NNSA, a separately organized agency within DOE, is responsible for the management and security of the nation’s nuclear weapons, nonproliferation, and naval reactor programs. To conduct these activities, NNSA’s fiscal year 2005 request is about $9 billion, with about $6.6 billion targeted for nuclear weapons programs managed by NNSA’s Office of Defense Programs. For many years, various external studies have found problems with the organization of NNSA’s principal activity—the Office of Defense Programs. For example, one such study found a dysfunctional management structure with convoluted, confusing, and often contradictory reporting channels, while another study cited ambiguities and overlaps in the roles of headquarters and the Albuquerque Operations Office as a primary source of inefficiencies and conflict within the program. In December 2000, we reported organizational problems at three levels—within the Office of Defense Program’s headquarters functions, between headquarters and the field offices, and between contractor-operated sites and their federal overseers. These problems resulted in overlapping roles and responsibilities for the federal workforce overseeing the nuclear weapons program and confusion and duplication of effort for the contractors implementing the program at sites within the nuclear weapons complex. In December 2002, NNSA formally announced the beginning of an overall reorganization and workforce reduction intended to enhance its operational efficiency and programmatic effectiveness. Prior to its December 2002 reorganization, NNSA’s organization consisted of multiple layers. In particular, under the Office of Defense Programs—NNSA’s largest program—seven area offices reported to three operations offices that in turn reported to the Deputy Administrator for Defense Programs. The Deputy Administrator then reported to the Administrator. Figure 1 shows NNSA’s prior organization. To remove a layer of management, NNSA closed the Albuquerque, Oakland, and Nevada operations offices. The new organization consists of eight site offices located at each of NNSA’s major contractors, one service center located in Albuquerque, New Mexico, and headquarters program offices that all report directly to the Administrator. NNSA headquarters sets requirements, defines policies, and provides high-level guidance. Site office managers are the designated contracting officers responsible for delivering federal direction to the contractor at each site and for ensuring the site’s safe and secure operation. The site office managers also manage each NNSA site office. Under the realignment, a single service center has been established in Albuquerque, New Mexico, to provide business and technical support services to the eight site offices and headquarters programs. Prior to the reorganization, about 200 staff provided these services in the Oakland and Nevada operations offices and in offices in Germantown, Maryland, and Washington, D.C. These services are now being consolidated in the new service center, resulting in the reassignment of the 200 staff to the Albuquerque service center. Figure 2 shows NNSA’s new organization structure. NNSA plans to staff the service center with 475 employees, down from 678 in December 2002. As part of its reorganization, NNSA decided to reduce the size of its federal staff. Originally, NNSA set an overall staff reduction target of 20 percent. However, in August 2003, NNSA reduced the target to 17 percent. The current target includes a 26 percent reduction at headquarters and a 30 percent reduction at the service center. Three site offices—Kansas City, Nevada, and Savannah River—are experiencing reductions, although overall staff size at all eight site offices will increase by 16 employees. NNSA is relying on a combination of buyouts, directed reassignments, and attrition to achieve these targets by its September 30, 2004, deadline. Standards that we have developed require federal agencies to establish and maintain an effective system of internal controls over their operations. Such a system is a first line of defense in safeguarding assets and preventing and detecting errors. Under our standards, managers should, among other things, ensure that their staffs have the required skills to meet organizational objectives, that the organizational structure clearly defines key areas of authority and responsibility, that progress be effectively measured, and that operations be effectively monitored. In addition to these internal control standards, in January 2001, and again in January 2003, we identified strategic human capital management as a governmentwide, high-risk area after finding that the lack of attention to strategic human capital planning had created a risk to the federal government’s ability to perform its missions economically, efficiently, and effectively. In that context, we have stated that strategic workforce planning is needed to address two critical needs: (1) aligning an organization’s human capital program with its current and emerging mission and programmatic goals and (2) developing long-term strategies for acquiring, developing, and retaining staff to achieve programmatic goals. There are five key principles that strategic workforce planning should address irrespective of the context in which the planning is done. It should involve top management, employees, and other stakeholders in developing, communicating, and implementing the strategic workforce plan; determine the critical skills and competencies that will be needed to achieve current and future programmatic results; develop strategies that are tailored to address gaps in