[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
DEPARTMENT OF ENERGY OVERSIGHT: WHAT IS NECESSARY TO IMPROVE PROJECT
MANAGEMENT AND MISSION PERFORMANCE?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 24, 2013
__________
Serial No. 113-76
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
LEE TERRY, Nebraska GENE GREEN, Texas
MIKE ROGERS, Michigan DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee JANICE D. SCHAKOWSKY, Illinois
Vice Chairman JIM MATHESON, Utah
PHIL GINGREY, Georgia G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington DONNA M. CHRISTENSEN, Virgin
GREGG HARPER, Mississippi Islands
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BILL CASSIDY, Louisiana JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
CORY GARDNER, Colorado BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
_____
Subcommittee on Oversight and Investigations
TIM MURPHY, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
Vice Chairman Ranking Member
MARSHA BLACKBURN, Tennessee BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
PETE OLSON, Texas KATHY CASTOR, Florida
CORY GARDNER, Colorado PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
BILL JOHNSON, Ohio GENE GREEN, Texas
BILLY LONG, Missouri JOHN D. DINGELL, Michigan (ex
RENEE L. ELLMERS, North Carolina officio)
JOE BARTON, Texas HENRY A. WAXMAN, California (ex
FRED UPTON, Michigan (ex officio) officio)
(ii)
C O N T E N T S
----------
Page
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, opening statement..................................... 4
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 74
Witnesses
Daniel B. Poneman, Deputy Secretary, Department of Energy........ 9
Prepared statement........................................... 12
Answers to submitted questions............................... 79
Gregory H. Friedman, Inspector General, Department of Energy..... 17
Prepared statement........................................... 19
Answers to submitted questions............................... 103
David C. Trimble, Director, Natural Resources and Environment
Team, Government Accountability Office......................... 29
Prepared statement........................................... 31
Answers to submitted questions............................... 106
Submitted Material
Hearing memorandum, dated July 22, 2013, submitted by Mr. Murphy. 75
DEPARTMENT OF ENERGY OVERSIGHT: WHAT IS NECESSARY TO IMPROVE PROJECT
MANAGEMENT AND MISSION PERFORMANCE?
----------
WEDNESDAY, JULY 24, 2013
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Tim Murphy
(chairman of the subcommittee) presiding.
Members present: Representatives Murphy, Burgess,
Blackburn, Scalise, Harper, Olson, Gardner, Griffith, Johnson,
Ellmers, Braley, Lujan, Castor, Tonko, Green, and Waxman (ex
officio).
Staff present: Carl Anderson, Counsel, Oversight; Charlotte
Baker, Press Secretary; Sean Bonyun, Communications Director;
Annie Caputo, Professional Staff Member; Karen Christian, Chief
Counsel, Oversight and Investigations; Andy Duberstein, Deputy
Press Secretary; Vincent Esposito, Fellow, Nuclear Programs;
Brad Grantz, Policy Coordinator, Oversight and Investigations;
Brittany Havens, Legislative Clerk; Brandon Mooney,
Professional Staff Member; Peter Spencer, Professional Staff
Member, Oversight; John Stone, Counsel, Oversight; Brian Cohen,
Democratic Staff Director, Oversight and Investigations, and
Senior Policy Advisor; Kiren Gopal, Democratic Counsel; Hannah
Green, Democratic Staff Assistant; and Stephen Salsbury,
Democratic Special Assistant.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Good morning, and welcome.
We convene this hearing as part of the committee's ongoing
oversight of the Department of Energy to review how the
Department may improve its project management and its mission
performance.
The hearing will feature testimony from Daniel Poneman, the
Deputy Secretary of Energy, who will describe and explain the
reorganization of the Department's management structure
announced just last week by the new Secretary of Energy, Ernest
Moniz. We will also hear from Greg Friedman, the DOE Inspector
General, and from David Trimble, of the Government
Accountability Office, both of whom will provide important
context to help understand the potential of the Secretary's
plans. Welcome, gentlemen.
The announced reorganization makes some significant changes
to the Department's management structure with a more explicit
focus on project management, so-called enterprise-wide mission
support, and the integration of the agency's science and
applied energy programs. The new structure will transform the
Office of Under Secretary, which previously managed the
Department's energy programs, into the Office of Under
Secretary for Management and Performance. Under this setup, a
new Under Secretary will manage the agency's large and
challenging environmental cleanup responsibilities as well as a
number of agency-wide mission support offices, and national
laboratory operations.
The energy programs, including the Offices of Fossil
Energy, Nuclear Energy, Energy Efficiency and Renewable energy,
the Office of Electricity Delivery and Reliability will now be
managed more closely with the Department's Office of Science by
an Under Secretary for Science and Energy. In addition, the
Secretary plans to reform agency safety and security oversight
and also plans to establish various secretarial councils to
address select policy issues.
On paper, these changes look like positive steps to help
DOE address the tremendous challenges and opportunities before
the agency. On the energy-mission side, we know that the
prospects of North American energy production have surpassed
all expectations in recent years. How this agency integrates
the strength of its world-class science and engineering with
its applied energy and various energy infrastructure programs
to help maximize the benefits of this new reality for the
American public is of key importance.
Meanwhile, DOE's core science and engineering missions must
also confront the Federal Government's tremendous environmental
responsibilities. Fifty years of Cold War nuclear research,
development and weapons production have left behind
contaminated water and soils, and tens of millions of gallons
and millions of cubic meters of waste that must be cleaned up.
Cleanup costs, estimated at more than $250 billion, are a
Federal liability surpassed only by Social Security and
Medicare.
Repeated audits for this subcommittee by GAO have found
that over the past two decades, DOE has suffered from
substantial and continual weaknesses in effectively overseeing
contractors and managing large, expensive and technically
complex projects. But multibillion-dollar projects aren't the
only problem. This past December, GAO told us that DOE did not
have sufficient documentation to assess performance on almost
40 percent of its non-major projects--those costing less than
$750 million.
Lessons generated out of the serious security failure that
occurred one year ago at the Y-12 site in Oak Ridge, Tennessee,
has indicated how the successful reliance on Department
contractors depends on strong and clear lines of accountability
and on meaningful and consistent measurement of contractor
performance. Attempts to institute what is called on the ``eyes
on, hands off'' contractor oversight in recent years weakened
accountability and were taken to a point that Washington had no
clue about the mounting security risks in Tennessee.
We heard testimony from then-Secretary Steven Chu's own
outside advisors that the Department's decentralized management
of the national security sites allowed them to leverage their
unique missions and geography to justify being held to
different levels of security standards. Confused accountability
and conflicting priorities and messages from Washington created
a culture of what is called ``tolerating the intolerable,'' as
one of the Secretary's advisors put it.
That episode relates to DOE's governance of the nuclear
security enterprise, but it points to accountability,
management and oversight issues that require constant attention
across all of the agency's operations and projects if the
agency is to perform its work safely, securely, and protective
of taxpayers' dollars.
Of course, whether and how the Secretary's efforts will
help improve the documented deficiencies in the Department's
performance will remain to be seen. The object of today's
hearing is to build a record that will help the committee
monitor progress and conduct constructive oversight in coming
months. Our goal is to help ensure the Department can sustain
management and performance improvements and develop a culture
of accountability, safety and security that extends throughout
the agency's operations.
[The prepared statement of Mr. Murphy follows:]
Prepared statement of Hon. Tim Murphy
We convene this hearing as part of the committee's ongoing
oversight of the Department of Energy to look particularly at
what is necessary for the Department to improve its project
management and mission performance.
The hearing will feature testimony from Daniel Poneman, the
Deputy Secretary of Energy, who will describe and explain the
reorganization of the Department's management structure
announced just last week by the new Secretary of Energy, Ernest
Moniz. We will also hear from Greg Friedman, the DOE Inspector
General, and David Trimble, of the Government Accountability
Office, both of whom will provideimportant context to help
understand the potential of the Secretary's plans.
The announced reorganization makes some significant changes
to the Department's managementstructure, with a more explicit
focus on project management, so-called enterprise-wide mission
support, and the integration of the agency's science and
applied energy programs.
The new structure will transform the Office of Under
Secretary, which previously managed theDepartment's energy
programs, into the Office of Under Secretary for Management and
Performance.Under this set-up, a new Under Secretary will
manage the agency's large and challenging environmental cleanup
responsibilities as well as a number of agency-wide mission
support offices, and national laboratory operations.
The energy programs--including the Offices of Fossil
Energy, Nuclear Energy, Energy Efficiency and Renewable Energy,
the Office of Electricity Delivery and Reliability--will now be
managed more closely with the Department's Office of Science,
by an Under Secretary for Science and Energy. In addition, the
secretary plans to reform agency safety and security oversight
and also plans to establish various Secretarial councils to
address select policy issues.
On paper, these changes look like positive steps to help
DOE address the tremendous challenges and opportunities before
the agency. On the energy-mission side, we know that the
prospects of North American energy production have surpassed
all expectations in recent years. How this agency integrates
the strength of its world-class science and engineering with
its applied energy and various energy infrastructure programs
to help maximize the benefits of this new reality for the
American public is of key importance.
Meanwhile, DOE's core science and engineering missions must
also confront the Federal Government's tremendous environmental
responsibilities. Fifty years of Cold War nuclear research,
development and weapons production have left behind
contaminated water and soils, and tens of millions of gallons
and millions of cubic meters of waste that must be cleaned up.
Cleanup costs, estimated at more than $250 billion, are a
Federal liability surpassed only by Social Security and
Medicare.
Repeated audits for this subcommittee by GAO have found
that, over the past two decades, DOE has suffered from
substantial and continual weaknesses in effectively overseeing
contractors and managing large, expensive, and technically
complex projects. But multibillion-dollar projects aren't the
only problem. This past December, GAO told us that DOE did not
have sufficient documentation to assess performance on almost
40 percent of its nonmajor projects--those costing less than
$750 million.
Lessons generated out of the serious security failure that
occurred one year ago at the Y-12 site in Oak Ridge, Tennessee,
has indicated how the successful reliance on Department
contractors depends on strong and clear lines of accountability
and on meaningful and consistent measurement of contractor
performance. Attempts to institute ``eyes on, hands off''
contractor oversight in recent years weakened accountability
and were taken to a point that Washington had no clue about the
mounting security risks in Tennessee.
We heard testimony from then-Secretary Steven Chu's own
outside advisors that the Department's decentralized management
of the national security sites allowed them to ``leverage''
their unique missions and geography to justify being held to
different levels of security standards. Confused accountability
and conflicting priorities and messages from Washington created
a culture of ``tolerating the intolerable,'' as one of the
Secretary's advisors put it.
That episode relates to DOE's governance of the nuclear
security enterprise, but it points toaccountability,
management, and oversight issues that require constant
attention across all of the agency's operations and projects--
if the agency is to perform its work safety, securely, and
protective of taxpayers' dollars.
Of course, whether and how the secretary's efforts will
help improve the documented deficiencies in the Department's
performance will remain to be seen. The object of today's
hearing is to build a record that will help the committee
monitor progress and conduct constructive oversight in coming
months. Our goal is to help ensure the Department can sustain
management and performance improvements and develop a culture
of accountability, safety, and security that extends throughout
the agency's operations.
