Summary

The Department of Energy (DOE) contracts with private companies and educational institutions to run 18 of its 22 laboratories. These are cost reimbursement contracts under which DOE pays all of its contractors' allowable costs. In 1994, DOE switched to performance-based contracts as part of its contract reform program. This report provides information on the status of performance-based contracting in DOE's national laboratory contracts and efforts to determine the impact of performance-based contracting. GAO found that DOE's use of performance-based contracting for its laboratories is in a state of transition. GAO found a wide variance in the number of performance measures and the types of fees negotiated. Also, the contractors reported that the main benefits from performance-based contracting were that it has helped DOE clarify what it expects from the contractors and that it has improved communication.

GAO noted that: (1) DOE's use of performance-based contracting for its laboratories is in a state of transition; (2) while all laboratory contracts GAO examined had some performance-based features, GAO found wide variance in the number of performance measures and the types of fees negotiated; (3) about half of the 18 laboratory contracts have performance fees to encourage superior performance--a major goal of performance-based contracting; (4) most of the remaining laboratory contracts are still based on DOE's traditional fixed-fee arrangement in which the fees are paid regardless of performance; (5) DOE has not evaluated the impact of performance-based contracting on its laboratory contractors and, as a result, does not know if this new form of contracting is achieving the intended results of improved performance and lower costs; (6) specifically, DOE has not determined whether giving higher fees to encourage superior performance by its laboratory contractors is advantageous to the government, although GAO recommended in 1994 that DOE develop criteria for measuring the costs and benefits to the government of using higher fees; (7) fees for the laboratories totalled over $100 million for fiscal year 1998; (8) while the contractors were unable to cite measurable benefits achieved by switching to performance-based contracting, they support its goals; and (9) the main benefits from performance-based contracting cited by laboratory contractors was that it has helped DOE clarify what it expects from the contractors and that it has improved communication.