laboratory contracts,  including those for the Los Alamos and Lawrence Livermore laboratories.
section_title: Challenges Remain for Sustaining Mission Support Improvements at the Laboratories
paragraphs: NNSA and the University face three main challenges to sustaining  improvements over the long term in mission support activities at the two  laboratories. These challenges include (1) ensuring that the mission  support activities are effectively performed, (2) ensuring that NNSA  provides effective oversight of laboratories’ activities, and (3) ensuring that  management improvement initiatives such as the improvements to  business systems at the Los Alamos laboratory fully address the existing  problems and are carried out in a systematic manner consistent with best  practices.
subsections: section_title: Ensuring that Mission Support Activities Are Effectively Performed
paragraphs: A major factor leading to the problems with managing mission support  activities at the laboratories, including an increased potential for fraud,  waste, and abuse, was what one internal DOE assessment referred to as the  devaluing of mission support activities by laboratory personnel. Although  significant investments in improving mission support activities and  controls have subsequently occurred, there are continuing concerns about  whether the laboratories will continue to place sufficient emphasis on  mission support activities to ensure that these functions are effectively  performed.
Ensuring that actions taken to address mission support problems translate  into effective performance of mission support requires establishing and  maintaining an effective system of management control. Office of  Management and Budget Circular No. A-123 defines management controls  as the organization, policies, and procedures used to reasonably ensure  that (1) programs achieve their intended results; (2) resources are used  consistent with agency missions; (3) programs and resources are protected  from waste, fraud, and mismanagement; (4) laws and regulations are  followed; and (5) reliable and timely information is obtained, maintained,  reported, and used for decision making. Effective management controls  require leadership and commitment on the part of management. Internal  control standards state that the attitude and philosophy of management  toward information systems, accounting, and monitoring can have a  profound effect on internal control. The standards require management to  establish and maintain an organizational environment that sets a positive  and supportive attitude toward internal control.
The two laboratories have differed in the degree to which they have been  successful in ensuring that mission support activities are effectively  performed and in maintaining effective management controls. The Los  Alamos laboratory had over time been weakening its management controls  over some mission support activities. Responding to pressures to reduce  overhead costs and a view that the NNSA laboratories were unnecessarily  burdened with administrative and procedural requirements that were not  adequately serving mission needs, the laboratory pursued cost efficiencies  in mission support activities without sufficient regard for ensuring that the  overall management control system was effective. For example, since fiscal  year 1995, the Los Alamos laboratory has reduced the relative funding for  mission support activities in order to provide more funding to mission  activities. The reduced funding contributed to the weakening of business  controls as the laboratory scaled back or eliminated steps, such as  reviewing small item purchases because fewer staff were available to  perform the reviews.
The problems with management controls at the Los Alamos laboratory  were to some extent due to the laboratory’s organizational culture. An April  2003 DOE report on the business operations problems at the Los Alamos  laboratory cited cultural problems as one of the underlying causes of the  systemic management failure of business systems at the laboratory. The  report stated that the Los Alamos culture exalted science and devalued  business practices, and that changing this attitude would be the most  difficult long-term challenge facing the laboratory, regardless of who  manages it in the future. NNSA and laboratory officials at Los Alamos have  stated that the pressures to reduce mission support costs will probably  continue, which increases the challenges associated with improving  controls and ensuring that mission support activities are effectively  performed.
In contrast to the problems documented at the Los Alamos laboratory, the  Lawrence Livermore laboratory has apparently been more successful in  emphasizing the importance of mission support activities and ensuring that  these support activities are effectively performed. The laboratory  encountered similar problems with its business operations in the early- 1990s, including weaknesses in procurement and property management,  and took steps at that time to improve its financial and accounting systems.  Thus, when faced with the same pressures to reduce overhead costs in  recent years, the Lawrence Livermore laboratory was better able to  accomplish those reductions without significantly degrading the quality or  effectiveness of its internal controls. For example, a June 2003 external  assessment of business systems at the Lawrence Livermore laboratory  identified no material weaknesses in internal control systems but did  contain recommendations to enhance management controls in such areas  as procurement and property management. In contrast, external reviews of  procurement systems at the Los Alamos laboratory identified significant  weaknesses in internal controls, such as insufficient policies and  procedures and inadequate management.
