Environmental Management: Impacts of Increases in DOE's Workforce
Published: 1995-07-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a congressional request, GAO reviewed the Department of Energy's (DOE) process for hiring new employees and improving the productivity of environmental cleanup, focusing on: (1) the process DOE used to justify the new hires; (2) whether DOE justifications support the claimed cost savings and productivity improvements; and (3) how the cost savings and productivity improvements will be achieved.
section_title: What GAO Found
paragraphs: GAO found that: (1) DOE used a competitive bidding process to justify the allocation of 1,200 new positions in its field and headquarters offices; (2) the offices requested 1,575 new staff and estimated that the new staff could save over $1.2 billion dollars in fiscal years (FY) 1995 and 1996, resulting from increased federal oversight of contractors and greater federal involvement in contract management; (3) DOE lowered the 2-year savings estimate to about $890 million, not including the $84 million annually in compensation for the 1,200 new staff; (4) DOE did not adequately justify about $900 million in savings from productivity improvements; (5) although DOE is unsure of the justifications, it is reducing its Environmental Management Office's budget by about $300 million in FY 1995, before seeing if productivity improvements occur; and (6) DOE is developing procedures to measure productivity improvements and resulting cost savings the new staff are expected to achieve.

section_title: Letter
paragraphs: In order to better manage the billions of dollars it is spending to clean up the nation’s nuclear weapons complex, the Department of Energy (DOE) has initiated several productivity improvements. One such improvement included the hiring of up to 1,600 new employees, who are expected to save millions of dollars by replacing contractor staff and improving the productivity of the environmental cleanup. This effort resulted from the designation of DOE’s Office of Environmental Management as a pilot project under the Government Performance and Results Act of 1993 (GPRA). The act requires federal agencies, beginning in 1997, to develop strategic plans and performance measures to improve their operations. The act also provides for the initiation of a series of pilot projects in fiscal years 1994, 1995, and 1996. The Office of Management and Budget (OMB), which coordinates GPRA pilot projects, allowed DOE, as part of its pilot project, to hire up to 1,200 new employees during fiscal years 1994 and 1995, and an additional 400 in fiscal year 1996.
This report responds to your request that we review DOE’s process for hiring the new employees. We agreed to (1) identify the process DOE used to justify the new hires, (2) determine whether DOE’s justifications support the claimed cost savings and productivity improvements, and (3) identify how DOE plans to assure itself that the expected cost savings and productivity improvements will be achieved.
subsections: section_title: Background
paragraphs: Since 1989, DOE has spent about $23 billion cleaning up the environmental contamination resulting from over 50 years of nuclear weapons production. During this time, the agency has completed the restoration of less than 20 percent of the total number of contaminated sites. One reason DOE cites for the slow progress is that it has an insufficient workforce to manage and oversee what it calls “the largest environmental cleanup program in the world.” In 1993, the Environmental Management Program had a contractor-to-federal-worker ratio of 21 to 1—one of the highest ratios in the federal government—and the highest funding per FTE in the federal government, $3.3 million per FTE.
In September 1993, DOE requested that OMB designate the Environmental Management Program as a pilot project under GPRA and authorize additional employees as part of that project. The agency asserted that it did not have sufficient staff with the skills needed to oversee contractors and review their cost estimates. To support its position, DOE cited our reports and reports by the Congressional Budget Office, which supported the need for additional federal staff to manage the cleanup program. The reports noted the impact of FTE ceilings that restricted the agency from hiring enough federal employees to manage the cleanup program, the use of support service contractors at substantially greater cost, limitations in staff skills for adequate contract management, and the lack of federal expertise. In addition, a study conducted for DOE in 1993 concluded that federal staff have minimal supervision of agency cleanup projects, and as a result, the cleanup is costing significantly more than comparable private sector and government projects. DOE said that it wanted to increase its oversight of contractors and involve federal employees more in contract management.
DOE proposed to hire 1,600 new employees by (1) converting 1,050 support service contractor positions to federal positions and (2) adding 550 federal employees to help manage the environmental program. The agency estimated that the new staff would save $188 million through fiscal year 1996 by better managing contractors’ operations and would produce more tangible environmental results. OMB authorized DOE to hire 1,200 of the 1,600 additional staff requested during fiscal years 1994 and 1995 and the additional 400 in fiscal year 1996. As of May 31, 1995, the agency had hired about 700 new employees. Those hired to date have included project engineers, cost analysts, estimators, and environmental safety and health specialists. However, DOE is considering not hiring all of the approved FTEs because of budget constraints, according to the leader of the Office of Environmental Management’s evaluation team.
section_title: DOE Justified the New Staff Through Competitive Bids
paragraphs: DOE required field and headquarters offices to include justifications for the initial 1,200 FTEs as part of a competitive bidding process. The offices were required to submit bids containing detailed information on their additional personnel needs and on the savings they anticipate will be achieved from the new staff. DOE evaluated the bids and allocated all 1,200 positions that OMB had approved. The additional 400 FTEs were approved by OMB in May 1995 but had not been allocated at the conclusion of our review.
