Federal Research: Information on DOE's Laboratory-Directed R&amp;D Program
Published: 2004-04-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Energy's (DOE) contractor-operated laboratories perform mission-related research and development (R&D) for DOE and other federal agencies. In 1992, DOE established the Laboratory- Directed Research and Development (LDRD) program, under which laboratory directors may allocate funding to scientists to conduct worthy independent research. DOE allows participating laboratories to support their LDRD programs by including a charge of up to 6 percent of the total project cost in the indirect costs for R&D performed for DOE and other federal agencies. GAO was asked to address 11 specific questions on DOE's LDRD program regarding: DOE's statutory authority for charging other federal agencies for LDRD, DOE's policies and procedures for ensuring departmental compliance with statutory requirements and committee report direction, the extent to which DOE believes the LDRD program is a necessary tool for recruiting and retaining laboratory scientists, and the sources and amounts of LDRD funding that each laboratory received from fiscal year 1998 through fiscal year 2003. In commenting on the draft report, DOE agreed with its factual accuracy.
section_title: What GAO Found
paragraphs: By law, when DOE conducts R&D for other federal agencies and uses a laboratory contractor to carry out the tasks, DOE must recover from the other agency all costs, including LDRD, DOE owes its contractor in performing the work. DOE has issued a departmental order and clarifying memoranda and guidance to ensure LDRD program compliance with statutory requirements and congressional direction. For example, the Secretary of Energy's April 2002 guidance requires that agencies funding work at its laboratories be notified about the LDRD program, including the laboratory's indirect-cost rate and an estimate of the associated cost. According to senior budget, legal, and research program officials at six federal agencies that fund work at the DOE laboratories, inclusion of funding for the LDRD program as an indirect cost does not limit their agency's ability to comply with statutory or appropriations requirements. Managers at the four DOE laboratories that primarily conduct nuclear weapons and environmental management R&D told us that LDRD is vital for recruiting and retaining top scientists, while managers at the five Office of Science laboratories said that LDRD plays an important, but less vital, role in recruiting and retaining top scientists. From fiscal year 1998 through fiscal year 2003, DOE's contractor-operated laboratories spent a total of $1.8 billion, or an average of $296 million per year, on LDRD. DOE accounted for 84 percent and the Department of Defense and the intelligence agencies, through their payments to DOE, accounted for 12 percent of the federal support for the LDRD program in fiscal year 2003.

section_title: Letter
paragraphs: In fiscal year 2003, the Department of Energy’s (DOE) contractor-operated  laboratories spent more than $7.9 billion on research and development  (R&D) and other operating expenses that supported the department’s  national nuclear security, energy resources, environmental management,  and science programs. To foster scientific excellence at these laboratories,  the Atomic Energy Act of 1954, as amended, and other laws have  authorized DOE laboratories to use a reasonable amount of laboratory  funds to conduct employee-suggested R&D projects selected at the  discretion of the laboratory directors. Subsequently, the National Defense  Authorization Act for Fiscal Year 1991 authorized the contractor-operated  laboratories that receive funding for national security programs to perform  laboratory-directed R&D of a creative and innovative nature to maintain  the vitality of the laboratories’ defense-related scientific disciplines.
In fiscal year 1992, DOE formalized its laboratories’ self-initiated R&D  programs by establishing the Laboratory-Directed Research and  Development (LDRD) program. Under this program DOE’s contractor- operated laboratories may fund their LDRD programs by including up to 6  percent of an R&D project’s total cost in its indirect cost of doing the work  for DOE, other federal agencies, and nonfederal organizations. Total funding support for the LDRD program grew from $223 million in fiscal  year 1992 to $356 million in fiscal year 2003.
Table 1 shows the nine contractor-operated laboratories that participated  in DOE’s LDRD program in fiscal year 2003. These laboratories include  three within the National Nuclear Security Administration (NNSA) that  primarily conduct R&D for the nuclear weapons program, five within  DOE’s Office of Science that primarily perform basic research, and one  within the Office of Nuclear Energy, Science, and Technology that primarily  performs research for the environmental management program. DOE’s  appropriations are the source of more than 80 percent of the LDRD funding  each year; the remaining funds are reimbursements to DOE that are paid  out of appropriations of other federal agencies, or private organizations, to  cover the costs DOE incurred in performing work for these entities,  primarily through DOE’s Work for Others program.