NNSA recently began to address these organizational culture issues and the  need to understand the importance of effective management controls. The  problems with management controls at the Los Alamos laboratory are  similar to the organizational problems documented at the National  Aeronautics and Space Administration (NASA) after the Columbia space  shuttle accident in February 2003. The independent panel tasked with  investigating the causes of the accident reported in August 2003 that  NASA’s organizational culture was a contributing factor to the breakdown  in management controls intended to ensure safety for the shuttle and its  crew. Specifically, the report cited as one of the root causes of the  accident the organizational culture at NASA, which emphasized mission  rather than safety. In addition, under pressure to reduce costs, the agency  had transferred responsibilities to the private sector while reducing federal  oversight. As part of its efforts to improve operations at the laboratories,  the NNSA Administrator has required all of the senior NNSA managers to  review the Columbia Accident Investigation Report for findings that could  be applied to NNSA. In addition, the Administrator chartered a task force to  perform an in-depth review of the cultural and organizational issues  described in the Columbia report and to make recommendations on how  the department could improve the effectiveness of mission support  functions to ensure the safe performance of high-risk mission work. NNSA  officials estimate that the task force report will be available in March 2004.
The laboratories have also taken steps to address organizational attitudes  about mission support activities. At the Lawrence Livermore laboratory,  the director and senior management developed a list of values for the  laboratory that includes 10 items deemed to be critical to success. One of  the items is “simultaneous excellence in science and technology,  operations, and business practices.” At the Los Alamos laboratory, the  director established priorities in 2003 to help guide the laboratory’s efforts.  The priorities include safety and security, mission, and business operations.  The laboratory is also developing a strategic plan that includes both  mission and mission support goals and objectives.
The University is also exploring other ways to improve management of the  two laboratories. In January 2004, the University Board of Regents took  steps to allow the University to form partnerships with outside companies  for the upcoming competition for the laboratory contracts. The University’s  Vice President for Laboratory Management said that outside partners with  strong management and business experience could strengthen its  performance in the areas of business operations and other mission support  areas.
These actions are positive steps toward increasing the awareness of the  importance of mission support activities, but for several reasons concerns  remain about whether the laboratories will continue to ensure that mission  support activities are effectively performed. First, although current senior  management at both laboratories supports the importance of having  effective mission support activities, there has been a long history of  emphasizing mission over mission support. Second, NNSA has also  typically placed much more emphasis on mission than mission support and  has often failed to detect problems when they existed. For example, the  April 2003 DOE report on business operations at the Los Alamos laboratory  stated that the NNSA evaluation system in place at Los Alamos failed to  consider relationships between different processes at the laboratory and  therefore failed to detect overall systemic problems. One of the report’s  recommendations was to ensure that NNSA reviews of contractor  performance capture cross-cutting information in both mission and  mission support areas to form a more complete picture of performance.
Furthermore, although much work has been done to implement new  mission support requirements and improve management of mission  support at the two laboratories, considerable time may be needed to  determine the extent to which the actions taken will result in improved  performance. For example, some of the efforts, such as the longer-term  efforts needed to reduce deferred maintenance to industry standards by  fiscal year 2009, will take years to complete. In addition, the Los Alamos  laboratory continues to have problems with workers failing to comply with  nuclear safety procedures. For fiscal years 2001 through 2003, the Los  Alamos laboratory had filed 51 reports on nuclear safety incidents, some  resulting in exposures of workers to radiation. Efforts are underway to  improve performance in this area, but safety officials at the laboratory  acknowledge that some of the improvement efforts may take months or  years of sustained effort to complete.