Mr. Murphy. With that in mind, I look forward to an
informative hearing, and I now recognize for 5 minutes the
gentlelady from Florida, Ms. Castor, who is sitting in today
for Ranking Member DeGette.
OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Ms. Castor. Well, good morning, and thank you, Chairman
Murphy. I am glad we are here today to discuss management and
performance issues at the Department of Energy.
This committee has held a number of productive hearings on
these important but sometimes overlooked areas. On this
committee, there is a bipartisan consensus and there has been
for some time regarding the importance of making sure that DOE
is effectively managing its contractors and its environmental
management and keeping the nuclear complex safe.
The recent confirmation of Energy Secretary Moniz and his
efforts to reorganize the Department make this the perfect time
to reexamine the longstanding agency weaknesses because for too
long, the structure and culture at DOE has allowed for
inadequate focus on management and performance. Because of the
size of the agency, the complexity of its mission and its
reliance on contractors--it is the largest civilian contracting
agency in the Federal Government--it has proved difficult to
set up effective performance and benchmarking procedures. But
these tasks are essential in order to evaluate the quality of
the work being carried out by the agency.
So I am interested in hearing from the witnesses today
about the progress the Department of Energy has made in
resolving these issues and about the GAO's and IG's recent work
in the area. The Secretary's announcement last week regarding
DOE reorganization that created a new Under Secretary for
Management and Performance is an encouraging development, and
she must tackle these challenges head on. I am eager to learn
more about how exactly this role will function and how the new
integrated organizational approach will further DOE's mission
and help build a clean energy economy.
It is a positive sign that DOE has a renewed commitment to
resolving some of the thorny issues that have plagued the
agency across multiple administrations. The effort must be
sustained, and while there are no easy answers, I am confident
that these challenges are not insurmountable. The Government
Accountability Office designed contract administration and
project management as a high-risk area in 1990. That it remains
on the list is 2013 is proof of both the mistakes that have
been made since that time and the inherent challenges of
managing one of the most complex Federal agencies, especially
when it comes to nuclear safety and security.
Security lapses at the Nation's nuclear weapons complex
have been well documented from the Los Alamos National Lab to
the shocking breach last year at the Y-12 facility in Oak
Ridge, Tennessee, where an 83-year-old nun broke into what was
supposed to be a highly secured area.
GAO reported recently that DOE and NNSA continue to face
challenges in ensuring that oversight of safety and performance
activities is effective. I would like to hear from DOE today
about what more the agency can do to instill a culture of
safety and what security measures have been put in place over
the past year to ensure that critically important facilities
are protected. The persistent issues at our nuclear facilities
make very clear the need for strong oversight from this
committee. Because DOE so heavily relies on contractors to
carry out its mission activities, effective contractor
governance is critical. But in January of this year, the
Inspector General reported that despite at least 5 years of
effort, NNSA had not yet implemented fully function and
effective contractor assurance systems. NNSA must improve upon
these efforts.
Finally, I continue to be concerned by DOE's longstanding
problems relating to inaccurate cost estimates. The GAO has
reported that cost-estimate practices are not uniform and that
cost-estimating guidance is not up to date. The bottom line
here is that taxpayers' dollars are at risk if the Department
of Energy cannot accurately estimate costs. If we can conduct
world-class nuclear research, then surely we can have
consistent cost-estimating practices. So I would like to hear
from the Deputy Secretary about what is being done to remedy
these problems and how the new management structure will bring
greater focus to these challenges.
The restructuring at the Department of Energy presents an
opportunity for a fresh start with respect to DOE's management
and performance issues. There is bipartisan agreement that
these issues must be taken seriously, so thank you, Chairman
Murphy, for holding this hearing today, and I look forward to
having a productive session.
Mr. Murphy. The gentlelady yields back, and now I recognize
the vice chair of the subcommittee, Dr. Burgess, for 5 minutes.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman, and thanks to our
witnesses for being here today to help us as we study this
subject.
Last month, before the Subcommittee on Energy and Power,
Secretary Moniz testified that he would be addressing the
restructuring of management and performance within the
Department of Energy as one of his top priorities. This
admission comes as welcome news to those of us who have been
concerned for several terms of Congress about the structure of
the Department of Energy. As such, it is the intention of this
hearing to identify what concerns Department officials have
themselves, and going forward to the extent that they can be
remedied.
But I can't help but reference, since the ranking member
brought it up in her opening statement, in a previous
subcommittee hearing many, many years ago when the problems at
Los Alamos Lab were surfacing and apparently the thumb drive
was a relatively new invention and was utilized for the
inappropriate transfer of information, the response of the
Director of Los Alamos was to fill the little USB ports with JB
weld, which did solve the problem temporarily but I have got to
believe that the clever criminal mind could find a way around
that.
Members of Congress are not the only ones who have
apprehensions that the structure of the Department of Energy
has given rise to security risks and mismanagement. Because of
the way the Department of Energy has been set up, in 1990 the
Government Accountability Office designated the Department's
contract management as high risk, saying that inadequate
oversight has left it ripe for fraud and abuse. For the most
part, Department of Energy has tried to address such high-risk
areas, and the GAO has since removed the designation from its
Office of Science. Since being listed as high risk, the
Department of Energy has also taken the initiative to implement
a corrective action plans and hopes to be removed from GAO's
list. Despite this effort, a total of 12 projects are currently
either at risk of breaching performance baselines or expected
to breach performance baselines.
Unfortunate incidents have occurred. A year ago, last July,
antinuclear activists entered the Y-12 complex and sprayed
antiwar slogans on the exterior of a highly enriched uranium
materials facility, a very dangerous exercise for them
personally and certainly exposed the risks of that facility.
To date, the GAO, the Department of Energy, the Inspector
General and Secretary Moniz himself have stated that
reorganization is paramount in order to address future concerns
at the Department of Energy. I will tell you as a physician
that in order to prescribe the right medicine, you need to
correctly diagnose the problem, so with that in mind, I am
looking forward to the testimony of our witnesses today, and
thank you, Mr. Chairman. I will yield back.
Mr. Murphy. The gentleman yields back. Now to the ranking
member of the full committee, Mr. Waxman of California, for 5
minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you Mr. Chairman. I appreciate you
holding this hearing on management and performance at the
Department of Energy.
Secretary Moniz has gotten off to a very good start at DOE,
and I am pleased with the extent to which he has moved quickly
to make positive changes since his confirmation. I think he has
a good vision for the agency.
The energy subject at the top of my priority list is
climate change. Secretary Moniz understands the challenges
posed by rising levels of carbon pollution. He will play a key
role in the implementation of the President's National Climate
Action Plan. His efforts to identify the threats our energy
sector faces due to climate change and to improve energy
efficiency are important.
I am also impressed at the quick action he has taken to
address the subject of this hearing: longstanding DOE problems
with cost management, environmental compliance and physical
security at the Nation's nuclear complex. These are not new
problems at DOE. The agency is the largest civilian contractor
in the Federal Government. For more than 20 years, dating to
the first President Bush, GAO has placed DOE contract
management on its high-risk list.
As one of his first acts, Secretary Moniz announced a
reorganization that will create a new Under Secretary for
Management and Performance. The President has nominated Beth
Robinson, currently NASA's Chief Financial Officer, to fill the
position. This restructuring will put one official in charge of
strengthening environmental cleanup, contracting oversight,
human capital and other important functions. I am interested in
learning today about how this reorganization will strengthen
lines of authority, program oversight, and internal
coordination. I appreciate that Deputy Secretary Poneman is
here today to discuss these changes and to explain to us how
this new focus will represent an improvement over previous
agency efforts. I also appreciate that the DOE Inspector
General and Mr. Trimble from the Government Accountability
Office are here to provide their views on these changes.
Mr. Chairman, I hope this is not the last hearing we hold
on this subject. This committee has held multiple hearings on
the subject of DOE management. Most recently, we held a hearing
in March on the alarming incident involving an 83-year-old
breaking into the highly secure DOE Y-12 facility in Tennessee.
One of the conclusions from that hearing was that NNSA and DOE
and their contractors need more oversight: from within their
own agencies, from Congress, and from independent entities like
GAO and the Inspector General.
The organizational changes announced by Secretary Moniz are
promising. We know that the longstanding problems at DOE will
not be easy to solve. But the Department of Energy's vital
missions to develop new clean energy technologies and protect
our nuclear stockpile are too important to the Nation for us to
ignore.
I look forward to today's hearing and appreciate this
committee's efforts to make sure that DOE's project management
and mission performance improvements are on track.
I want to apologize in advance to the witnesses. I think
every subcommittee on this committee is having meetings
simultaneously this morning, and so I am telling each one when
I am not present I am at the other one, and then I am going to
go fishing. No, no, no, I will be at one hearing or the other,
and I will try to get back here, Mr. Chairman.
Mr. Murphy. We thank the ranking member for being
omnipresent as well, and the same goes for the chairman of the
full committee, Mr. Upton, who will probably be joining us
here, but thank you.
I now want to introduce our witnesses for today. I
mentioned them before but let me give you a little more
background. The first is the Honorable Daniel Poneman, the
Deputy Secretary for the U.S. Department of Energy, and as
Deputy Secretary, he also serves as the Chief Operating Officer
of the Department. Nominated to this position by the President
on April 20, 2009, and confirmed by the Senate later, and in
addition between April and May of 2013 was the Acting Secretary
of Energy. Good to have you here, sir.
Our second witness is the Honorable Gregory Friedman, the
Inspector General for the U.S. Department of Energy. In this
capacity, he is responsible for nationwide independent program
of audits, inspections and law enforcement efforts related to
the Department of Energy's programs and operations. In addition
to these responsibilities, Mr. Friedman also serves as a member
of the Recovery Act Accountability and Transparency Board and
the Government Accountability and Transparency Board.
Our third witness, David Trimble, serves as Director in the
U.S. Government Accountability Office Natural Resources and
Environmental Group. In this role, he provides leadership and
oversight on U.S. and international nuclear security and
cleanup issues including a number of projects conducted for
this subcommittee.
I will now swear in the witnesses. As you are aware, this
committee is holding an investigative hearing, and when doing
so has the practice of taking testimony under oath. Do you have
any objections to testifying under oath? Thank you. The chair
then advises you that under the rules of the House and the
rules of the committee, you are entitled to be advised by
counsel. Do you desire to be advised by counsel during the
hearing today? None of the witnesses wishes to be advised by
counsel, so in that case, if you would please rise and raise
your right hand, I will swear you in.
[Witnesses sworn.]
Mr. Murphy. You are now under oath and subject to the
penalties set forth in Title XVIII, section 1001 of the United
States Code. You may now each give a 5-minute summary of your
written statement. We will begin with Mr. Poneman.
STATEMENTS OF DANIEL B. PONEMAN, DEPUTY SECRETARY, DEPARTMENT
OF ENERGY; GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT
OF ENERGY; AND DAVID C. TRIMBLE, DIRECTOR, NATURAL RESOURCES
AND ENVIRONMENT TEAM, GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF DANIEL B. PONEMAN
Mr. Poneman. Thank you, Chairman Murphy, Ranking Member
Castor and distinguished members of this subcommittee. I want
to thank you all for the opportunity to discuss with you today
the Department of Energy's ongoing efforts to improve its
management and performance. In the past month, the President
has given two major policy speeches, and the work that we do at
the Department of Energy lies at the heart of both of these
issues.
