[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]






                     NEON WARNING SIGNS: EXAMINING
                         THE MANAGEMENT OF THE
                NATIONAL ECOLOGICAL OBSERVATORY NETWORK

=======================================================================

                             JOINT HEARING

                               BEFORE THE

               SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY &
                       SUBCOMMITTEE ON OVERSIGHT

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           September 18, 2015

                               __________

                           Serial No. 114-39

                               __________

 Printed for the use of the Committee on Science, Space, and Technology

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma             EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER, JR.,         ZOE LOFGREN, California
    Wisconsin                        DANIEL LIPINSKI, Illinois
DANA ROHRABACHER, California         DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
MO BROOKS, Alabama                   ALAN GRAYSON, Florida
RANDY HULTGREN, Illinois             AMI BERA, California
BILL POSEY, Florida                  ELIZABETH H. ESTY, Connecticut
THOMAS MASSIE, Kentucky              MARC A. VEASEY, Texas
JIM BRIDENSTINE, Oklahoma            KATHERINE M. CLARK, Massachusetts
RANDY K. WEBER, Texas                DON S. BEYER, JR., Virginia
BILL JOHNSON, Ohio                   ED PERLMUTTER, Colorado
JOHN R. MOOLENAAR, Michigan          PAUL TONKO, New York
STEVE KNIGHT, California             MARK TAKANO, California
BRIAN BABIN, Texas                   BILL FOSTER, Illinois
BRUCE WESTERMAN, Arkansas
BARBARA COMSTOCK, Virginia
DAN NEWHOUSE, Washington
GARY PALMER, Alabama
BARRY LOUDERMILK, Georgia
RALPH LEE ABRAHAM, Louisiana
                                 ------                                

                Subcommittee on Research and Technology

                 HON. BARBARA COMSTOCK, Virginia, Chair
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
MICHAEL T. MCCAUL, Texas             ELIZABETH H. ESTY, Connecticut
RANDY HULTGREN, Illinois             KATHERINE M. CLARK, Massachusetts
JOHN R. MOOLENAAR, Michigan          PAUL TONKO, New York
BRUCE WESTERMAN, Arkansas            SUZANNE BONAMICI, Oregon
DAN NEWHOUSE, Washington             ERIC SWALWELL, California
GARY PALMER, Alabama                 EDDIE BERNICE JOHNSON, Texas
RALPH LEE ABRAHAM, Louisiana
LAMAR S. SMITH, Texas
                                 ------                                

                       Subcommittee on Oversight

                 HON. BARRY LOUDERMILK, Georgia, Chair
F. JAMES SENSENBRENNER, JR.,         DON BEYER, Virginia
    Wisconsin                        ALAN GRAYSON, Florida
BILL POSEY, Florida                  ZOE LOFGREN, California
THOMAS MASSIE, Kentucky              EDDIE BERNICE JOHNSON, Texas
BILL JOHNSON, Ohio
DAN NEWHOUSE, Washington
LAMAR S. SMITH, Texas
















                            C O N T E N T S

                           September 18, 2015

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Barbara Comstock, Chairwoman, 
  Subcommittee on Research and Technology, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........     7
    Written Statement............................................     7

Statement by Representative Daniel Lipinski, Ranking Minority 
  Member, Subcommittee on Research and Technology, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..     8
    Written Statement............................................     9

Statement by Representative Barry Loudermilk, Chairman, 
  Subcommittee on Oversight, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................    10
    Written Statement............................................    11

Statement by Representative Donald S. Beyer, Jr., Ranking 
  Minority Member, Subcommittee on Oversight, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    12
    Written Statement............................................    13

Statement by Representative Lamar S. Smith, Chairman, Committee 
  on Science, Space, and Technology, U.S. House of 
  Representatives................................................    14
    Written Statement............................................    15

                               Witnesses:

Dr. James L. Olds, Assistant Director, Directorate for Biological 
  Sciences, National Science Foundation
    Oral Statement...............................................    17
    Written Statement............................................    19

Dr. James P. Collins, Chairman of the Board, National Ecological 
  Observatory Network, Inc.
    Oral Statement...............................................    25
    Written Statement............................................    27
Discussion.......................................................    35

             Appendix I: Answers to Post-Hearing Questions

Dr. James L. Olds, Assistant Director, Directorate for Biological 
  Sciences, National Science Foundation..........................    52

            Appendix II: Additional Material for the Record

Document submitted by Barry Loudermilk, Chairman, Subcommittee on 
  Oversight, Committee on Science, Space, and Technology, U.S. 
  House of Representatives.......................................    76

Doument submitted by Daniel Lipinski, Ranking Minority Member, 
  Subcommittee on Research and Technology, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........    84

Addittional responses submitted by Dr. James L. Olds, Assistant 
  Director, Directorate for Biological Sciences, National Science 
  Foundation.....................................................    87
 
                          NEON WARNING SIGNS:
                    EXAMINING THE MANAGEMENT OF THE
                NATIONAL ECOLOGICAL OBSERVATORY NETWORK

