Department of Energy: Observations on the Future of the Department
Published: 1996-09-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO discussed the Department of Energy's (DOE) future, focusing on DOE efforts to restructure its missions and address policy and management issues.
section_title: What GAO Found
paragraphs: GAO noted that: (1) DOE is having a difficult time responding to its changing mission and organizational structure; (2) DOE is unable to evaluate its activities due to weak management and information systems; (3) DOE has a highly decentralized field structure that is unable to respond to changing conditions and priorities, fraught with communication problems, and ill-equipped to handle cross-cutting issues; (4) many former DOE officials and other experts believe that DOE should concentrate on several key issues such as energy policy, energy information, and energy supply research and development; (5) DOE is reforming its contracting practices to make them more business-like and results-oriented, opening up its decisionmaking processes to the public, and organizing high-level task forces on laboratory and research management; (6) DOE is on target with its planned budget savings under the Strategic Alignment and Downsizing Initiative and is depending on its process improvements and reengineering efforts to fulfill its mission under reduced budgets; (7) a governmentwide approach to restructuring DOE is desirable, since transferring any DOE mission will have a broad impact on other federal agencies; and (8) DOE will have to address contract reform, acquisitions, and environmental cleanup and waste management issues to effectively restructure its organization.

section_title: Letter
paragraphs: We are pleased to provide our views on proposals affecting the future of the Department of Energy (DOE). My testimony today will discuss the need for change at DOE and the efforts it has under way, a framework for reevaluating the Department, the desirability of a governmentwide approach to restructuring, and the need to address policy and management issues that will persist irrespective of the future of the Department. The information included in this testimony is drawn from our management reviews of DOE and our past and ongoing work on a wide variety of DOE’s programs and activities.
In summary, now is an ideal time to reevaluate DOE and its missions. Its priorities have changed dramatically since its creation in 1977 in response to the nation’s energy crisis, shifting to nuclear weapons production in the 1980s and environmental cleanup now. Describing the need to change DOE, many former Department officials and other experts we surveyed believe that the Department should focus on just a few of its current missions. DOE’s reforms that are under way are important and much needed, but we believe that a more fundamental rethinking is in order. A framework for evaluating DOE could begin with basic questions about the validity of missions and their organizational placement. Because transferring missions from DOE to other agencies has broad impacts, we believe that ideally a governmentwide approach to restructuring is desirable. Regardless of the future of DOE, many long-term issues, such as contract reform, major acquisitions, and environmental cleanup and waste management, will need addressing.
subsections: section_title: The Need to Change DOE and Efforts Under Way
paragraphs: It is time for a fundamental rethinking of DOE’s missions. Created predominantly to deal with the energy crisis of the 1970s, DOE has changed its mission and budget priorities dramatically over time. By the early 1980s, its nuclear weapons production grew substantially; and following revelations about environmental mismanagement in the mid- to late-1980s, DOE’s cleanup budget began to expand, and now the task overshadows other activities. With the Cold War’s end, DOE has new or expanded missions in industrial competitiveness; science education; environment, safety, and health; and nuclear arms control and verification.
Responding to changing missions and priorities with organizational structures, processes, and practices that had been established largely to build nuclear weapons has been a daunting task for DOE. For example, DOE’s approach to contract management, first created during the World War II Manhattan Project, allowed private contractors to manage and operate billion-dollar facilities with minimal direct federal oversight yet reimbursed them for all of their costs regardless of their actual achievements; only now is DOE attempting to impose modern standards for accountability and performance. Also, weak management and information systems for evaluating program’s performance has long hindered DOE from exercising effective oversight. In addition, DOE’s elaborate and highly decentralized field structure has been slow to respond to changing conditions and priorities, is fraught with communication problems, and poorly positioned to tackle difficult issues requiring a high degree of cross-cutting coordination.
Experts we consulted in a 1994 survey support the view that, at a minimum, a serious reevaluation of DOE’s basic missions is needed. We surveyed nearly 40 former DOE executives and experts on energy policy about how the Department’s missions relate to current and future national priorities. Our respondents included a former President, four former Energy Secretaries, former Deputy and Assistant Secretaries, and individuals with distinguished involvement in issues of national energy policy.