The laboratories will also need to ensure that improvement efforts are  sustained and effective. NNSA officials, including the senior technical  safety advisor at the Los Alamos site office, noted they did not have a high  level of confidence in the laboratory’s ability to sustain improvements  because the laboratory’s track record in this regard has not been good. For  example, a March 2003 report on nuclear safety at the Los Alamos  laboratory analyzed 32 corrective actions between fiscal years 1996 and  2003 and concluded that many of the improvement efforts had not been  sustained or followed up on, allowing many of the safety violations to  recur. NNSA officials, including the assistant manager for business  management, also noted that the laboratory was reporting on when  corrective actions had been implemented rather than on their  effectiveness. For example, in December 2003, Los Alamos reported that it  had completed 80 percent of its improvement efforts in procurement but  did not report on the effectiveness of those efforts. Based on complaints  from vendors and others outside the laboratory, NNSA officials sampled  procurement records and found recurring problems. The NNSA officials  said that they had been in discussions with Los Alamos laboratory officials  since September 2003 in efforts to reach agreement on how to assess  improvement efforts for effectiveness, but as of December 2003, no  agreement had been reached.
section_title: Ensuring that NNSA’s Oversight Is Effective
paragraphs: NNSA’s reliance on contractors to operate its facilities and carry out its  missions makes effective oversight of contractor activities crucial to  success. In the past, however, oversight of the laboratories’ mission  support activities has been inadequate. Both the University and NNSA had  failed to ensure that the laboratories’ mission support activities were  effective.
The University had in general taken a “hands off” approach to overseeing  the laboratories. For example, in its April 2003 report on evaluating  problems at the Los Alamos laboratory, NNSA stated that prior to  November 2002, the University’s oversight of Los Alamos was ineffective in  the area of business processes. The report added that the University was  slow to respond to allegations of problems with business practices, initially  limiting its involvement to providing assistance as requested by the  laboratory director and not ensuring that the laboratory director was taking  sufficient steps to address the problem.
NNSA oversight also was not adequate to identify and address the critical  shortcomings in management controls. Regarding the Los Alamos  laboratory, in May 2003, DOE’s Office of Inspector General reported that  improvements were needed in NNSA’s project management oversight and  control. This conclusion was based on the Inspector General’s review of a  new facility that will be used to evaluate the effects of aging on the nation’s  nuclear weapons stockpile.  The report stated that the project did not  have a viable baseline and that at least $57 million in cost increases had  occurred, but NNSA oversight was inadequate to identify the problem.  Also, the April 2003 DOE report on problems at the Los Alamos laboratory  stated that NNSA’s direct federal oversight had been narrowly focused on  specific performance measures in the contract, rather than on overall  effectiveness. Weaknesses in NNSA oversight also occurred at the  Lawrence Livermore laboratory. For example, in a 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 took over a year to resolve disagreements with  the laboratory on technical issues affecting the safe operation of the new  building for temporarily storing wastes. Providing clear requirements and  ensuring that the contractor complies with those standards in a timely  manner is part of NNSA’s oversight responsibilities.
These past problems with oversight raise concerns about NNSA’s proposed  change to its oversight approach. NNSA’s August 2003 draft Line Oversight  and Contractors’ Assurance System policy would rely more on contractor  oversight and self-assessment 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  contractor’s 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.
Although we believe that the overall concept of a risk-based approach to  federal oversight is reasonable, concerns exist about whether NNSA will be  able to effectively carry out this approach while successfully meeting its  responsibility for safe and secure operations. For example, considerable  work will be needed to successfully implement a risk-based approach to  laboratory oversight. According to the Associate Director for Operations at  the Los Alamos 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  addition, they said that both the laboratory and NNSA have been reacting  to problems after they have come to light rather than managing risks to  prevent problems from occurring.
In addition to these concerns specific to the two laboratories, DOE and  others have 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 the three internal control challenges  facing the department. The report stated that these challenges represent  issues that, if not addressed, may impede the department’s ability to carry  out its program responsibilities and ensure the integrity of its operations.  The department also included program oversight of contractors as a  significant matter of concern in its performance and accountability report  for fiscal year 2003. 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.
section_title: Ensuring that Improvement Initiatives Follow Best Practices
paragraphs: NNSA and the University have not ensured that the laboratories manage  major improvement initiatives using a best practices framework that helps  ensure successful implementation. For example, one aspect of improving  mission support activities at the Los Alamos laboratory has involved a  major upgrade of business systems including budgeting, accounting,  procurement, and property management. This business systems  improvement initiative is planned to take 18 months and be completed at  the end of June 2004. Unfortunately, laboratory officials have not followed  best practices in managing the improvement initiative, increasing the risk  that the initiative may not fully address existing problems or be the most  effective approach.