                              ----------                              


                       FRIDAY, SEPTEMBER 18, 2015

                  House of Representatives,
  Subcommittee on Research and Technology &
                         Subcommittee on Oversight,
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Subcommittees met, pursuant to call, at 9:04 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Barbara 
Comstock [Chairwoman of the Subcommittee on Research and 
Technology] presiding.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Comstock. The Subcommittees on Research and 
Technology and Oversight will come to order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    Welcome to today's hearing titled ``NEON Warning Signs: 
Examining the Management of the National Ecological Observatory 
Network.'' I now recognize myself for five minutes for an 
opening statement.
    In August, the National Science Foundation informed the 
Committee that the National Ecological Observatory Network 
project, known as NEON, was on trajectory to be $80 million 
over budget and 18 months behind schedule. NSF also notified 
the Committee that it was taking immediate action to de-scope 
the project and institute other corrective actions to keep it 
on time and on budget, in accordance with the no-cost-overrun 
policy that the Foundation has had in place since 2009. To put 
this in perspective, the $80 million is about 20 percent of the 
project's $433 million construction budget, a project that is 
supposed to be in its final year of construction in the 
upcoming fiscal year 2016.
    In today's hearing, we want to learn more about how NEON 
has gotten so far off track, why the overrun was not caught 
sooner, and look at what corrective actions both NSF and NEON 
intend to take to complete the project, or actions that they've 
already undertaken to correct this issue. I also want to review 
NSF's proposed plans for scaling back the project and 
understand what impact it will have on the scientific value of 
the network.
    We have an obligation and responsibility to ensure every 
dollar intended for scientific research is spent as effectively 
and efficiently as possible. Any dollars that are wasted on 
mismanagement is a dollar that could have been spent on 
groundbreaking basic research or training future scientists.
    This is not the first time the Committee has looked at the 
serious problems which seem to have plagued NEON. We need to 
better understand what went wrong so we can determine what 
steps, including new legislation or guidelines, must be taken 
to ensure these problems never happen again.
    [The prepared statement of Chairwoman Comstock follows:]

      Prepared Statement of Subcommittee on Research & Technology
                      Chairwoman Barbara Comstock

    In August, the National Science Foundation informed the Committee 
that the National Ecological Observatory Network project, known as 
NEON, was on trajectory to be $80 million over budget and 18 months 
behind schedule.
    NSF also notified the Committee that it was taking immediate action 
to de-scope the project and institute other corrective actions to keep 
it on time and on budget, in accordance with the no-cost overrun policy 
that the Foundation has had in place since 2009.
    To put this in perspective, $80 million is about 20% of the 
project's $433 million construction budget--a project that is supposed 
to be in its final year of construction in the upcoming Fiscal Year 
2016.
    In today's hearing, I want to learn more about how NEON has gotten 
so far off track, why the overrun was not caught sooner, and look at 
what corrective actions both NSF and NEON intend to take to complete 
the project. I also want to review NSF's proposed plans for scaling 
back the project and understand what impact it will have on the 
scientific value of the network.
    We have a constitutional obligation and responsibility to ensure 
every dollar intended for scientific research is spent as effectively 
and efficiently as possible. Every dollar wasted on mismanagement, is a 
dollar that could be spent on groundbreaking basic research or training 
future scientists.
    This is not the first time the Committee has looked at the serious 
problems, which seem to have plagued NEON. We need to better understand 
what went wrong so we can determine what steps, including new 
legislation or regulations, must be taken to ensure these problems 
never happen again.

    Chairwoman Comstock. I now recognize the Ranking Member, 
the gentleman from Illinois, Mr. Lipinski, for an opening 
statement.
    Mr. Lipinski. Thank you, Chairwoman Comstock and Chairman 
Loudermilk, and thank you for holding this hearing, and I thank 
Dr. Olds and Dr. Collins for being here this morning.
    About six weeks ago, NSF informed the Committee that NEON 
was on a projected path, if not corrected, to go $80 million 
over budget, clearly a significant problem. While I hope that 
all of my colleagues join me in supporting the scientific goals 
of the NEON project and are interested in seeing it put on a 
better path going forward, I know we share the goal of being 
good stewards of taxpayer money. And I also believe we agree 
that, in a situation like this, more information sharing with 
the Committee at an earlier date would have helped us do better 
by these goals.
    On the other hand, it seems a crisis may have been averted 
by swift action on the part of NSF and the NEON governing 
board, and this hearing is an opportunity to learn some lessons 
for the future. Today we will examine what went wrong, 
including whether NSF could have taken more aggressive steps 
sooner, and whether NSF has since taken all necessary 
corrective actions.
    As we all know, this is not the first time this Committee 
is holding hearings about the NEON project. Our most recent 
hearings addressed NEON Inc.'s use of management fees under 
their cooperative agreement. In those hearings, we also 
addressed larger risk management policies, including policies 
for cost estimates and contingency funds. In fact, those 
broader topics have come up at a number of hearings over the 
last few years.
    As we take a close look at what went wrong with NEON, we 
should also be considering what broader reforms may still be 
necessary. The NSF Inspector General, Ms. Lerner, is not on 
today's panel, but she has weighed in for several years on her 
broader facility management and policy concerns, and earlier 
this week on NEON specifically with an Alert Memo on NEON's 
potential $80 million cost overrun. As we discuss what reforms 
NSF has implemented and what reforms may still be necessary, it 
will be valuable for us to have that discussion in the context 
of the Inspector General's recommendations.
    Finally, I want to address what happens now to ensure that 
NEON remains a valuable scientific asset for the research 
community and for the nation. We do not have a representative 
from the ecological sciences research community on today's 
panel. However, a group of leaders from that research community 
did publish a statement supporting the NEON project, while also 
expressing concerns about the level of engagement between NSF 
and the user community in determining the scientific priorities 
for NEON. I ask unanimous consent to include that letter with 
my opening remarks.
    Chairwoman Comstock. Without objection.
    [The information appears in Appendix II]
    Chairwoman Comstock. Thank you----
    Mr. Lipinski. I'm not done yet.
    Chairwoman Comstock. Sorry.
    Mr. Lipinski. I don't believe anyone is interested in 
delaying NEON construction by another year. However, we are in 
effect at a temporary pause in the project. Given how much the 
scientific opportunities, the technological options, and the 
environment itself have changed since the NEON scope and design 
were approved five years ago, it might be worth taking 
advantage of this unplanned pause to ensure that we truly are 
getting the best science out of this facility.
    I look forward to today's discussion. I believe the 
Committee can work productively with NSF to ensure NEON's 
success going forward and avert similar challenges for future 
NSF projects.
    With that, I yield back.
    [The prepared statement of Mr. Lipinski follows:]