Overwhelmingly, our respondents emphasized that DOE should focus on core missions. Many believed that DOE must concentrate its attention more on energy-related missions such as energy policy, energy information, and energy supply research and development. A majority favored moving many of the remaining missions from DOE to other agencies or entities. For example, many respondents suggested moving basic research to the National Science Foundation, the Commerce or Interior departments, other federal agencies, or a new public-private entity; some multiprogram national laboratories to other federal agencies (or sharing their missions with other agencies); the management and disposal of civilian nuclear waste to a new public-private organization, a new government agency, or the Environmental Protection Agency; nuclear weapons production and waste cleanup to the Department of Defense (DOD) or a new government agency and waste cleanup to the Environmental Protection Agency; environment, safety, and health activities to the Environmental Protection Agency or other federal entities; arms control and verification to DOD, the State Department, the Arms Control and Disarmament Agency, or a new government nuclear agency; activities furthering industrial competitiveness to the Commerce Department or a public-private organization; and science education to the National Science Foundation or another federal agency.
Recognizing the need to change, DOE has several efforts under way to strengthen its capacity to manage. For example, DOE’s reform of its contracting practices aims to make them more business-like and results-oriented; decision-making processes have been opened up to the public in an attempt to further break down DOE’s long-standing culture of secrecy, which has historically shielded the Department from outside scrutiny; and high-level task forces convened by DOE have made recommendations on laboratory and research management and on the Department’s missions.
DOE is also developing a strategic plan aiming to arrange its existing missions into key “business lines.” While we have yet to evaluate how well DOE is reorganizing along these business lines, we did recently complete a review of DOE’s Strategic Alignment and Downsizing Initiative, which arose from the plan. We found that DOE’s planned budget savings are on target and that the Department is depending on process improvements and reengineering efforts to enable it to fulfill its missions under the reduced budgets called for by the Initiative. However, the cost-savings potential of DOE’s efforts is uncertain because most of them are just beginning and some are not scheduled to be completed for several years. For example, of DOE’s 45 implementation plans, 22 plans have milestones that delineate actions to be met after May 1996 and 5 of those plans have milestones that will not occur until the year 2000. Because these actions are in their early stages, it is not yet clear if they will reduce costs to the extent DOE envisioned.
Although DOE’s reforms are important and much needed, they are based on the assumption that existing missions are still valid in their present forms and that DOE is the best place to manage them. Along with many of the experts we surveyed, we think a more fundamental rethinking of missions is in order.
section_title: A Framework for Evaluating DOE
paragraphs: As we explained in an August 1995 report, two fundamental questions are a good starting point for developing a framework for evaluating the future of DOE and its missions:
Which missions should be eliminated because they are no longer valid governmental functions?
For those missions that are governmental, what is the best organizational placement of the responsibilities?
Once agreement is reached on the appropriate governmental missions, a practical set of criteria could be used to evaluate the best organizational structure for each mission. These criteria—originally used by an advisory panel for evaluating alternative approaches to managing DOE’s civilian nuclear waste program—allow for rating each alternative structure on the basis of its ability to promote cost-effective practices, attract talented technical specialists, be flexible to changing conditions, and accountable to stakeholders. Using these criteria could help identify more effective ways to implement missions, particularly those that could be privatized or reconfigured under alternative governmental forms. Appendix II summarizes these criteria.
Our work and others’ has revealed the complex balancing of considerations in reevaluating missions. In general, deciding the best place to manage a specific mission involves assessing the advantages and disadvantages of each alternative institution for its potential to achieve that mission, produce integrated policy decisions, and improve efficiency. Potential efficiency gains (or losses) that might result from moving parts of DOE to other agencies need to be balanced against the policy reasons that first led to placing that mission in the Department.
For example, transferring the nuclear weapons complex to DOD, as is proposed by some, would require carefully considering many policy and management issues. Because of the declining strategic role of nuclear weapons, some experts argue that DOD might be better able to balance resource allocations among nuclear and other types of weapons if the weapons complex were completely under its control. Others argue, however, that the need to maintain civilian control over nuclear weapons outweighs any other advantages and that little gains in efficiency would be achieved by employing DOD rather than DOE supervisors. Some experts we consulted advocated creating a new federal agency for weapons production.