The nine DOE laboratories select LDRD projects on their scientific and  technical merits without regard to funding origin, provided that the  projects will support DOE’s national security mission. DOE requires that  LDRD projects focus on the advanced study of scientific or technical  problems, experiments directed toward proving a scientific principle, or  early analysis of experimental facilities or devices. For example, scientific  knowledge gained from Sandia’s LDRD project that created crystalline  silicotitanate, a material capable of separating highly radioactive cesium  from other wastes, led to the development of new technology that could  substantially reduce the costs of cleaning up radioactive waste at DOE’s  Hanford site. Similarly, Lawrence Berkeley’s LDRD project on advanced  neutron generation has aided in the development of a portable neutron  generating device that can be used for detecting explosives and nuclear  materials that could be hidden in different types of containers. This device  could eventually be used to screen luggage at airports or steel shipping  containers at port facilities.
Generally, scientists at each laboratory independently propose projects  that peer review panels and laboratory managers prioritize on the basis of  their assessment of potential scientific and technical merit and potential  strategic impact. The laboratory directors use these assessments to make  their selections. In accordance with DOE policy, the selected LDRD  projects are reviewed and approved by DOE. In general, projects cost from  $100,000 to $300,000 and last 2 to 3 years.
This report addresses the 11 specific questions that you asked us on DOE’s  LDRD program. To answer these questions, we examined the authorizing  legislation, DOE’s order and memoranda implementing the LDRD program,  LDRD program documents, and financial data for each of the nine  contractor-operated laboratories that participate in the LDRD program. We  also interviewed cognizant officials at DOE and its nine laboratories. In  addition, we interviewed officials at the Departments of Defense (DOD),  Homeland Security (DHS), and Transportation (DOT); the National  Aeronautics and Space Administration (NASA); the National Institutes of  Health (NIH), within the Department of Health and Human Services; and  the Nuclear Regulatory Commission (NRC). Through their payments to  DOE, these federal agencies were among the primary sources of LDRD  funding generated from R&D performed for non-DOE agencies from fiscal  years 1998 through 2003. We conducted our review from July 2003 through  March 2004 in accordance with generally accepted government auditing  standards.
subsections: section_title: Questions Posed by the Subcommittee and GAO’s Responses
paragraphs: Question 1:  Does DOE have statutory authority that specifically  authorizes it to spend the funds appropriated to other federal agencies and  use those funds for LDRD?
The Strom Thurmond National Defense Authorization Act for Fiscal Year  1999 authorizes DOE to conduct R&D at DOE facilities for  “other  departments and agencies of the government . . .” The act requires that  when DOE conducts R&D for other agencies, it impose a charge to recover  its costs of conducting the work. The charge must include both direct  costs that DOE incurs in carrying out the work and all associated overhead  costs. When DOE assesses the charge to recover its costs, the ordering  agency transfers amounts from its appropriation to DOE to pay the  assessed charge.
An interagency transaction, like that authorized by section 7259a, is not  unlike a contractual transaction. Because of a statutory prohibition on  transferring funds between two appropriations, federal agencies require  specific statutory authority, like section 7259a, to engage in interagency  transactions. In other words, federal agencies require statutory authority to  contract with each other. Section 7259a permits other federal agencies to  contract with DOE for R&D. When other agencies transfer amounts to DOE  to pay the charge that DOE assesses under section 7259a, and DOE uses  those amounts to defray the costs it incurred in carrying out the work for  the other agency, DOE is not “spending” funds appropriated to another  agency any more than a private vendor with whom the agency had  contracted for services “spends” federal appropriations when it uses  amounts received in payment from the federal agency to defray its costs of  doing business. As in a contractual transaction, when a federal agency  transfers amounts to DOE in payment of the section 7259a charge, the  funds transferred become DOE funds and are available for the same  purposes and uses as the other amounts in the DOE appropriation account  to which they are credited.
When DOE agrees to carry out R&D for another agency and conducts the  work in one of its laboratories, DOE asks the contractor who operates its  laboratory to undertake the R&D tasks. In that case, the cost to DOE of  having its contractor conduct these tasks is a direct cost that DOE is  required by section 7259a to include in the charge that it assesses the other  agency.  The other agency is not paying DOE’s contractor; in fact, the other  agency has no legal relationship with DOE’s contractor.