                   Prepared Statement of Subcommittee
                Minority Ranking Member Daniel Lipinski

    Thank you Chairwoman Comstock and Chairman Loudermilk for holding 
this hearing, and thank you Dr. Olds and Dr. Collins for being here 
this morning.
    About six weeks ago, NSF informed the Committee that NEON was on a 
projected path, if not corrected, to go $80 million over budget. 
Clearly a significant problem. While I hope that all of my colleagues 
join me in supporting the scientific goals of the NEON project and are 
interested in seeing it put on a better path going forward, I know we 
share the goal of being good stewards of taxpayer money. And I also 
believe we agree that, in a situation like this, more information 
sharing with the Committee at an earlier date would have helped us do 
better by these goals.
    On the other hand, it seems a crisis may have been averted by swift 
action on the part of NSF and the NEON governing board, and this 
hearing is an opportunity to learn some lessons for the future. Today 
we will examine what went wrong, including whether NSF could have taken 
more aggressive steps sooner, and whether NSF has since taken all 
necessary corrective actions.
    As we all know, this is not the first time this Committee is 
holding hearings about the NEON project. Our most recent hearings 
addressed NEON Inc.'s use of management fees under their cooperative 
agreement. In those hearings we also addressed larger risk management 
policies, including policies for cost estimates and contingency funds. 
In fact, those broader topics have come up at a number of hearings over 
the last few years. As we take a close look at what went wrong with 
NEON, we should also be considering what broader reforms may still be 
necessary. The NSF Inspector General, Ms. Lerner, is not on today's 
panel, but she has weighed in for several years on her broader facility 
management and policy concerns, and earlier this week on NEON 
specifically with an ``Alert Memo'' on NEON's potential $80 million 
cost overrun. As we discuss what reforms NSF has implemented and what 
reforms may still be necessary, it will be valuable for us to have that 
discussion in the context of the Inspector General's recommendations.
    Finally, I want to address what happens now to ensure that NEON 
remains a valuable scientific asset for the research community and for 
the nation. We do not have a representative from the ecological 
sciences research community on today's panel. However, a group of 
leaders from that research community did publish a statement supporting 
the NEON project, while also expressing concerns about the level of 
engagement between NSF and the user community in determining the 
scientific priorities for NEON. I am attaching that statement to my 
opening remarks.
    I don't believe anyone is interested in delaying NEON construction 
by another year. However, we are in effect at a temporary pause in the 
project. Given how much the scientific opportunities, the technological 
options, and the environment itself have changed since the NEON scope 
and design were approved five years ago, it might be worth taking 
advantage of this unplanned pause to ensure that we truly are getting 
the best science out of this facility.
    I look forward to today's discussion. I believe the Committee can 
work productively with NSF to ensure NEON's success going forward and 
avert similar challenges for future NSF projects.
    I yield back.

