DOE Contracting Woes Continue

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.