The amount DOE owes its contractor for this work is determined by the  terms of the contract that DOE has with its contractor. Included in the  amounts DOE pays its contractor is an amount for LDRD. The National  Defense Authorization Act for Fiscal Year 1991 requires DOE to pay its  laboratory contractors an amount for LDRD, not to exceed 6 percent of the  amount that DOE pays to the contractor for national security activities.
Consequently, DOE is not “using” funds appropriated to other federal  agencies for LDRD. LDRD is a cost that DOE incurs, both statutorily and  contractually, whenever the laboratory’s contractor performs work for  DOE. When another agency asks DOE to conduct R&D on its behalf, and  DOE, in performing that work incurs an LDRD cost, DOE, under section  7259a, properly includes that cost in calculating what it will charge the  ordering agency. Just as a private vendor factors its costs of doing business  into the price it charges for services rendered, DOE, under section 7259a,  must factor its costs of doing business, including LDRD, into the amount it  charges other agencies. That DOE might use monies properly transferred  from another agency to defray the LDRD amount it owes its laboratory  contractor does not mean that DOE is “using” another agency’s funds for  LDRD any more than a private vendor is using a federal agency’s  appropriation when it applies amounts paid by a federal agency for services  rendered to defray its costs of doing business.
Question 2:  Congressional appropriations laws must comply with defense  and domestic firewalls in Senate budget resolutions adopted by Congress.  What mechanism has DOE had in place to ensure that funds appropriated  for defense purposes are used only for defense activities and that funds  appropriated for domestic purposes are used only for activities in support  of those domestic agencies?  This question applies to both LDRD  conducted with DOE funds and LDRD conducted with funds received from  other federal agencies.
As discussed in our response to question 1, DOE’s funds support the LDRD  programs at participating DOE contractor-operated laboratories—not the  appropriations of other agencies. Under the terms of the agreement when  another federal agency asks DOE to perform work on its behalf, the agency  agrees to reimburse DOE all costs that DOE incurs in performing the work.
In funding and carrying out LDRD, DOE and the laboratories must comply  with statutory requirements imposed on them. For example, DOE and its  contractor-operated laboratories are required to comply with the National  Defense Authorization Act for Fiscal Year 1998, which requires that when  DOE uses its appropriation for nuclear weapons activities to pay for LDRD,  the LDRD must support projects in DOE’s national security mission and  when DOE uses its environmental restoration, waste management, or  nuclear materials and facilities stabilization appropriation to pay for LDRD,  the LDRD must support projects in these mission areas. In addition, the  Homeland Security Act of 2002 specifically directs that when DHS orders  work from DOE’s laboratories, the laboratories must use the associated  LDRD funds only for purposes that benefit DHS missions.
Officials at each of the laboratories we visited told us that, because LDRD  promotes cutting-edge science and technology, much of the R&D  conducted is basic research that, by definition, can result in applications  that benefit both defense and civilian agencies. Thus, projects proposed  with the intention of supporting a defense mission may lead to cross- cutting applications that benefit Homeland Security or other civilian  agencies. Specifically, officials at DOE’s weapons laboratories cited  examples in sensor research for identifying traces of radiological and  biological agents that had benefited both the nuclear nonproliferation and  homeland security missions. They also mentioned LDRD projects that had  applications for the NIH’s cancer research programs, as well as DHS and  DOE.
Question 3:  Which federal agencies, in addition to DOE, have a similar  process whereby up to 6 percent of funds appropriated to the agency (or  any other federal agency) may be diverted to purposes other than those for  which the Congress appropriated the funds?
NASA’s Jet Propulsion Laboratory, operated by the California Institute of  Technology, is the only federal laboratory we identified that includes an  assessment on the work performed for other federal agencies to support a  laboratory-directed R&D program. In fiscal year 2003, the Jet Propulsion  Laboratory Director’s R&D Fund received about $91,000 through an  assessment of .025 percent on all projects over $250,000 performed for  other federal agencies—primarily DOD. The Director’s R&D Fund also  received $3.5 million from NASA’s research directorates that was pro rated  on the basis of their expected R&D funding at the Jet Propulsion  Laboratory. Similar to DOE’s LDRD program, the Director’s R&D Fund is  designed to promote innovative science and new technology. The fund also  encourages collaborative work with the California Institute of Technology,  other universities, other federal laboratories, and industry. The Jet  Propulsion Laboratory’s director awards funding to research projects on  the basis of peer review of their scientific merits.
