This is the accessible text file for GAO report number GAO-04-370 
entitled 'Department of Energy: Mission Support Challenges Remain at 
Los Alamos and Lawrence Livermore National Laboratories' which was 
released on March 31, 2004.

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

Report to Congressional Requesters:

February 2004:

DEPARTMENT OF ENERGY:

Mission Support Challenges Remain at Los Alamos and Lawrence Livermore 
National Laboratories:

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-370]: 

GAO Highlights:

Highlights of GAO-04-370, a report to Congressional Requesters 

Why GAO Did This Study:

The University of California (University) operates the Los Alamos and 
Lawrence Livermore National Laboratories for the Department of Energy’s 
National Nuclear Security Administration (NNSA). The two research 
laboratories, with a combined fiscal year 2003 budget of $2.3 billion, 
have had problems in such mission support areas as managing projects, 
conducting business operations, and ensuring safe nuclear operations. 
GAO was asked to describe the actions taken to address mission support 
problems identified in 2001, as well as problems that have since 
emerged, and to assess the main challenges to sustaining mission 
support improvements.

What GAO Found:

For the three mission support areas with problems as of 2001—managing 
construction and other major projects, maintaining and managing 
existing facilities, and ensuring safe operations of nuclear 
facilities—actions are basically complete in the first two areas but 
not in the third. For all three areas, NNSA incorporated new 
requirements into the contracts, developed new performance measures, 
and increased its oversight. The University of California has 
strengthened oversight of the laboratories by, among other things, 
establishing a new position of vice president for laboratory 
management. The laboratories will not fully comply with new 
requirements for providing a safety analysis of each nuclear facility 
until mid-2005.

The actions taken by NNSA and the University to correct problems in 
project, facilities, and nuclear safety management were not systemic 
enough to keep problems from developing in other mission support areas 
after 2001. At the Los Alamos laboratory, emerging problems centered on 
business operations, including inadequate controls over procurement, 
purchase cards, and property management. The laboratory now has 
extensive corrective actions underway and expects to have most of the 
new measures in place by the end of 2005. At the Lawrence Livermore 
laboratory, the problems centered on emergency planning and 
preparedness, in that the laboratory had made little progress in 
developing an emergency management program that complied with NNSA 
requirements. The laboratory has taken steps over the past 2 years to 
improve in this area, and NNSA now estimates that the laboratory will 
have an approved emergency management program by the end of fiscal year 
2004.

NNSA and the University face three main challenges to sustaining 
improvements in mission support performance over the long term. The 
first challenge is for the laboratories to ensure that actions taken to 
address mission support problems translate into effective performance 
of mission support activities. A past lack of emphasis on mission 
support activities was a major factor when problems surfaced, 
particularly at the Los Alamos laboratory. Ensuring that mission 
support activities are effective will require sustained leadership, 
resources, and effective internal controls. The second challenge is 
ensuring appropriate and effective oversight of mission support 
activities, which has been inadequate in the past. In particular, a 
draft NNSA policy that calls for relying primarily on contractors’ 
management controls raises concerns about the future adequacy of NNSA 
oversight. The third challenge is ensuring that the laboratories follow 
best practices in developing any future improvement initiatives. In its 
efforts to improve business systems, the Los Alamos laboratory did not 
follow best business practices for managing such improvements. Not 
doing so lessens the laboratory’s ability to ensure that the efforts 
will achieve the desired results.

What GAO Recommends:

GAO recommends that the Secretary of Energy direct the NNSA 
Administrator to take steps regarding mission support activities to 
ensure that (1) any contractor operating the two laboratories provides 
leadership, resources, and oversight to ensure effective activities; 
(2) assessments of contractor performance evaluate the adequacy of 
leadership, resources, and internal controls; (3) NNSA effectively 
oversees contractor activities; and (4) improvement initiatives follow 
best practices. In commenting on the report, NNSA cited actions taken 
or planned that it said met the intent of these recommendations. 
However, GAO believes that further improvements are needed.

www.gao.gov/cgi-bin/getrpt?GAO-04-370.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robin M. Nazzaro at 
(202) 512-3841 or nazzaror@gao.gov.

[End of section]

Contents:

Letter: 

Results in Brief: 

Background: 

NNSA and University's Actions Taken to Address Mission Support Problems 
Identified in 2001 Have Not Been Fully Implemented: 

After 2001, Additional Mission Support Problems Developed at the 
Laboratories, and Further Corrective Actions Are Underway: 

Challenges Remain for Sustaining Mission Support Improvements at the 
Laboratories: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendixes:

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Energy: 

Appendix III: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Acknowledgments: 

Table: 

Table 1: Information on NNSA's Contracts with the University of 
California to Manage and Operate the Los Alamos and Lawrence Livermore 
National Laboratories: 

Abbreviations: 

DNFSB: Defense Nuclear Facilities Safety Board:

DOE: Department of Energy:

NASA: National Aeronautics and Space Administration:

NNSA: National Nuclear Security Administration:

Letter February 27, 2004:

The Honorable Sherwood L. Boehlert: 
Chairman:
The Honorable Bart Gordon: 
Ranking Minority Member: 
Committee on Science: 
House of Representatives:

The Honorable Jerry F. Costello: 
House of Representatives:

For more than 50 years, the University of California (University) has 
operated the Los Alamos National Laboratory in New Mexico and the 
Lawrence Livermore National Laboratory in California for the Department 
of Energy (DOE). These two research laboratories, with a $2.9 billion 
fiscal year 2003 budget, have a science and technology mission that 
focuses on maintaining the nation's nuclear weapons, preventing nuclear 
proliferation, and furthering scientific knowledge in chemistry, 
structural biology, and mathematics. Besides conducting this research 
and development work, managing and operating the two sites encompasses 
a broad range of mission support functions, such as maintaining roads 
and providing communications, managing facilities to ensure that needed 
repairs are done to buildings, purchasing and accounting for products 
and services, and ensuring good relations with local communities.

The two laboratories have a reputation for conducting world-class 
science and technology work. Starting in the 1990s, however, 
performance problems in various mission support areas have been 
reported at both laboratories. These areas include project management 
(managing projects to ensure they are completed on time and within 
budget and achieve their intended purpose) and nuclear safety 
(conducting operations and activities in a way that ensures the safety 
of workers, the public, and the environment). Problems in these areas 
included cost and schedule overruns on major projects, such as the 
National Ignition Facility at the Lawrence Livermore 
laboratory,[Footnote 1] and violations of nuclear safety rules that 
resulted in overexposure of some workers to radiation at both 
laboratories. Another mission support area--facilities management--had 
also become an area of concern, as buildings continued to age and the 
need for maintenance and repairs increased.

Mission support problems led congressional committees and others to 
call on DOE to open these two contracts to competitive bidding. 
Instead, in January 2001, DOE's National Nuclear Security 
Administration (NNSA) [Footnote 2] decided to extend the University's 
contracts through September 2005. NNSA officials believed they could 
successfully address the laboratories' mission support problems using 
contract mechanisms such as setting clearer performance expectations 
and requiring the contractor to meet those expectations in order to 
earn incentive fees. However, mission support problems continued to 
occur at the laboratories in areas such as business operations 
(accounting, procurement, and property management) and emergency 
management (identifying possible hazards and threats and developing 
plans and procedures to address the hazards). In December 2003, the 
Congress enacted legislation to require NNSA to compete the contracts 
for both laboratories when the current terms expire in 2005.

You asked us to identify the steps that NNSA and the University have 
taken to improve contractor performance in mission support activities 
at the laboratories and to assess whether any improvements can be 
sustained over time. Our report (1) describes the actions taken to 
address the major mission support problems identified when NNSA 
extended the contracts in 2001,[Footnote 3] (2) describes the actions 
taken to address additional mission support problems that have emerged 
or become more significant since the contracts were extended in 2001, 
and (3) assesses the major challenges NNSA and the University face in 
sustaining improvements in mission support activities at the two 
laboratories.

Results in Brief:

For the three problem areas that NNSA had identified in 2001--project 
management, facilities management, and nuclear safety management--
actions are basically complete in the first two areas but not in the 
third. For all three problem areas, NNSA incorporated new requirements 
into its contracts with the University. The new requirements included, 
for example, developing 10-year comprehensive site plans on how to meet 
NNSA goals for stabilizing and reducing the deferred maintenance 
backlog for aging facilities and submitting documentation of safety 
requirements and operating procedures for each nuclear facility for 
NNSA approval by April 2003. NNSA delineated, in a new appendix to the 
contracts, the initiatives that would be required in the mission 
support problem areas during the first 2 years of the new contracts. 
NNSA also clarified the lines of authority and reporting at both 
laboratory site offices and increased its oversight through such steps 
as holding regular status meetings with senior University officials and 
laboratory managers to monitor performance and identify emerging 
concerns. For its part, the University's actions included establishing 
an oversight board and a new position of vice president for laboratory 
management to improve oversight at both laboratories. NNSA and the 
University have generally completed the actions they plan to take 
related to project management and facilities management, but they have 
been slower in putting all steps in place for nuclear safety management 
and will not complete these actions until mid-2005. The Lawrence 
Livermore laboratory did not meet the original April 2003 deadline for 
submitting required safety documentation for four of its nine nuclear 
facilities because of resource constraints and changes in the work 
activities at some of the facilities.