On June 19th in Berlin, the President echoed the nuclear
security vision he first laid out in his 2009 Prague speech,
calling on the global community to secure vulnerable materials,
combat nuclear terrorism and proliferation, and build a
sustainable and secure nuclear energy industry. As long as
nuclear weapons exist, it is also this Department's
responsibility to ensure that the U.S. nuclear stockpile
remains safe, secure, and effective.
Less than a week later at Georgetown University, the
President laid out a commonsense plan to reduce the effects of
climate change by cutting dangerous carbon pollution,
increasing the production of clean energy, and doubling down on
energy efficiency. As the President said, and I am quoting, ``A
low-carbon, clean energy economy can be an engine of growth for
decades to come.'' By taking action to reduce carbon pollution,
the United States can spark new jobs and industries building
cleaner and more efficient energy technologies.
These presidential priorities demand the best from us in
terms of our performance, and so last week Secretary Moniz and
I announced a reorganization that will better focus our efforts
on all four mission areas of the Department: nuclear security,
solving the Nation's energy challenges, advancing fundamental
science, and environmental stewardship. For the Department to
carry out our critical work in these areas, the Secretary has
made clear that we must renew our focus on improving our
management and performance in addressing the challenges that
the Department has faced for its entire history. And in doing
so, we will follow the President's direction to us earlier this
month when he instructed his Cabinet to develop an aggressive
management agenda for his second term, and I am quoting the
President again, ``that delivers a smarter, more innovative and
more accountable government for its citizens.''
The first major component of the reorganization expands the
portfolio of the statutory Under Secretary for Science to
include the energy technology portfolio, establishing the
Office of the Under Secretary for Science and energy.
Successful innovation for implementing the President's all-of-
the-above energy strategy requires the ability closely to
integrate basic science, applied research and technology
demonstration. This is especially important in light of the
urgency of addressing climate change and the need rapidly to
develop technologies to materially alter the trajectory of
greenhouse gas pollution.
The second major component of the reorganization
consolidates the primary mission and operational support
functions of the Department within the Offices of the Under
Secretary for Management and Performance and also includes the
Office of Environmental Management and the Office of Legacy
Management as part of its structure and functions. Moving the
Office of Environmental Management under the purview of the
Under Secretary for Management and Performance brings the
Department's strongest project management capabilities resident
within the Office of Acquisition and Project Management
directly to bear on one of the Department's most vexing yet
vital challenges: cleaning up the nuclear waste that is a
legacy byproduct of the Cold War.
In addition, transferring the Offices of Environmental
Management and Legacy Management from the Under Secretary for
Nuclear Security will allow this Under Secretary to focus
exclusively on the NNSA's forward-looking missions while
entrusting the environmental management mission to an
organization devoted to solving management challenges. Aside
from increasing the management resources available to oversee
large projects, consolidating mission-support functions in the
Office of the Under Secretary for Management and Performance
will place a senior policy official dedicated to the task of
management improvement on a full-time basis. The consolidation
of these mission-support functions such as the Office of
Management and Administration and the Office of the Chief Human
Capital Officer will clarify and strengthen the lines of
authority and accountability of these functions. The goal will
be to institute enterprise-wide solutions to common challenges
faced by program officers across the complex such as
information management, acquisition and human resources. Within
the Office of Management and Performance, we will also
establish a new organizational unit: the National Laboratory
Operations Board. It will have responsibility for oversight of
administrative, mission support and infrastructure management
of the National Laboratory System.
The third component increases coordination across the
Department for a number of important cross-cutting policy
issues that affect a number of programs across the Department.
The Secretary has established the following secretarial
councils: an Energy Council, a National Laboratory Policy
Council, a Revised Credit Review Board including the
establishment of a new Risk Committee, and the Cybersecurity
Council.
I would like to bring to your attention two final areas in
which we are seeking to improve coordination between program
offices: policy formation and physical security management.
First, we are examining opportunity for consolidating and
upgrading the policy analysis functions of the Department. This
capability will be needed to support the government-wide
Quadrennial Energy Review the President called for in his June
25th climate speech at Georgetown University. The core of our
new systems analysis capability will be formed from the
existing Office of Policy and International Affairs. We will
also examine opportunities to draw from the policy expertise of
the program offices.
A second area under careful study is security management. I
have previously testified before this subcommittee on the
Department's management of security and improvements we have
made in the last year's Y-12 incident but this a matter of such
serious that we must always continue our efforts to improve our
performance, and I very much take account of the wise words of
the chairman and ranking member here on that subject this
morning. This includes thorough examination of broad issues of
governance as they relate to the security of our category I
nuclear materials. In recent months, we have been engaged in a
thorough review of our security management, not just within
NNSA or at the labs but enterprise-wide including assignment of
authority and responsibility, contracting, performance
measurement and accountability.
Finally, the Department under the leadership of Secretary
Moniz has made management improvement a top priority, and we
are aggressively pursuing a broad agenda of initiatives. The
Secretary has challenged us to further elevate our performance,
and I appreciate the opportunity to appear before this
subcommittee to discuss our efforts to do so and of course, I
would be pleased to answer any questions from subcommittee
members. Thank you.
[The prepared statement of Mr. Poneman follows:]
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Mr. Murphy. Thank you.
Mr. Friedman for 5 minutes.
STATEMENT OF GREGORY H. FRIEDMAN
Mr. Friedman. Mr. Chairman, Ms. Castor, members of the
subcommittee, I appreciate the opportunity to testify at your
request on the major challenges facing the Department of
Energy.
The Department is, as has been described, responsible for
executing some of the Nation's most complex and technologically
advanced missions. The Office of Inspector General provides
independent oversight of the Department's operations to promote
economy and efficiency and to detect and prevent fraud, waste
and abuse.
My office annually identifies what it considers to be the
most significant management challenges facing the Department.
For 2013, this list includes operational efficiency and cost
savings, contract and financial assistance award management,
cybersecurity, energy supply, environmental cleanup, human
capital management, nuclear waste disposal, safeguards and
security, and stockpile stewardship. Because of their
complexity, these challenges are not amenable to immediate
resolution. Therefore, they must be addressed through a
sustained effort over time.
In 2012 and 2013, due to what appeared to us to be obvious
looming budget constraints, we identified operational
efficiency and cost savings as the Department's preeminent
management challenge. In doing so, we presented the Department
with five suggestions to optimize operations. These include
applying the Quadrennial Technology Review strategic planning
concept to the Department's entire science and technology
portfolio, eliminating costly duplicative National Nuclear
Security Administration functions, evaluating, consolidating
and/or rightsizing the Department's laboratory and technology
complex, reprioritizing the Department's environmental remedial
efforts with the goal of funding work on a risk basis, and
realigning the current structure of the Department's physical
security apparatus. These suggestions provide only a starting
point for further discussion and examination. They represent
approaches that we readily acknowledge are difficult to
implement, highly controversial and politically challenging.
Virtually all of our work intersects with one or more of
the management challenges that I alluded to earlier. In my
written statement, I have summarized three recent reports that
are reflective of this relationship. These include first
contract management, project management and quality assurance
concerns with the Department's contractor-managed construction
of the Waste Treatment and Immobilization Plant--the WTP--in
Hanford, Washington. The current cost estimate for the WTP
project is over $12 billion, or three times larger than its
original budget. Second, issues relating to the implementation
and effectiveness of contractor assurance systems by NNSA and
its contractors, and finally, efforts by the Department to
reduce international travel as a means of reducing Federal
expenditures.
In its invitation letter, the subcommittee expressed
specific interest in the status of project management at the
Department. Your interest reflects a concern that we share and
one that is clearly of prime importance to the Department's
senior leaders. The Department currently has several major
projects including the WTP that are significantly over budget
and face considerable delays. As I have testified previously,
there are several common threads central to these and related
contract and project management problems. Improvements are
needed to ensure that project scopes and supporting cost
estimates are realistic, manageable, recognizing the technical
challenges facing many Department efforts. The change control
management is adequate and project baselines are updated on a
real-time basis to maintain their effectiveness as a primary
tool. Contract terms are kept current to track with project
events, contractor performances measured against established
metrics including realistic and reliable cost estimates,
Federal staffing is sufficient both in terms of size and
expertise to provide effective contract and project oversight,
and finally, the project have focused, empowered and consistent
Federal project manager leadership throughout their lifecycle.
As Deputy Secretary Poneman has discussed, Secretary Moniz
recently unveiled a new structure for the Department, which is
designed to focus on key programmatic priorities and agency
performance and management. We are hopeful that the new
initiatives, as widespread as they are, as has been described
the Deputy Secretary, will help to address the Department's
management challenges. We look forward to working with
Secretary Moniz, Deputy Secretary Poneman, program officials
and the Congress to enhance departmental operations and in so
doing to advance the interest of the U.S. taxpayers.
Mr. Chairman and members of the subcommittee, this
concludes my statement. I would be pleased to answer any
questions that you may have.
[The prepared statement of Mr. Friedman follows:]
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Mr. Murphy. Thank you. I apologize. I had to step out of
the room for a second.
Mr. Trimble.
STATEMENT OF DAVID C. TRIMBLE
Mr. Trimble. Chairman Murphy, Ranking Member Castor and
members of the subcommittee, my testimony today discusses our
observations on the management challenges facing DOE. My
observations are drawn from our past work, which has
highlighted the challenges DOE faces in project and contract
management, security and safety, and producing reliable
enterprise-wide management information.
Regarding project and contract management, DOE has made
progress in managing the cost and schedule of non-major
projects--those costing less than $750 million--and in
recognition of this progress, we narrowed the focus of our
high-risk designation to major contracts and projects.
Major projects, however, continue to pose a challenge for
EM and NNSA. All of the ongoing major projects continue to
experience significant cost increases and schedule delays. UPF
costs have increased seven fold, up to $6.5 billion, for a
project with a reduced scope and 11 years after the schedule.
MOX costs have increased five fold, up to $7.7 billion, with 15
years added to the schedule. Notably, since 2010 alone, cost
increases for MOX have totaled $2.8 billion for a project
originally estimated to cost $1.4 billion. WTP has tripled in
cost to over $12 billion with a decade added to its schedule.
Moreover, we found that DOE prematurely rewarded the contractor
for resolving technical issues and completing work. We are
currently assessing DOE cost-estimating policies and practices
and plan to issue a report later this year.
Regarding security, over a decade after NNSA was created to
address security issues, the Y-12 security incident has raised
concern that NNSA has still not embraced security as an
essential element of its missions. Multiple investigations into
the security breach identified significant deficiencies in NNSA
security organization, oversight and culture. DOE and NNSA have
taken a number of actions including repairing security
equipment, reassigning key security personnel, and firing the
Y-12 protective force contractor. DOE and NNSA's leadership
have also committed to additional actions such as revamping the
security oversight model.
DOE has a long history of security breakdowns and an
equally long history of instituting responses and remedies to
fix these problems. In recent testimony, the leadership of the
NNSA security task force examining the Y-12 incident identified
problems with NSSA's Federal security organization. Notably, in
2003, we reported on these very same problems, problems which
have persisted or resurfaced, notwithstanding numerous DOE
initiatives to fix or address them. The key challenge going
forward will not be how to implement security improvements but
how to sustain them.
