FOREWORD DOE officials have been criticized regarding their management of management and operating contractors--especially in areas such as: compliance with environmental, safety, and health laws and regulations; maintenance of facilities; and management of major projects. The inspection of the San Francisco Operations Office is the first in a series of operations office inspections. As we conduct these inspections, we expect to: make recommendations to improve the Department's report on the responsibilities and roles of operations report on the differences between the various operations offices in terms of what is expected of them, and the manner in which they perform their respective missions. This report contains information on the San Francisco Operations office and is not intended to represent all operations offices. i LIST OF ACRONYMS USED IN THE REPORT Acronym AMA AMDP AMEP AMESQA AMFMS ASDP ASMA AVLIS CERCLA CICA DOE DP EEO EFM ERDA ETEC FAR FTE FY GC IRS LANL LBL LLNL LREH M&O MIPR Definition Assistant Manager for Administration Assistant Manager for Facilities and Assistant Secretary for Defense Programs Administration Atomic Vapor Laser Isotope Separation Department of Energy Acquisition Regulations Defense Programs Equal Employment Opportunity Engineering and Facilities Management Energy Research Development Administration Energy Technology Engineering Center General Counsel Internal Revenue Service Los Alamos National Laboratories Lawrence Berkeley Laboratory Lawrence Livermore National Laboratory Laboratory of Radiobiology and Environmental Management and operating Military Interdepartmental Procurement Request I. SUMMARY RESULTS OF INSPECTION PURPOSE AND BACKGROUND We have completed an inspection of the Department of Energy's San Francisco Operations Office (SAN). The purpose of the inspection was to: (1) describe SAN's responsibilities, authorities, and resources; and (2) review SAN's organizational structure, resource allocation, and management procedures to carry out these responsibilities and authorities. We focused in particular on how SAN carried out the Department's management and operating contract administration authorities and practices. The emphasis of this inspection on M&O contract administration is because over 70 percent of the Department's fiscal year funding goes to M&O contracts. For example, the Department's most recent "Annual Procurement and Financial Assistance Report" showed that $11.5 billion, of the Department's $15.7 billion in Fiscal Year 1988 procurement obligations went to M&O contracts. Of this $11.5 billion, about $5 billion was subcontracted. At SAN $1.4 billion of its $1.8 billion in FY 1989 funding went to M&O contractors. Because the Department pays for virtually all costs incurred by M&O contractors, the efficient and effective administration of their contracts is especially important to ensure that the funds are expended properly and as program managers planned. M&O Contracts Το For over 40 years the Department and its predecessor agencies have used M&O contracts as the contractual instrument under which its major research, production and weapons facilities are operated. Use of M&O contracts began when the Manhattan Engineer District first contracted with major industrial companies to develop and operate facilities to produce an atomic bomb. facilitate developing the bomb, the M&O contracting concept gave the Government wide latitude in the assignment of work and committed the contractor to do whatever the Government directed. In return, the contractor was assured that it would be reimbursed for virtually all costs incurred. Under the Atomic Energy Act of 1954, the Department has authorities to exempt itself from procurement requirements applied to most other Federal activities. This authority is the basis for Federal Acquisition Regulation (FAR) section 17.6, which allows the Department to establish M&O contract procurement policy and procedures. This has been done in part 970 of the Department of Energy Acquisition Regulations (DEAR). 46-913 0 91 - 2 |