The actions taken by NNSA and the University to correct problems in 
project, facilities, and nuclear safety management were not systemic 
enough to keep problems from developing in other mission support areas 
after 2001. NNSA and the University have initiated actions to address 
problems that emerged or became more significant in business operations 
and emergency planning, but these steps are not yet complete. At the 
Los Alamos laboratory, problems emerging in the summer of 2002 centered 
on business operations, including allegations of fraudulent use of 
government purchase cards and questions about the adequacy of property 
controls over items such as computers. In an effort to improve controls 
over procurement and property management, the laboratory has been 
working on more than 600 corrective actions, and it expects to complete 
those actions by June 2004. Los Alamos also plans to put other measures 
in place by the end of 2005, including a new computer system that will 
integrate budgeting, accounting, procurement, and property management 
activities. At the Lawrence Livermore laboratory, documented problems 
with the laboratory's approach to emergency management took on greater 
significance because the laboratory had made slow progress in 
correcting problems with its emergency management program. Emergency 
planning involves identifying hazards and threats such as the release 
of radioactive or chemical materials from facilities, developing 
emergency plans and procedures to address the hazards and threats, and 
identifying personnel and resources needed to ensure an effective 
emergency response. The laboratory has been working on improvements to 
its plan, and NNSA officials estimate that the laboratory will have an 
approved emergency management program in place by the end of fiscal 
year 2004.

NNSA and the University face three main challenges to sustaining 
improvements in mission support performance over the long term. The 
first challenge is for the laboratories to ensure that the actions 
taken to address mission support problems translate into effective 
performance of mission support activities. A past lack of emphasis on 
procurement, property management, emergency management, and other 
mission support activities was a major contributor to recent problems 
at the laboratories, particularly at the Los Alamos laboratory, and it 
will be important to ensure that the current emphasis results in 
systemic improvement, not simply in completing a set of required 
actions. Ensuring that these and other mission support activities are 
effective will require sustained leadership and resources, effective 
internal controls, and an assessment process that evaluates the impact 
of improvement actions on performance. The second challenge is to 
ensure that NNSA oversight of the laboratories' mission support 
activities will be effective once the current round of actions has been 
completed. NNSA's oversight has been inadequate in the past, and recent 
proposed changes have raised concerns about the future adequacy of 
NNSA's involvement. Under a draft NNSA policy, NNSA would tailor the 
level of federal oversight to the individual sites and contractors 
based on the quality and completeness of the contractor assurance 
systems and an acceptable level of contractor performance. Although we 
believe the overall concept of relying in part on a contractor's 
demonstrated system of management controls is reasonable, we and 
independent oversight organizations have concerns about whether NNSA, 
given its past performance in this area, will effectively implement 
such a system and successfully carry out its oversight 
responsibilities. The third challenge is to ensure that the two 
laboratories manage efforts to improve their operations using a best 
practices framework that focuses on outcomes. For example, in embarking 
on a major effort to improve its management of business operations at 
the Los Alamos laboratory, including making changes to procurement and 
property systems and designing a new computer system to integrate these 
and other business activities, the laboratory did not follow best 
practices for managing such improvements. Specifically, the laboratory 
did not define measurable goals and outcome measures to use in 
evaluating the overall success of the improvement plan. Without these 
key elements in place, neither the laboratory nor NNSA can be sure that 
improvement efforts are achieving the desired outcomes or are cost-
effective.

To address these ongoing mission support challenges at the Los Alamos 
and Lawrence Livermore laboratories, we are recommending that the 
Secretary of Energy direct the Administrator of NNSA to take steps to 
ensure that the contractor operating each laboratory provides 
sufficient leadership, resources, and oversight to ensure that mission 
support activities are sustained and effective; that NNSA effectively 
oversees contractor performance of mission support activities, 
including evaluating the leadership, resources, and internal controls 
associated with those activities; and that the laboratories' 
improvement initiatives follow best practices.

NNSA said that two of our recommendations were not needed--ensuring 
that NNSA performance assessments include evaluating the adequacy of 
laboratory leadership, resources, and internal controls; and ensuring 
that NNSA effectively implements its proposed contractor-based 
oversight policy--because NNSA had already taken steps that it believes 
were consistent with the recommendations. NNSA was silent on the need 
for the other two recommendations--ensuring that any contractors 
operating the laboratories adequately support mission support 
activities, and follow best practices in implementing improvement 
initiatives--but stated that the University is committed to providing 
the leadership, resources, and oversight to ensure that mission support 
activities are conducted effectively, and to ensuring that its 
improvement efforts continue to achieve the desired results. However, 
as discussed in this report, the laboratories' mission support 
performance problems have not been fully resolved and improved 
performance has not been fully demonstrated. We continue to believe 
that further improvements in mission support activities are necessary 
and that our recommendations are warranted.

Background:

NNSA carries out its nuclear weapons research missions at research 
laboratories located in two states--California and New Mexico.[Footnote 
4] NNSA and DOE have traditionally relied on contractors to carry out 
the department's missions. However, the department's history of 
inadequate management and oversight and failure to hold its contractors 
accountable for results led GAO in 1990 to designate DOE contract 
management as a high-risk area vulnerable to fraud, waste, abuse, and 
mismanagement. As of February 2004, this high-risk designation was 
still in effect.

At the Los Alamos and Lawrence Livermore laboratories, about 200 NNSA 
personnel at laboratory site offices are responsible for oversight of 
the work performed under contract by over 16,000 employees of the 
University of California. The contracts with the University provide for 
reimbursement of all allowable costs plus a fee that is in addition to 
the allowable costs. The total fee available to the University includes 
a base or fixed amount that is guaranteed and an "at-risk" amount that 
is tied to performance measures in the contract.[Footnote 5] (See table 
1.):

Table 1: Information on NNSA's Contracts with the University of 
California to Manage and Operate the Los Alamos and Lawrence Livermore 
National Laboratories:

Year contract initially awarded to University; 
Los Alamos: 1943; 
Lawrence Livermore: 1952.

Fiscal year 2003 budget; 
Los Alamos: $1.65 billion; 
Lawrence Livermore: $1.2 billion.

Fiscal year 2003 base fee; 
Los Alamos: $3.5 million; 
Lawrence Livermore: $2.8 million.

Fiscal year 2003 at-risk fee; 
Los Alamos: $5.2 million; 
Lawrence Livermore: $4.3 million.

Fiscal year 2003 total fee available; 
Los Alamos: $8.7 million; 
Lawrence Livermore: $7.1 million. 

Source: NNSA data.

[End of table]

For more than a decade, GAO and others have reported on problems with 
the mission support activities at the two laboratories, including 
project management, nuclear safety management, and facilities 
management. The problems have included cost and schedule overruns on 
major projects such as the Dual-Axis Radiographic Hydrodynamic Test 
Facility at Los Alamos; lack of adequate safety documentation for 
nuclear facilities; and a deferred maintenance backlog of about $318 
million at Lawrence Livermore and $564 million at Los Alamos. In 
addition, in the early 1990s, we reported on poor controls over 
business operations such as procurement and property management at the 
Lawrence Livermore laboratory.

For several years, NNSA has chosen to address these performance 
problems using contract mechanisms. For example, when DOE extended the 
Los Alamos contract in October 1997, it included a special provision in 
the contract that would allow DOE to terminate the contract if the 
University failed to make improvements in several mission support 
areas--ensuring that workers, the public, and the environment are 
protected; cleaning up radioactive and hazardous wastes; and 
maintaining a good relationship with the local community. The 
department subsequently decided to continue the contract after the Los 
Alamos laboratory made improvements in these three areas. However, when 
NNSA extended the contracts for both of the laboratories in January 
2001, it included additional requirements to improve project 
management, facilities management, and nuclear safety management.

Oversight of the laboratories occurs at several different levels. NNSA 
provides direct oversight of the two laboratories through its site 
offices. In addition, NNSA headquarters staff offices, such as the 
Offices of Defense Programs and Nonproliferation, provide funding and 
program direction to the site offices. DOE's Offices of Independent 
Oversight and Performance Assurance and Price-Anderson Enforcement also 
oversee laboratory activities. Finally, the Defense Nuclear Facilities 
Safety Board, an independent oversight organization created by the 
Congress in 1988, provides advice and recommendations to the Secretary 
of Energy to ensure adequate protection of public health and safety at 
all of the department's defense nuclear facilities, including the Los 
Alamos and Lawrence Livermore laboratories.

NNSA and University's Actions Taken to Address Mission Support Problems 
Identified in 2001 Have Not Been Fully Implemented:

NNSA and the University have taken a number of steps to address the 
major mission support problems that were known when NNSA extended the 
University's contracts in 2001, but all actions will not be complete 
until mid-2005. When NNSA decided to extend the contracts for the two 
laboratories, concerns had emerged in three areas: project management, 
facilities management, and nuclear safety. For its part, NNSA 
incorporated into the two contracts new agencywide requirements related 
to each area, developed performance measures focusing on these 
activities, and changed its overall structure and approach for 
overseeing the actions taken at the laboratory level. In response, the 
University has implemented many of NNSA's requirements at the two 
laboratories, particularly in project and facilities management, but 
progress has been slower for nuclear safety. The University also has 
taken steps to improve its oversight of the two laboratories and to 
foster coordination and collaboration between them.

NNSA Set New Requirements and Moved to Strengthen Its Oversight:

One step NNSA took to improve laboratory performance in mission support 
activities was to incorporate into the contracts new agencywide 
requirements related to all three of the identified problem areas. In 
general, these new requirements call for the laboratories to be more 
disciplined and businesslike in carrying out their management 
responsibilities.

* Project Management. In October 2000, DOE approved Order 413.3, which 
set agency wide standards for managing projects, including NNSA 
projects. The order is intended to help ensure that projects are 
delivered on schedule and within budget and are fully capable of 
meeting mission requirements as well as environmental, safety, and 
health standards.[Footnote 6] It requires that all projects costing 
more than $5 million go through five decision checkpoints, such as 
approving mission need and approving the start of operations. At each 
checkpoint, NNSA must make a formal determination to allow the project 
to proceed.