The Air Force’s Lincoln Laboratory, operated by the Massachusetts  Institute of Technology, has a Directed Defense Research and Engineering  program. However, unlike LDRD, the Defense budget provides the Directed  Defense Research and Engineering program with about $25 million  annually through a direct appropriation from the Congress—Lincoln does  not include an assessment in its indirect-cost rate to finance its program.   Similar to DOE’s LDRD program, Lincoln Laboratory’s director awards  funding to research projects on the basis of peer review of their scientific  merits. The Army and the Navy also reported that their In-house Laboratory  Independent Research program is fully funded by their appropriations.
NRC’s Center for Nuclear Waste Regulatory Analyses, operated by the  Southwest Research Institute, also has a small self-initiated research  program. However, NRC’s center does not receive funding support from  other federal agencies.
Question 4:  What mechanisms has DOE had in place to ensure that the  department fully complies with all statutory and report language in  appropriations bills for itself and other federal agencies when DOE spends  funds on their behalf?
DOE has issued a departmental order for the LDRD program and clarifying  memoranda and guidance to ensure departmental compliance with  statutory requirements and congressional direction in committee reports.  These include the following:  The National Defense Authorization Act for Fiscal Year 1991 established  an annual 6-percent funding limit on LDRD. Subsequently, DOE’s Order  413.2A established departmental requirements for the LDRD program,  and each laboratory establishes a fixed rate for the LDRD assessment  each year that ensures compliance with the 6-percent funding limit.  DOE officials told us that the department does not need to link the  LDRD funding from non-DOE sources to specific LDRD projects  because it treats LDRD as an indirect cost that, under cost accounting  standards, must be pooled with other LDRD funds and not tracked back  to a specific funding source. The DOE officials added that LDRD costs  are charged to all laboratory customers at the same rate and are  considered a normal cost of doing business.
The National Defense Authorization Act for Fiscal Year 1998 limited the  use of LDRD funds (1) originating from nuclear weapons funding to  LDRD projects that support DOE’s national security mission and (2)  originating from environmental restoration, waste management, or  nuclear materials and facilities stabilization for LDRD projects that  support these missions. DOE and laboratory LDRD managers told us  that they have achieved the act’s funding requirements through (1) the  identification of areas of emphasis that are likely to benefit DOE’s  national security and environmental management missions in each  laboratory’s annual LDRD program plan and its calls for proposals and  (2) the laboratory’s LDRD manager’s and DOE site office’s review of  proposals recommended for funding.
The National Defense Authorization Act for Fiscal Year 1998 also  required that DOE report to the Congress on the extent to which the  LDRD Program has met the objective of supporting R&D with long-term  application to national security. DOE’s most recent report to the  Congress stated that, in fiscal year 2003, the laboratories spent about  $356 million for LDRD, of which defense customers, through  reimbursement to DOE, provided $243 million and nondefense  customers, through reimbursement to DOE, provided $113 million.   DOE concluded that about $268 million of the LDRD funding supported  projects expected to benefit the defense and national security missions  and about $283 million of the LDRD funding supported projects  expected to benefit the nondefense mission areas.
The Conference Report accompanying the Energy and Water  Development Appropriations Act for Fiscal Year 2002 directs that (1)  when accepting funds from another federal agency for work, DOE notify  the agency in writing how much will be used for LDRD and (2) the  Secretary of Energy affirm each year that all LDRD projects support  R&D that benefits the sponsoring agencies’ programs and are consistent  with their appropriations acts. On April 30, 2002, the Secretary of  Energy issued a memorandum to the Under Secretary for Nuclear  Security and the Under Secretary for Energy, Science and Environment  that provided guidance directing that all DOE agreements to perform  R&D for other federal agencies provide notice about each participating  laboratory’s LDRD program, including (1) the applicable indirect-cost  rate, (2) an estimate of the associated cost, and (3) an explanation of the  LDRD program’s purpose. Furthermore, each agreement to perform  work states that DOE will conclude that, by approving the agreement  and providing funds, the agency acknowledges that LDRD benefits the agency and is consistent with its appropriation requirements. DOE  officials told us that the DOE site office responsible for the laboratory  typically sends this notification to the program manager or contracting  officer at the sponsoring agency.