Regarding safety, in September 2012, we testified before
this subcommittee noting that DOE's recent safety reforms may
have actually weakened independent oversight. Notably, since
this testimony, reports by DOE have continued to identify
safety concerns at Pantex and other DOE sites.
In regard to important enterprise-level management
information such as budgetary and cost data, in June 2010 we
examined NNSA's program to operate and maintain weapons
facilities and infrastructure and found that NNSA could not
accurately identify the total costs for this congressionally
directed program, and NNSA's budget justification understated
these costs by over $500 million.
In July 2012, we found deficiencies in NNSA's validation of
budget requests for its programs and concluded that these
weaknesses impacted the credibility and reliability of those
budget estimates. According to NNSA's officials, the agency's
experience and trust in its contractors minimized the need for
such review. Without accurate cost and budget data, DOE will
continue to be surprised by cost and schedule problems in its
projects and programs, and Congress will not have the
information it needs to oversee the billions provided yearly in
appropriations.
In closing, let me observe that the Department's most
significant mission accomplishments such as keeping the
stockpile safe and reliable, successfully closing nuclear
facilities such as the old Rocky Flats plant, consolidating
nuclear material, and energy and science breakthroughs are too
often overshadowed by repeated project cost overruns, schedule
delays, glaring security incidents and safety mishaps. Until
these key management issues are addressed, such problems will
continue to cast a shadow over DOE's mission accomplishments. A
key step in addressing these longstanding issues will be for
DOE to embrace sound project management, credible security and
security programs, and reliable management information systems
as key elements of the Department's mission instead of
impediments to this mission.
Thank you. I would be happy to answer any questions.
[The prepared statement of Mr. Trimble follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you. I will begin questioning here and
recognize myself for 5 minutes.
So Mr. Poneman, let me understand your role here. You are
Deputy Secretary and therefore the Chief Operating Officer of
the Department, and you had a direct role in managing the
program execution and the mission-support functions of the
agency and directly responsible to the Secretary for managing
and implementing these organizational challenges, and you have
been doing it for about 4 years. So lots of firsthand
experience. So would you explain why the Under Secretary for
Performance and Management will help improve project management
in the Department overall?
Mr. Poneman. Yes, sir. I am very excited about this
opportunity precisely because, as you noted, I have been the
chief operating officer, and all of the burden you, yourself,
and ranking members have identified as well as those we have
just heard from the other witnesses show you what we are up
against. We had frankly improvised an Associate Deputy
Secretary in the first term to try to enhance our capacity to
tackle these problems, recognizing the full weight of the
problems and, frankly, having the leadership of Secretary Moniz
from his earlier experience at the Department as Under
Secretary, including his more recent experience writing very
thoughtfully about how to organize the Department better to
tackle these challenges as a member of the President's Council
of Advisors on Science and Technology.
It was clear that the opportunity presented by taking one
of the available Under Secretary positions in the Department
and having that individual, an individual of authority and in
whom the Secretary and myself could propose confidence to work
full time on these problems was absolutely critical to getting
our arms around this very daunting agenda.
Mr. Murphy. I appreciate the level of what you are facing
here too, and so how would we be able to measure progress, and
are you setting some performance baselines?
Mr. Poneman. So it would depend on the precise mission
area. There are some, Mr. Chairman, across-the-board kinds of
metrics that we can apply, and let me just start from the
outset and responding also to the ranking member's comment,
this aspect of metrics and cost estimation and measurement of
performance is absolutely critical to our successful. If you
don't measure it, you don't manage it.
But let me just take the largest example, these very large,
complex capital projects. We have to have a system of
evaluation to measure continuously whether we are on or off
budget, whether we are on or off schedule, and, at the same
time, to measure whether we are on or off meeting the spec of
the project itself. That is to say, it is not enough to have a
project being on schedule and on budget if it doesn't do the
job, and Mr. Trimble alluded to this peripherally in his
comments. So we have to make sure that we take the orders that
are in place in terms of cost estimation under Order 413-B and
actually measure it and have them upload it into our business
management systems that we put into our quarterly reviews of
the business quarterly reviewed by the Government Performance
and Requirements Act, and that is a start on how we are going
to measure our performance.
Mr. Murphy. Thank you. Two other quick questions I want to
get into in terms of lessons learned and remanaging things.
Other the past 3 years, this committee has dealt with a number
of cases--Solyndra, Fiscar, A123--where the loan or grant
assessments just turned out to be plain wrong, and we have had
a number of people before this committee talking about this.
You had a policy interest to push these out, but the data, as
it turns out, just didn't add up for this. So how will the
management changes ensure that decisions are made based on
sound analysis moving forward?
Mr. Poneman. Well, first, Mr. Chairman, let me note that
the portfolio as a whole, which has been very thoroughly
reviewed by many including by the late Mr. Herb Allison, is
actually performing quite well. We have the largest wind farm
in the world operating quite well, the largest photovoltaic
plant operating quite well. Tesla has repaid its loan 9 years
early. We do the best due diligence we can. These programs are
intended to promote innovation, and unfortunately, not every
case works out. That having been said, we have done a number of
things recommended by Mr. Allison and we have brought new
leadership and new staffing inside the Loan Program Office to
make sure that, again, we have a very strong ability to monitor
the existing portfolio, that we have a new risk officer set up
to look precisely at the questions of risk that you are
addressing, and that we have a much more open and transparent
set of data flowing up from the program office to the Secretary
and the Deputy Secretary.
Mr. Murphy. I appreciate that. It is something we will be
watching. A lot of data was there before. We just thought a lot
of it was also ignored. Multiple departments are saying the
Solyndra loan wasn't a good idea. So it isn't just a matter of
having the data but making sure you have a system in place to
have honest reassessments of that.
One other quick question in my time. In your testimony you
said that President laid out a commonsense plan to reduce the
effects of climate change by cutting dangerous carbon
pollution, as you put it, increasing the production of clean
energy and doubling down on energy efficiency. I noticed the
Department released a new rule for microwave oven efficiencies
and included a calculation for the social cost of carbon, and I
would like to know if the agency considered doing a formal
notice and comment to the microwave rule before using this
figure. Did anyone in your office participate in any
discussions about this social cost of carbon before using it in
the DOE microwave rule, and can you please submit to us emails
and documents to help us understand why that was done.
Mr. Poneman. Mr. Chairman, I was present for some
discussion of social costs of carbon. I was not--I would have
to get back to you with details on how it related to that
particular rule.
Mr. Murphy. That is something this committee is going to
want to review in an open and scientific way.
Mr. Poneman. We would be very happy to supply that.
Mr. Murphy. I see my time is expired. Now we will go to Ms.
Castor for 5 minutes.
Ms. Castor. Thank you, Chairman Murphy.
It is very important and a positive sign that the
Department of Energy has taken action where with the
reorganization to address the persistent flaws in management
and oversight of the Department of Energy. We have seen that in
many cases there is duplicative activity and unnecessary
expenditures because of lack of coordination effective
oversight of contractors, and DOE has been facing these
problems for years, and your predecessors in multiple
Administrations from both political parties have made little
headway. So is this new Under Secretary of Management and
Performance a sign that the Department of Energy has learned
the lessons of the past?
Mr. Poneman. Congresswoman, we are always seeking to learn
lessons from the past. I personally am learning lessons every
single day, and our management principles require us to do
that.
Ms. Castor. What makes it different this time after
decades?
Mr. Poneman. Well, if I may suggest a couple of things,
Congresswoman. Number one, both Secretary Moniz and, as the
chairman alluded, I have been working on this for some period
of time so we understand from having witnessed firsthand some
of the very problems that you all have describe, what has
caused some of those problems. We believe that the structure
the Secretary has designed here is well suited to given us the
capacity to do better in achieving these results, and I would
actually echo Mr. Trimble's comments. The test here isn't, can
we impose a new bureaucrat structure on the building. The
question, can we sustain it? The results, in our judgment, will
be the proof in the pudding. If we can in this reorganization,
which we think suits the problems well, start to deliver those
kinds of results this committee and our Department want to see,
that will take root in the Department and the people, the
professionals will----
Ms. Castor. Give us a specific example, something the IG or
GAO has highlighted that you think or you can show early signs
in progress.
Mr. Poneman. I will give you one very specific example.
Many of you have alluded to the fact that since 1990 we have
been on a high-risk list. The GAO has given us five specific
taskings on what it takes to get out from under the high-risk
list. The Office of Science got out in 2009. I will tell you,
Congresswoman, we were very gratified that the projects up to
$750 million came out from under? Why did that happen? Because
they at GAO said what you need to do is break down very big
projects to chunkable sizes that can be managed more
effectively. That is simply one example of many I could cite of
where we have taken the advice from the GAO, applied it and
actually obtained a much better result in terms of projects
coming in on budget and on time.
Ms. Castor. And Mr. Friedman, I know you agree that the
contractor workforce needs more vigorous oversight at the
Department of Energy, correct?
Mr. Friedman. I do.
Ms. Castor. You have stated that again and again. What
recommendations--highlight your most important recommendations
from the IG's office to ensure that DOE contractors are meeting
their performance standards.
Mr. Friedman. Well, I think the Deputy Secretary referred
to it and others have as well, and that is the question of
sustainability. I think it is an excellent point. I have been
around long enough, Ms. Castor, unfortunately in a sense to
have seen the Department through valleys and mountaintops for
years, and invariably a fix is imposed or attempted but it
loses power after a period of time. We get lethargic, or the
Department gets lethargic. So sustainability, it seems to me,
in that process is key. So if the reforms the Deputy Secretary
has described, if they address the problem, if we sustain them
going forward, we really will have moved the Department
forward.
Ms. Castor. In your testimony, you noted that contractor
weaknesses were not effectively communicated to senior
management officials. Do you believe that the new Under
Secretary for Management and Performance could help strengthen
the lines of communication?
Mr. Friedman. I hope that is the case, and it is more than
just the mere establishment of the Under Secretary's position,
which I think is an interesting concept and I think has great
possibilities. It has to permeate the entire organization, that
people at all levels in the field, in headquarters feel that
they can surface problems to the Department's leadership in a
way that, number one, of course, they won't feel they will be
subjected to retaliation, but more importantly, that they can
see meaningful steps taken in response to that information to
try to address the underlying root causes of the problems.
Ms. Castor. Thank you.
Mr. Trimble, GAO has reported that DOE's contractor
assurance systems are producing inconsistent results across the
agency. Can you elaborate on this finding, and what are the
ramifications of these inconsistencies and how can DOE improve?
Mr. Trimble. Well, I think the cost overruns and schedule
delays are indicative of that. I think what we have seen in our
ongoing work looking at MOX and UPF is, some concerns where
there are--the information system being reported to the
government, there are red lights on the dashboard indicating
problems, and the key question we are getting at is, what is
being done when those lights go off and are people recognizing
them and are they taking action and is the action effective.
And so again, it is sort of the proof-in-the-pudding argument.