* Facilities Management. Many of the facilities at NNSA sites are 
decades old and in poor condition. For fiscal year 2003, NNSA required 
each nuclear weapons site to develop a 10-year comprehensive site plan 
for facilities management that incorporated NNSA's strategic goals. The 
main objective of the plans is to restore, rebuild, and revitalize the 
physical infrastructure of the nuclear weapons complex. Two of NNSA's 
specific goals are to stabilize the deferred maintenance backlog by the 
end of fiscal year 2005 and to reduce the amount of deferred 
maintenance to within industry standards by the end of fiscal year 
2009.

* Nuclear Safety. DOE has always required that the contractors 
responsible for a nuclear facility analyze the facility, the work to be 
performed, and the associated hazards. Contractors use this information 
to identify the conditions, safe boundaries, and hazard controls 
necessary to protect workers, the public, and the environment from 
adverse consequences. Finally, the contractors document the safety 
requirements and operating procedures for each facility, referred to as 
the safety basis. Although DOE included these steps in an order for 
contractors to follow, the laboratories had not consistently done a 
thorough and quality analysis of their nuclear facilities. In January 
2001, DOE finalized a revised nuclear safety rule, requiring that 
contractors responsible for nuclear facilities establish and maintain a 
safety basis.[Footnote 7] Contractors may be subject to civil penalties 
for failing to comply with this requirement.[Footnote 8] This revised 
rule strengthened NNSA's ability to hold contractors accountable for 
the safety of nuclear facilities:

In addition to incorporating new agencywide requirements into the two 
contracts, NNSA established new contract mechanisms and performance 
measures to help ensure that the laboratories put in place management 
improvements for mission support activities. These measurements have 
changed over time. Initially, NNSA added a number of specific 
improvement initiatives in a new appendix (appendix O) to the contract, 
established to address known problems areas and provide a framework for 
improved results. For the first 2 years of the contract, the 
laboratories had to meet all of the requirements in appendix O on a 
pass/fail basis in order to qualify for performance incentive fees. 
NNSA phased out appendix O at the end of fiscal year 2002 after 
determining that the laboratories had met all of the provisions and 
requirements.

Starting in fiscal year 2003, NNSA shifted to assessing a "critical 
few" broadly defined performance objectives. In prior fiscal years, the 
two laboratory contracts contained dozens of individual performance 
objectives, and poor performance in one of these individual objectives 
would have minimal impact on NNSA's evaluation of overall contractor 
performance or the amount of fee that could be earned by the 
contractor. In fiscal year 2003, NNSA narrowed the number of 
performance objectives in the two contracts to nine objectives that 
define the mission of the laboratories, including two objectives that 
cover mission support activities--achieving successful completion of 
projects and maintaining secure, safe, environmentally sound, 
effective, and efficient operations and infrastructure in support of 
mission objectives. In fiscal year 2004, NNSA added a third mission 
support objective--improving or maintaining effective business systems 
and practices that safeguard public assets and support mission 
objectives.

The third main step NNSA took was to revise its approach to overseeing 
the laboratories. NNSA moved additional oversight staff, which had 
previously been in operations offices located in distant cities, to the 
laboratories themselves to bring more oversight staff closer to the 
laboratory's day-to-day operations. NNSA also began regular meetings 
with senior managers at the University and the two laboratories to 
identify and resolve emerging issues or areas that need improvement. 
Finally, NNSA designated the senior on-site NNSA representative--the 
site office manager--as the contracting officer for the laboratory. The 
contracting officer is the main point of contact and the single point 
of accountability for the contract. Before this change, the contracting 
officer was located in the procurement division at the operations 
office and did not report to the NNSA site office manager. NNSA 
believed this organizational change would clarify roles and 
responsibilities, eliminate a layer of management, and provide more 
effective federal oversight.

University Strengthened Management and Began Implementing New 
Requirements:

The University made several changes designed to strengthen management 
of mission support activities. The first was to redefine the 
relationship between the two laboratories, making their efforts at 
managing mission support more collaborative and interactive. 
Previously, the laboratories had operated more autonomously and 
competitively--an approach the University fostered as the best means 
for achieving world-class science. The recent onset of mission support 
problems convinced University officials that increased coordination in 
mission support activities would be beneficial. According to University 
officials, they wanted to create an environment in which the 
laboratories would identify problems, share solutions, create best 
practices, and be more consistent in their approaches to laboratory 
management.

Specific steps the University took to develop a more collaborative 
relationship between the two laboratories included creating a position 
of vice president of laboratory management,[Footnote 9] loaning staff 
between the two laboratories and from the University as needed, and 
creating standardized policies. For example, after the Lawrence 
Livermore laboratory developed a model for a risk-based approach to 
facilities management, the Lawrence Livermore staff visited Los Alamos 
to help that laboratory apply the approach to its facilities 
management. In addition, when the University determined that the two 
laboratories had different security policies regarding foreign 
nationals and different definitions of "sensitive property" for 
property management, it required the laboratories to work out the 
differences and devise one best practice.

The second major change by the University was to provide more outside 
assistance to the laboratories. The University contracted with firms 
from private industry for expertise and advice on nuclear facility 
safety at the Los Alamos laboratory and on project management at both 
laboratories. In addition, since the early 1990s, a University 
President's Council supported by five different panels had been in 
place to make University expertise available to the laboratories in 
such areas as project management and environment, safety, and health. 
In 2001, the University increased the interaction between the Council, 
the panels, and the laboratories, for example, by assigning a mentor 
from the project management panel to each of the major projects at the 
laboratories. In November 2003, the University also created two 
additional oversight groups to strengthen management and oversight of 
the two laboratories and to make more expertise available from outside 
the University.[Footnote 10]

Laboratories' Actions Are in Various Stages of Completion:

Although NNSA had substantially completed its efforts at incorporating 
new requirements into the contracts, establishing new performance 
measures, and modifying its oversight approach, the laboratories' 
efforts to implement the new requirements are in various stages of 
completion.

* Project management. By June 2002, both laboratories had completed 
planned actions, including implementing new DOE procedures for managing 
projects, providing improved training for project managers, and 
providing improved assistance to project teams. In addition, both 
laboratories had standardized the formats for monthly reporting on cost 
and schedule for major projects to make it easier to identify negative 
performance trends.

* Facilities management. By October 2002, both laboratories had 
completed 10-year strategic plans detailing how the laboratories will 
restore, rebuild, and revitalize their physical infrastructures. The 
plans incorporated NNSA's goals of stabilizing deferred maintenance by 
fiscal year 2005 and reducing deferred maintenance to industry 
standards by fiscal year 2009. According to the Los Alamos 10-year 
plan, industry standards set maintenance costs at about 2 to 4 percent 
of the estimated replacement value of the entire facility. To achieve 
this goal, Los Alamos plans to increase maintenance funding and 
implement the corrective actions necessary to create a more efficient 
program. Los Alamos and NNSA officials noted that some of the actions 
would involve long-term efforts spanning several years. In contrast, 
since 1998, the Lawrence Livermore laboratory has had a risk-based 
facility maintenance program to prioritize facility maintenance 
requirements. In addition, the laboratory began to assess a "laboratory 
facility charge" per square foot to building occupants, both to fund 
facility maintenance and to encourage users to give up unnecessary 
space.[Footnote 11] As a result, the Lawrence Livermore laboratory has 
already met NNSA's fiscal year 2005 goal of stabilizing the deferred 
maintenance backlog.

* Nuclear safety. The two laboratories did not submit all required 
safety analysis documentation by the April 2003 milestone date, and 
they may not be fully in compliance until mid-2005. Federal regulations 
required that by April 10, 2003, the laboratories must have provided 
assurance that they could meet new and enhanced nuclear safety 
requirements. The Los Alamos laboratory initially reported that it had 
met the deadline for providing that assurance, but later disclosed to 
NNSA that some radioactive waste sites were not included in the 
original analyses submitted to NNSA. In December 2003, NNSA and the 
laboratory agreed that 11 radioactive waste sites were subject to the 
nuclear safety requirement. NNSA expects the laboratory to provide the 
safety basis documentation on these sites by April 2004. In addition, 
NNSA reported in its fiscal year 2003 assessment for the Los Alamos 
laboratory that the quality of 7 of the 12 safety analyses submitted on 
time had been unsatisfactory and required revision. As for the Lawrence 
Livermore laboratory, it completed 5 of the 9 required safety analyses 
by the April 10, 2003, deadline and requested and received extensions 
for submitting the remaining analyses. NNSA has granted an extension 
until April 2005 for the laboratory to submit the safety analysis for 
the final facility. Lawrence Livermore laboratory officials said they 
did not meet the original deadline because of resource constraints and 
changes in the work activities at some of the facilities.

After 2001, Additional Mission Support Problems Developed at the 
Laboratories, and Further Corrective Actions Are Underway:

Despite the steps taken in 2001 to address mission support problems at 
the two laboratories, the laboratories have encountered additional 
problems in mission support activities and are taking further actions 
to address those problems. New problems in business operations, such as 
controls over purchase cards and property, emerged at the Los Alamos 
laboratory in 2002, while developing an emergency management program 
that complied with NNSA requirements continued to be a problem at the 
Lawrence Livermore laboratory.