number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies; build the capability needed to address administrative, educational, and other requirements important to support workforce planning strategies; and monitor and evaluate the agency’s progress toward its human capital goals and the contribution that human capital results have made toward achieving programmatic results. In light of shortcomings in strategic human capital management reported by us, the President’s Management Agenda identified strategic management of human capital as a governmentwide initiative. Established in August 2001, the President’s Management Agenda identified a strategy for improving the management and performance of the federal government. The agenda included five governmentwide initiatives: the strategic management of human capital, competitive sourcing, improved financial performance, expanded electronic government, and budget and performance integration. Regarding strategic management of human capital, two principals are considered central to its success. One, people are assets whose value can be enhanced through investment. As with any investment, the goal is to maximize value while managing risk. Two, an organization’s human capital approach should be designed, implemented, and assessed by the standards of how well they help the organization achieve results and pursue its mission. Effective strategic workforce planning is considered an essential element of strategic human capital management. Also called human capital planning, it focuses on developing long-term strategies for acquiring, developing, and retaining an organization’s total workforce (including full- and part-time federal staff and contractors) to meet the needs of the future. NNSA’s reorganization has resulted in some progress in delineating lines of authority between NNSA headquarters and its field offices, thus addressing some past problems; however, at the working level, NNSA has not formalized a program management structure that identifies its program managers or what their responsibilities and qualifications should be, particularly regarding their role in directing and overseeing contractor activity under its new organization. Furthermore, the reorganization has created gaps in the responsibility for important safety oversight that need to be addressed. Without first clarifying such key management issues, NNSA cannot, among other things, ensure the improved discipline and accountability it seeks in managing its programs. By delineating lines of authority between NNSA headquarters and its field offices, NNSA’s reorganization has addressed past problems, such as communications problems resulting from overlapping roles and responsibilities of the federal workforce overseeing the nuclear weapons program. For example, according to NNSA site office managers, the streamlined structure has improved vertical communication because communication channels between headquarters and the field are more direct and do not involve an extra layer of management in the operations offices. Site office managers also state that by now reporting directly to the NNSA Administrator’s office, the time required to make decisions has been reduced. In addition, the realignment provides NNSA site office managers with additional authority to manage contractors and assigns them responsibility for the day-to-day security and safety of contractor operations. As a result, it has strengthened the hand of local NNSA site office managers who now have the authority to shut down operations at the sites, if necessary, due to security or safety concerns. Despite this progress NNSA’s reorganization still suffers from two shortcomings. First, the reorganization plan does not yet fully delineate the authority and responsibility of program managers, who are responsible for ensuring that program goals and requirements are met, or reconcile these responsibilities with the mutual responsibilities of contracting officers and their designated representatives who manage the contract. Specifically, under the new reorganization, the contracting officer is responsible for appointing contracting officer representatives to carry out specific functions, such as monitoring, inspection, and other functions of a technical nature not involving a change in the scope, cost, or terms and conditions of the contract. These contracting officer representatives then assist in directing and overseeing the contractor for the programs that they represent. NNSA is attempting to improve program management accountability and discipline by requiring program managers to direct all work to the contractors through a contracting officer or a designated contracting officer representative instead of through the now defunct operations offices or by bypassing the formal contract administrators and informally directing the contractor, as was done in the past. NNSA’s policy on program management, however, is still being developed. NNSA’s Assistant Deputy Administrator for the Office of Program Integration told us that the exact number of program managers within the Office of Defense Programs has yet to be determined because disagreement exists within the program about who currently is or is not a program manager. Furthermore, NNSA has not yet articulated its qualification standards for program managers. These standards are important to program success. As we noted in our report on NNSA’s Stockpile Life Extension Program, problems with the W-87 refurbishment were caused, in part, because the assigned program manager was not qualified to perform all required tasks and was not enrolled in DOE’s project management qualification program.