It is, you can establish systems but then do you have processes
to act on the information you get and does the organization
support that. There is a parallel here between, I think,
between the problems we have seen on the security side where
the culture has been highlighted where you can have rules, but
if the organization and culture is not to abide by the rules,
things don't happen. There is that same challenge here on cost
and schedule management. You can have processes and
organizations but everyone has to walk the talk for it to work,
and that is sort of where the, you know, again a part of the
challenge facing the Department is going to lie.
Mr. Murphy. Thank you. The gentlelady's time is expired. I
will recognize the vice chairman, Dr. Burgess, for 5 minutes.
Mr. Burgess. Mr. Trimble and Inspector Friedman, let us
follow up on that about walking the talk a little bit. How do
you know, Inspector Friedman, that stuff is going to get
reported in the management plan you are proposing that now
there is greater flexibility and freedom for people to report
problems that are identified?
Mr. Friedman. Dr. Burgess, I am not instituting--I don't
manage the Department obviously, and I am not instituting the
new process; the Deputy Secretary and the Secretary are. But I
think I understand your question. I think the test will be if
the very core issues that we are talking about here and the
reason that you are holding--one of the reasons that you are
holding this hearing, if those issues are addressed through an
open line of communication and we can demonstrate that the
communications are working, we reduce the number of complaints
we get from employees who say that their concerns are not being
addressed. We can gauge that quite effectively as to whether
the process is working.
Mr. Burgess. And so from that, do you have confidence that
the process is working?
Mr. Friedman. At this point, I don't have that confidence.
If we reconvene at some point in the future, if we have time to
see the new system in place and take a look at it and evaluate
it, I will be more than happy to come back and give you my
review.
Mr. Burgess. Well, I suspect we will. You know, you have
been kind to be with us every times and I suspect that we will
have an opportunity to talk.
Secretary Poneman, can you address that?
Mr. Poneman. Yes, sir. It is a work in progress. We
actually measure it quite regularly. We have self-evaluations.
We have third parties come in, and they evaluate. I personally
have spent hours and hours speaking to 4,000 people out at
Hanford making sure people understand there can be no
retaliation for people coming forward expressing their
concerns. We had an--I put out quarterly a notice saying anyone
who has a differing professional opinion can be heard, and we
actually had the experience of a differing professional opinion
be sustained as we reviewed it. There is never grounds for
complacency. As others have said, it is a cultural issue. We
have to keep working at it. We will never be perfect but we are
trying to improve it at a cultural level, at an institutional
level, and we are trying to measure it on a periodic basis. You
made the very good point in your opening statement, we have to
measure these things or we are not going to know if we are
doing better.
Mr. Burgess. Yes. A chance to measure is a chance to cure.
Mr. Poneman. Your point about the diagnosis is critical,
by.
Mr. Burgess. Well, just as far as developing that culture
of accountability within the Department, how do you feel that
that is going? I don't get the impression from Mr. Trimble that
is quite where it needs to be but where do you think?
Mr. Poneman. I think, Congressman, there too it is a work
in process. Actually, the sunshine of some of the things the
President has required in terms of disclosure of our results on
the Internet I think is a very powerful tool. As has been noted
by many members of this committee, much of work is performed by
contractors. They are indeed sensitive to how their work is
evaluated and how that is disclosed. Again, I think we have
improved.
One critical thing I would like to note, Congressman, is,
we have made it a policy of the Department to align the
taxpayer incentives and interest with those of the contractors
so we cannot get into a situation in which a contractor can do
well and the taxpayer do poorly.
Mr. Burgess. Let me ask you a question about that, because
obviously there is a lapse. They involve scientists, and you
want your scientists to do your best work, and how do you
ensure that that is deliverable for the President and the
Congress and the taxpayer does not get in the way of delivering
on the scientific product required?
Mr. Poneman. You have just put your finger on an absolutely
critical factor. People sometimes lose sight of the fact that
these labs have produced the most awesome intellectual property
in history beginning with the weapon that won World War II. The
last thing we want to do is to stifle that creativity. So what
we need to do is give these people the tools and the authority
to get their work done, but we have to have in exchange
transparency into what they are doing because we are the owners
on behalf of the taxpayer to have the transparency to hold them
accountable to the results that we expect from them.
Mr. Burgess. And since you brought up Los Alamos, I took a
visit out there in 2005. It was a long time ago. And their
security detail, they apparently have been tested and found
wanting at some point in the past. They were fairly sensitive
about it and demonstrated that sensitivity to me with what they
were able to do, which is why we had the hearing on Y-12, I
didn't understand how those people could be in the audience
that day. I thought they should be interred in someplace
because of the response of the security team when you wander
into the kill zone. You don't ask questions; you take them out.
So what am I missing on that?
Mr. Poneman. Congressman, you are not missing a thing. We
discussed this before. That was an unforgivable breach. The
cameras were out. The guards were not responding properly. We
have taken all of the immediate steps that we could including
aligning the security force subcontract under the management
and operations contract including removing the responsible
individuals, but we are continuing, as I said earlier, to look
at the broader systemic changes that we need to do to make
sure, per Mr. Trimble, that these changes that we have started
are sustained.
Mr. Burgess. Would you give advice to the protesting public
to not try this again?
Mr. Poneman. Yes, I surely would, because what was a very
terrible, terrible episode could have been tragic with loss-of-
life consequences.
Mr. Burgess. Yes, it could. Thank you, Mr. Chairman. I will
yield back.
Mr. Murphy. Thank you. Mr. Lujan for 5 minutes.
Mr. Lujan. Mr. Chairman, thank you very much, and thank you
and to the ranking member for calling this important hearing.
Mr. Poneman, could you help me understand how the
reorganization is going to help with management of the national
labs? There are a number of new entities concerning the labs
that have different responsibilities and reporting chains.
These include the National Lab Operations Board, which reports
to the new Under Secretary of Management and Performance, the
National Lab Policy Council reporting to the Secretary, in
addition to the Under Secretary for Science and Energy has
primary responsibility for many labs while the Under Secretary
for Nuclear Security has responsibility for the rest. Is this
going to result in more inspections and transactional oversight
at the labs or less but more effective inspections and
oversight, as a number of experts have called for?
Mr. Poneman. Congressman, I don't think we will--the metric
won't be number of inspections per se but rather the results
which will endeavor to measure, but let me try to make sense of
what sounded a bit intensive in terms of the kind of oversight
from your comment.
The National Laboratory Council is absolutely critical to
the point Dr. Burgess just raised. We need to make sure that we
get together with all the lab directors, the fountainhead of
our innovation, and think through what are we trying to do as a
Nation in support of the President. The very first meeting that
Secretary Moniz had out of town in a rare time we traveled
together was to Oak Ridge to meet with all of them. That is a
big thing, what we are trying to do. The lab operations board
that will report to this new Under Secretary will deal with all
of those issues like real estate and IT purchases and
cybersecurity that will enable the smart scientists to do the
innovative work. So actually, it is a much more operational
hands-on thing. I don't think you are going to find it a
cluttered system in practice, but we would be very happy to
stay in touch with you as we roll it forward.
Mr. Lujan. That is what I am hoping, that we don't have a
cluttered system, that there is not just layers and layers that
are put on top of each other but that we do follow many of the
suggestions that have been put forth. That way is effective,
that the time that is used to be able to go in and look is
effective and we are able to identify things. Do you foresee
any structural changes to NNSA besides moving Environmental
Management from NNSA to the Under Secretary for Management and
Performance?
Mr. Poneman. Congressman, I will make two comments. Number
one, as I have alluded to, we have received further thoughtful
input from a number of wise people including some of whom I
think have visited with this committee on structural changes to
enhance our security, our physical security, especially for
category I nuclear materials, and we are actually, even as we
speak, having people look deeply at that so Secretary Moniz can
make some decisions in the near term. That said, as you well
know, there is a congressional mandated panel that has been
empowered to look at these governance issues, and as they
continue their work, we will of course be in touch with them
and look forward to hearing what their results are and seeing
what further actions, if any, are required.
Mr. Lujan. Under the reorganization, the technology
transfer coordinator would be put within the Office of the
Under Secretary for Science and Energy. While this Under
Secretary does have responsibility for most of the labs and
basic and applied science programs at the Department, it does
not include the NNSA laboratories. What will be done to ensure
that tech transfer coordinator will be able to coordinate
technology transfer activities across the entire Department,
which spans two Under Secretaries and will not prevent the NNSA
laboratories from participating?
Mr. Poneman. Congressman, the entire thrust of the
reorganization has been to put stronger leadership at the top,
precisely so that we can enhance our ability to catch these
cross-cutting issues. I can tell you because we have already
been doing it, this is the practice that we have already
engaged in, and one example which would apply equally when we
get the new tech transfer coordinator is cybersecurity. We have
cybersecurity all across all portfolios of the Department, and
we have now constituted the Cybersecurity Council to make sure
that we get that kind of cross cut, that we don't miss a bet in
terms of getting the tech transfer. Some of the innovation out
of the national labs could be very, very important in the
science and energy portfolio.
Mr. Lujan. I am certainly hopeful that there won't be more
burdensome restrictions put on the NNSA laboratories versus the
other labs when it comes to tech transfer, so I am encouraged
by that, Mr. Poneman.
Mr. Friedman, there was an incident in which in New Mexico
you identified a contractor that was overpaid. You brought it
to the attention, based on a request from NNSA, where minimum
requirements have to be met by contractors in order for these
contractors to get paid. Can you talk about that and what we
can do to prevent that from happening in the future?
Mr. Friedman. Well, one of the problems we have, Mr. Lujan,
DOE has an incredible structure of prime contracts and a
significant subtext of that is the subcontractors and secondary
and tertiary subcontractors that it has. One of the
responsibilities of the prime contractors is in fact to make
sure that the subcontractors are responding appropriately, that
are paid appropriately, and the taxpayers are treated fairly in
this process. One of the promising things that we have seen is
a number of referrals from prime contractors including those in
New Mexico, if I might, of cases where they believe the
subcontractors have not acted appropriately in one way or
other. So we take those cases very seriously, and a lot of our
work is done with the subcontractors to the prime contractors,
that is the national labs in the case of New Mexico.
Mr. Lujan. I appreciate that. And Mr. Chairman, this may be
an area where the committee as a whole, that we can try to get
all of the additional information or whatever has not been
released thus far in regards to this instance and maybe some
others so that we can see if there is going to be any
additional information released on this matter or whatever has
not been public. So I appreciate that, Mr. Chairman, and look
forward to working with you and the committee on this.
Thank you again for the responses.
Mr. Burgess [presiding]. I acknowledge the gentleman's
comments and now recognize the gentleman from Virginia, Mr.
Griffith, 5 minutes for questions, please.
Mr. Griffith. Thank you very much, Mr. Chairman.
The other chairman asked some questions that raised some
issues for me that I hadn't really planned on getting into
today, but I guess this is as good time as any.
When you talk about trying to, you know, reorganize and
make things more efficient, are you just rearranging the deck
chairs or are we actually having some personnel changes? And
let me tell you what I am referencing in specifics. I have
always been bothered by the Solyndra situation, and the
response, as yours was today, is, you know, we try to do what
we can and our due diligence, etc. And I accept that
notwithstanding the fact, as the permanent chairman said of
this subcommittee, but there were warning signs out there. I
have always been concerned with the subordination issue and the
fact that to me, in my opinion, it was horrendous legal advice.