Problems Surfaced with Business Operations at Los Alamos:

Beginning in the summer of 2002, a series of problems with business 
operations at the Los Alamos laboratory surfaced, raising questions 
about the effectiveness of controls over government purchase cards and 
property. These events included allegations of fraudulent use of 
government purchase cards and purchase orders by a few Los Alamos 
employees, questions about the adequacy of property controls over items 
such as computers, and disputed rationales for the laboratory's firing 
of two investigators who were working on some of these cases. In an 
April 2003 report on the problems with business operations at Los 
Alamos,[Footnote 12] the department identified multiple causes, 
including (1) the University's supervision of business processes at the 
laboratory was ineffective, (2) NNSA's oversight was narrowly focused 
on specific performance measures in the contract rather than on overall 
effectiveness, and (3) both the University and NNSA may have ignored 
warning signs of problems because other evaluations of contractor 
performance did not identify significant weaknesses. The report 
concluded that the actual loss to the federal government could have 
been far greater than it actually was, and the business practices in 
place in 2002 would not have been able to prevent or detect such 
losses. In addition, the report concluded that the firing of the two 
investigators was inappropriate and demonstrated the degree to which 
the laboratory's management was out of touch with activities at the 
laboratory.

In January 2001, when NNSA extended and modified the contract for the 
Los Alamos laboratory, NNSA officials were not aware of the problems 
with business operations at the laboratory. NNSA did not consider 
business operations at Los Alamos to be an area of concern to include 
in the ongoing mission support improvement efforts. Furthermore, even 
after the problems with business operations at Los Alamos emerged in 
the summer of 2002, NNSA did not include any performance measures for 
business operations at the start of fiscal year 2003. It was not until 
February 2003 that NNSA added performance measures to the contract to 
address the business operations problems. NNSA also modified its method 
of assessing contractor performance in fiscal year 2003 to provide a 
more integrated evaluation of performance in business operations.

Once the significance of the problems with business operations at the 
Los Alamos laboratory was known, the University responded with 
corrective actions. The University made sweeping changes in the Los 
Alamos management team, replacing, among others, the laboratory 
director, principal deputy director, chief financial officer, and 
laboratory auditor. In addition, the University commissioned a series 
of internal and external reviews to identify further problems and 
control weaknesses in procurement and property management. These 
reviews resulted in more than 300 findings and recommendations to 
improve controls. The laboratory is in the process of implementing more 
than 600 corrective actions to respond to these recommendations and 
implement other laboratory initiatives and expects to complete these 
corrective actions by June 2004.

As a fuller understanding of the scope of the problem emerged, managers 
at the Los Alamos laboratory decided to address the problems with 
business operations in three phases. Initially, the laboratory is 
taking hundreds of specific actions in response to identified problems 
and recommendations. These actions included changing procedures and 
strengthening internal controls. According to the laboratory managers, 
the second phase involves a more comprehensive change to business 
systems by designing and implementing an improved, integrated business 
computer system that will facilitate both more efficient and more 
effective business operations. Laboratory officials most recently 
estimated the cost of this system, currently under development, at 
about $150 million. Laboratory management said the last phase will 
involve developing and implementing a set of performance goals and 
measures for business operations so that laboratory management can 
better track and sustain results in this important area. The laboratory 
plans on having these additional measures in place by the end of 2005.

In April 2003, primarily because of these ongoing problems with 
business operations, the Secretary of Energy announced his intention to 
open the Los Alamos contract to competition for the first time, when 
the current contract expires in September 2005. Although acknowledging 
the University's contribution to high caliber science at Los Alamos, 
the Secretary stated that he held the University responsible for the 
systemic management failures at the laboratory. The Secretary 
encouraged the University to enter the contract competition, but made 
clear that the laboratory's performance in business services needed to 
be as good as its performance in science.

Lawrence Livermore Continued to Have Problems with Emergency 
Management:

The Lawrence Livermore laboratory has had difficulty developing an 
emergency management program that complies with NNSA requirements. 
Emergency planning consists of identifying hazards, threats, and ways 
to mitigate hazards; developing and preparing emergency plans and 
procedures; and identifying personnel and resources needed to ensure 
effective emergency response. Effective emergency management has been 
an issue of increasing significance since the terrorist attacks against 
the United States in September 2001.

When NNSA extended the contract in January 2001, NNSA recognized that 
the emergency management program at the Lawrence Livermore laboratory 
was not in compliance with DOE Order 151.1, which sets out the program 
requirements. For example, the laboratory had not included in its 
previous assessment of hazards and risks even the possibility that a 
release of materials or other incidents on site would potentially 
travel off site and affect the local community outside the boundaries 
of the Livermore site. As a first step toward compliance, NNSA included 
a requirement in the contract for 2001 that the laboratory prepare and 
submit for approval hazard assessments for each of its facilities and 
activities that met the specified thresholds for such assessments. 
These assessments were submitted on time in May 2001 and were reviewed 
and approved by NNSA.

In the fiscal year 2002 performance measures for the contract, NNSA 
required the laboratory to develop and implement a plan to achieve 
substantial compliance with DOE Order 151.1 by September 2003. This 
plan was to include a schedule and milestones to satisfy all the 
elements of an emergency management program, such as emergency 
preparedness training and an emergency public information program. 
Although the laboratory submitted the first draft of the plan on time 
early in the fiscal year, the quality of the plan did not meet NNSA 
expectations, and the laboratory received a marginal rating on this 
measure for fiscal year 2002.[Footnote 13] NNSA required the laboratory 
to revise and resubmit its plan. In its overall evaluation of the 
laboratory's performance for that year, NNSA identified implementing an 
effective emergency management program as one of the three 
institutional management challenges facing the laboratory.

In July of 2002, DOE's Office of Independent Oversight and Performance 
Assurance criticized the laboratory's lack of progress in resolving its 
problems with emergency management. The review team identified a number 
of important procedural and performance weaknesses. For example, the 
laboratory did not have clearly defined processes for deciding on the 
appropriate on-site and off-site protective actions to take. The report 
concluded that the laboratory faced significant challenges in 
implementing improvements in the program and that the poor quality of 
the documents provided to NNSA raised serious questions about the 
laboratory's ability to meet the implementation milestones in the plan.

Starting in fiscal year 2003, NNSA officials took additional steps to 
help ensure that the laboratory addressed its emergency management 
problems. In the fiscal year 2003 and 2004 performance measures in the 
laboratory contract, emergency management was included as one of the 
"critical few" measures. According to an NNSA official, this increased 
the focus of senior management attention on the activity. Prior to 
fiscal year 2003, performance measures for emergency management were 
included as part of the overall performance objective of environment, 
safety, and health and received less emphasis and attention. The 
laboratory received a satisfactory rating (one step higher than the 
fiscal year 2002 marginal rating) on the fiscal year 2003 emergency 
management measure. NNSA now estimates that the laboratory will have an 
emergency management program that is in substantial compliance with DOE 
orders by the end of fiscal year 2004.

In contrast to the Los Alamos contract, the Secretary had not signaled 
his intention about whether to extend or compete the Lawrence Livermore 
laboratory contract. However, in the fiscal year 2004 appropriations 
act for energy and water development, the Congress required DOE to 
compete the Lawrence Livermore laboratory contract when the current 
contract expires in 2005. The statute provides that no appropriated 
funds for fiscal year 2004 or any previous fiscal year could be used 
for specified laboratory contracts that had been awarded more than 50 
years ago without competition, unless the Secretary of Energy announces 
a decision to compete the contracts at the end of their current 
terms.[Footnote 14] In late January 2004, the Secretary announced the 
decision to compete the specified laboratory contracts, including those 
for the Los Alamos and Lawrence Livermore laboratories.

Challenges Remain for Sustaining Mission Support Improvements at the 
Laboratories:

NNSA and the University face three main challenges to sustaining 
improvements over the long term in mission support activities at the 
two laboratories. These challenges include (1) ensuring that the 
mission support activities are effectively performed, (2) ensuring that 
NNSA provides effective oversight of laboratories' activities, and (3) 
ensuring that management improvement initiatives such as the 
improvements to business systems at the Los Alamos laboratory fully 
address the existing problems and are carried out in a systematic 
manner consistent with best practices.

Ensuring that Mission Support Activities Are Effectively Performed:

A major factor leading to the problems with managing mission support 
activities at the laboratories, including an increased potential for 
fraud, waste, and abuse, was what one internal DOE assessment referred 
to as the devaluing of mission support activities by laboratory 
personnel. Although significant investments in improving mission 
support activities and controls have subsequently occurred, there are 
continuing concerns about whether the laboratories will continue to 
place sufficient emphasis on mission support activities to ensure that 
these functions are effectively performed.

Ensuring that actions taken to address mission support problems 
translate into effective performance of mission support requires 
establishing and maintaining an effective system of management control. 
Office of Management and Budget Circular No. A-123 defines management 
controls as the organization, policies, and procedures used to 
reasonably ensure that (1) programs achieve their intended results; (2) 
resources are used consistent with agency missions; (3) programs and 
resources are protected from waste, fraud, and mismanagement; (4) laws 
and regulations are followed; and (5) reliable and timely information 
is obtained, maintained, reported, and used for decision making. 
Effective management controls require leadership and commitment on the 
part of management. Internal control standards state that the attitude 
and philosophy of management toward information systems, accounting, 
and monitoring can have a profound effect on internal control.[Footnote 
15] The standards require management to establish and maintain an 
organizational environment that sets a positive and supportive attitude 
toward internal control.