The Homeland Security Act of 2002 requires that DHS funds are not to  be expended for LDRD unless such activities support DHS missions. On  February 28, 2003, the Secretary of Energy and the Secretary of  Homeland Security entered into a Memorandum of Agreement that  establishes a framework for DHS to access the capabilities of DOE’s  national laboratories and production facilities. On April 21, 2003, DOE’s  Deputy Secretary issued DOE Notice 481.1A, Reimbursable Work for  Department of Homeland Security, which provided information on the  process by which DHS would place orders for reimbursable work  activities at the DOE laboratories. The DOE notice includes provisions  that DOE notify DHS of LDRD charges in the cost proposals and that  DHS acknowledge the benefits of LDRD prior to final approval. DHS has  set up centers at each of the DOE laboratories to facilitate its access,  and DOE and DHS are still formalizing their working relationship.
Question 5:  To what extent does the leadership of federal agencies that  give funds to DOE for its laboratories to conduct R&D on their behalf fully  understand that up to 6 percent of the funds may be diverted under DOE’s  LDRD program to purposes that have nothing to do with the purpose for  which the Congress originally appropriated the funds?  Please detail the  written notifications that DOE has issued in response to the requirement in  the Conference Report for the Energy and Water Development  Appropriations Act for Fiscal Year 2002 that DOE notify federal agencies in  writing how much of their funds may be diverted to LDRD.
Senior officials at each of the six federal agencies we contacted stated that  their offices were aware that the DOE laboratories included a charge of up  to 6 percent for LDRD in the costs they are required to reimburse DOE.  Specifically, the senior officials in the Office of the Chief Financial Officer  (CFO) and/or the Office of General Counsel at each agency told us that the  LDRD program’s inclusion as an indirect cost does not limit their ability to  comply with their agency’s statutory or appropriations requirements.  Similarly, none of the research managers and/or contracting officers at  these agencies expressed concern about the LDRD program or its funding  method.
In December 2003, at the direction in the Conference Report accompanying  the Energy and Water Development Appropriations Act for Fiscal Year  2002, DOE sent the CFOs of 22 agencies information about the LDRD  program and its inclusion in the indirect costs for R&D performed at DOE  laboratories. Specifically, DOE provided each CFO office, with the  exception of DHS, with a copy of the Secretary of Energy’s April 2002  memorandum, an explanation of how the LDRD program is funded, and a  description of DOE’s notification process. However, DOE did not identify  a point of contact within each agency’s Office of the CFO or provide the  CFO’s room number, and senior officials in the CFO’s office at  Transportation and NRC told us that they did not receive DOE’s  information even though they were the appropriate point of contact. These  officials commented on the LDRD program after we provided them with  copies of the DOE materials.
Similarly, research managers and/or contracting officers responsible for  funding R&D at DOE’s contractor-operated laboratories for DOD, DHS,  DOT, NASA, NIH, and NRC had differing levels of knowledge about how the  LDRD program functioned and how it is funded. For example, the DOD,  DHS, and NASA research managers we interviewed had detailed  knowledge of the LDRD program. In contrast, research managers at DOT  were less familiar with the LDRD program and how it is funded. They told  us that this was mainly because the department funds relatively little R&D  at the DOE laboratories and the decisions to use the DOE laboratories are  made by the departmental agencies.
Question 6:  Please identify any instances when another federal agency  has refused to pay the LDRD charge assessed by the DOE laboratories on  work for other agencies, as well as any instances when the DOE  laboratories have voluntarily waived assessment of the LDRD charge on  funds received from another federal agency.
None of the officials at the six agencies we contacted cited any instances  when their agencies have refused to reimburse DOE for the LDRD charge  or expressed concern about the LDRD expense. In June 1998, DOE and NIH  signed a Memorandum of Understanding that clarified the terms and  conditions of NIH grants awarded to DOE laboratories. Among other  things, the Memorandum of Understanding states that (1) the DOE  laboratory contractor may be the awardee organization, (2) DOE will waive  its 3-percent administrative overhead rate, and (3) while NIH awards will  not include an allowance for LDRD, the DOE laboratories may recover  LDRD costs from the total funding included in grants awarded to DOE  laboratory contractors.
