Summary

The Energy Department's (DOE) monitoring of its main contractors at the Savannah River Site in South Carolina--Westinghouse and Bechtel--do not ensure that DOE pays fair and reasonable prices for acquisitions of goods and services from the contractors' subsidiaries. GAO's review of Westinghouse and Bechtel acquisitions uncovered inadequate cost controls and performance problems, unallowable and questionable costs, and inappropriate contract approvals and contract payments. Poor Westinghouse management and limited DOE internal controls were contributing factors. DOE has not complied with its own regulations requiring competition for acquisitions from affiliates. Furthermore, Westinghouse and Bechtel have been able to acquire items from its subsidiaries without the same level of scrutiny that DOE would apply if the purchases were made from nonaffiliated third parties. Various DOE studies point out that problems with acquisitions from affiliates exist elsewhere in the agency.