The two laboratories have differed in the degree to which they have 
been successful in ensuring that mission support activities are 
effectively performed and in maintaining effective management controls. 
The Los Alamos laboratory had over time been weakening its management 
controls over some mission support activities. Responding to pressures 
to reduce overhead costs and a view that the NNSA laboratories were 
unnecessarily burdened with administrative and procedural requirements 
that were not adequately serving mission needs, the laboratory pursued 
cost efficiencies in mission support activities without sufficient 
regard for ensuring that the overall management control system was 
effective. For example, since fiscal year 1995, the Los Alamos 
laboratory has reduced the relative funding for mission support 
activities in order to provide more funding to mission activities. The 
reduced funding contributed to the weakening of business controls as 
the laboratory scaled back or eliminated steps, such as reviewing small 
item purchases because fewer staff were available to perform the 
reviews.

The problems with management controls at the Los Alamos laboratory were 
to some extent due to the laboratory's organizational culture. An April 
2003 DOE report on the business operations problems at the Los Alamos 
laboratory cited cultural problems as one of the underlying causes of 
the systemic management failure of business systems at the 
laboratory.[Footnote 16] The report stated that the Los Alamos culture 
exalted science and devalued business practices, and that changing this 
attitude would be the most difficult long-term challenge facing the 
laboratory, regardless of who manages it in the future. NNSA and 
laboratory officials at Los Alamos have stated that the pressures to 
reduce mission support costs will probably continue, which increases 
the challenges associated with improving controls and ensuring that 
mission support activities are effectively performed.

In contrast to the problems documented at the Los Alamos laboratory, 
the Lawrence Livermore laboratory has apparently been more successful 
in emphasizing the importance of mission support activities and 
ensuring that these support activities are effectively performed. The 
laboratory encountered similar problems with its business operations in 
the early-1990s, including weaknesses in procurement and property 
management, and took steps at that time to improve its financial and 
accounting systems. Thus, when faced with the same pressures to reduce 
overhead costs in recent years, the Lawrence Livermore laboratory was 
better able to accomplish those reductions without significantly 
degrading the quality or effectiveness of its internal controls. For 
example, a June 2003 external assessment of business systems at the 
Lawrence Livermore laboratory identified no material weaknesses in 
internal control systems but did contain recommendations to enhance 
management controls in such areas as procurement and property 
management. In contrast, external reviews of procurement systems at the 
Los Alamos laboratory identified significant weaknesses in internal 
controls, such as insufficient policies and procedures and inadequate 
management.

NNSA recently began to address these organizational culture issues and 
the need to understand the importance of effective management controls. 
The problems with management controls at the Los Alamos laboratory are 
similar to the organizational problems documented at the National 
Aeronautics and Space Administration (NASA) after the Columbia space 
shuttle accident in February 2003. The independent panel tasked with 
investigating the causes of the accident reported in August 2003 that 
NASA's organizational culture was a contributing factor to the 
breakdown in management controls intended to ensure safety for the 
shuttle and its crew.[Footnote 17] Specifically, the report cited as 
one of the root causes of the accident the organizational culture at 
NASA, which emphasized mission rather than safety. In addition, under 
pressure to reduce costs, the agency had transferred responsibilities 
to the private sector while reducing federal oversight. As part of its 
efforts to improve operations at the laboratories, the NNSA 
Administrator has required all of the senior NNSA managers to review 
the Columbia Accident Investigation Report for findings that could be 
applied to NNSA. In addition, the Administrator chartered a task force 
to perform an in-depth review of the cultural and organizational issues 
described in the Columbia report and to make recommendations on how the 
department could improve the effectiveness of mission support functions 
to ensure the safe performance of high-risk mission work. NNSA 
officials estimate that the task force report will be available in 
March 2004.

The laboratories have also taken steps to address organizational 
attitudes about mission support activities. At the Lawrence Livermore 
laboratory, the director and senior management developed a list of 
values for the laboratory that includes 10 items deemed to be critical 
to success. One of the items is "simultaneous excellence in science and 
technology, operations, and business practices." At the Los Alamos 
laboratory, the director established priorities in 2003 to help guide 
the laboratory's efforts. The priorities include safety and security, 
mission, and business operations. The laboratory is also developing a 
strategic plan that includes both mission and mission support goals and 
objectives.

The University is also exploring other ways to improve management of 
the two laboratories. In January 2004, the University Board of Regents 
took steps to allow the University to form partnerships with outside 
companies for the upcoming competition for the laboratory contracts. 
The University's Vice President for Laboratory Management said that 
outside partners with strong management and business experience could 
strengthen its performance in the areas of business operations and 
other mission support areas.

These actions are positive steps toward increasing the awareness of the 
importance of mission support activities, but for several reasons 
concerns remain about whether the laboratories will continue to ensure 
that mission support activities are effectively performed. First, 
although current senior management at both laboratories supports the 
importance of having effective mission support activities, there has 
been a long history of emphasizing mission over mission support. 
Second, NNSA has also typically placed much more emphasis on mission 
than mission support and has often failed to detect problems when they 
existed. For example, the April 2003 DOE report on business operations 
at the Los Alamos laboratory stated that the NNSA evaluation system in 
place at Los Alamos failed to consider relationships between different 
processes at the laboratory and therefore failed to detect overall 
systemic problems. One of the report's recommendations was to ensure 
that NNSA reviews of contractor performance capture cross-cutting 
information in both mission and mission support areas to form a more 
complete picture of performance.

Furthermore, although much work has been done to implement new mission 
support requirements and improve management of mission support at the 
two laboratories, considerable time may be needed to determine the 
extent to which the actions taken will result in improved performance. 
For example, some of the efforts, such as the longer-term efforts 
needed to reduce deferred maintenance to industry standards by fiscal 
year 2009, will take years to complete. In addition, the Los Alamos 
laboratory continues to have problems with workers failing to comply 
with nuclear safety procedures. For fiscal years 2001 through 2003, the 
Los Alamos laboratory had filed 51 reports on nuclear safety incidents, 
some resulting in exposures of workers to radiation. Efforts are 
underway to improve performance in this area, but safety officials at 
the laboratory acknowledge that some of the improvement efforts may 
take months or years of sustained effort to complete.

The laboratories will also need to ensure that improvement efforts are 
sustained and effective. NNSA officials, including the senior technical 
safety advisor at the Los Alamos site office, noted they did not have a 
high level of confidence in the laboratory's ability to sustain 
improvements because the laboratory's track record in this regard has 
not been good. For example, a March 2003 report on nuclear safety at 
the Los Alamos laboratory analyzed 32 corrective actions between fiscal 
years 1996 and 2003 and concluded that many of the improvement efforts 
had not been sustained or followed up on, allowing many of the safety 
violations to recur.[Footnote 18] NNSA officials, including the 
assistant manager for business management, also noted that the 
laboratory was reporting on when corrective actions had been 
implemented rather than on their effectiveness. For example, in 
December 2003, Los Alamos reported that it had completed 80 percent of 
its improvement efforts in procurement but did not report on the 
effectiveness of those efforts. Based on complaints from vendors and 
others outside the laboratory, NNSA officials sampled procurement 
records and found recurring problems. The NNSA officials said that they 
had been in discussions with Los Alamos laboratory officials since 
September 2003 in efforts to reach agreement on how to assess 
improvement efforts for effectiveness, but as of December 2003, no 
agreement had been reached.

Ensuring that NNSA's Oversight Is Effective:

NNSA's reliance on contractors to operate its facilities and carry out 
its missions makes effective oversight of contractor activities crucial 
to success. In the past, however, oversight of the laboratories' 
mission support activities has been inadequate. Both the University and 
NNSA had failed to ensure that the laboratories' mission support 
activities were effective.

The University had in general taken a "hands off" approach to 
overseeing the laboratories. For example, in its April 2003 report on 
evaluating problems at the Los Alamos laboratory, NNSA stated that 
prior to November 2002, the University's oversight of Los Alamos was 
ineffective in the area of business processes. The report added that 
the University was slow to respond to allegations of problems with 
business practices, initially limiting its involvement to providing 
assistance as requested by the laboratory director and not ensuring 
that the laboratory director was taking sufficient steps to address the 
problem.

NNSA oversight also was not adequate to identify and address the 
critical shortcomings in management controls. Regarding the Los Alamos 
laboratory, in May 2003, DOE's Office of Inspector General reported 
that improvements were needed in NNSA's project management oversight 
and control. This conclusion was based on the Inspector General's 
review of a new facility that will be used to evaluate the effects of 
aging on the nation's nuclear weapons stockpile.[Footnote 19] The 
report stated that the project did not have a viable baseline and that 
at least $57 million in cost increases had occurred, but NNSA oversight 
was inadequate to identify the problem. Also, the April 2003 DOE report 
on problems at the Los Alamos laboratory stated that NNSA's direct 
federal oversight had been narrowly focused on specific performance 
measures in the contract, rather than on overall effectiveness. 
Weaknesses in NNSA oversight also occurred at the Lawrence Livermore 
laboratory. For example, in a May 2003 report[Footnote 20] on a new 
waste treatment facility at the laboratory, we concluded that a delay 
in initiating storage and treatment operations at the new facility 
occurred because NNSA managers took over a year to resolve 
disagreements with the laboratory on technical issues affecting the 
safe operation of the new building for temporarily storing wastes. 
Providing clear requirements and ensuring that the contractor complies 
with those standards in a timely manner is part of NNSA's oversight 
responsibilities.