Both field and headquarters offices competed for the 1,200 positions, but DOE used a different process to allocate the new positions to the offices. A team of DOE analysts reviewed the bids submitted by the field offices and then submitted their recommendations to management for review. The team reviewed the bids for compliance with requirements and for the adequacy of the justifications supporting the savings. Senior Environmental Management and other headquarters officials reviewed the bids submitted by the headquarters offices and then made the determinations. The DOE senior management officials included the Assistant Secretary for Environmental Management, the Assistant Secretary for Human Resources and Administration, and the Associate Deputy Secretary for Field Management.
By early March 1994, 11 field and 15 headquarters offices had submitted bids for new staff. Collectively, the offices requested 1,575 new FTEs and proposed a total of $1.235 billion in savings. In mid-March 1994, the field offices presented their bids orally to DOE management, the review team, and an OMB representative. In their presentations, field office managers explained their bids and responded to management’s questions. Following the presentations, management asked the field offices to revise and resubmit their bids for final consideration. The revised bids were to respond to numerous questions raised during the presentations.
In May 1994, DOE informed the field offices of their FTE allocations and the savings targets they were to achieve. The field offices were allocated 831 FTEs, with a total savings target of almost $876 million for fiscal years 1995 and 1996. The headquarters offices were provided with 369 FTEs and a savings target totaling $14.5 million. These savings do not include the FTEs’ salary and benefit costs, about $70,000 per employee—$84 million annually if all 1,200 new employees are hired. Although DOE’s agreement with OMB stipulated that contractor positions would be reduced in conjunction with the new hires, the offices that were allocated new positions have not received the funds that were previously paid to contractors. Instead, DOE required those offices to absorb the additional costs in existing budgets. Appendix I summarizes the initial and revised bids, the allocation of FTEs, and the decisions on the savings targets for the field and headquarters offices.
section_title: Most of the Proposed Savings Were Not Adequately Justified, but Budgets Were Reduced Nonetheless
paragraphs: Most of the cost savings and productivity improvements proposed in the field offices’ bids were not adequately justified, according to DOE’s evaluation team. The evaluation team concluded that the field offices had not adequately justified 87 percent of the savings that they said could be achieved. Despite finding these weaknesses in the justifications, in May 1994 DOE approved most of the savings proposed in the field offices’ bids. In two separate reviews of the field offices’ bids, the evaluation team expressed concerns about the quality of the supporting justifications and the likelihood of achieving the savings through improved productivity. The team concluded that most of the justifications of the savings were inadequate. As a result of the first review in March 1994, the field offices were required to revise their bids. Consequently, the overall 2-year savings target proposed in the initial bids was reduced from $1.221 billion to $1.035 billion. In its review of the field offices’ revised bids, the evaluation team concluded that the justifications were not adequate for almost $900 million—87 percent—of the $1.035 billion in savings targeted for the 2 years. Despite this finding, most of the savings targets were approved.
For example, DOE’s Savannah River Site first proposed that it could save $121 million in fiscal years 1995 and 1996. However, $56 million of that amount—46 percent—was due to a reduction in contractor positions that had occurred in a prior year and was unrelated to the savings that would result from the new positions. DOE questioned the $56 million during its review of Savannah River’s first bid but did not subtract that amount from the site’s expected savings. In a similar example, about 48 percent of the Oak Ridge Site’s overall proposed savings was to come from the elimination of about 500 contractor positions. The evaluation team commented that Oak Ridge had not adequately explained the proposed cuts in contractors, and in its second review, the team classified these savings as inadequately justified. However, DOE later approved the productivity savings that were to accrue from the cuts in Oak Ridge’s contractor personnel.
In another example, the evaluation team considered almost all of the $549 million in savings contained in the Hanford Site’s first proposal to be unjustified. The team commented that most of Hanford’s proposed savings were unrealistic or apparently based on productivity initiatives unrelated to the new FTEs. Hanford reduced its proposed savings in a revised bid, but the evaluation team’s subsequent review concluded that only 4 percent of Hanford’s revised proposed savings was fully justified. Nonetheless, according to members of the evaluation team, DOE approved almost all of Hanford’s proposed savings because the bids were considered an adequate basis for allocating the FTEs and imposing budget cuts at the field offices.
On the basis of the evaluation team’s findings, DOE further reduced the field offices’ total savings targets from $1.035 billion to about $876 million, which still included a substantial amount of savings that was not adequately justified. DOE then set savings targets for both field and headquarters offices of $442 million for fiscal year 1995 and $448 million for fiscal year 1996. DOE believed that the bids were adequate for allocating the FTEs and planned to hold office managers accountable for meeting those goals.