Cognizant officials at DOE and its laboratories told us that they are not  aware of any instances in which a federal customer has objected to or  stated that they would not reimburse DOE for the LDRD charge. The  officials also did not identify any instances in which the DOE laboratories  had not charged DOE for the LDRD portion of the work done on another  agency’s behalf—either voluntarily or involuntarily. Managers at each of the  nine DOE laboratories told us that their policy is to use the same indirect  cost rate for all R&D and other operations performed at the laboratory.
Question 7:  On April 30, 2002, the Secretary of Energy issued revised  LDRD guidance in response to direction provided in the Conference Report  for the Energy and Water Development Appropriations for Fiscal Year 2002.  Subsequently, DOE’s National Nuclear Security Administration (NNSA) and  Office of Science issued more detailed guidance to their respective  laboratories. What is the status of implementing the changes to the LDRD  approval and reporting process as outlined in this guidance?  Do these new  procedures constitute a firewall between LDRD using defense  appropriations and LDRD using nondefense appropriations, as some in  DOE have claimed?
DOE has implemented changes to the LDRD approval and reporting  process as outlined in the Secretary’s memorandum and the NNSA and  Office of Science guidance. These changes include having a DOE official  review and concur on all LDRD projects prior to approval by laboratory  directors and requiring DOE field officials associated with each laboratory  to certify annually that LDRD projects benefit the programs of the  sponsoring agencies. When approving these projects, DOE does not  distinguish whether the projects benefit defense or nondefense activities  because, in its view, LDRD projects are new concepts that may benefit  more than one area and therefore cannot be categorized in this manner.  DOE officials’ role in approving proposed LDRD projects is to ensure that  the projects support DOE’s national security mission. However, as stated  earlier, DOE’s annual report identifies the amounts of LDRD funding it  receives from defense and nondefense sponsors and the amounts of LDRD  funding that support projects expected to have primary benefit to defense  or nondefense mission areas.
Question 8:  Are the laboratories supplementing their funds for LDRD  with funds designated for the Strategic Initiative?
None of the nine DOE laboratories has been supplementing funding for  LDRD programs with other laboratory funds, such as Idaho National  Engineering and Environmental Laboratory’s (INEEL) Strategic Initiative,  according to officials of DOE’s Office of Inspector General; Office of  Management Budget and Evaluation; Office of Science; NNSA; Office of  Nuclear Energy, Science, and Technology; and the nine laboratories. As  stated earlier, DOE’s Order 413.2A prohibits DOE’s laboratories from using  LDRD funds on projects that will need additional non-LDRD funding to  reach their goals.
A May 2003 DOE Inspector General report cited possible misuse of INEEL’s  Strategic Initiative Fund for LDRD projects. In response, DOE’s acting  CFO conducted a review of the expenditures in question and determined  that no funds were misused and INEEL had not exceeded its LDRD funding  limit. The Inspector General accepted the CFO’s findings.
Question 9:  What does DOE do to ensure, in advance, that different  laboratories do not undertake duplicative LDRD projects?  What does DOE  do to ensure that LDRD projects are not duplicative of research in other  federal agencies or in universities?
DOE and its laboratories rely on the scientists, who submit proposals;  members of peer review committees; and laboratory managers to ensure  that LDRD projects do not duplicate research at other laboratories or  universities. According to officials at the four laboratories we visited, the  chances for duplication among LDRD projects are remote for several  reasons. First, the NNSA laboratories (Los Alamos, Lawrence Livermore,  and Sandia) coordinate their work to ensure there is no duplication.  Second, peer review groups consisting of laboratory, DOE, industry, and  university representatives involve themselves in project management and  try to eradicate duplication or other potential wastes of resources. Third,  science is a very competitive field, and scientists have strong incentives to  conduct original research and publish or present the results of that  research. Finally, because basic science explores fundamental principles,  scientists may be looking at the same issue, for example, techniques for  sensing ever smaller amounts of an element, but for different reasons or  with different approaches. In addition, our September 2001 report  concluded that the LDRD project-selection and review processes that are in  place at the nine DOE laboratories are adequate to reasonably ensure  compliance with DOE’s project-selection guidelines.
Question 10:  To what extent does DOE believe that the LDRD program is  still a necessary tool to recruit and retain scientists?