These past problems with oversight raise concerns about NNSA's proposed 
change to its oversight approach. NNSA's August 2003 draft Line 
Oversight and Contractors' Assurance System policy would rely more on 
contractor oversight and self-assessment and less on NNSA's direct 
oversight.[Footnote 21] The proposal would require a comprehensive 
contractor assurance system, or system of management controls, to be in 
place and would primarily rely upon these systems and controls to 
ensure that its missions and activities are properly executed in an 
effective, efficient, and safe manner. NNSA would use a risk-based, 
graded approach to its oversight and tailor the extent of federal 
oversight to the quality and completeness of the contractor's assurance 
systems and to evidence of acceptable contractor performance. NNSA's 
oversight functions would include review and analysis of contractor 
performance data, direct observations of contractor work activities in 
nuclear and other facilities, annual assessments of overall performance 
under the contract, and certifications by the contractor or independent 
reviewers that the major elements of risk associated with the work 
performed are being adequately controlled. NNSA stated in its draft 
policy and in public meetings before the Defense Nuclear Facilities 
Safety Board that the department plans to phase in this new oversight 
approach over the next few years.

Although we believe that the overall concept of a risk-based approach 
to federal oversight is reasonable, concerns exist about whether NNSA 
will be able to effectively carry out this approach while successfully 
meeting its responsibility for safe and secure operations. For example, 
considerable work will be needed to successfully implement a risk-based 
approach to laboratory oversight. According to the Associate Director 
for Operations at the Los Alamos laboratory, the laboratory's ability 
to manage risk is at a beginning level of maturity. Other officials at 
the Los Alamos laboratory, including officials from the Performance 
Surety Division and the Quality Improvement Office, said that the 
laboratory and NNSA have different perceptions of risks at the 
laboratory and how to manage those risks. In addition, they said that 
both the laboratory and NNSA have been reacting to problems after they 
have come to light rather than managing risks to prevent problems from 
occurring.

In addition to these concerns specific to the two laboratories, DOE and 
others have raised broader concerns about the adequacy of oversight. 
For example, in November 2003, DOE's Office of Inspector General 
released its annual report on management challenges, including 
oversight of contracts and project management as two of the three 
internal control challenges facing the department.[Footnote 22] The 
report stated that these challenges represent issues that, if not 
addressed, may impede the department's ability to carry out its program 
responsibilities and ensure the integrity of its operations. The 
department also included program oversight of contractors as a 
significant matter of concern in its performance and accountability 
report for fiscal year 2003. Furthermore, the Defense Nuclear 
Facilities Safety Board, in recent public meetings, has expressed 
concerns about nuclear safety under the proposed NNSA contractor 
assurance policy and said that NNSA should not delegate responsibility 
for such an inherently high-risk area of operations.

Ensuring that Improvement Initiatives Follow Best Practices:

NNSA and the University have not ensured that the laboratories manage 
major improvement initiatives using a best practices framework that 
helps ensure successful implementation. For example, one aspect of 
improving mission support activities at the Los Alamos laboratory has 
involved a major upgrade of business systems including budgeting, 
accounting, procurement, and property management. This business systems 
improvement initiative is planned to take 18 months and be completed at 
the end of June 2004. Unfortunately, laboratory officials have not 
followed best practices in managing the improvement initiative, 
increasing the risk that the initiative may not fully address existing 
problems or be the most effective approach.

In previous work,[Footnote 23] we found that best practices by leading 
organizations to sustain management improvement initiatives involved 
using a systematic, results-oriented approach that incorporated a 
rigorous measurement of progress. Such an approach typically included 
the following elements: (1) define clear goals for the initiative, (2) 
develop an implementation strategy that sets milestones and establishes 
responsibility, (3) establish results-oriented outcome measures early 
in the process to gauge progress toward the goals, and (4) use results-
oriented data to evaluate the effectiveness of the initiative and to 
make additional changes where warranted.

For its business systems improvement initiative, the Los Alamos 
laboratory established an implementation strategy that set milestones 
and assigned responsibility for carrying out the strategy. For example, 
the business process improvement plan included over 600 required 
actions, each of which had a time frame for completion and a laboratory 
employee responsible for the action. The laboratory is tracking each of 
the actions to ensure that they are completed.

While the Los Alamos laboratory had an implementation strategy for its 
business systems improvement initiative, it implemented those actions 
largely without clearly defined goals, results-oriented measures, or 
results-oriented data to evaluate the effectiveness of its actions.

* Clear goals not defined. Although the Los Alamos laboratory had a 
strategy for business improvement that included general goals, it did 
not define the goals in measurable terms. The laboratory's primary goal 
for 2003 was to reduce the risks associated with internal control 
vulnerabilities in its business systems. This general goal does not 
provide a measurable end point; it does not indicate how much risk 
reduction is enough or how changes in risk could be measured. Nor does 
the even more general objective of restoring trust in the laboratory's 
business systems, mentioned by some Los Alamos officials, provide a 
measurable end point. While addressing internal control problems is 
important, it does not by itself indicate that improvements are 
sufficient or effective.

* Results-oriented outcome measures not established. The laboratory did 
not establish results-oriented outcome measures for its business 
improvement initiative. Instead, the laboratory generally focused on 
measuring the progress of implementing its improvement actions, such as 
the percentage of improvements that have been implemented. Such 
measurements, however, do not provide an indication of progress toward 
the overall goal of reducing the risk of fraud, waste, and abuse. 
Laboratory officials told us that instead of developing such measures 
early in the business improvement initiative, their strategy is to 
define measurable performance goals after the many actions associated 
with the business improvement initiative are in place.

* Results-oriented data not used to evaluate effectiveness. The 
laboratory did not have the results-oriented outcome data needed to 
evaluate the effectiveness of its business improvement initiative. 
Again, laboratory officials told us that after the improvement actions 
are in place, they plan to define and generate results-oriented data to 
correspond with measurable performance goals. In addition to the lack 
of results-oriented outcome data, the laboratory also lacks the 
information necessary to determine if these improvement efforts are 
cost-effective. The laboratory has only partial information on the cost 
of the improvement initiative. The laboratory's Associate Director for 
Administration told us that the laboratory has not focused on the costs 
of the current business improvements. He added that the laboratory will 
consider costs once the new systems are in place and decisions must be 
made about balancing the cost of business activities against the risks 
of removing some internal control activities.

Because the Los Alamos laboratory lacked several elements of a best 
practices approach to managing improvement initiatives, the laboratory 
did not have a sufficient basis from which to objectively review the 
results of the improvement initiative, assess the reasonableness of 
costs incurred, or take further corrective actions if necessary to 
achieve the overall goals of the initiative. Laboratory officials 
explained that they had given immediate priority to fixing business 
system problems rather than measuring and sustaining improved business 
results. Furthermore, the Associate Director for Administration 
concluded that good performance measures would take considerable time 
to develop and that implementing corrective actions was a higher 
priority. However, by waiting to focus on results and costs later, the 
laboratory increases its risk that the initiative may not fully address 
existing problems or be the most cost-effective approach to reducing 
its internal control vulnerabilities to appropriate levels.

Laboratory officials said that they generally follow an organized 
process for implementing improvement initiatives that includes defining 
the tasks to be accomplished, creating a schedule with milestones, and 
assigning responsibility for the actions. However, such a process does 
not include all the elements that we have identified as necessary for a 
best practices approach. Neither the University nor NNSA was 
influential in ensuring that the laboratory followed best practices in 
managing the business system improvement initiative, even after the 
department had issued guidance on managing improvement initiatives. In 
October 2003, DOE issued Notice 125.1, Managing Critical Management 
Improvement Initiatives, which describes best practices for managing 
improvement initiatives and requires that those practices be followed 
by NNSA. However, this notice does not apply to DOE's contractors, and 
NNSA has not incorporated similar requirements into NNSA's contracts 
with the University to manage the Los Alamos and Lawrence Livermore 
laboratories.

Conclusions:

Effectively accomplishing the mission of conducting world-class 
scientific work at the Los Alamos and Lawrence Livermore laboratories 
also requires the laboratories to maintain good business practices; 
accountability for mission support activities; and safeguards against 
fraud, waste, abuse, and mismanagement. Sufficient emphasis on mission 
support activities has been lacking, especially at the Los Alamos 
laboratory, and achieving and sustaining effective performance in 
mission support will require strong leadership and commitment. Efforts 
to improve performance in mission support activities are still underway 
at the laboratories, and it may take considerable time to determine if 
the efforts are effective. Managing these efforts using best practices 
will help ensure that they succeed.

Keeping these improvements in place over the long term also requires an 
effective process for assessing contractor performance on mission 
support activities. We continue to have concerns about NNSA's oversight 
approach. Under its proposed risk-based approach to federal oversight, 
NNSA would determine the risks associated with a given operation or 
function, evaluate how good the contractor assurance system is in that 
area, and also factor in past contractor performance. NNSA would take 
these factors into consideration to determine whether it could reduce 
federal oversight of an operation and rely more on the contractor's 
assurance that the risk is being adequately addressed and controlled. 
In our view, such autonomy for the laboratories is inadvisable this 
soon into the process of recovery from a string of embarrassing 
revelations. Regardless of whether the University of California retains 
the contracts when they are competed in 2005 or another organization is 
selected to operate one or both of the laboratories, until the 
laboratories have demonstrated the maturity and effectiveness of 
contractor assurance systems and the adequacy of the contractor's 
oversight has been validated, NNSA needs to maintain sufficient 
oversight of mission support activities to fulfill its responsibilities 
independently.