Similarly, moving the responsibility for cleaning up DOE’s defense facilities to another agency or to a new institution, as proposed by some, requires close scrutiny. For example, a new agency concentrating its focus on cleanup exclusively would not have to allocate its resources among competing programs and could maximize research and development investments by achieving economies of scale in applying cleanup technology more broadly. On the other hand, separating cleanup responsibility from the agency that created the waste may limit incentives to reduce waste and to promote other environmentally sensitive approaches. In addition, considerable startup time and costs would accompany a new agency, at a time when the Congress is interested in downsizing the federal government.
DOE’s task force on the future of the national laboratories (The Galvin Task Force) has suggested creating private or federal-private corporations to manage most or all of the laboratories. Under this arrangement, nonprofit corporations would operate the laboratories under the direction of a board of trustees that would channel funding to various labs to meet the needs of both government and nongovernment entities. DOE would be a customer, rather than the direct manager of the labs. The proposal raises important issues for the Congress to consider, such as how to (1) monitor and oversee the expenditure of public funds by privately managed and operated entities; (2) continue the laboratories’ significant responsibilities for addressing environmental, safety, and health problems at their facilities, some of which are governed by legal agreements between DOE, EPA, and the states; and (3) safeguard federal access to facilities so that national priorities, including national security missions, are met. Other alternatives for managing the national labs exist: each has advantages and disadvantages, and each needs to be evaluated in light of the laboratories’ capabilities for designing nuclear weapons and pursuing other missions of national and strategic importance. Furthermore, the government may still need facilities dedicated to national and defense missions, a possibility that would heavily influence any future organizational decisions.
Finally, another set of criteria, developed by the National Academy of Public Administration (NAPA) in another context, could be useful for determining whether DOE should remain a cabinet-level department.These criteria, which are summarized in appendix III, pose such questions as the following: “Is there a sufficiently broad national purpose for the Department? Are cabinet-level planning, executive attention, and strategic focus necessary to achieve the Department’s mission goals? Is cabinet-level status needed to address significant issues that otherwise would not be given proper attention?”
Although DOE’s strategic plan and Strategic Alignment and Downsizing Initiative address internal activities, they assume the validity of the existing missions and their placement in the Department. But DOE alone cannot make these determinations—they require a cooperative effort among all stakeholders, with the Congress and the administration responsible for deciding which missions are needed and how best to implement them. The requirements of the Government Performance and Results Act (GPRA) reinforce this concept by providing a legislative vehicle for the Congress and agencies to use to improve the way government works. The act requires, among other things, strategic plans based on consultation with the Congress and other stakeholders. These discussions are an important opportunity for the Congress and the executive branch to jointly reassess and clarify the agencies’ missions and desired outcomes.
section_title: Desirability of a Governmentwide Approach to Restructuring
paragraphs: Our work has shown that to be effective, decisions about the structure and functions of the federal government should be made in a thorough manner with careful attention to the effects of changes in one agency on the workings of other agencies. Specifically, reorganization demands a coordinated approach, within and across agency lines, supported by a solid consensus for change; it should seek to achieve specific, identifiable goals; attention must be paid to how the federal government exercises its role; and sustained oversight by the Congress is needed to ensure effective implementation. Given both the current budgetary environment and other proposals to more extensively reorganize the executive branch, the Congress could judge the feasibility and desirability of assigning to some entity the responsibility of guiding reorganizations and downsizing.
Even though there has been little experience abolishing federal agencies, officials with the Office of Personnel Management (OPM) articulated to us some lessons learned from their experiences:
Agencies are usually willing to accept functions, but they are not necessarily willing to accept the employees who performed those functions in the abolished agency—doing so may put the receiving agency’s existing staff at increased risk of a reduction-in-force.
Transferring functions that have an elaborate field structure can be very expensive.
Transferred functions and staff may duplicate existing functions in the new agency, so staff may feel threatened, resulting in friction.
Employees performing a function in the abolished agency may be at higher or lower grades than those performing the same function in the receiving agency.
