For example, there was a significant backlog of personnel security clearance adjudications. A critical facility at LLNL had not been inspected during the most recent evaluation. The Safeguards and Security organization and management were experiencing constant turnover. There was an insufficient number and poorly trained staff in the Personnel Sécurity Branch. A lack of equipment hampered technical security surveillance at SAN, LLNL and other SAN contractors.

The SAN Manager said that a number of actions have been taken to improve its internal safeguards and security performance and its oversight of safeguards and security operations at LLNL. Among other measures, SAN has acquired additional qualified personnel security specialists; provided formal training for personnel security staff; and, had eliminated the personnel security clearance backlog by December 1989. The SAN manager stated that the acquisition and upgrades of technical security surveillance equipment was requested in the SAN FY90 budget, but not funded. SAN has included these 'requirements in the FY 91-93 budget submission.

Use-of-Force Policy

We found that issues regarding the use-of-force policy may not be fully resolved at LLNL.

The U.S. Department of Justice (DOJ) issued opinions on March 31, 1986, to DOE regarding the use-of-force by Federal and contractor employees in the protection of DOE nuclear facilities. As a result of the March opinions, on June 10, 1986, LLNL instructed its Security Department to fully implement. 10 CFR 1047, Limited Arrest Authority And Use Of Force By Protective Force Personnel. In implementing this order, LLNL required their guards to sign a document entitled "LLNL Policy on the Use of Firearms and Deadly Force." This policy statement described the circumstances under which deadly force could be used.

In our review of 10 CFR 1047, we noted it required that a warning, e.g. an order to halt, be given if feasible before a shot is fired. The LLNL policy statement signed by its guards did not include the requirement to issue a warning if feasible.

We also found that the LLNL policy statement signed by its guards did not address procedures to be followed in the event that offsite "hot pursuit" is required to prevent the theft of nuclear weapons, nuclear devices, or category II quantities of special nuclear material. Further, we did not find the general subject of "hot pursuit" by contractor guards discussed in 10 CFR 1047. It is noted that the March 31, 1986, DOJ opinions stated that

there were "serious reservations" regarding the authority of contractor guards to make warrantless arrests outside of the facility.

The SAN Chief Counsel stated that 10 CFR 1047 was not explicit on the issue of "hot pursuit" by contractor guards. The Chief Counsel said that "hot pursuit" had not been a major issue primarily because a number of the LLNL protective force personnel are also California peace officers. As such, they have the authority of California state police and can engage in offsite pursuit.

LLNL officials told us there were 209 uniformed guards and none were sworn California peace officers. There were, however, 14 other LLNL Safeguards and Security personnel, including 4 investigators, that were sworn California peace officers.

We believe that a Departmental policy should be developed on "hot pursuit" by contractor guards. This policy should include the use of deadly force by contractor guards while in "hot pursuit." At LLNL this issue appears to be particularly important. For example, it is not clear to us whether the 14 sworn California peace officers at LLNL are expected to conduct "hot pursuit" offsite and, if so, would they be expected to follow the DOE or State of California policy on the use of deadly force.

An attorney with Headquarters DOE General Counsel said the DOJ opinions resolved any question regarding Federal jurisdiction over LLNL protective force personnel and indicated that, if the State of California were to prosecute a guard, DOE would seek to move the case to Federal court. The attorney said that the Office of General Counsel was "comfortable" that Federal law would prevail.

A Departmental Deputy General Counsel, in comments provided, stated that... "It should be noted that the statutory authority of these individuals to carry arms and make arrests is a matter which must be carefully coordinated with both the Department of Justice and State of California."

We continue to believe that the issues discussed above need resolution.

6. General Management

The SAN Manager oversees a broad range of general management activities that deal with programmatic, officewide support, legal, and contracting issues. Assisting the Manager are staff within the Office of the Manager, the Office of Chief Counsel (OCC), the Office of External Affairs, and divisions managed by

five Assistant Managers. Altogether, SAN was authorized 310 FTES, of which 25 were assigned to the Office of the Manager, including Office of Chief Counsel and Office of External Affairs, as of July 1989.

These

We identified a number of issues and made eight recommendations regarding the Office of the Manager's responsibilities. issues are summarized below.

Laboratory Appraisals

SAN's annual appraisals of LLNL, LBL, and SLAC may not be a realistic assessment of contractor performance as required by a DOE order and a draft SAN management directive.

An example of our concern is that safeguards and security at LLNL was rated outstanding in the fiscal year 1988 appraisal. However, the SAN Manager later wrote that the preliminary results of a Headquarters evaluation found the LLNL safeguards and security function "wholly unsatisfactory."

Pending Litigation

SAN personnel stated that they were not always notified of pending litigation at LLNL and LBL, as required in the contract. The contract requires that the university keep the contracting officer fully informed of pending litigation by furnishing immediate notice of that litigation. Unlike the contract clauses for SLAC and ETEC, which require immediate written notice as specified in the DEAR, the contract clauses for LLNL and LBL do not specify the method of notification.

In addition, the status of current litigation was not being maintained as described in a 1983 SAN Chief Counsel memorandum. According to SAN personnel, this was due to a lack of staff.

Legal Fees

Fees for outside legal counsel are an allowable expense under the University of California contracts. In addition, the contracts require contracting officer approval for costs for professional services. According to a 1987 SAN contractor procurement systems review, at LLNL the contracting officer must approve personal services agreements above $350 a day.

SAN did not review and approve fees for outside legal counsel retained for the laboratories, because they did not view legal services as professional services. In contrast, the Albuquerque

Operations Office viewed the Los Alamos National Laboratory use of outside legal counsel as a professional service under the same clause of the University of California contract.

In response to our recommendation in this report SAN officials stated that their office of Chief Counsel will be reviewing quarterly statements of cost incurred by outside counsel.

Inventions and Patents

The University of California had not submitted, as required by the Patents clause of the contracts, a set of procedures for avoiding the appearance of conflict of interest. Conflict of interest could result from the University's financial interest in royalty rights from its DOE patents. We believe these procedures are particularly important, since a former LLNL employee had actively solicited commercial licensing agreements for himself for patents owned by the University.

In addition, LLNL attorneys said they gave higher priority to filing applications for patents for which the University has automatic patent rights, rather than to prosecution of patents for the Government.

Press Releases

Only the ETEC and Radiation Laboratory M&O contracts had a provision for prior submission of press releases to SAN for review, although a DOE order requires such review. However, a SAN official said advance review of press releases was not done and could not be done routinely, due to limited staff.

II. PURPOSE, SCOPE, AND METHODOLOGY

We conducted a general management inspection of the San Francisco Operations Office (SAN). One purpose of this inspection was to review the entire range of activities of an operations office, which had not been done in the recent past. In doing this, we sought to examine SAN's responsibilities, authorities, and resources and to review SAN's organizational structure, resource allocation, and management procedures to carry out these responsibilities and authorities.

A separate but related purpose of this inspection was to review how an operations office performed M&O contract administration. Our interest in contract administration was based on the findings of an earlier inspection report. That report, Indemnification of the Department of Energy's Management and Operating Contractors, established that the Department, with few exceptions, paid for virtually all costs incurred by M&O contractors. Given this situation, we believe contract administration of M&O contractors is extremely important to assure proper expenditure of funds. Thus, this inspection focused in particular on SAN's contract administration of its management and operating contractors. Finally, this inspection sought to briefly examine the development of M&O contracting by the Department and its predecessor agencies.

The historical context and authorities in which current M&O contracts have developed are, we believe, important to understanding current contract administration authorities and practices.

SCOPE AND METHODOLOGY

This inspection was designed as the first in a series of general management inspections at DOE operations offices. With this in mind, a generic inspection guideline was developed for use in this and future general management inspections. The generic guide was supplemented with SAN-specific questions.

The inspection guideline was structured to obtain information about mission and functions; operating authorities and responsibilities; internal resources, organization, and procedures; and performance in the areas of M&O oversight, program support, and internal administration.

In conducting the inspection, discussions were held with selected M&O contractor, DOE Headquarters, and SAN personnel. In addition, the inspection team reviewed the DOE Acquisition Regulations (DEAR), M&O contract provisions, DOE orders, SAN management directives, and other documents. Analyses were made