Recommendations for Executive Action:

We recommend that the Secretary of Energy direct the Administrator of 
NNSA to:

* ensure through contract and other management mechanisms that the 
University of California and any future contractor managing Los Alamos 
and Lawrence Livermore National Laboratories provide leadership, 
resources, and oversight to ensure effective mission support 
activities, including evaluating the impact of improvement actions on 
performance;

* ensure that NNSA performance assessments at the laboratories include 
evaluations of the adequacy of leadership, resources, and internal 
controls associated with mission support activities;

* ensure that as NNSA implements its proposed oversight and contractor 
assurance policy at Los Alamos and Lawrence Livermore National 
Laboratories, NNSA retains sufficient independent federal oversight of 
mission support activities to fulfill its responsibilities associated 
with protecting public resources and safety; and:

* include in its contract with the University of California and any 
future contractor at Los Alamos and Lawrence Livermore National 
Laboratories a requirement that major improvement initiatives be 
managed consistent with the best practices of high-performing 
organizations, as defined in DOE Notice 125.1.

Agency Comments:

We provided a draft of this report to NNSA and the University of 
California for their review and comment. The University provided its 
comments through NNSA. In written comments, NNSA's Associate 
Administrator for Management and Administration generally agreed with 
the accuracy of the report and acknowledged that both NNSA and the 
University face challenges in improving mission support activities at 
the two laboratories. NNSA also cited actions taken or planned that it 
said met the intent of our recommendations.

However, regarding the report's accuracy, NNSA said our report 
substantially understates the extent of progress made in correcting the 
laboratories' mission support problems. We believe that we have 
accurately described the progress made in implementing actions aimed at 
improving mission support. Even though the University has made progress 
in implementing corrective actions and new requirements, the extent to 
which these actions have resulted in improvements in mission support 
performance at the laboratories is still unclear.

In an attachment to the letter, NNSA raised a concern about our 
discussion of its efforts to oversee the laboratories and our 
recommendation concerning NNSA's proposed risk-based approach to 
laboratory oversight. NNSA disagreed with our reservations about its 
proposal to rely more on a contractor's system of management controls 
and less on NNSA's own independent oversight. NNSA acknowledged that 
there have been problems with its oversight in the past but believes 
that its proposed risk-based approach will be successfully implemented, 
resulting in improved contractor oversight. Therefore, NNSA said that 
our recommendation to ensure that it retains sufficient independent 
oversight of the laboratories' mission support activities was not 
necessary. However, as we discussed in our report, a risk-based 
approach to federal oversight appears reasonable in concept, but the 
University of California has not demonstrated that its contractor 
assurance systems can be relied on to prevent or detect fraud, waste, 
abuse, or mismanagement. And, in the past, NNSA has not been effective 
at detecting these weaknesses. Until improved performance in these 
areas has been clearly demonstrated, we continue to be concerned about 
whether NNSA can effectively implement a risk-based approach to 
contractor oversight. That is why we are recommending that NNSA retain 
sufficient independent oversight of mission support activities to 
ensure that those activities are safe and effective.

The attachment to the letter also discussed or referred to the report's 
other recommendations. Regarding our recommendation that NNSA's 
performance assessments at the laboratories include an evaluation of 
the adequacy of leadership, resources, and internal controls associated 
with mission support activities, NNSA said that the performance 
assessment process it began using in fiscal year 2003 already includes 
such an evaluation, so this recommendation is no longer required. For 
fiscal year 2003, the "critical few" performance measures used as a 
basis for evaluation of contractor performance did include maintaining 
secure, safe, environmentally sound, effective, and efficient 
operations and infrastructure in support of mission objectives. 
However, we do not believe that NNSA's assessment of contractor 
performance on this measure is equivalent to evaluating the adequacy of 
leadership, resources, and internal controls associated with mission 
support activities. Therefore, we continue to believe that such an 
evaluation is an important part of NNSA's oversight of contractor 
performance and that the recommendation is warranted.

Regarding our recommendations that NNSA ensure that any contractors 
operating the laboratories (1) provide the leadership, resources, and 
oversight to ensure effective mission support activities and (2) manage 
improvement initiatives consistent with best practices, NNSA was silent 
on the usefulness of the recommendations, but stated that the 
University is committed both to providing the leadership, resources, 
and oversight to ensure that mission support activities are conducted 
effectively and to ensuring that its improvement efforts continue to 
achieve the desired results. We believe that the oversight activities 
inherent in these recommendations are an important part of improving 
the management of mission support at the laboratories.

NNSA also provided technical comments, which we have incorporated as 
appropriate. NNSA's written comments on our draft report are included 
in appendix II.

We conducted our review from May 2003 through February 2004, in 
accordance with generally accepted government auditing standards. 
Appendix I provides details on our scope and methodology.

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 to the University of California Office of the 
President. We will also make copies available to others on request. In 
addition, the report will be available at no charge on the GAO Web 
site at [Hyperlink, http://www.gao.gov].

If you or your staff have any questions on this report, please call me 
at (202) 512-3841. Other staff contributing to this report are listed 
in appendix III.

Robin M. Nazzaro 
Director, Natural Resources and Environment:

[End of section]

Appendixes: 

Appendix I: Scope and Methodology:

We addressed three of the five problem areas NNSA identified when it 
extended the laboratory contracts with the University of California in 
January 2001. NNSA had identified problems with management 
accountability; safeguards and security management; facility safety, 
including nuclear facility operations; critical skills, knowledge, and 
technical capabilities; and project management. Based on discussions 
with committee staff, we reviewed three of these initiatives--
management accountability, including steps taken by the University to 
strengthen its oversight of the two laboratories; facility safety, 
including nuclear safety and facilities management; and project 
management. The other two areas NNSA identified--safeguards and 
security management and critical employee skills--were outside the 
scope of our review. These topics are the subject of other GAO 
engagements.

To identify the status of actions taken by NNSA and the University of 
California to address the mission support problems that were 
highlighted when NNSA decided to extend the contracts for the Los 
Alamos and Lawrence Livermore National Laboratories in January 2001, we 
reviewed and analyzed prior GAO reports and testimonies, reports from 
the Inspector General, and other reports in order to determine the 
types of problems identified in the past. In addition, we reviewed and 
analyzed documentation on the two contracts, including the annual 
performance measures and NNSA's annual evaluations of contractor 
performance. We reviewed DOE orders and other agencywide requirements 
that had been incorporated into the contracts, as well as the 
documentation provided by the laboratories that demonstrated compliance 
with these requirements. We interviewed officials in the University of 
California Office of the President, Laboratory Administration Office, 
to understand the contractor's perspective and management role. In 
addition, we interviewed officials at the two laboratories and the NNSA 
site offices to determine actions they had taken or were taking to 
address identified problem areas. We also reviewed documentation 
obtained from DOE's Office of Environment, Safety and Health regarding 
nuclear safety violations and similar problems. In addition, we viewed 
public meetings of the Defense Nuclear Facilities Safety Board (DNFSB), 
an independent oversight board charged with providing safety oversight 
of the nuclear weapons complex, and interviewed a DNFSB official at the 
Los Alamos National Laboratory to obtain DNFSB views on the progress 
made by Los Alamos in the area of nuclear safety. We also interviewed 
officials from DOE's Office of Engineering and Construction Management 
regarding project management, the Office of Price-Anderson Enforcement 
regarding nuclear safety, and the Office of Environmental Management 
regarding environmental cleanup. Lastly, we interviewed officials with 
the Department of Energy Inspector General at the Los Alamos and 
Lawrence Livermore National Laboratories and in Washington, D.C., to 
obtain additional information on actions taken to address problems and 
the progress that has been made.

To identify the status of the actions taken to address additional 
mission support problems that have emerged or become more significant 
since 2001, we took several steps. To obtain information on the 
problems with business operations at Los Alamos, we reviewed and 
analyzed reports by DOE's Office of Inspector General and external 
reviews done by Price-Waterhouse Coopers, Ernst and Young, and others. 
We also reviewed and analyzed the April 2003 report from the Deputy 
Secretary of Energy and the NNSA Administrator on the business problems 
and Los Alamos and the recommendations to the Secretary of Energy. In 
addition, we interviewed officials with the Los Alamos laboratory, the 
NNSA Los Alamos site office, and the University of California 
Laboratory Administration Office on the status of corrective actions, 
and we reviewed documentation and reports they provided. To obtain 
information on the continuing problems with emergency management at the 
Lawrence Livermore laboratory, we reviewed reports of DOE's Office of 
Independent Oversight and Performance Assurance, the annual performance 
measures in the contract for the Lawrence Livermore laboratory, and 
NNSA's annual evaluations of contractor performance. In addition, we 
interviewed NNSA officials at the Lawrence Livermore site office and 
reviewed documents provided by them. We also reviewed the Fiscal Year 
2004 Energy and Water Development Appropriations Act and corresponding 
House of Representatives and Conference Reports to understand the 
requirement to compete DOE contracts that had been awarded more than 50 
years ago without competition.

To determine the remaining challenges, if any, that NNSA and the 
University face in sustaining improvements in mission support 
activities, we reviewed and analyzed Office of Management and Budget 
Circular A-123, Management Accountability and Control; GAO's Standards 
for Internal Control in the Federal Government; and DOE Office of 
Inspector General and Performance and Accountability reports. We also 
reviewed and analyzed University, laboratory, and independent reports 
obtained during site visits and during interviews with officials to 
identify other areas of concern and any potential barriers to 
implementing and sustaining the improvement efforts. We interviewed 
officials with the University Laboratory Administration Office, the Los 
Alamos and Lawrence Livermore laboratories, and the NNSA site offices 
to obtain their views on remaining challenges the laboratories face and 
the need for improved oversight of the laboratories. In particular, we 
discussed DOE's oversight policies, NNSA's proposed oversight policies, 
and challenges to improving oversight. We also reviewed documents 
relevant to oversight issues, such as NNSA's draft policy letter on 
contractor assurance and oversight and the investigative report on the 
space shuttle Columbia accident, which was prepared for the National 
Aeronautics and Space Administration. Finally, for additional insight 
into remaining challenges, we analyzed the results of public meetings 
on DOE and NNSA oversight of nuclear safety held by the Defense Nuclear 
Facilities Safety Board.