I really don't think it was well done, and I am wondering if
that department is also being reorganized in any way to try to
make sure that when Congress says that money is not to be
subordinated, that that doesn't mean you can do a loan at 11
and subordinate at 12 because you didn't do it at the time of
the closing, and that was basically what we heard in that
investigation. Can you answer that for me?
Mr. Poneman. Let me offer a couple of comments,
Congressman. First of all, in terms of your appropriate
question of the structural changes, we didn't start with this
reorganization; we started, of course, with the Allison report.
As you saw, he said the health of the portfolio was strong.
That said, he had a number of very important practical
suggestions in terms of transparency, accountability, customer
service, portfolio management, and many of those have been
implemented, point one. Point two, that included making sure we
had very highly capable people in the positions. Point three, a
lot of those people are very much focused on portfolio
management, and there is a brand-new leader of the Loan Program
Office, and finally, in this reorganization, Secretary Moniz
wants to make sure that the Credit Review Board itself, which
sits above the Credit Committee, is strengthened so that we
will have the ability in the normal kind of boardroom fashion
of doing due diligence on transactions to make sure we bring
those kinds of disciplines to bear.
Mr. Griffith. One of my concerns there was, it appeared
that the legal counsel that was being given was seeing--and
this is my interpretation, nobody ever said this--saw itself as
trying to come up with a legal opinion to justify what the
Department of Energy wanted to do as opposed to protecting the
American taxpayers, and I would hope that the legal department
would see as a part of their duty at the very least is to make
sure that what they are doing is lawful because the laws that
Congress pass are intended to protect American taxpayers, and
the decision to subordinate cost $170 million to the American
taxpayers.
Mr. Poneman. Congressman, I would have to dig back into the
details. I would just say my recollection of the legal advice
received at the time was there was a higher chance of a higher
recovery from a going concern than from a fire sale, and the
question at the time that it was presented was whether
subordination would meet the statutory requirement that the
Secretary was obliged to seek the maximum recovery for the
taxpayer. But we can obviously follow up on that.
Mr. Griffith. And I would like you to follow up on what has
happened because while I think that may have been the party
line, so to speak, when you looked it, the rules that were
required to follow and make that decision, even though
subordination was not lawful, the following rules in other
situations to do that were also not followed, so it was just a
big mess and it cost the taxpayers a lot of money.
Inspector General, in that same regard, at the time I asked
some questions that you were unable to answer for me because
the investigation had not yet been completed. I am not asking
you to answer questions that you can't and probably use another
day to get into that, but has that investigation been completed
on the internal workings at the Department of Energy in regard
to the subordination issue?
Mr. Freidman. Mr. Griffith, both the Justice Department and
our office are prepared to say that there is an active
investigation, criminal investigation ongoing, and as much as I
would love to be able to answer your question, and I truly
would----
Mr. Griffith. I just wanted to know if it was still
ongoing. I appreciate that. Thank you very much.
Back to you, Deputy Secretary. As a part of this, another
issue has been brought to my attention, and I am not going to
tell you I am well versed in it, but it does concern me, and
that relates to the National Nuclear Security Administration
and the National Security Complex and Pantex plant management
contracts, and in that process, GAO has said that there was an
upheld--they upheld a procurement protest. My concern on that
is, is that apparently, according to a press report that has
been brought to me, in three instances, the source selection
authority at the 11th hour changed some of the criteria, and I
know there are all these big companies jockeying for position,
but at the 11th hour three matters were changed, and that
changed who got the contract. On its face, that doesn't smell
right to me. Are you all looking into that matter and trying to
make sure those things don't happen?
Mr. Poneman. Congressman, precisely because if I understand
which procurement you are talking about, it is still open and
we are still working on it. I cannot comment on what we are
doing, but obviously we do everything possible to make sure
that we hew to all of the requirements, statutory, regulatory
and ethical, that apply.
Mr. Griffith. Well, you can understand my concern. When
rules are changed at the last minute, it is hard for people to
honestly compete.
Mr. Burgess. The gentleman's time has expired. We will go
to the gentleman from Texas, Mr. Green, 5 minutes for your
questions, please.
Mr. Green. Thank you, Mr. Chairman.
In today's testimony from the GAO and the Inspector
General, we have heard how many instances of significant cost
increases for major environmental management and nuclear
programs, cases where actual contract costs far exceeded the
original cost estimates. This is a problem we need to solve in
order for the DOE and Congress to make informed decisions about
allocating resources. We must have accurate and reliable
information.
Mr. Trimble, can you give us some examples of how
inaccurate cost estimates impact the agency's ability to
function efficiently and effectively?
Mr. Trimble. Sure. Aside from the examples I gave in my
testimony, you know, the obvious ones--MOX, WTP, UPF--you have
other issues involving, say, projects, for example, the Pit
disassembly building, which entered design. It was supposed to
be an adjunct to the MOX facility, $730 million spent before it
was canceled. I think what is interesting about these cases is
that in all of them, at the very beginning, the critical
decision point one, there is no requirement currently for an
independent cost estimate. So DOE can start a project and go a
long time before it hits the decision point two requirement
where you actually have an independent cost estimate
requirement. But we have already spent tens if not hundreds of
millions of dollars on these projects. So you start on a path.
The control weakness hits you early. You spent a lot of money
and it takes a long time before you are in a position to
rectify that.
Mr. Green. What are the reasons we have seen so many cost
increases in the past, and how can DOE do a better job of
producing cost estimates that are accurate?
Mr. Trimble. Well, in the past we have recommended that at
CD-1, the decision point early in the process, that there an
independent cost estimate. We have had past recommendations,
for example, to have a cost estimating policy. Right there is
guidance but there is not a policy. The Department had
guidance. We first reported on this issue in 1983. In the mid-
1980s, they instituted a policy. They rescinded the policy
around 1995. They put guidance into their processes but there
is no cost policy which would then tell contractors, hey, you
are coming up with an estimate for this project, these are--
this is how you are going to do the estimate or these are the
rules I want to see, what are the marks you have to hit to give
me a quality estimate. Right now we don't have that. There is
guidance that creates looseness in the system and problems.
Mr. Green. Deputy Secretary, obviously DOE is not the only
Federal agency that has trouble with cost estimates. What steps
has DOE taken to improve the reliability and uniformity of its
cost estimates?
Mr. Poneman. A couple things, Mr. Chairman. I think it is
very important to point out a clarification here. Under our
directive 413-B, which applies to the big capital projects, for
the first time we insisted that each of these main gates of
identifying the mission, picking the main technology and so
forth that we do have cost estimation. There are different
terms of art of what you call it, but one of the reasons,
frankly, sir, why we have gotten in trouble is because people
have said, oh, this is too early in the project, you can't tell
anything at this point, to which I say, you know, if you are
going to St. Louis or Mars, you should be able to give me the
right number of zeros, OK. So we actually have tried, and I
invite you to look at 413-B and we will have your staff briefed
on it. That tries to get at exactly the problem that Mr.
Trimble has identified in response to your question.
Also, it is not only a question of having the requirements
in there but a question of having the metrics, and so instead
of requiring a constant manual uploading of data from the
contractor to the Federal oversight and so on, we are trying
to, through what we call the PARS software system, make sure
that the very same data that is entered by the contractor is
transparent from, as we say, from stem to stern and that we
have got real-time accurate data on what is happening on the
ground because the real problem enters into it, sir, when we
get a gap in the reporting of what is happening on the ground
and when it comes to our attention.
Mr. Green. Mr. Trimble, do you think that is progress, and
is it the solution to the issue identified?
Mr. Trimble. Well, I think we may disagree a little bit on
how robust the 413 requirements are at CD-1, and I think that
that would be a great question for the record, and we can give
you a more robust answer on that.
Mr. Green. I appreciate that. Thank you, Mr. Chairman. I
yield back.
Mr. Burgess. The gentleman yields back his time. The chair
recognizes the gentleman from Texas, Mr. Olson, 5 minutes for
questions, please.
Mr. Olson. I thank the chair, and good morning to our
witnesses. This is not news, gentlemen, but one of my
responsibilities under the Constitution of the United States is
to provide oversight on behalf of the people of Texas 22 of the
Executive Branch agencies and oversight of the Department of
Energy. The Department's budget remains in the tens of billions
of dollars. It covers topics as diverse as financial support
for emerging solar power technologies to safeguarding
technology responsible for the most potent weapons mankind has
ever created. Guaranteeing commonsense execution of DOE's
mission is not just needed to protect taxpayer dollars, it is
needed for national security. There have been problems in the
past but with the new Secretary and a new organizational
structure, I see this hearing as the first step to prevent
problems in the future.
And my first question is for you, Mr. Friedman--I am sorry.
This is for you, Secretary Poneman. In Inspector General
Friedman's testimony, he laid out a number of suggestions that
he recommends as solutions to some of DOE's problems, specific
ideas from reducing duplication at NNSA to reevaluating
security. And many of these sound like excellent suggestions
but they are similar to suggestions from 2012. My question,
sir, is, what is the process at DOE for considering suggestions
that the Inspector General makes? What keeps them from being
heard but ignored?
Mr. Poneman. Congressman, with all due respect, they are
heard but they are very, very closely heeded to, and under the
Inspector General Act, if my memory serves me, of 1978. This is
an absolutely critical function in the Department. I would be
the first to tell you that in an organization, as you say,
about a $25 billion budget, 115,000, 110,000 people working, we
have a lot, a lot of problems, and one of our critical tools is
the Inspector General reports. They come in, they get seen at
the highest levels by the Secretary and myself, and we take
them very, very seriously. We have not, and I suspect we never
will, hit 100 percent in terms of executing against all of the
ideas that come in, and in fact, sometimes we have responses
and we have different approaches and so forth. But I cannot
exaggerate--it is an invaluable tool, and we will continue to
use it to enhance our performance.
Mr. Olson. Thank you, sir. And I am a Texan, so I am not
looking to provoke a little battle here, but Mr. Friedman, I
would appreciate your comments on the issue as well.
Mr. Friedman. I couldn't have posed the question better if
I had been sitting where you are sitting and you were sitting
where I was sitting, Mr. Olson.
Mr. Olson. You don't want my seat, trust me.
Mr. Friedman. The Deputy Secretary, I have known him for a
number of years, and he has been extremely responsive to our
reports, and the way he has described it is absolutely
accurate. I said in my testimony that the five recommendations
for cost savings that we have enunciated in 2 years
sequentially are politically challenging, they are highly
controversial and very difficult for anyone to grasp, get their
hands around and really implement. So I am a realist, and I
understand that while I hope they're considered and I hope they
receive serious thought, I anticipate that implementation if it
ever is to happen is going to take some time.
Mr. Olson. Well, we need to correct these problems, as I
mentioned. Some of these issues are very important to our
national security and our country.
One further question for you, Secretary Poneman. You and
Secretary Moniz held a DOE town hall, a forum that showcased
some of your new organizational changes. There are two points
that were discussed that were better communication and
improving DOE's ``tooth to tail ratio.'' Reducing redundancy
and streamlining your work are both noble goals. However, it
seems to me that there have been long questions about this
broader philosophical approach that has been taken in running
this Department. How far will this reorganization move DOE
forward in improving mission execution? What are some of the
next steps that are being considered?