Terminating an agency places an enormous burden on that agency’s personnel office—it will need outside help to handle the drastic increase in paperwork due to terminations, grievances, and appeals.
section_title: Issues That Need Addressing Regardless of Where They Are Managed
paragraphs: Regardless of what the Congress decides on the future of the DOE, a number of critical policy and management issues will require close attention regardless of their placement in the federal government or outside it. These issues include contract reform, major systems acquisitions, and environmental cleanup and waste management.
subsections: section_title: Contract Reform
paragraphs: DOE has a long history of management problems. At the core of many of these problems is its weak oversight of more than 110,000 contractor employees, who perform nearly all of the Department’s work. Historically, these contractors worked largely without any financial risk, they got paid even if they performed poorly, and DOE oversaw them under a policy of “least interference.” DOE is now reforming its contracting practices to make them more business-like and results-oriented.
While we believe that these reforms, which we are currently evaluating, are generally a step in the right direction, at this time we are unsure whether the Department is truly committed to fully implementing some of its own recommendations. For example, in May 1996, the Secretary announced the extension of the University of California’s three laboratory contracts (currently valued at about $3 billion). DOE’s decision to extend, rather than “compete” these enormous contracts—held by the University continuously for 50 years—violates two basic tenets of the Department’s philosophy of contract reform. First, contracts will be competed except in unusual circumstances. Second, if current contracts are to be extended, the terms of the extended contracts will be negotiated before DOE makes its decision to extend them. DOE justified its decision on the basis of its long-term relationship with the University. However, the Secretary’s Contract Reform team concluded that DOE’s contracting suffered from a lack of competition, which was caused, in part, by several long-term relationships with particular contractors.
section_title: Major Acquisitions
paragraphs: DOE has historically been unsuccessful in managing its many large projects—those that cost $100 million or more and that are important to the success of its missions. Called “major acquisitions,” these projects include accelerators for high-energy and nuclear physics, nuclear reactors, and technologies to process nuclear waste. Since 1980, DOE has been involved with more than 80 major acquisitions. We currently have work underway for the Senate Governmental Affairs Committee examining DOE’s success with these acquisitions. Our work indicates that many more projects are terminated prior to completion than are actually completed. Many of these projects had large cost overruns and delays. This work will also address efforts to improve the acquisition process and contributing causes of these problems. The causes appear to include constantly changing missions, which makes maintaining support over the long term difficult; annual, incremental funding of projects that does not ensure that funds are available when needed to keep the projects on schedule; the flawed system of incentives that has sometimes rewarded contractors despite poor performance; and an inability to hire, train, and retain enough people with the proper skills.
section_title: Environmental Waste and Cleanup
paragraphs: Another issue needing long-term attention is cleaning up the legacy of the nuclear age. This monumental task currently assigned to DOE includes both the environmental problems created by decades of nuclear weapons production and the management and disposition of highly radioactive waste generated by over 100 commercial nuclear power plants. Although the Department has made some progress on both fronts, major obstacles remain. One obstacle common to both efforts is the estimated total cost over the next half century. According to DOE, cleaning up its complex of nuclear weapons facilities could cost as much as $265 billion (in 1996 dollars) and disposing of highly radioactive waste from commercial nuclear power plants could cost another $30 billion (in 1994 dollars).
Even though DOE received over $34 billion between 1990 and 1996 for environmental activities, it has made limited progress in addressing the wide range of environmental problems at its sites. In managing its wastes, DOE has encountered major delays in its high-level waste programs and has yet to develop adequate capacity for treating mixed waste (which includes both radioactive and hazardous components) at its major sites. Finally, DOE has begun deactivating only a handful of its thousands of inactive facilities.
On the basis of our reviews over the last several years of DOE’s efforts to clean up its nuclear weapons complex, we have identified many ways to potentially reduce the cost. These methods can be applied regardless of who has the responsibility for the cleanup. For example, DOE has usually assumed that all of its facilities will be cleaned up for subsequent unrestricted use; however, because many of these facilities are so contaminated, unrestricted use of them is unlikely, even after cleanup. By incorporating more realistic land-use assumptions into its decision-making, DOE could, by its own estimates, save from $200 million to $600 million annually. Also, to reduce costs, DOE is now preparing to privatize portions of the cleanup, most notably the vitrification of high-level waste in the tanks at its Hanford facility. But key issues need to be considered, including whether DOE has adequately demonstrated that privatization will reduce the total cost and whether DOE is adequately prepared to assume management and safety oversight responsibilities over the private firms.
Moreover, DOE cannot permanently dispose of its inventory of highly radioactive waste from the Hanford tank farms and other facilities until it has developed a geologic repository for this waste generated by the commercial nuclear power industry and DOE. Utilities operating more than 100 nuclear power plants at about 70 locations have generated about 32,000 metric tons of highly radioactive waste in the form of spent (used) fuel and are expected to have produced about 85,000 metric tons of spent fuel by the time the last of these plants has been retired in around 30 years. Although an operational repository was originally anticipated as early as 1998, DOE now does not expect to determine until 2001 if the site at Yucca Mountain, Nevada, is suitable and, if it is, to begin operating a repository there until at least 2010. Following a call from 39 Members of Congress for a presidential commission to review the nuclear waste program, this year legislation that includes reforms is pending in both the House and the Senate; and some experts, including DOE’s own internal advisory panel, have called for moving the entire program to the private sector.
Mr. Chairman, this concludes our prepared statement. We would be pleased to respond to any questions that you or other Members of the Committee may have.
section_title: Summary of Survey Responses on the Best Location for Accomplishing the Department of Energy’s Missions
subsections: section_title: Move to another Federal Agency
paragraphs: The following criteria, adapted from a former DOE advisory panel that examined the Department’s civilian nuclear waste program, offers a useful framework for evaluating alternative ways to manage missions. These criteria were created to judge the potential value of several different organizational arrangements which included an independent federal commission, a mixed government-private corporation, and a private corporation.
Mission orientation and focus: Will the institution be able to focus on its mission(s), or will it be encumbered by other priorities? Which organizational structure will provide the greatest focus on its mission(s)?
Credibility: Will the organizational structure be credible, thus gaining public support for its action?
Stability and continuity: Will the institution be able to plan for its own future without undue concern for its survival?
Programmatic authority: Will the institution be free to exercise needed authority to accomplish its mission(s) without excessive oversight and control from external sources?
Accessibility: Will stakeholders (both federal and state overseers as well as the public) have easy access to senior management?
Responsiveness: Will the institution be structured to be responsive to all its stakeholders?
Internal flexibility: Will the institution be able to change its internal systems, organization, and style to adapt to changing conditions?
Political accountability: How accountable will the institution be to political sources, principally the Congress and the President?
Immunity from political interference: Will the institution be sufficiently free from excessive and destructive political forces?
Ability to stimulate cost-effectiveness: How well will the institution be able to encourage cost-effective solutions?
Technical excellence: Will the institution attract highly competent people?
Ease of transition: What will be the costs (both financial and psychological) of changing to a different institution?
section_title: Criteria for Evaluating Cabinet-Level Status
paragraphs: The following criteria were developed by the National Academy of Public Administration as an aid to deciding whether a government organization should be elevated to be a cabinet department. However, they raise issues that are relevant in judging cabinet-level status in general. 1. Does the agency or set of programs serve a broad national goal or purpose not exclusively identified with a single class, occupation, discipline, region, or sector of society? 2. Are there significant issues in the subject area that (1) would be better assessed or met by elevating the agency to a department and (2) are not now adequately recognized or addressed by the existing organization, the President, or the Congress? 3. Is there evidence of impending changes in the type and number of pressures on the institution that would be better addressed if it were made a department? Are such changes expected to continue into the future? 4. Would a department increase the visibility and thereby substantially strengthen the active political and public support for actions and programs to enhance the existing agency’s goals? 5. Is there evidence that becoming a department would provide better analysis, expression, and advocacy of the needs and programs that constitute the agency’s responsibilities? 6. Is there evidence that elevation to a cabinet department would improve the accomplishment of the existing agency’s goals? 7. Is a department required to better coordinate or consolidate programs and functions that are now scattered throughout other agencies in the executive branch of government? 8. Is there evidence that a department—with increased centralized political authority—would result in a more effective balance within the agency, between integrated central strategic planning and resource allocation and the direct participation in management decisions by the line officers who are responsible for directing and managing the agency’s programs? 9. Is there evidence of significant structural, management, or operational weaknesses in the existing organization that could be better corrected by elevation to a department? 10. Is there evidence that there are external barriers and impediments to timely decision-making and executive action that could be detrimental to improving the efficiency of the existing agency’s programs? Would elevation to a department remove or mitigate these impediments? 11. Would elevation to a department help recruit and retain better qualified leadership within the existing agency? 12. Would elevation to a department promote more uniform achievement of broad, cross-cutting national policy goals? 13. Would elevation to a department strengthen the Cabinet and the Executive Office of the President as policy and management aids for the President? 14. Would elevation to a department have a beneficial or detrimental effect upon the oversight and accountability of the agency to the President and the Congress?