We conducted our review from May 2003 through February 2004 in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from the Department of Energy:

Department of Energy:

National Nuclear Security Administration 
Washington, DC 20585:

FEB 23 1004:

Ms. Robin M. Nazzaro 
Director:

Natural Resources and Environment 
General Accounting Office 
Washington, D.C. 20548:

Dear Ms. Nazzaro:

The National Nuclear Security Administration (NNSA) appreciates the 
opportunity to have reviewed the General Accounting Office's (GAO) 
draft report, "DEPARTMENT OF ENERGY: Mission Support Challenges Remain 
at Los Alamos and Lawrence Livermore National Laboratories." We 
understand that GAO was asked to describe the actions taken to address 
mission support problems identified in 2001, when NNSA last extended 
the University of California's contracts, as well as problems that have 
subsequently emerged. Additionally, you were asked to assess the major 
challenges that NNSA and the University face in sustaining mission 
support improvements.

NNSA generally agrees with the report and acknowledges that there are 
challenges facing NNSA and the University of California. We appreciate 
GAO's view that substantial progress has been made in correcting 
identified deficiencies in mission support areas. NNSA believes that 
there has been substantially more progress achieved than GAO has noted 
in their draft report. We are committed to seeking out and applying 
best practices to our business operations just as others use our 
laboratories as examples of best practices for a high-performing 
scientific, technical, and engineering organization.

The enclosures that I am providing include (1) comments from the 
University of California to the Administrator supporting NNSA's efforts 
to implement a robust Line Oversight/Contractor Assurance System, and, 
(2) detailed comments related to factual corrections and/or clarity to 
the draft report.

Should you have any questions, please contact Mr. Richard M. Speidel, 
Director, Policy and Internal Controls Management. He may be contacted 
at 202-586-5009.

Sincerely,

Signed by: 

Michael C. Kane 
Associate Administrator for Management and Administration:

Enclosures: 

[End of section]

Appendix III: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Robin M. Nazzaro, (202) 512-3841 William R. Swick, (206) 287-4800:

Acknowledgments:

In addition to the individuals named above, Carole Blackwell, Doreen 
Feldman, Terry Hanford, Jonathan McMurray, Jill Peterson, Robert 
Sanchez, and Stan Stenersen made key contributions to this report.

(360348):

FOOTNOTES

[1] For more information on the National Ignition Facility, see U.S. 
General Accounting Office, National Ignition Facility: Management and 
Oversight Failures Caused Major Cost Overruns and Schedule Delays, GAO/
RCED-00-271 (Washington, D.C.: Aug. 8, 2000).

[2] NNSA was created in 2000 as a separately organized agency within 
DOE. NNSA's mission includes maintaining and enhancing the safety, 
reliability, and performance of the U.S. nuclear weapons stockpile; 
promoting international nuclear safety and nonproliferation; and 
supporting U.S. leadership in science and technology. 

[3] The mission support problem areas we addressed included project 
management, facilities management, and nuclear safety management. Two 
other areas of concern identified in 2001 were safeguards and security 
management and human capital management to ensure that critical 
employee skills are maintained. To avoid duplicating other GAO 
engagements, we did not include these other two areas of concern in the 
scope of this engagement.

[4] NNSA's third research laboratory, the Sandia National Laboratories 
in New Mexico and California, has been operated by for-profit 
contractors since its inception. AT&T operated the Sandia laboratory 
until the contract was opened to competition in 1993 and awarded to the 
Sandia Corporation, the current contractor.

[5] The University uses the fee earned to cover costs under the 
contract that are not allowable or reimbursed by NNSA and to fund 
University of California-directed research and development projects 
that are supportive of laboratory mission work.

[6] The National Research Council has reviewed project management in 
DOE and has reported that project management needs to be a core 
competency in DOE as it strives to achieve its mission. In its 2002 
assessment of DOE's project management, the Council reported that 
implementation of DOE Order 413.3 has increased the level of 
consistency in project management practices throughout the department. 
See National Research Council, Improving Project Management in the 
Department of Energy; Progress in Improving Project Management at the 
Department of Energy--2001 Assessment; and Progress in Improving 
Project Management at the Department of Energy--2002 Assessment.

[7] Amendments to DOE's Nuclear Safety Management regulations, 10 
C.F.R. part 830, were issued as a final rule January 10, 2001 (66 Fed. 
Reg. 1810). The amendments included a requirement that contractors 
responsible for hazard category 1, 2, or 3 nuclear facilities present a 
safety basis to the department for its approval by April 10, 2003. 

[8] Under section 234A of the Atomic Energy Act of 1954, as amended, 42 
U.S.C. 2282a, DOE has the authority to impose civil penalties on 
contractors for violations of nuclear safety requirements. However, 
under section 234A(d), certain nonprofit contractors (including the 
University of California) are specifically exempted from paying such 
penalties. The Congress has proposed legislation that would remove this 
exemption.

[9] NNSA had specifically required that this position be created.

[10] One oversight group, the National Security Laboratories Board of 
Directors, will report directly to the University's Board of Regents 
and will bring outside expertise to the University. It will have the 
authority to approve major policies and organizational structures, 
monitor performance, and recommend to the regents the hiring and firing 
of laboratory directors. The University also established a Laboratory 
Management Council that will have responsibility to develop, issue, and 
implement appropriate corporate policy, as well as advise the vice 
president for laboratory management on numerous issues such as 
effectiveness of internal controls and performance improvements.

[11] The Lawrence Livermore laboratory's approach to facilities 
maintenance was cited as an example of a program that incorporated 
"promising practices" in a September 1999 GAO report. See U.S. General 
Accounting Office, Military Infrastructure: Real Property Management 
Needs Improvement, GAO/NSIAD-99-100 (Washington, D.C.: Sept. 7, 1999).

[12] U.S. Department of Energy, Report by the Deputy Secretary of 
Energy and the Acting Administrator of the National Nuclear Security 
Administration on the future relationship between Los Alamos National 
Laboratory and the University of California (Washington, D.C.: Apr. 26, 
2003).

[13] The rating scale used for evaluations of contractor performance 
includes five categories: unsatisfactory, marginal, good or 
satisfactory, excellent, and outstanding.

[14] Energy and Water Development Appropriations Act, 2004, Pub. L. No. 
108-137 (2003). This provision applies to both the Los Alamos and 
Lawrence Livermore laboratories. The provision also applies to several 
other laboratories, including the Lawrence Berkeley National 
Laboratory, operated by the University of California for DOE's Office 
of Science. The act required that the Secretary publish a notice in the 
Federal Register and submit written notification to the House and 
Senate Committees on Appropriations within 60 days of enactment. The 
House Committee on Appropriations report accompanying the 
appropriations act states that the committee included this provision 
because of ongoing concerns that the department continued to extend 
without competition contracts for managing and operating its sites, 
some of which had never been competitively awarded in over 60 years. 
H.R. Rep. No. 108-212, at 189-190 (2003).

[15] U.S. General Accounting Office, Internal Control: Standards for 
Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 
(Washington, D.C.: November 1999). The term "internal control" in this 
document is synonymous with the term "management control" as used in 
Circular A-123.

[16] U.S. Department of Energy, Report by the Deputy Secretary of 
Energy and the Acting Administrator of the National Nuclear Security 
Administration on the future relationship between Los Alamos National 
Laboratory and the University of California (Washington, D.C.: Apr. 26, 
2003).

[17] Columbia Accident Investigation Board, Report Volume I 
(Washington, D.C.: August 2003).

[18] Department of Energy, Lack of Sustainable Corrective Actions, Los 
Alamos National Laboratory, NTS-LANL-2003-006 (Washington, D.C.: Mar. 
26, 2003).

[19] Department of Energy, Audit Report on the Dual Axis Radiographic 
Hydrodynamic Test Facility, DOE/IG-0599 (Washington, D.C.: May 22, 
2003).

[20] U.S. General Accounting Office, Radioactive Waste: DOE Has Acted 
to Address Delay in New Facility at Livermore Laboratory, but 
Challenges Remain, GAO-03-558 (Washington, D.C.: May 15, 2003).

[21] Historically, NNSA has depended upon a combination of contractor 
controls and direct federal oversight to help manage the risks 
associated with the work conducted at its laboratories. However, there 
are diverse views on the proper balance between federal oversight and 
reliance on contractors' systems of internal controls. Since 1990, GAO 
and others have criticized NNSA for inadequate federal oversight and 
failure to hold contractors accountable. In contrast, a 1995 Secretary 
of Energy Advisory Board task force report on alternative futures for 
the national laboratories criticized DOE for excessive oversight and 
micromanagement of contractors' activities. 

[22] Department of Energy, Management Challenges at the Department of 
Energy, DOE/IG-0626 (Washington, D.C.: Nov. 12, 2003).

[23] U.S. General Accounting Office, Contract Reform: DOE Has Made 
Progress, but Actions Needed to Ensure Initiatives Have Improved 
Results, GAO-02-798 (Washington, D.C.: Sept. 13, 2002).

GAO's Mission:

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony:

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics.

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading.

Order by Mail or Phone:

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:

U.S. General Accounting Office

441 G Street NW,

Room LM Washington,

D.C. 20548:

To order by Phone: 

 Voice: (202) 512-6000:

 TDD: (202) 512-2537:

 Fax: (202) 512-6061:

To Report Fraud, Waste, and Abuse in Federal Programs:

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470:

Public Affairs:

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.

General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.

20548: