Summary
In December 2000, the Department of Energy (DOE) awarded Bechtel National, Inc. (Bechtel) a contract to design and construct the Waste Treatment Plant (WTP), one of the largest nuclear waste cleanup projects in the nation. Originally expected to cost $4.3 billion and be completed in 2011, DOE now estimates that WTP will cost over $12.2 billion and be completed in late 2019. Weaknesses in DOE's management and oversight of contractors led GAO to designate DOE contract management as a high-risk area since 1990. GAO was asked to determine whether (1) DOE's internal controls are designed to provide reasonable assurance against improper WTP payments and (2) DOE's controls reasonably ensure proper accountability for WTP assets. GAO reviewed fiscal year 2005 and 2006 internal controls by analyzing data and documents, interviewing DOE and contractor staff, and physically observing property items.
DOE's internal controls over payments to contractors on its WTP project did not provide reasonable assurance against the risk of improper contractor payments, particularly given the project's substantial inherent risks. Several factors combined to pose a risk of improper payments on this project, including the size and complexity of this one-of-a-kind nuclear construction project, escalating cost and schedule estimates, and the thousands of charges Bechtel billed to DOE on each invoice. Despite the risks, in fiscal years 2005 and 2006 DOE performed little or no review of contractor invoices or supporting documents for the $40 million to $60 million in charges that Bechtel billed to DOE each month to help ensure the validity of these charges. Instead, DOE officials relied primarily on the Defense Contract Audit Agency's reviews of Bechtel's corporate-wide financial systems and on Bechtel's reviews of subcontractor charges for assurance that the charges were proper. DOE's heavy reliance on others, with little oversight of its own, exposed the hundreds of millions of dollars it spent annually on the project to an unnecessarily high risk of improper payments. DOE also did not adequately oversee the contractor to ensure accountability for assets purchased with WTP contract funds, relying primarily on the contractor to manage such government property without ensuring the adequacy of the contractor's controls. We found numerous internal control weaknesses with Bechtel's property management program, including poor segregation of duties, property system errors, and inadequate property procedures. For example, Bechtel did not timely prepare and submit required reports of lost or damaged property, taking up to 2 years in some instances to report missing assets, such as computers, to DOE. Bechtel also did not always review subcontractors' property management policies and procedures as required or follow up on subcontractor weaknesses it identified to help ensure that its subcontractors adequately managed and safeguarded WTP property in their possession. These property control weaknesses coupled with the lack of DOE oversight created an environment in which property could be lost or stolen without detection.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Linda M. Calbom
Government Accountability Office: Financial Management and Assurance
(202) 512-8341
Recommendations for Executive Action
Recommendation: To improve DOE's review and approval process for contractor billings, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to perform an assessment of the risks associated with WTP contract payments, including subcontractor payments, which should include comprehensively identifying the risks, performing a risk analysis of their possible effects, and identifying the actions--both preventive and detective--to be taken to mitigate those risks.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOE's review and approval process for contractor billings, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to, based on the results of the risk assessment, establish appropriate policies and procedures for effective review and approval of the prime contractor's invoices. Such policies and procedures should specify the steps to be performed for review and approval, the individuals responsible for carrying out these steps, the level of invoice detail needed to perform an appropriate review, and the appropriate documentation to be maintained of that review process.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOE's review and approval process for contractor billings, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to establish a policy and procedures to periodically assess the prime contractor's oversight of subcontractor payments to determine if there are any deficiencies and corrective actions needed and assess whether the controls can be sufficiently relied on to ensure that subcontractor payments are allowable, reasonable, and in compliance with all Federal Acquisition Regulation (FAR) and contract requirements.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to follow DOE's existing requirements to periodically document and assess the contractor's property management program for compliance with the FAR and DOE policy.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to follow DOE's existing requirements to document the adequacy of corrective actions planned and implemented by the contractor to address weaknesses identified in DOE's assessments of the contractor's property management program.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to direct the contractor to implement control procedures to help ensure the timeliness and accuracy of information entered into the property systems.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to review the adequacy of Bechtel's proposed inventory plan for construction materials once submitted, and ensure that the approved plan is properly implemented.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to direct the contractor to establish appropriate controls to ensure that employee exit procedures requiring terminated employees to return tools before they leave are followed.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to direct the contractor to establish a formal policy and procedures for property staff to (1) periodically monitor the government property system for assets with property passes that are due to expire soon, (2) notify property custodians with such assets to renew their property passes or return the items if no longer needed, and (3) ensure that such assets are verified as required.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to direct the contractor to establish control procedures to help ensure that Bechtel staff and subcontractors report lost or damaged government assets to property management in a timely manner so that they can be forwarded to DOE within recently established time frames.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To strengthen DOE's accountability for contractor-acquired government property, the Secretary of Energy should direct the Assistant Secretary for Environmental Management or designee to establish procedures to periodically assess the prime contractor's oversight of its subcontractors in possession of government property to ensure that the prime contractor (1) audits applicable subcontractors' property management programs as required, (2) reviews applicable subcontractors' property management policies and procedures for completeness and consistency, and (3) follows up on and documents resolution of corrective actions in a timely manner.
Agency Affected: Department of Energy
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