section_title: Related GAO Products
paragraphs: Department of Energy: A Framework For Restructuring DOE and Its Missions (GAO/RCED-95-197, Aug. 21, 1995).
Department of Energy: Framework Is Needed to Reevaluate Its Role and Missions (GAO/T-RCED-95-232, June 21, 1995).
Department of Energy: Alternatives for Clearer Missions and Better Management at the National Laboratories (GAO/T-RCED-95-128, Mar. 9, 1995).
Nuclear Weapons Complex: Establishing a National Risk-Based Strategy for Cleanup (GAO/T-RCED-95-120, Mar. 6, 1995).
Department of Energy: National Priorities Needed for Meeting Environmental Agreements (GAO/RCED-95-1, Mar. 3, 1995).
Department of Energy: Research and Agency Missions Need Reevaluation (GAO/T-RCED-95-105, Feb. 13, 1995).
Department of Energy: National Laboratories Need Clearer Missions and Better Management (GAO/RCED-95-10, Jan. 27, 1995).
Department of Energy: Need to Reevaluate Its Role and Missions (GAO/T-RCED-95-85, Jan. 18, 1995).
Nuclear Waste: Comprehensive Review of the Disposal Program Is Needed (GAO/RCED-94-299, Sept. 27, 1994).
Energy Policy: Ranking Options to Improve the Readiness of and Expand the Strategic Petroleum Reserve (GAO/RCED-94-259, Aug. 18, 1994).
Department of Energy: Management Changes Needed to Expand Use of Innovative Cleanup Technologies (GAO/RCED-94-205, Aug. 10, 1994).
Department of Energy: Challenges to Implementing Contract Reform (GAO/RCED-94-150, Mar. 24, 1994).
DOE’s National Laboratories: Adopting New Missions and Managing Effectively Pose Significant Challenges (GAO/T-RCED-94-113, Feb. 3, 1994).
Financial Management: Energy’s Material Financial Management Weaknesses Require Corrective Action (GAO/AIMD-93-29, Sept. 30, 1993).
Department of Energy: Management Problems Require a Long-Term Commitment to Change (GAO/RCED-93-72, Aug. 31, 1993).
Energy Policy: Changes Needed to Make National Energy Planning More Useful (GAO/RCED-93-29, Apr. 27, 1993).
Energy Management: High-Risk Area Requires Fundamental Change (GAO/T-RCED-93-7, Feb. 17, 1993).
Nuclear Weapons Complex: Issues Surrounding Consolidating Los Alamos and Livermore National Laboratories (GAO/T-RCED-92-98, Sept. 24, 1992).
Department of Energy: Better Information Resources Management Needed to Accomplish Missions (GAO/IMTEC-92-53, Sept. 29, 1992).
Naval Petroleum Reserve: Limited Opportunities Exist to Increase Revenues From Oil Sales in California (GAO/RCED-94-126, May 5, 1994).
High-Risk Series: Department of Energy Contract Management (GAO/HR-93-9, Dec. 1992).
Comments on Proposed Legislation to Restructure DOE’s Uranium Enrichment Program (GAO/T-RCED-92-14, Oct. 29, 1991).
Nuclear Waste: Operation of Monitored Retrievable Storage Facility Is Unlikely by 1998 (GAO/RCED-91-194, Sept. 24, 1991).
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