In previous work, we found that best practices by leading organizations to  sustain management improvement initiatives involved using a systematic,  results-oriented approach that incorporated a rigorous measurement of  progress. Such an approach typically included the following elements: (1)  define clear goals for the initiative, (2) develop an implementation strategy  that sets milestones and establishes responsibility, (3) establish results- oriented outcome measures early in the process to gauge progress toward  the goals, and (4) use results-oriented data to evaluate the effectiveness of  the initiative and to make additional changes where warranted.
For its business systems improvement initiative, the Los Alamos laboratory  established an implementation strategy that set milestones and assigned  responsibility for carrying out the strategy. For example, the business  process improvement plan included over 600 required actions, each of  which had a time frame for completion and a laboratory employee  responsible for the action. The laboratory is tracking each of the actions to  ensure that they are completed.
While the Los Alamos laboratory had an implementation strategy for its  business systems improvement initiative, it implemented those actions  largely without clearly defined goals, results-oriented measures, or results- oriented data to evaluate the effectiveness of its actions.
Clear goals not defined. Although the Los Alamos laboratory had a  strategy for business improvement that included general goals, it did not  define the goals in measurable terms. The laboratory’s primary goal for  2003 was to reduce the risks associated with internal control  vulnerabilities in its business systems. This general goal does not  provide a measurable end point; it does not indicate how much risk  reduction is enough or how changes in risk could be measured. Nor  does the even more general objective of restoring trust in the  laboratory’s business systems, mentioned by some Los Alamos officials,  provide a measurable end point. While addressing internal control  problems is important, it does not by itself indicate that improvements  are sufficient or effective.
Results-oriented outcome measures not established. The laboratory did  not establish results-oriented outcome measures for its business  improvement initiative. Instead, the laboratory generally focused on  measuring the progress of implementing its improvement actions, such  as the percentage of improvements that have been implemented. Such  measurements, however, do not provide an indication of progress  toward the overall goal of reducing the risk of fraud, waste, and abuse.  Laboratory officials told us that instead of developing such measures  early in the business improvement initiative, their strategy is to define  measurable performance goals after the many actions associated with  the business improvement initiative are in place.
Results-oriented data not used to evaluate effectiveness. The laboratory  did not have the results-oriented outcome data needed to evaluate the  effectiveness of its business improvement initiative. Again, laboratory  officials told us that after the improvement actions are in place, they  plan to define and generate results-oriented data to correspond with  measurable performance goals. In addition to the lack of results- oriented outcome data, the laboratory also lacks the information  necessary to determine if these improvement efforts are cost-effective.  The laboratory has only partial information on the cost of the  improvement initiative. The laboratory’s Associate Director for  Administration told us that the laboratory has not focused on the costs  of the current business improvements. He added that the laboratory will  consider costs once the new systems are in place and decisions must be  made about balancing the cost of business activities against the risks of  removing some internal control activities.
Because the Los Alamos laboratory lacked several elements of a best  practices approach to managing improvement initiatives, the laboratory did  not have a sufficient basis from which to objectively review the results of  the improvement initiative, assess the reasonableness of costs incurred, or  take further corrective actions if necessary to achieve the overall goals of  the initiative. Laboratory officials explained that they had given immediate  priority to fixing business system problems rather than measuring and  sustaining improved business results. Furthermore, the Associate Director  for Administration concluded that good performance measures would take  considerable time to develop and that implementing corrective actions was  a higher priority. However, by waiting to focus on results and costs later,  the laboratory increases its risk that the initiative may not fully address  existing problems or be the most cost-effective approach to reducing its  internal control vulnerabilities to appropriate levels.
Laboratory officials said that they generally follow an organized process for  implementing improvement initiatives that includes defining the tasks to be  accomplished, creating a schedule with milestones, and assigning  responsibility for the actions. However, such a process does not include all  the elements that we have identified as necessary for a best practices  approach. Neither the University nor NNSA was influential in ensuring that  the laboratory followed best practices in managing the business system  improvement initiative, even after the department had issued guidance on  managing improvement initiatives. In October 2003, DOE issued Notice  125.1, Managing Critical Management Improvement Initiatives, which  describes best practices for managing improvement initiatives and requires  that those practices be followed by NNSA. However, this notice does not  apply to DOE’s contractors, and NNSA has not incorporated similar  requirements into NNSA’s contracts with the University to manage the Los  Alamos and Lawrence Livermore laboratories.
section_title: Conclusions
paragraphs: Effectively accomplishing the mission of conducting world-class scientific  work at the Los Alamos and Lawrence Livermore laboratories also requires  the laboratories to maintain good business practices; accountability for  mission support activities; and safeguards against fraud, waste, abuse, and  mismanagement. Sufficient emphasis on mission support activities has  been lacking, especially at the Los Alamos laboratory, and achieving and  sustaining effective performance in mission support will require strong  leadership and commitment. Efforts to improve performance in mission  support activities are still underway at the laboratories, and it may take  considerable time to determine if the efforts are effective. Managing these  efforts using best practices will help ensure that they succeed.
Keeping these improvements in place over the long term also requires an  effective process for assessing contractor performance on mission support  activities. We continue to have concerns about NNSA’s oversight approach.  Under its proposed risk-based approach to federal oversight, NNSA would  determine the risks associated with a given operation or function, evaluate  how good the contractor assurance system is in that area, and also factor in  past contractor performance. NNSA would take these factors into  consideration to determine whether it could reduce federal oversight of an  operation and rely more on the contractor’s assurance that the risk is being  adequately addressed and controlled. In our view, such autonomy for the  laboratories is inadvisable this soon into the process of recovery from a  string of embarrassing revelations. Regardless of whether the University of  California retains the contracts when they are competed in 2005 or another  organization is selected to operate one or both of the laboratories, until the  laboratories have demonstrated the maturity and effectiveness of  contractor assurance systems and the adequacy of the contractor’s  oversight has been validated, NNSA needs to maintain sufficient oversight  of mission support activities to fulfill its responsibilities independently.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Energy direct the Administrator of  NNSA to  ensure through contract and other management mechanisms that the  University of California and any future contractor managing Los Alamos  and Lawrence Livermore National Laboratories provide leadership,  resources, and oversight to ensure effective mission support activities,  including evaluating the impact of improvement actions on  performance;  ensure that NNSA performance assessments at the laboratories include  evaluations of the adequacy of leadership, resources, and internal  controls associated with mission support activities;  ensure that as NNSA implements its proposed oversight and contractor  assurance policy at Los Alamos and Lawrence Livermore National  Laboratories, NNSA retains sufficient independent federal oversight of  mission support activities to fulfill its responsibilities associated with  protecting public resources and safety; and  include in its contract with the University of California and any future  contractor at Los Alamos and Lawrence Livermore National  Laboratories a requirement that major improvement initiatives be  managed consistent with the best practices of high-performing  organizations, as defined in DOE Notice 125.1.
section_title: Agency Comments
paragraphs: We provided a draft of this report to NNSA and the University of California  for their review and comment. The University provided its comments  through NNSA. In written comments, NNSA’s Associate Administrator for  Management and Administration generally agreed with the accuracy of the  report and acknowledged that both NNSA and the University face  challenges in improving mission support activities at the two laboratories.
NNSA also cited actions taken or planned that it said met the intent of our  recommendations.
However, regarding the report’s accuracy, NNSA said our report  substantially understates the extent of progress made in correcting the  laboratories’ mission support problems. We believe that we have accurately  described the progress made in implementing actions aimed at improving  mission support. Even though the University has made progress in  implementing corrective actions and new requirements, the extent to  which these actions have resulted in improvements in mission support  performance at the laboratories is still unclear.