Despite the fact that the savings targets were not fully justified, budget reductions are occurring. As shown in figure 1, DOE expects to cut the Office of Environmental Management’s budget by $913 million over fiscal years 1995 and 1996, even though it considered only $136 million of that amount fully justified through the bid process.
section_title: DOE Is Developing a Reporting System to Track Cost Savings and Productivity Improvements
paragraphs: DOE is assured of lower costs because the agency is incurring major reductions in its cleanup budget—about $913 million in fiscal years 1995 and 1996. Even though these cost savings will occur, DOE has not developed a reporting system that would track and validate whether productivity improvements were a result of the new employees. DOE has developed some of the monitoring and evaluating tools required by GPRA, such as annual plans and reports that will yield broad information about the entire pilot project. By the fourth quarter of fiscal year 1995, procedures to collect, report, and validate the productivity improvements and resulting dollar savings related to the new staff are expected to be in place. DOE then plans to include these productivity improvements in its overall GPRA Environmental Management pilot project reports.
GPRA requires agencies with pilot projects to prepare a strategic plan for the program, annual plans for each year of a pilot project, and an annual report that assesses the project’s performance. As of March 1995, DOE had completed the strategic plan and performance plans for fiscal years 1994 and 1995 and was preparing a performance plan for fiscal year 1996. Additionally, the agency was preparing its first performance report, which will cover fiscal year 1994. The agency is reviewing the performance plan for fiscal year 1995 through a series of quarterly management reviews and is tracking field offices’ savings against their savings goals.
While the GPRA reports will provide an overall picture of the Environmental Management Program’s performance, additional information is required to track the cost savings and productivity improvements that have resulted from the new staff. Therefore, offices are developing monitoring and evaluation systems intended to determine the success of projects that use the new staff.
Some projects are easily tracked, while others are more difficult. For example, some of Oak Ridge’s 77 new employees will manage three specific projects—the removal of cooling towers on the site, demolition of a power house, and cleanup of selected burial grounds. According to DOE, it will save about $16 million from these three projects during fiscal years 1995 and 1996. Since these three projects are specifically identified, measuring the savings will be straightforward. Oak Ridge is also developing baseline cost data for other environmental restoration projects and waste management activities that will use new hires—a more difficult task, according to Oak Ridge staff.
The Savannah River Site is putting systems into place to track the progress of the productivity improvements and savings realized by its 128 new staff in the high-level waste program, environmental restoration program, and waste minimization program, among others. These systems were not in place at the conclusion of our review. Other sites are also developing program performance baselines to measure performance against goals.
section_title: Agency Comments
paragraphs: DOE provided written comments on a draft of this report. (App. III contains the full text of DOE’s comments.) The agency said that our draft report fairly represented the process the Office of Environmental Management used in allocating the new positions for the Environmental Management Program. However, the agency pointed out that we emphasized the inadequacy of the justifications supporting the savings projections but did not give credit to the process that made field office managers accountable for achieving the projected savings. We believe that our report adequately addresses managers’ accountability for the projected savings. Specifically, we note in our report that DOE plans to hold office managers accountable for meeting the productivity achievements tied to these savings.
DOE also said that tracking the results from the additional positions will be especially difficult because the agency is now streamlining its organization and will be unable to fill all 1,600 positions. Additionally, the agency said that further budget reductions are expected to cause delays in accomplishing needed work and may result in increased life-cycle costs.
To perform our work, we met with and obtained data from Environmental Management officials at DOE headquarters and at four of its field offices—the Savannah River Operations Office, Oak Ridge Operations Office, Albuquerque Operations Office, and the Ohio Field Office. We performed our work between July 1994 and June 1995 in accordance with generally accepted government auditing standards. (App. II discusses our objectives, scope, and methodology in more detail.)
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 other interested parties. We will also make copies available to others upon request.
Please contact me at (202) 512-3841 if you have any questions. Major contributors to this report are listed in appendix IV.
section_title: Environmental Management’s Bid FTEs and Savings, by Office
section_title: Objectives, Scope, and Methodology
paragraphs: In June 1994, the then Chairman, Senate Committee on Governmental Affairs, asked to us evaluate the portion of a pilot project of the Department of Energy’s (DOE) Office of Environmental Management that involves the hiring of additional federal employees (full-time equivalents, or FTEs). Our review focused on the following three major questions:
What process did DOE use to justify the new hires?
Did DOE’s justifications support the claimed cost savings and productivity improvements?
How is DOE assuring itself that the established cost savings and productivity improvements will be achieved?
We selected four of the largest DOE facilities with major environmental cleanup under way: the Savannah River Site, South Carolina; Oak Ridge Operations Office, Tennessee; Ohio Field Office, Ohio; and Albuquerque Operations Office, New Mexico. At each facility, we reviewed the competitive bid proposals and discussed the proposed savings with program officials. Additionally, we reviewed the four facilities’ implementation plans and performance reports that were submitted to DOE. For DOE’s other seven offices, we reviewed their bid proposals, implementation plans, and performance reports.
We interviewed key officials at DOE headquarters who were responsible for developing, managing, and evaluating the pilot project, including the new FTEs. We obtained evaluations of the facilities’ bids and discussed them with agency officials. We also interviewed the Office of Management and Budget officials responsible for approving and overseeing the agency’s pilot project.
section_title: Comments From the Department of Energy
section_title: Major Contributors to This Report
subsections: section_title: Resources, Community, and Economic Development Division, Washington, D.C.
section_title: Office of the General Counsel
section_title: Atlanta Regional Office
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subsections: section_title: Address Correction Requested