Officials at NNSA laboratories told us that LDRD remains a necessary tool  to recruit and retain top scientists because their program work provides  little opportunity for basic scientific research. Similarly, INEEL officials  told us that LDRD plays a major role in attracting and retaining the most  qualified scientists and engineers at their laboratory. In comparison,  officials at Office of Science laboratories believe that LDRD is important  for recruiting and retaining scientists; however, they noted its role is less  essential for their laboratories because they primarily perform basic  research.
NNSA laboratory managers told us that LDRD is an essential tool for  recruiting and retaining scientists for several reasons. As a recruiting tool,  the LDRD program is vital because the mission of the NNSA laboratories— to perform applied research to develop nuclear weapons technologies— does not readily attract qualified new hires. The LDRD program has served  as a stepping stone for the NNSA laboratories to attract and hire many  scientists by supporting from nearly one-half to two-thirds of the post  doctoral researchers at the laboratories. For example, one of the three  LDRD program components at Los Alamos National Laboratory makes  awards to research proposals specifically targeted at post-doctoral  candidates. As a result, 262 (61 percent) of the 427 post-doctoral scientists  charged substantial amounts of time to LDRD. According to NNSA  laboratory managers, post-doctoral scientists who work at their  laboratories are more likely to seek permanent employment at the  laboratory, and LDRD projects provide opportunities for laboratory  managers to evaluate the post-doctoral scientists for future employment. In  some cases, the LDRD program also provides meaningful work  opportunities at the NNSA laboratories while newly hired scientists wait to  receive their security clearances. In addition, the LDRD program provides  opportunities for collaboration with universities and other research  organizations, thereby providing a pipeline for new employees. As a  retention tool, LDRD provides scientists with funding to perform basic and  applied research on the cutting edge of their field, improve their technical  skills, and make scientific contributions in their fields.
INEEL managers told us that the LDRD program funded 55 percent of the  post-doctoral candidates supported by the laboratory in fiscal year 2002.
The managers attributed about 40 percent of the scientists and engineers  hired at INEEL in the past 4 years to investments in LDRD.
Managers at the five Office of Science laboratories told us that the LDRD  program is important for their efforts to recruit and retain scientists.  However, they noted that the LDRD program is less important to their  laboratories than it is to the NNSA laboratories, because their laboratories  mainly fund basic research. According to laboratories managers, it is basic  research and the opportunity for technological advances—whether  performed as LDRD or as program work—that attracts and maintains the  interest of the top scientists. As a result, the Office of Science laboratories  typically devote, at most, slightly over 4 percent of their R&D and other  operating funds to LDRD each year and have substantially smaller LDRD  programs than the NNSA laboratories.
Question 11:  How much has each of the nine DOE laboratories spent on  LDRD from fiscal year 1998 through fiscal year 2003, and which federal  agencies’ funds have been used and in what amounts?
For the 6 years from fiscal year 1998 through fiscal year 2003, DOE’s nine  laboratories spent a total of $1.8 billion, or an average of $296 million per  year, on LDRD. In fiscal year 2003, the laboratories received $7.7 billion  from DOE and other federal agencies, through reimbursement to DOE, and  spent $347 million, or 4.5 percent, on LDRD. Los Alamos National  Laboratory, Sandia National Laboratories, and Lawrence Livermore  National Laboratory accounted for $257 million, or 74 percent, of the LDRD  funds. DOE, DOD, and the intelligence agencies have been the primary  sources of LDRD funding, accounting for 96 percent of the federal support  in fiscal year 2003.
Table 2 shows that the nine laboratories received $7.7 billion from DOE and  other federal agencies for their R&D and other operating expenses in fiscal  year 2003. Specifically, DOE and DOD provided $7.3 billion, or 96 percent,  of the federal funding that the laboratories received. NIH, NRC, and NASA  provided $190 million, or 2.5 percent, of the funding. DOT and DHS  provided only $12.6 million and $9.4 million, respectively, for work at the  DOE laboratories.
