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Mr. Chairman and Members of the Subcommittee, I am submitting for
the record a copy of the attached Office of Inspector General
report entitled "General Management Inspection of the San
Francisco Operations Office." The report was issued in September
The following is a brief summary of the premise for the
inspection and the results of the attached report.
The Department of Energy has management and operating contracts
with about 52 contractors to operate DOE facilities and carry out
a major part of its mission.
These contractors spend
approximately 70% of the Department's procurement funds.
first established, M&O contractors have been reimbursed for
virtually all costs incurred, in return for performing as the
DOE recently issued regulations designed to increase the accountability of for-profit M&O contractors. However, the
fundamental policy, of completely indemnifying and reimbursing
almost all costs remains unchanged for its non-profit M&O
contractors such as the University of California (UC) and
Because of this fundamental policy, effective contract administration is the primary method the Department has of
assuring that funds are spent as intended and are not wasted.
Within DOE, Field Offices have the primary responsibility for
administering M&O contracts.
For these reasons my office decided to conduct general management
reviews of Field Offices, focusing on how they administer M&O
The first general management review was of the San
Francisco Field Office.
Our report on the SAN Field Office review identifies four
impediments to the Department's ability to effectively administer
its M&O contracts.
The four areas are:
First, nonstandard contract clauses limit DOE's authority to
direct its contractors' to follow DOE policy and procedures;
Second, lack of visibility of indirect costs at DOE
facilities limits DOE's control over how its funds are spent
for indirect services;
Third, staffing problems limit SAN's ability to administer
its contracts; and
Fourth, DOE policies and management agreements limit SAN'S
authority to administer its contracts.
The Secretary has taken action in regard to our report issued in September 1990. He immediately tasked the Directors of
Procurement and Administration to provide him with
recommendations for corrective actions.
He also requested the
status of actions already underway, and established a task force
to review and make recommendations on the management and
contractual relationship between DOE and UC.
In closing, the Department--not its M&O contractors--is
ultimately responsible for operating its facilities and assuring
that its funds are properly spent.
Therefore as I stated before,
effective M&O contract administration is essential to DOE
carrying out its responsibilities.