    Chairwoman Comstock. Thank you, Mr. Lipinski, and I now 
recognize the Chair of the Oversight Subcommittee, the 
gentleman from Georgia, Mr. Loudermilk, for his opening 
statement.
    Mr. Loudermilk. Good morning. Thank you, Chairwoman 
Comstock. I would also like to thank our witnesses for being 
here today.
    As indicated, we are here today to discuss the $80 million 
in projected cost overruns to the National Science Foundation's 
cooperative agreement regarding the NEON Project. The fact that 
we are also here to discuss how this project is 18 months 
behind schedule is frankly unbelievable and is unfortunately 
what the American taxpayer has come to think of as business as 
usual.
    Well, I'm here to say that at some point this most stop. In 
fact, I think that's exactly what the NSF Inspector General has 
been saying for years about this project. Just this week the IG 
released an Alert Memo on the subject of today's hearing. 
Striking is the fact that the NSF did not become aware of the 
$80 million budget overrun until August of this year, despite 
first having concerns about the budget and timeline in January 
of 2013. Given the multiple warning signs we'll hear about this 
morning, was the NSF asleep at the wheel?
    This hearing is as much a reflection of the lack of 
oversight conducted by NSF as it is for the complete 
incompetence of NEON Incorporated to adequately handle a 
cooperative agreement of this size. However, I'm not sure 
anyone should be surprised of this outcome given that the NSF 
awarded NEON the $432 million cooperative agreement before an 
ongoing audit of their proposal was even completed. Frankly, 
exposing this kind of mismanagement in the federal government 
is one of the reasons my constituents sent me to Congress.
    According to the IG's memo, although NEON plans to address 
the $80 million overrun, that number is only their best 
estimate and the IG indicates that based on their 
investigation, there is no certainty that the overrun will not 
increase. I am very troubled that NSF can provide our 
subcommittee with only its best estimate of an $80 million 
overrun. NSF needs an independent, expert analysis of the 
financial damage, or we may be in this hearing room again in 
another month to talk about how to de-scope another $10 to $20 
million from the NEON project to make up for an even worse 
overrun.
    To illustrate how fluid the $80 million NSF estimate is, I 
understand NSF is still unable to determine whether it gave 
NEON approval to spend any of the $35 million in project 
contingency funds. There is no accounting going on at the NSF 
for this almost half-a-billion-dollar project?
    As one looks further at the IG memo and reviews the IG's 
previous audits of the NEON project, it is clear there has been 
a complete lack of proper oversight for this project. The memo 
indicates that the IG's auditors issued three inadequacy memos 
and an adverse opinion since 2011 regarding NEON's accounting, 
and the NSF has still not required NEON to provide adequate 
support for their spending. It also appears that multiple 
external audits were attempted before and during construction 
but were delayed because of an inability or unwillingness to 
provide the needed information. How do you get almost a half-a-
billion-dollar federal cooperative agreement and not have to 
cooperate when the government demands an accounting?
    As if it couldn't get worse, we then learn that NEON has 
spent over a quarter of a million dollars on lobbyists and the 
NSF still hasn't determined if those expenses were legal. Are 
these lobbyists being used to conceal the true cost of this 
project from the American people while ensuring that more and 
more money is spent on it? In addition to the lobbyists, the 
top executives at NEON are making more than $200,000 a year, 
and as we have already discovered from previous hearings, 
thousands of dollars are being spent on lavish Christmas 
parties, gourmet coffee, happy hours, and unnecessary travel.
    As a small business owner and former director of a 
nonprofit, I wholeheartedly understand the importance of 
accountability. However, what is inexcusable is that NSF has 
received warnings about this kind of irresponsible spending 
over the past four years, and it has not taken adequate 
measures to resolve the matter.
    At today's hearing, I am not only interested in learning 
about how the federal government can and needs to do a better 
job with transparency and accountability, but also how we can 
ensure that this kind of abuse is not occurring with other 
cooperative agreements. Taxpayer money should be spent in a 
responsible way with the help of efficient management and 
oversight. In the end, I hope that this hearing will inform us 
on how to provide better oversight and management of federally 
funded research projects to ensure that taxpayers can trust us 
with their money and know that it will be spent in the manner 
intended.
    I have a copy of the September 15, 2015, IG Alert Memo that 
I would like to add to the record.
    [The prepared statement of Mr. Loudermilk follows:]

              Prepared Statement of Oversight Subcommittee
                       Chairman Barry Loudermilk

    Good morning. Thank you Chairwoman Comstock. I would also like to 
thank our witnesses for being here today.
    As indicated, we are here today to discuss the $80 million in 
projected overrun to the National Science Foundation's (NSF) 
cooperative agreement regarding the NEON Project. The fact that we are 
also here to discuss how this project is 18 months behind schedule is 
frankly unbelievable and is unfortunately what the American taxpayer 
has come to think of as business as usual. Well, I'm here to say that 
at some point this most stop. In fact, I think that's exactly what the 
NSF Inspector General has been saying for years about this project.
    Just this week the IG released an alert memo on the subject of 
today's hearing. Striking is the fact that the NSF did not become aware 
of the $80 million budget overrun until August of this year, despite 
first having concerns about the budget and timeline in January 2013. 
Given the multiple warning signs we'll hear about this morning, was NSF 
asleep at the wheel? This hearing is as much a reflection of the lack 
of oversight conducted by NSF as it is for the complete incompetence of 
NEON Inc. to adequately handle a cooperative agreement of this size. 
However, I'm not sure anyone should be surprised of this outcome given 
that the NSF awarded NEON the $432 million cooperative agreement before 
an ongoing audit of their proposal was even completed. Frankly, 
exposing this kind of mismanagement in the federal government is one of 
the reasons my constituents sent me to Congress.
    According to the IG's memo, although NEON plans to address the $80 
million overrun, that number is only their ``best estimate'' and the IG 
indicates that based on their investigation, there is ``no certainty 
that the overrun will not increase.'' I am very troubled that NSF can 
provide our subcommittee with only its ``best estimate'' of an $80 
million overrun. NSF needs an independent, expert analysis of the 
financial damage, or we may be in this hearing room again in another 
month to talk about how to de- scope another $10-20 million from the 
NEON project to make up for an even worse overrun. To illustrate how 
fluid the $80 million NSF estimate is, I understand NSF is still unable 
to determine whether it gave NEON approval to spend any of the $35 
million in project contingency funds. Is there no accounting going on 
at the NSF for this almost half a billion project?
    As one looks further at the IG memo and reviews the IG's previous 
audits of the NEON project, it is clear there has been a complete lack 
of proper oversight for this project. The memo indicates that the IG's 
auditors issued three inadequacy memos and an ``adverse opinion'' since 
2011 regarding NEON's accounting, and the NSF has still not required 
NEON to provide adequate support for their spending. It also appears 
that multiple external audits were attempted before and during 
construction but were delayed because of an inability or unwillingness 
to provide needed information. How do you get almost a half a billion 
federal cooperative agreement and not have to cooperate when the 
government demands an accounting?
    As if it couldn't get worse, we then learn that NEON has spent over 
a quarter of a million dollars on lobbyists and the NSF still hasn't 
determined if those expenses were legal. Are these lobbyists being used 
to conceal the true cost of this project from the American people while 
ensuring that more and more money is spent on it? In addition to the 
lobbyists, the top executives at NEON are making more than $200,000 a 
year, and as we have already discovered from previous hearings, 
thousands of dollars are being spent on lavish Christmas parties, 
gourmet coffee, happy hours, and unnecessary travel.
    As a small business owner and former director of a non-profit, I 
wholeheartedly understand the importance of accountability. However, 
what is inexcusable is that NSF has received warnings about this kind 
of irresponsible spending over the past four years, and it has not 
taken adequate measures to resolve the matter.
    At today's hearing, I am not only interested in learning about how 
the federal government can--and needs to--do a better job with 
transparency and accountability, but also how we can ensure that this 
kind of abuse is not occurring with other cooperative agreements. 
Taxpayer money should be spent in a responsible way with the help of 
efficient management and oversight.
    In the end, though, I hope that this hearing will inform us on how 
to provide better oversight and management of federally-funded research 
projects to ensure that taxpayers can trust us with their money and 
know that it will be spent in the manner intended.
    I have a copy of the September 15, 2015 IG Alert Memo that I would 
like added to the record.

