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DOE Contracting Woes Continue

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The Department of Energy (DOE) and its National Nuclear Security Administration (NNSA) continues to have contracting problems. Last week, the Project On Government Oversight wrote about a DOE/NNSA contract that was awarded without proper consideration of cost savings, and recommended that the procurement should be reopened and possibly rebid. And this week, POGO learned about another contracting problem recently exposed by the DOE Inspector General, which found subcontract audit weaknesses with nine Management and Operating (M&O) contractors—contractors hired to manage and operate DOE facilities and the national laboratories. Between 2010 and 2012, “subcontracts valued in excess of $906 million had not been audited or were reviewed in a manner that did not meet audit standards,” according to the IG.

One reason for this problem is that the vast majority of DOE’s mission is outsourced to “28 [M&O] contractors that perform essential mission work under cost reimbursable contracts.” In turn, those DOE M&O contractors subcontract work out to other vendors who are actually conducting the research, development, production, testing, and facility security. That’s a lot of unmonitored cash going out the door to subcontractors with little government administration or oversight.

That problem is compounded by the fact that “M&O contractors may use internal audit staff, engage contract auditors, or use the services of the Defense Contract Audit Agency (DCAA) to audit the subcontractors,” according to the report. Sounds like another example of the farmer staying in the farm house while the fox is guarding the hen house.

The DOE IG found that M&O contractors at NNSA facilities at Yucca Mountain, Y-12, Kansas City Plant, Argonne, Los Alamos, Idaho, Pantex, Berkeley, and Princeton had audit flaws, including:

  • $398 million in subcontract costs had not been audited as required.
  • $165 million in subcontract costs at Los Alamos had not been subjected to audits that met professional standards.
  • Nearly $343 million in subcontract costs at Los Alamos should have been audited but were not due to a policy approved by the Los Alamos Field Office.

On a positive note, subcontract audits performed properly during the period covered by the DOE IG’s review identified over $2.5 million in “questioned costs.”

DOE isn’t the only agency to experience major problems in its audit programs. The Defense Department has a huge backlog of unaudited contracts. And to make matters worse, auditing offices’ funds are being cut, even though their work provides a great return on investment and helps deter wasteful government spending on goods and services.

The government should be looking for ways to improve the audit process so that taxpayer dollars aren’t paying contractors to keep the air conditioning running while all the windows and doors are open. NNSA should be promoting accountability within the nuclear weapons complex, especially in the wake of recent troubles with security at Y-12 and worker safety at Sandia National Laboratory—but all too often the agency continues to throw money at the industry instead.

Image from the Department of Energy.

By: Scott H. Amey, J.D.
General Counsel, POGO

scott amey Scott Amey is General Counsel for the Project On Government Oversight. Some of Scott's investigations center on contract oversight, human trafficking, the revolving door, and ethics issues.

Topics: Contract Oversight

Related Content: Auditing (DCAA/FCAA), Contractor Accountability, Inspector General Oversight, Los Alamos National Lab, Pantex, Sandia National Lab, Sequester, Y-12 /Oak Ridge National Lab

Authors: Scott H. Amey, J.D.

Submitted by bongo at: February 24, 2014
This is about the recent WIPP rad release. The release is being billed as minor but there has been significant contamination 37000 dpm on the station A monitor which is an outside air monitor. Offsite contamination (Am-241 and Pu-239) have been discovered on the North access road offsite. This follows the uncontrolled truck fire that they had a few days ago where a truck caught fire inside the mine. The fire was so large that they had to evacuate the mine and let it burn itself out. There is significant contamination inside the mine as 400,000 dpm alpha was discovered on the station B monitor inside the mine. There has been bypass flow past the mine HEPA filters. DOE and WIPP contractors are attempting to minimize the problems in all of their statements and local Cong Rep Pierce is helping the misrepresentation by issuing statements like he did 2 weeks ago saying that the fire was "minor". It was not "minor" and the person driving the truck that caught fire was only on the job 4 months (new hire) with little experience. The local DOE office head (Franko Garcia) used to work at the WIPP site as a contractor, has no degree and recently was seen weeping in public in an internal meeting that he held with the WIPP contractor saying that the contractor and DOE need to be a big family and watch out for one another. All of the DOE personnel at the local Field office are compromised relative to their independence and ability to do their oversight jobs. Although Carlsbad where WIPP is located is often called "Little Texas" because of their very strong republican bent, even the local ranchers are getting concerned about their cattle eating the radiation escaping outside of the plant on the local grazing lands. Operations at Wipp have long been very bad in terms of work control, good procedures, , good conduct of operations, and maintenance which is pretty much ignored at the plant. A great many of the maintenance procdures are either not being done or have been cancelled by management. Many of the people that work there tend to "Cowboy" it in terms of following procedures and doing good sound safe work. "Cowboy" mentality pervades the site at the worker and management levels. I hope somebody can look into this as Wipp is a biger accident waiting to happen than has already occurred.
Submitted by babs at: May 25, 2013
I would start with Brookhaven and go back to the 1980's when Rudolf Ortmayer was a supplier to that laboratory. That is just a start. You could also check with NASA Lewis about Ortmayer and Finke and their contract. Good luck.
Submitted by Dfens at: May 22, 2013
It seems odd to me that POGO does not ever tie incidents like these at the DOE to the issue of outsourcing government. When these facilities were run, maintained, and secured by government employees, they were state-of-the-art. Now they are a joke, and we are spending more money on these facilities than ever before. If you're really serious about stopping the outsourcing of government, why not include stories like this in the case against outsourcing?
Submitted by Scott at: May 21, 2013
Information comes to us via government reports and sources inside and outside the government. In this case, the M&O contractors are failing to follow the rules so we hope that our exposure of the issue will result in DOE holding contractors accountable. Most importantly, DOE must ensure that audits are conducted so that taxpayers aren’t picking up the tab for unreasonable and unallowable costs, i.e. wasteful spending.
Submitted by tommyjohn at: May 20, 2013
you seem to know what the problems are but can u fix them,if not hire me
Submitted by tommyjohn at: May 20, 2013
when u find out all this crap what do u do about it?

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