In an attachment to the letter, NNSA raised a concern about our discussion  of its efforts to oversee the laboratories and our recommendation  concerning NNSA’s proposed risk-based approach to laboratory oversight.  NNSA disagreed with our reservations about its proposal to rely more on a  contractor’s system of management controls and less on NNSA’s own  independent oversight. NNSA acknowledged that there have been  problems with its oversight in the past but believes that its proposed risk- based approach will be successfully implemented, resulting in improved  contractor oversight. Therefore, NNSA said that our recommendation to  ensure that it retains sufficient independent oversight of the laboratories’  mission support activities was not necessary. However, as we discussed in  our report, a risk-based approach to federal oversight appears reasonable  in concept, but the University of California has not demonstrated that its  contractor assurance systems can be relied on to prevent or detect fraud,  waste, abuse, or mismanagement. And, in the past, NNSA has not been  effective at detecting these weaknesses. Until improved performance in  these areas has been clearly demonstrated, we continue to be concerned  about whether NNSA can effectively implement a risk-based approach to  contractor oversight. That is why we are recommending that NNSA retain  sufficient independent oversight of mission support activities to ensure  that those activities are safe and effective.
The attachment to the letter also discussed or referred to the report’s other  recommendations. Regarding our recommendation that NNSA’s  performance assessments at the laboratories include an evaluation of the  adequacy of leadership, resources, and internal controls associated with  mission support activities, NNSA said that the performance assessment  process it began using in fiscal year 2003 already includes such an  evaluation, so this recommendation is no longer required. For fiscal year  2003, the “critical few” performance measures used as a basis for  evaluation of contractor performance did include maintaining secure, safe,  environmentally sound, effective, and efficient operations and  infrastructure in support of mission objectives. However, we do not believe  that NNSA’s assessment of contractor performance on this measure is  equivalent to evaluating the adequacy of leadership, resources, and internal  controls associated with mission support activities. Therefore, we continue  to believe that such an evaluation is an important part of NNSA’s oversight  of contractor performance and that the recommendation is warranted.
Regarding our recommendations that NNSA ensure that any contractors  operating the laboratories (1) provide the leadership, resources, and  oversight to ensure effective mission support activities and (2) manage  improvement initiatives consistent with best practices, NNSA was silent on  the usefulness of the recommendations, but stated that the University is  committed both to providing the leadership, resources, and oversight to  ensure that mission support activities are conducted effectively and to  ensuring that its improvement efforts continue to achieve the desired  results. We believe that the oversight activities inherent in these  recommendations are an important part of improving the management of  mission support at the laboratories.
NNSA also provided technical comments, which we have incorporated as  appropriate. NNSA’s written comments on our draft report are included in  appendix II.
We conducted our review from May 2003 through February 2004, in  accordance with generally accepted government auditing standards.  Appendix I provides details on our scope and methodology.
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 letter. At that time, we will send copies to the Secretary of  Energy and to the University of California Office of the President. 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 staff have any questions on this report, please call me at  (202) 512-3841. Other staff contributing to this report are listed in  appendix III.
section_title: Scope and Methodology
paragraphs: We addressed three of the five problem areas NNSA identified when it  extended the laboratory contracts with the University of California in  January 2001. NNSA had identified problems with management  accountability; safeguards and security management; facility safety,  including nuclear facility operations; critical skills, knowledge, and  technical capabilities; and project management. Based on discussions with  committee staff, we reviewed three of these initiatives—management  accountability, including steps taken by the University to strengthen its  oversight of the two laboratories; facility safety, including nuclear safety  and facilities management; and project management. The other two areas  NNSA identified—safeguards and security management and critical  employee skills—were outside the scope of our review. These topics are  the subject of other GAO engagements.