    Chairwoman Comstock. Thank you, Chairman Loudermilk.
    I now recognize the Ranking Member of the Subcommittee on 
Oversight, the gentleman from Virginia, Mr. Beyer, for an 
opening statement.
    Mr. Beyer. Thank you, Madam Chairman.
    I believe--and thank you both, Dr. Olds and Dr. Collins for 
being with us.
    I believe the National Ecological Observatory Network is a 
valuable and innovative scientific project. Its mission, to 
create a nationwide observatory to detect, study and forecast 
ecological change, is a major challenge with the potential for 
great scientific benefits. I am concerned, with my colleagues, 
about the management and budget challenges NEON has recently 
confronted, and possibly they may have been avoided.
    It appears that the National Science Foundation (NSF) may 
not have been adequately informed by NEON project management of 
cost and schedule challenges when they originally emerged, and 
the potential cost overrun also raises legitimate questions 
about NSF's oversight of the NEON project. It troubles me that 
NEON was on a projected path that would have placed it $80 
million over budget and potentially 18 months behind schedule, 
although I am thankful that you are moving forward with 
aggressive actions to put it back on track. Later in the 
questions, I am eager to explore, Dr. Olds, whether we can 
apply the no-cost-overrun policy to the rest of government and 
maybe the rest of the private sector, because I think it's very 
important as we talk about abuse and irresponsibility and all 
that, that these are hardly--that this is the first project 
hardly to have a cost overrun. Let me point out that the NOAA 
satellites were billions of dollars overrun back during the 
Bush Administration. Let me point out that the Joint Strike 
Fighter, the F-35, is again billions and billions of dollars 
overrun. The wars in Afghanistan and Iraq cost a little more 
than we had projected. And I will also say, this is not limited 
to the public sector. I have had the opportunity to build a 
number of buildings in Virginia over the last couple years and 
have yet to have one that met the original budget or the 
original timeline. We are constantly adapting and adjusting 
based on what we're actually learning.
    Now, that doesn't relieve you guys, our witnesses today, of 
trying to explain why the $80 million is over there, why the 18 
months is behind, what we're going to lose as we adapt to it, 
and how we take steps to make sure that we move forward. But we 
can't let the mistakes of the past relieve us of our 
responsibility to make NEON come true in a good and meaningful 
way in the short run.
    This is--we can overcome the budget challenges to look to 
the incredible technological and environmental benefits that 
NEON will yield when we get past this. It is wise and important 
to understand the interaction among organisms in our 
environment and the impact the environment has on these 
organisms, specifically how land-use changes and climate change 
are driving ecological change, and how these changing systems 
in turn affect human health and wellbeing, and the economy, and 
this is NEON's fundamental purpose.
    The environmental data that NEON collects will--and their 
analyses that will be conducted on the basis of this will help 
us understand the spread of invasive diseases, invasive 
species. It will help us gain potential insights into the 
biological and agricultural impact of increasing droughts 
across the country. It will help us explore responsible 
measures regarding land use, and aid scientists in deciphering 
the challenges we face from climate change.
    So I'm looking forward to a good discussion on what 
happened and how we can prevent it in the future, but we also 
want to make sure that this doesn't get to be highly political 
because history would suggest that that would be pretty ugly.
    Thank you. I yield back to the Chair.
    [The prepared statement of Mr. Beyer follows:]

            Prepared Statement of Subcommittee on Oversight
              Minority Ranking Member Donald S. Beyer, Jr.