Mr. Poneman. Well, Congressman, it was just announced here
a week or so ago, so it is still in early stages. The first
thing we have to do is to make sure that we have got the people
encumbering these new positions that will have the capacity to
achieve these outcomes--point one. Point two, some of the
things we have already started, and the first thing I will just
note because we haven't had the meeting, I chair the
Cybersecurity Council, which is crossing cutting. Secretary
Moniz himself just attended ex officio to show his commitment
to this cross-cutting effort. We have got to get better in
terms of various IT systems that they can talk to each other so
that they can be robust in making sure that our most secret
secrets that have you said are our sacred obligation to protect
are fully protected. It is going to be a work in progress, and
we welcome--I sincerely mean this--we warmly welcome the
oversight of this committee to make sure that we stay on track.
Mr. Olson. Thank you. I have run out of time, but what a
great comment about the Secretary. Being a military officer,
one thing the leader can do is get involved with the troops and
show them he cares, and it sounds like he is doing that.
I yield back the balance of my time.
Mr. Murphy. Thank you. I now recognize the gentleman from
New York, Mr. Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair.
For the first time, GAO earlier this included climate
change in its high-risk list. GAO recognized the reality of
climate change and found that the Federal Government is not
well positioned to address the fiscal exposures presented by
climate change. I would like to hear from GAO about the risk of
inaction and how the Federal Government can respond to this
given threat.
Mr. Trimble, why did GAO decide to include better
management of climate risk on its high-risk list this year?
Mr. Trimble. The addition of climate change, it is really--
the way we phrased that is the adaptation of response to
climate change from a Federal perspective, and the rationale on
that is really just looking at the potential Federal exposure
to the potential liabilities that are associated with extreme
climate events. Those changes run from sort of being the
insurer of last resort. They involve being a significant
landlord of large Federal assets such as NASA facilities, DOE
facilities, and they also involve sort of agricultural and
Federal lands issues. So when you look at sort of the
portfolio, sort of chits or pieces that we have in the game,
all of those areas have potential implications. Changing
climate has a potential implication for all those in terms of
the Federal Government's exposure to liabilities.
Mr. Tonko. And you noted in the high-risk report that
climate change adaptation is a risk mitigation strategy to help
protect vulnerable communities. If we fail to do things like
raise a river or coastal dykes or build higher bridges, what
kind of adverse impacts might be experienced?
Mr. Trimble. Well, absolutely, and I think that is what is
interesting about this. If you look at some of the experiences
with the recent extreme weather events, there are some very
simple engineering changes that could have been built in. A lot
of the associated costs and economic repercussions of those
events would have been mitigated. So for example, how you
attach a bridge to its moorings, the height of the bridge, in
terms of insurance exposure of homes, do you have a backflow
check valve. There are many, many simple things that are sort
of low cost that can help mitigate that exposure. So that is
part of the adaptation focus.
Mr. Tonko. You know, I had witnessed in my district a
couple of years ago Irene and Lee, and the exponentially
increased volume of water flowing through some of the creek
beds, and so as we displace this infrastructure with the
ravages of Mother Nature, it became imperative, I believe, for
government to build back intelligently, effectively, and to
build the same stretch, same span or same height on a bridge
would just be wasted money. So it is interesting to hear you
say that.
What recommendations do you have for us to address the high
risk of climate change?
Mr. Trimble. With that, I may have exhausted my knowledge.
I know we have several reports dealing with adaptation to
climate change, and I know we have made recommendations to the
Administration on coordinating Federal response to climate
change sort of at the Executive Office of the President level,
to coordinate policies for each agency. I know there has been a
lot of action in that regard.
Mr. Murphy. Is your mic on?
Mr. Tonko. Under Secretary, growing threats of climate
change, critical government infrastructure could be at risk.
What is DOE doing or what does it hope to do to protect
critical infrastructure and more generally to mitigate the
effects of climate change?
Mr. Poneman. This is a huge challenge, Congressman. We are
working on it not only in terms of our own enterprise, but we
are, as you know, responsible as the sector-specific agency for
homeland protection for protecting the electric grid, the
natural gas pipeline system and so forth. We have been from the
first day of--actually from before Hurricane Sandy striking at
the center of the Federal effort working very closely with FEMA
and with the President to make sure that we are taking those
steps first on the mitigation side so that we can reduce the
risks of these raging storms and floods the President has
alluded to, but also we are working in terms of the area of New
York and New Jersey reconstruction, smart grid, distributed
generation, micro grids so that you can have a self-healing
grid in the case of a devastating storm so that the critical
places like hospitals and gas stations and places like that
actually are able to respond better.
It would be hard for me to exaggerate, sir, the amount of
time and effort that this is taking. It is a much larger chunk
of our effort in the Department that in the past, precisely
because the problem has become so much greater.
Mr. Tonko. All right. The ounce of prevention here could be
a pound of cure when you look at the comeback and disaster aid
monies that are required not only to restore and rebuild but to
do it effectively and intelligently.
Mr. Poneman. Absolutely.
Mr. Tonko. I thank you very much.
Mr. Murphy. I thank the gentleman. The gentleman yields
back. Now Mr. Scalise is recognized for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
having the hearing, and I appreciate our witnesses coming to
testify.
When we got the reports back, and you all have addressed a
number of the items and the problems that were identified, but
when you look at the overall DOE budget, you see that 90
percent of the budget is, in essence, contractors. You know,
when you look at the agencies that have addressed some of the
problems, the two agencies that were still remaining within DOE
that were still considered high risk have over 64 percent of
the budget, so there is still a lot of the budget that is still
out there, and one of the points I want to bring up, and I will
start with Mr. Friedman, is going back to 2007, DOE and NNSA
have required contractors to implement a self-assessment
strategy to identify deficiencies. I want to ask you how you
feel that process is working where you are in essence allowing
the contractors to assess themselves to identify deficiencies,
considering there is such a large percentage of the overall DOE
budget that is going towards contractors. How does this process
work? Is that the best method to get us the efficiencies that
we are looking for?
Mr. Friedman. Well, we issued a report on that, Mr.
Scalise, several months ago on the contractor assurance
process, and frankly, we think it is not ripe and it is not
mature and therefore it is not as effective as it needs to be
to satisfy basic requirements to protect the interest of the
U.S. taxpayers. There was a disconnect, for example, between
contractor metrics and the pay-for-performance mechanism that
was in place. There were a number of other weaknesses that we
identified in that report. So does it have promise? I guess it
has potential, but at this point we don't think the Department
nor NNSA are there.
Mr. Scalise. I want Mr. Poneman to be able to address this
as well. How do you plan on addressing those deficiencies that
were outlined in that report?
Mr. Poneman. Congressman, I take a very old-fashioned view
of this. It is true, and you know, one should note, this
committee has noted several times, our national security
imperative, this structure goes literally back to the Manhattan
Project. This is how it was set up because President Roosevelt
understood that he didn't know how to have the chemistry and
physics and so forth. So it started a long time ago. But my
view is still the same one that you would have if you are
building a house: the contractor has got the expertise but you
are the owner. That is what GOCO means: government owned,
contractor operated. What we need to do, Congressman, in my
judgment is to make sure that as an owner, just like any owner
would in a house situation, you have got the expertise to hold
the contractor accountable, and the mechanisms that we are
talking about in this set of reforms in addition to the things
we have been trying to do in terms of contract management, in
terms of transparency of metrics that come out of their
performance are intended to put us in that position to be a
smart owner.
Mr. Scalise. And Mr. Trimble, do you have any follow-up on
what this says about the DOE's ability to rely on contractors
for self-assessment?
Mr. Trimble. Well, we have ongoing work on the contractor
assurance model. Right now we also have an ongoing review
looking at the security reforms. Both those are in process, so
we will have more to add later. I think as the Inspector
General notes, we have observed some of the problems, and I
think in addition to the Y-12 incident, there was a case at
Livermore where in 2009 the DOE found--gave the security force
there one of its lowest ratings, and this was 6 months earlier
then that inspection the local site office had given a 100
percent rating. So again, it is a matter of how do you execute
this and can the system be made to work, and I think notably
since Y-12, you know, the DOE has backed off from that and has
taken a new approach, and that is part of what we are looking
at in our new review.
Mr. Scalise. Thanks. My last----
Mr. Friedman. Mr. Scalise, could I just amplify on my
comment earlier?
Mr. Scalise. Yes, if you can do it real quickly.
Mr. Friedman. I will. And the answer, it seems to me, is
there nothing wrong with contractor self-assessment as long as
there is adequate government validation.
Mr. Scalise. Yes, there has got to be some kind of extra
layer of somebody looking over the shoulder, and two eyes are
better than one, especially when one of those sets of eyes is
the person looking at themselves in the mirror. I want to make
sure there is another set of eyes checking that.
I want to talk about cost estimates because that has been a
problem, getting cost estimates right, and both Mr. Friedman
and Mr. Trimble, you have indicated the need to develop
realistic timetables and baselines to try to address that, but
you have also talked about trying to break up these larger
projects into smaller chunks, you know, whatever the
terminology you are using is. Can you do that, and can you
still get reliable baselines and cost estimates as you are
going forward? How do you plan on doing that? I would ask Mr.
Poneman or Mr. Trimble.
Mr. Poneman. Well, yes, sir, Congressman, that precise GAO
recommendation we followed, and because we followed it, I think
that is one of things that led to better performance that led
us to get out from under the high-risk list for our projects
less than $750 million. Yes, you can sir. Under Order 413, you
can have cost estimates at each of our gates of our capital
construction projects, mission identification, selection of
technology and so on, and that is what we have got to do.
Mr. Burgess [presiding]. The gentleman's time is expired.
Mr. Scalise. Thank you. I am out of time. I yield back the
balance.
Mr. Burgess. I recognize the gentlelady from North
Carolina, 5 minutes for your questions, please.
Mrs. Ellmers. Thank you, Mr. Chairman, and thank you to our
panel for being here today.
Mr. Trimble, you indicated in your opening statement that
even in recent work concerning the DOE's management of projects
smaller than $750 million, about 30 or so projects did not
provide sufficient information and documentation for an
assessment of their performance. Can you explain why this is
significant and what your feelings are on that?
Mr. Trimble. I think this is an issue we have discussed
with the Department and they have acknowledged and agreed to
work on this, but it goes back to the justification and the
paper behind the decisions, and I think this issue has come up
in another context, but if you don't have the information and
the file on which the decisions are based, it is hard to
imagine from an outsider's perspective how the decision was
made in the first place and was it made for the right reasons,
but it is also impossible to validate the decisions that were
made.
Mrs. Ellmers. So it really seems like there is really not a
process of full evaluation?
Mr. Trimble. Or there is a process but it is not being
followed.
Mrs. Ellmers. I see. So you believe the tools are there, it
just isn't necessarily----
Mr. Trimble. Not necessarily followed in all cases.
Mrs. Ellmers. OK. Do you see any other area where lack of
information is a hindrance in information gathering in regard
to contractors?
Mr. Trimble. Well, I mean, there is lots of--this could go
in a lot of different directions. I think one of the questions
that comes up quite often is, DOE uses an earned value
management system to track the performance of contractors.