Table 3 shows that, in fiscal year 2003, the nine DOE laboratories allocated  to LDRD $347 million, or 4.5 percent, of the $7.7 billion they received from  DOE and other federal sources, through reimbursement to DOE. Los  Alamos National Laboratory, Sandia National Laboratories, and Lawrence  Livermore National Laboratory accounted for $257 million, or 74 percent,  of the $347 million. DOE’s appropriations accounted for $293 million, or 84  percent, of the LDRD funding from federal sources, while $54 million, or 16  percent, originated from other federal agencies, through reimbursement to  DOE. DOD and the intelligence agencies accounted for $41 million, or 12  percent. NIH, NRC, and NASA together accounted for $7.5 million, or 2  percent.
Appendix 1 provides data on each laboratory’s total R&D spending and  LDRD spending for DOE and other federal agencies, through  reimbursement to DOE, for fiscal years 1998 through 2001, and appendix II  provides more detailed data on each laboratory’s total R&D spending and  LDRD spending by subagency for fiscal years 2002 and 2003. The funding  amounts for prior fiscal years are presented in fiscal year 2003 dollars.
section_title: Agency Comments
paragraphs: We provided DOE with a draft of this report for its review and comment. In  written comments, DOE agreed with the report. (See app. III.)  DOE also  provided comments to improve the report’s technical accuracy, which we  incorporated as appropriate.
section_title: Scope and Methodology
paragraphs: To assess DOE’s statutory authority for charging other federal agencies for  LDRD, we researched and analyzed statutes and legislative histories and  referred to principles of appropriations law. To identify laboratory-initiated  research programs similar to LDRD at other federal agencies’ laboratories,  we interviewed cognizant officials within DOD, DHS, DOT, NASA, NIH, and  NRC. Through their payments to DOE, these federal agencies were among  the primary sources of LDRD funding generated from R&D performed for  non-DOE agencies from fiscal years 1998 through 2003.
To examine DOE’s policies and procedures for ensuring that its  laboratories spend LDRD funds in ways that benefit the requesting  agencies’ programs and are consistent with their appropriation acts, we  evaluated DOE’s implementing order and documents for the LDRD  program and interviewed cognizant officials at DOE and obtained  information from its nine contractor-operated laboratories regarding the  actions they have taken to improve the program’s accountability. In  addition, we contacted cognizant officials in the Office of the CFO and/or  the Office of General Counsel in DOD, DOT, NASA, NIH, and NRC to  determine whether the funding structure of the LDRD program presented  issues for their compliance with statutory or appropriations requirements.  These five agencies, through their reimbursements to DOE, were among  the primary sources of LDRD funding at the nine DOE laboratories from  fiscal years 1998 through 2003. We also contacted cognizant officials in the  Office of the CFO and the Science and Technology Directorate in DHS  because of its special relationship with DOE’s laboratories.
To assess whether the LDRD program is a necessary tool for recruiting and  retaining laboratory scientists, we obtained information from cognizant  officials at each of DOE’s nine laboratories about the role that LDRD plays  in recruiting and retaining scientists and obtained documentation. We also  reviewed laboratories’ information on the participation of post-doctoral  scientists and others in LDRD research.
To provide data on the sources and amounts of LDRD funding, we obtained  data from each laboratory on its operating and LDRD funds for fiscal year  1998 through fiscal year 2003. Specifically, the laboratories provided  financial data for each of DOE’s major program budgets and for each  federal agency that, in a given year, funded more than $1 million in R&D  through DOE’s Work for Others program. Because the laboratories’ prior  fiscal year data were in nominal dollars, we converted their current dollars  to constant fiscal year 2003 dollars using deflators for nondefense from the  Office of Management and Budget’s Budget of the United States  Government, Fiscal Year 2005, Historical Tables. We also obtained from  key database officials responses to a series of questions focused on data  reliability covering issues such as data entry access, quality control  procedures, and the accuracy and completeness of the data. Follow-up  questions were added whenever necessary. In addition, we reviewed all  data provided by the laboratories, investigated all instances where we had  questions regarding issues such as categories or amounts, and made  corrections as needed. Based on this work, we determined that the  financial data provided were sufficiently reliable for the purposes of our  report. We did not assess the reliability of the fiscal year 1992 LDRD  funding total, which was used for background purposes only.
As arranged with your offices, 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, the Director of the Office of Management and Budget, and other  interested parties. We will also make copies available to others on request.  In addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3841. Key contributors to this report were Richard Cheston,  Carol Kolarik, Daren Sweeney, Doreen Feldman, and Hannah Laufe.
section_title: Comments from the Department of Energy
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