    Thank you Chair Comstock and Loudermilk.
    I believe the National Ecological Observatory Network or NEON is a 
valuable and innovative scientific project. Its mission, to create a 
nationwide observatory to detect, study and forecast ecological change, 
is a major challenge with the potential for great scientific benefits.
    I am, however, concerned that some of the management and budget 
challenges NEON has recently confronted may have been avoided. It 
appears that the National Science Foundation (NSF) may not have been 
adequately informed by NEON project management of cost and schedule 
challenges when they originally emerged. The potential cost overrun 
also raises legitimate questions about NSF's oversight of the NEON 
project. It troubles me that NEON was on a projected path that would 
have placed it $80 million over budget and potentially 18 months behind 
schedule, although I am thankful that NSF and NEON Inc. are now taking 
aggressive actions to put NEON on a better path forward.
    I hope that our two witnesses, Dr. Olds from NSF and Dr. Collins 
from the NEON Inc. governing board, can help us better understand what 
led to this situation and what corrective actions they have put in 
place to prevent these issues from emerging in the future. I have other 
questions regarding how NEON Inc. and NSF are communicating with the 
ecological sciences community about their needs and what steps they are 
each taking to ensure that these needs are being appropriately examined 
and addressed.
    We cannot step back to prevent past mistakes or missteps. But we 
can and should learn from these past events. We can implement 
corrective actions now to ensure greater oversight of NEON by NSF in 
the future. NEON is a unique and important scientific endeavor. I 
believe NEON Inc. and NSF can rise to the challenge and build a cutting 
edge scientific facility. There may be bumps on the road ahead and new 
scientific and management challenges. That is not uncommon to 
innovative technological projects. But I believe the benefits we will 
draw from NEON's future are indispensable and worthy of our continued 
investment and support.
    I believe it is both wise and important to understand the 
interaction among organisms in our environment and the impact the 
environment has on these organisms, specifically how land use changes 
and climate change are driving ecological change, and how these 
changing systems in turn affect human health and wellbeing, and the 
economy. Fundamentally, this is NEON's purpose. Everyone benefits from 
this challenging scientific endeavor.
    The environmental data NEON will help collect and the scientific 
analyses that will be conducted will help us all better understand the 
spread of infectious diseases and invasive species. It will help us 
gain potential insights into the biological and agricultural impact of 
increasing droughts across our country. It will help us explore 
responsible measures regarding land use, and aid scientists in 
deciphering the challenges we face from a changing climate.
    I believe these are deeply important issues, regardless of 
political convictions. I believe there are legitimate management 
concerns about NEON that needs to be aggressively addressed and quickly 
corrected. But I hope those issues are not used as a political excuse 
to undermine the unique scientific benefits we can all gain from this 
project.
    Thank you. I yield back.

    Chairwoman Comstock. Thank you, Beyer.
    I now recognize the Chairman of the full Committee, Mr. 
Smith.
    Chairman Smith. Thank you, Madam Chair.
    This morning's hearing will focus on one of the National 
Science Foundation's most ambitious major research facility 
projects, the National Ecological Observatory Network, or NEON. 
This hearing should help answer why the NSF and NEON Inc. 
failed to heed the warning signs that the $433 million project 
was seriously off track. We now have a better estimate of just 
how far off track---$80 million over budget and 18 months 
behind schedule--and there is no guarantee that the figure is 
not even higher, as I understand NSF has increased this 
estimate several times since June.
    For over a year, this Committee has raised concerns about 
the financial mismanagement of NEON. We have pushed the NSF to 
exert greater oversight controls of the construction project, 
which seemed to be plagued with problems. In the first NEON 
hearing the Committee held in December 2014, we learned that 
the Inspector General's independent audit of NEON's cost 
proposal identified more than $150 million in unsupported or 
questionable costs, yet NSF went ahead and made the award and 
did not resolve these issues.
    A second audit of NEON's accounting system revealed a 
number of inappropriate NEON expenditures, which include 
lobbying, parties, and travel. All of these activities were 
financed by the management fee NSF agreed to pay NEON for 
ordinary and essential business expenses, and, of course, all 
these dollars came from taxpayers. The IG issued an Alert 
Memorandum this week that details further inappropriate 
expenditures by NEON discovered by the National Science 
Foundation. These include liability insurance for the CEO, 
excessive legal fees, and salaries for multiple executives in 
excess of $200,000. It also appears NEON wasted a half a 
million dollars when it broke a rental lease to move into a 
larger office space.
    NSF discovered these inappropriate costs when they finally 
started to require NEON to provide more detail about its 
spending in May 2015. My understanding is that NEON still has 
not provided the NSF with adequate documentation to review all 
taxpayer-charged expenses.
    In the Committee's second hearing in February, the chairman 
of NEON testified that NEON had made mistakes, but pledged to 
redouble their efforts to be ``good stewards of the taxpayer 
funds we receive.'' It appears that the leadership of NEON Inc. 
has not fulfilled that promise. I understand that the Board of 
Directors is transitioning out the current CEO and is in the 
process of hiring a replacement. But I am frankly not sure that 
change is enough to regain the confidence of this Committee or 
the American people.
    For its part, the NSF finally seems to be taking steps to 
more closely manage and take control over the costs of NEON. I 
am pleased that at the Committee's urging, the Foundation also 
has begun to evaluate how it can better manage major research 
facilities in the future. But the NSF must now scale back the 
scope of NEON to keep it under budget, which means less science 
for the same price tag. This week the IG recommended some 
additional steps that the NSF could take immediately to ensure 
it has the financial and project information it needs to 
oversee NEON. I hope the Foundation will take a close look at 
those recommendations.
    The NSF, as well as its grantees and contractors, need to 
be held accountable for how they spend taxpayers' hard-earned 
dollars. I hope today's hearing will give the Committee a 
better understanding of the missteps that have lead NEON to 
this point, and I hope it will lead to a solution, which 
includes the possibility of legislative action, so that the 
mismanagement of taxpayer funds will not continue.
    Madam Chair, also let me acknowledge that most of the 
problems with NEON occurred before the current Director of the 
National Science Foundation, Dr. Cordova, assumed her 
responsibilities, but there is still much that needs to be 
done, and I realize that Dr. Cordova is aware of that too.
    I'll yield back.
    [The prepared statement of Chairman Smith follows:]