Every time we go through where there is a re-baselining, it is
sort of all your road signs from tracking the progress until
the project gets suspended because you have to re-baseline it,
and so your milestones for tracking the performance of that
contractor sort of get put on hold. But since this process can
take a year, two years, 18 months----
Mrs. Ellmers. That time----
Mr. Trimble [continuing]. You are sort of flying blind for
a little while. Now, they take measures to address that, but
that is a significant----
Mrs. Ellmers. And time is money. I have used that recently
so many times.
Now, does this also relate to contractor assurance
programs? I mean, is this all related?
Mr. Trimble. It is not directly related. It is an enabling
issue in terms of more information and the quality and the
robustness of your information would support any system.
Mrs. Ellmers. Thank you, Mr. Trimble.
Mr. Deputy Secretary, it looks like you want to make a
comment about that.
Mr. Poneman. No. I have not heard Mr. Trimble speak to this
fact before but he has identified a very important problem,
which is exactly that. When your project goes off its baseline,
this system that is set up to clock it, it basically comes
useless to you, and that is the point of maximum danger to have
unrestricted cost growth and losing control over projects. So
we to a first order have got to put a tourniquet on that
particular problem and then we need to have a systemic fix.
Mrs. Ellmers. Suggestions on a systemic fix?
Mr. Poneman. Well, look, to me, it all comes down to real-
time from-the-ground data with the minimum amount of human
intervention in uploading from system to system to system. We
need to know how much pipe is getting laid per day. We have to
know what valves are going on, and to keep track where the big
subcontracted components are coming in, where is that on
schedule, even if we are between two baselines, and we just
have got to get a set of metrics and a way to measure that we
can monitor real time.
Mrs. Ellmers. Mr. Friedman, would you like to expand on
that?
Mr. Friedman. No, but I think the issue with regard to
getting off baseline and that interregnum before you get back
on baseline is what we have found to be a very, very dangerous
period, and it sometimes lasts far too long. So compressing
that period would be ideal as far as we were concerned. In
other words, once you find you are off baseline, re-baseline
the entire package, have a changed control system that makes
sense, so that you have made the whole system rational going
forward. Otherwise we lose the progress that we have made in
terms of controlling the project.
Mrs. Ellmers. Great. Well, thank you.
Mr. Chairman, I yield back the remainder of my time. I
think that was an excellent discussion.
Mr. Murphy. The gentlelady yields back. Thank you. I now
recognize Mr. Johnson of Ohio.
Mr. Johnson. Thank you, Mr. Chairman, and I too want to
thank our panelists for being here this morning.
Mr. Poneman, can you please explain the difference between
the Department-wide mission support offices and program
offices?
Mr. Poneman. Yes, sir. The program offices are the ones
that are dedicated to the nameplate mission, so maintaining a
safe, secure and effective arsenal, making scientific
breakthroughs, transforming our energy economy, cleaning up
legacy waste. The support functions are all the things that you
need to make that stuff work so that you do it legally,
financially responsibly with adequate attention to safety and
security. Those are enabling elements that support the mission.
Mr. Johnson. OK. How do these mission support offices work
to ensure that management practices and especially cost
estimating are consistent and effective across the Department?
Mr. Poneman. Well, two points, Congressman. So far, we took
some of the elements that were in our earlier organization
where we had a procurement office separate from the contract
management office because those were sources of expertise on
this very point of cost estimation, and we have merged those in
a unified office under a very strong leader. But secondly,
Congressman, the reorganization that we have described here
today is intended to give that office the kind of support at
the senior executive level of Under Secretary to make sure that
those disciplines can apply enterprise-wide.
Mr. Johnson. OK. What authority do mission support offices
or the new Under Secretary managing the offices, for that
matter, what authority do they have to tell program offices
what to do when those offices operate under the authority of
another Under Secretary?
Mr. Poneman. Well, of course, all of these authorities flow
out of our statute, and under the authority that goes to the
Secretary, all roads lead up to the Secretary and to the Deputy
Secretary. So I can assure you, Congressman, that when I hear
from my health and safety people that a program office has a
problem, the program office may not disregard that. We are one
enterprise, and I have often said in our team, the mission
elements have got to own support, they have to feel that they
own the security, fiscal responsibility, but the support
offices have to feel that they own the mission as well and so
we try to get that kind of a cross cut.
Mr. Johnson. I certainly understand that that is how it
should work in principle, but my 26 \1/2\ years in the Air
Force and working with major program offices and being a
program manager myself, yes, all roads may lead to the top but
if they're not going down the same street with responsibility
and accountability aligned, that creates dysfunction, and it
basically then becomes a personality-driven organization rather
than a process-driven organization.
Mr. Poneman. Congressman, that is a very important insight
there. One of my early lessons in this is when I was assisting
Mr. Lee Hamilton and Senator Baker when we were asked by
Secretary Richardson to look at the hard drive lost at Los
Alamos back in 1999, that is what we found. We found that the
organizations that were committed to the missions did not
really feel that personal responsibility for safety and
security that was essential to avoid exactly the problem you
described.
Mr. Johnson. Sure. Do you think that this might create more
problems by stovepiping mission support?
Mr. Poneman. Oh, to the contrary, Congressman. I think what
we are fighting against, in other words, we believe that this
reorganization is going to synthesize and bring together
mission and support in a much better way than has been done
before. We wouldn't do this reorganization otherwise.
Mr. Johnson. It doesn't appear that the Chief Financial
Officer is in this new structure. Is the CFO an important
mission support office, and does the CFO have more mission
support authority than the management office or the CIO, for
example?
Mr. Poneman. Well, the CFO, Congressman, is under the Under
Secretary for Performance and Management so that would be right
alongside the other mission support offices such as Management
and Administration, so that is--obviously the CFO has huge
enterprise-wide responsibilities and it is very, very important
but in terms of the structure, it is embedded inside that Under
Secretary office.
Mr. Johnson. I associate my same concerns that I previously
mentioned. You know, at least in the corporate world, if all
money decisions don't flow through the CFO, and you have those
stovepiped organizations, that makes it difficult as well.
Mr. Friedman, you indicated that Federal staffing must be
sufficient in terms of size and expertise to provide effective
control and project oversight so that projects have focused,
empowered and consistent Federal project management leadership
throughout their lifecycle. Regarding expertise--and I have run
out of time--what deficiencies have you observed in expertise
over the years?
Mr. Friedman. Well, as a general point, Congressman
Johnson, we have found that the Federal managers did not feel
they could exercise the necessary oversight over the
contractors because they felt the contractors were so far
better prepared for the job and the task that they faced. So
certainly they need to be recognized professions. They need to
get recognition within the Department and outside the
Department, and the contractors need to understand that they're
dealing with people on par who are prepared to take necessary
actions to ensure the government's interest is protected. In
terms of personal expertise, I don't believe we have found that
people were inadequately trained on a personal basis.
Mr. Johnson. All right. Thank you, Mr. Chairman. I yield
back.
Mr. Murphy. The gentleman's time is expired. Now to the
gentlelady from Tennessee, home to many Energy projects, Ms.
Blackburn.
Mrs. Blackburn. That is exactly right, and I welcome you
all, and Secretary Poneman, I want to come to you and talk a
little bit about Y-12, and we all know that April 29th, the GAO
upheld a procurement protest regarding the combined contract,
therefore, the National Security Complex and Pantex plan, and
it was a $22 billion over 10 years contract. You are familiar
with that?
Mr. Poneman. Yes, Congresswoman, but as I testified a
little earlier today, since that contract action is still under
review, we will not be able to in this session comment in
detail about the workings of that.
Mrs. Blackburn. All right. Well, I appreciate that, and I
appreciate that there was a desire to get a $3.27 billion
savings in that contract. I think that what I would like to
know is, how can our committee be assured that NNSA's nuclear
production mission can be safety and effectively carried out
under the big cost savings requirement of that type of
procurement? What is the guarantee that you can give us?
Mr. Poneman. Well, I can tell you, Congresswoman, that we
are operating under presidential direction in terms of what we
need to do modernize and recapitalize the complex. We have an
extraordinarily detailed stockpile stewardship management plan,
and of course, given the limitations under the Budget Control
Act and the sequestration, we need to make sure that we make
every dollar count towards that mission, and you have the full
attention of the Secretary and myself and the NNSA to that end,
and of course, this has to be carried out through these
contracts that you are talking about.
Mrs. Blackburn. Let me ask you this. As you look at what
has transpired in this process, has there been any thought
given to revisiting the premise of the RFP when you are looking
at some of these contracts? Have you all, or Mr. Friedman, have
you all given any thought to that? Mr. Poneman first.
Mr. Poneman. Well, again, Congresswoman, I don't think that
I am permitted to speak to the ins and outs of the RFP since it
is still under consideration, but what I can tell you is that
we are always looking at those things that we can do to do the
mission of the Department for the President and the Nation
safely and securely and in a manner that is cost-effective, and
that would always inform any RFP that we have.
Mrs. Blackburn. Mr. Friedman?
Mr. Friedman. Congresswoman, I don't really think we have
anything to add. I don't think we have looked at that with any
specificity.
Mrs. Blackburn. OK. I appreciate that. I think that it is
fair to say, it is an issue that is tremendously important to
us. We have a lot of concerns about sacrificing the mission for
the cost savings. We have a problem with the possibility of the
Department having failed to verify the validity of the cost
savings. We think that that as something that when you look at
an item that is a critical mission, that it does raise concern
for us, so those of us in Tennessee will continue to keep a
close eye on this.
And Mr. Poneman, I will just say, I appreciated your
comment about needing a systemic fix to how we approach some of
this, and being able to work through real-time data. As you
look at a complex like the Y-12 complex, we can see where
something of that nature might be helpful, and what we would
like to do is to yield a better outcome from the work that is
done, and then be able to quantify and achieve some savings
through that process, through efficiencies, through technology
transfer, things of that nature, that will allow a little bit
more efficiency.
I appreciate that, and Mr. Chairman, I will yield my time
back.
Mr. Murphy. I thank the gentlelady. We were hoping that the
chairman of the full committee would be here because he found
his documents from the 1990s when he asked Department of Energy
a number of questions before about some reorganization, and I
think he wanted to come and get an update of what has happened
in the last 20 years or so. But unfortunately, he got tied up,
but he will submit those. Mr. Poneman?
Mr. Poneman. Mr. Murphy, if I might, I would like to make a
slight, before we all break, amendment. In discussing with Mr.
Johnson, who I know is not here now, the CFO's office, I
thought it was in the Under Secretaryship but it is of such
breadth along with GC and others that that one actually is
above the fray, so to speak, so I just want to--we will get
more a detailed answer for the record but I didn't want to
leave you all with the wrong impression here, so I just wanted
to make that clarification of my earlier comment.
Mr. Murphy. I appreciate that. Overall, then, we will be
submitting other questions to you. We ask for a timely
response. Members are asked to get questions to us within 10
days.
And also, I ask unanimous consent that the written opening
statements of other members be introduced into the record. So
without objection, we will do that.
So I would like to thank the witnesses today, and again, as
members get more questions to you, we would all appreciate a
proper response. Thank you so much for being here today, and I
wish you all the best in getting things working over at the
Department of Energy, and with that, this hearing is adjourned.
[Whereupon, at 11:45 a.m., the subcommittee was adjourned.]
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