To identify the status of actions taken by NNSA and the University of  California to address the mission support problems that were highlighted  when NNSA decided to extend the contracts for the Los Alamos and  Lawrence Livermore National Laboratories in January 2001, we reviewed  and analyzed prior GAO reports and testimonies, reports from the  Inspector General, and other reports in order to determine the types of  problems identified in the past. In addition, we reviewed and analyzed  documentation on the two contracts, including the annual performance  measures and NNSA’s annual evaluations of contractor performance. We  reviewed DOE orders and other agencywide requirements that had been  incorporated into the contracts, as well as the documentation provided by  the laboratories that demonstrated compliance with these requirements.  We interviewed officials in the University of California Office of the  President, Laboratory Administration Office, to understand the contractor’s  perspective and management role. In addition, we interviewed officials at  the two laboratories and the NNSA site offices to determine actions they  had taken or were taking to address identified problem areas. We also  reviewed documentation obtained from DOE’s Office of Environment,  Safety and Health regarding nuclear safety violations and similar problems.  In addition, we viewed public meetings of the Defense Nuclear Facilities  Safety Board (DNFSB), an independent oversight board charged with  providing safety oversight of the nuclear weapons complex, and  interviewed a DNFSB official at the Los Alamos National Laboratory to  obtain DNFSB views on the progress made by Los Alamos in the area of  nuclear safety. We also interviewed officials from DOE’s Office of  Engineering and Construction Management regarding project management,  the Office of Price-Anderson Enforcement regarding nuclear safety, and the  Office of Environmental Management regarding environmental cleanup.
Lastly, we interviewed officials with the Department of Energy Inspector  General at the Los Alamos and Lawrence Livermore National Laboratories  and in Washington, D.C., to obtain additional information on actions taken  to address problems and the progress that has been made.
To identify the status of the actions taken to address additional mission  support problems that have emerged or become more significant since  2001, we took several steps. To obtain information on the problems with  business operations at Los Alamos, we reviewed and analyzed reports by  DOE’s Office of Inspector General and external reviews done by Price- Waterhouse Coopers, Ernst and Young, and others. We also reviewed and  analyzed the April 2003 report from the Deputy Secretary of Energy and the  NNSA Administrator on the business problems and Los Alamos and the  recommendations to the Secretary of Energy. In addition, we interviewed  officials with the Los Alamos laboratory, the NNSA Los Alamos site office,  and the University of California Laboratory Administration Office on the  status of corrective actions, and we reviewed documentation and reports  they provided. To obtain information on the continuing problems with  emergency management at the Lawrence Livermore laboratory, we  reviewed reports of DOE’s Office of Independent Oversight and  Performance Assurance, the annual performance measures in the contract  for the Lawrence Livermore laboratory, and NNSA’s annual evaluations of  contractor performance. In addition, we interviewed NNSA officials at the  Lawrence Livermore site office and reviewed documents provided by them.  We also reviewed the Fiscal Year 2004 Energy and Water Development  Appropriations Act and corresponding House of Representatives and  Conference Reports to understand the requirement to compete DOE  contracts that had been awarded more than 50 years ago without  competition.
To determine the remaining challenges, if any, that NNSA and the  University face in sustaining improvements in mission support activities,  we reviewed and analyzed Office of Management and Budget Circular A- 123, Management Accountability and Control; GAO’s Standards for Internal  Control in the Federal Government; and DOE Office of Inspector General  and Performance and Accountability reports. We also reviewed and  analyzed University, laboratory, and independent reports obtained during  site visits and during interviews with officials to identify other areas of  concern and any potential barriers to implementing and sustaining the  improvement efforts. We interviewed officials with the University  Laboratory Administration Office, the Los Alamos and Lawrence Livermore  laboratories, and the NNSA site offices to obtain their views on remaining  challenges the laboratories face and the need for improved oversight of the  laboratories. In particular, we discussed DOE’s oversight policies, NNSA’s  proposed oversight policies, and challenges to improving oversight. We  also reviewed documents relevant to oversight issues, such as NNSA’s draft  policy letter on contractor assurance and oversight and the investigative  report on the space shuttle Columbia accident, which was prepared for the  National Aeronautics and Space Administration. Finally, for additional  insight into remaining challenges, we analyzed the results of public  meetings on DOE and NNSA oversight of nuclear safety held by the  Defense Nuclear Facilities Safety Board.
We conducted our review from May 2003 through February 2004 in  accordance with generally accepted government auditing standards.
section_title: Comments from the Department of Energy
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to the individuals named above, Carole Blackwell, Doreen  Feldman, Terry Hanford, Jonathan McMurray, Jill Peterson, Robert  Sanchez, and Stan Stenersen made key contributions to this report.
section_title: GAO’s Mission
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subsections: section_title: Order by Mail or Phone
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Public Affairs