        Prepared Statement of Committee Chairman Lamar S. Smith

    This morning's hearing will focus on one of the National Science 
Foundation's (NSF's) most ambitious major research facility projects, 
the National Ecological Observatory Network, or NEON.
    This hearing should help answer why the NSF and NEON Inc. failed to 
heed the warning signs that the $433 million project was seriously off 
track. We now have a better estimate of just how far off track--$80 
million over budget and 18 months behind schedule.
    And there is no guarantee that the figure is not even higher, as I 
understand NSF has increased this estimate several times since June.
    For over a year this Committee has raised concerns about the 
financial mismanagement of NEON. We have pushed the NSF to exert 
greater oversight controls of the construction project, which seemed to 
be plagued with problems.
    In the first NEON hearing the Committee held in December 2014, we 
learned that the Inspector General's (IG's) independent audit of NEON's 
cost proposal identified more than $150 million in unsupported or 
questionable costs. Yet NSF went ahead and made the award and did not 
resolve these issues.
    A second audit of NEON's accounting system revealed a number of 
inappropriate NEON expenditures, which include lobbying, parties, and 
travel. All of these activities were financed by the management fee NSF 
agreed to pay NEON for ordinary and essential business expenses. And, 
of course, all these dollars came from taxpayers.
    The IG issued an alert memorandum this week that details further 
inappropriate expenditures by NEON discovered by the NSF. These include 
liability insurance for the CEO, excessive legal fees, and salaries for 
multiple executives in excess of $200,000. It also appears NEON wasted 
$500,000 when it broke a rental lease to move into a larger office 
space.
    NSF only discovered these inappropriate costs when they finally 
started to require NEON to provide more detail about its spending in 
May 2015. My understanding is that NEON still has not provided the NSF 
with adequate documentation to review all taxpayer charged expenses.
    In the Committee's second hearing in February, the chairman of NEON 
testified that NEON had made mistakes, but pledged to redouble their 
efforts to be ``good stewards of the taxpayer funds we receive.'' It 
appears that the leadership of NEON Inc. has not fulfilled that 
promise.
    I understand that the Board of Directors is transitioning out the 
current CEO and is in the process of hiring a replacement. But I am 
frankly not sure that change is enough to regain the confidence of this 
Committee or the American people.
    For its part, the NSF finally seems to be taking steps to more 
closely manage and take control over the costs of NEON. I am pleased 
that at the Committee's urging, the Foundation also has begun to 
evaluate how it can better manage major research facilities in the 
future.But the NSF must now scale back the scope of NEON to keep it 
under budget, which means less science for the same price tag.
    This week the IG recommended some additional steps that the NSF 
could take immediately to ensure it has the financial and project 
information it needs to oversee NEON. I hope the Foundation will take a 
close look at those recommendations.
    The NSF, as well as its grantees and contractors, need to be held 
accountable for how they spend taxpayers' hard-earned dollars.
    I hope today's hearing will give the Committee a better 
understanding of the missteps that have lead NEON to this point. And I 
hope it will lead to a solution, which includes the possibility of 
legislative action, so that the mismanagement of taxpayer funds will 
not continue.

    Chairwoman Comstock. Thank you, Mr. Chairman.
    At this time I would now like to introduce our witnesses. 
Our first witness is Dr. James Olds. He is the Assistant 
Director of the Directorate for Biological Sciences, or BIO, at 
the National Science Foundation. Before joining NSF, Dr. Olds 
was Director of the Krasnow Institute for Advanced Study at 
George Mason University in Virginia. Dr. Olds received his 
undergraduate degree in Chemistry from Amherst College and his 
doctorate from the University of Michigan in Neuroscience.
    Our second and final witness today is Dr. James Collins, 
Chairman of the Board for NEON. Prior to his work with NEON, 
Dr. Collins was NSF's Assistant Director for Biological 
Sciences. Dr. Collins has a long history at NSF, having served 
in various positions there from 1985 to 2009. Dr. Collins is 
also the Virginia M. Ullman Professor of Natural History and 
Environment in the School of Life Sciences at Arizona State 
University. Dr. Collins earned his bachelor of science degree 
from Manhattan College and his Ph.D. from the University of 
Michigan.
    I now recognize Dr. Olds for five minutes to present his 
testimony.

                TESTIMONY OF DR. JAMES L. OLDS,

                      ASSISTANT DIRECTOR,

              DIRECTORATE FOR BIOLOGICAL SCIENCES,

                  NATIONAL SCIENCE FOUNDATION

    Dr. Olds. Madam Chairwoman, Mr. Chairman, and Members of 
the Committee, thank you for this opportunity to testify about 
the National Science Foundation's oversight of the National 
Ecological Observatory Network project. I will confine my 
remarks to the steps NSF took to strengthen its oversight of 
NEON Inc. in light of recent schedule slippages and potential 
cost overruns. My written testimony provides a more complete 
explanation of the NEON project and its management history.
    NEON is a one-of-a-kind continental-scale research 
observatory with a potential to transform environmental 
science. NEON construction and operation are funded through a 
cooperative agreement with NEON Inc., a private nonprofit 
corporation responsible for building and operating the NEON 
project. An integrated NSF project team currently tracks NEON 
Inc.'s progress and costs against deliverables in the 
cooperative agreement and the organization's expenditures. 
NEON's civil construction has been completed in 48 of 82 site 
locations with expenditures to date of approximately $285 
million.
    In spite of NSF oversight of NEON Inc., a cost sufficiency 
review and attempts at corrective guidance, it was clear to NSF 
in June of 2015 that NEON Inc. was at risk of a potential $80 
million cost overrun and an 18-month schedule delay.
    NSF takes its responsibility for stewardship of taxpayer 
resources extremely seriously and strong oversight of our large 
facilities is a top priority for NSF. That is why major 
research projects are subject to NSF's no-cost-overrun policy, 
which requires the project to maintain its cost and schedule 
profile within budget and timeline approved by the National 
Science Board and approved and appropriated by Congress.
    When a project encounters potential cost overruns, NSF 
conducts a Scope Management Analysis to determine if the 
project should be de-scoped or canceled. A de-scoping can be 
achieved while still preserving the plan's transformational 
science and the project is allowed to continue within the 
bounds of the original budget.
    Consistent with NSF policy, in July 2015, the NSF Biology 
Directorate convened a Scope Management Analysis of NEON by a 
panel of experts drawn from NSF, NEON Inc., the Neon Board of 
Directors, and scientific experts from the community involved 
in the original design. This panel developed a plan to reduce 
NEON Inc. corporate and project management costs, accelerate 
transition to operations, and selectively reduce non-essential 
capabilities. Importantly, this plan will still allow NEON Inc. 
to deliver a continental-scale observatory that accomplishes 
the planned science goals. NSF formally notified NEON Inc. of 
this de-scoping plan including a detailed series of benchmarks 
and deadlines that must be met for the project to stay on 
track. Key community and government stakeholders were informed 
when the Scope Management Plan was finalized.
    In response, I'm pleased that past and present presidents 
of the Ecological Society of America published a letter 
expressing their enthusiastic support of the NEON project in 
its new de-scoped form.
    As described in my written testimony, NSF has carefully 
examined and strengthened its oversight of the project 
including implementing oversight recommendations by the NSF 
Inspector General. Organizing a review of the de-scoped project 
science by an independent subcommittee, the Biology Directorate 
Advisory Committee and establishing a National Science Board 
Task Force to monitor overall progress.
    By December 1, 2015, NSF expects to have enough information 
to determine if NEON Inc. has improved sufficiently to complete 
construction of the NEON project within budget and on time. If 
NEON Inc. is not capable of completing construction, NSF will 
take action to pursue an alternative management process capable 
of completing construction.
    Madam Chairwoman and Mr. Chairman, I hope I have reassured 
you that NSF has greatly increased its oversight of this 
important project and that we are following up with specific 
and appropriate actions. We remain ready to take additional 
actions if needed, but we are hopeful that the NEON Observatory 
will fulfill the goal of being a continental-scale research 
platform that supports transformative science.
    Thank you again for the opportunity to testify. I would be 
pleased to answer your questions.
    [The prepared statement of Dr. Olds follows:]
    
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    Chairwoman Comstock. Thank you, Dr. Olds.
    And I now recognize Dr. Collins for five minutes to present 
his testimony.

               TESTIMONY OF DR. JAMES P. COLLINS,

                     CHAIRMAN OF THE BOARD,

         NATIONAL ECOLOGICAL OBSERVATORY NETWORK, INC.

    Dr. Collins. My name is Dr. James Collins, and I serve as 
chairman of the Board of Directors of NEON Inc., a 501(c)(3) 
corporation established to implement NEON, or the National 
Ecological Observatory Network.
    At the outset, I want to thank you for your commitment to 
NEON. I can't say I relish the time I spend before you on this 
project--you ask hard questions but your diligent oversight is 
welcomed, and there is no doubt that it has made NEON a better 
project.
    I also want to thank NSF for its vision and tireless 
support of NEON and for being a terrific partner in this path-
breaking project.
    Finally, let me say that I share your concerns about the 
construction budget gap and regret that the project required 
re-scoping. We're taking dramatic steps to place NEON back on 
the right path, and I commit to you that we will do what we can 
to keep it there.
    NEON is an advanced research infrastructure for the study 
and analysis of the biosphere. Across the continent, we are 
creating a network of instruments and sensors so that we can 
better understand our changing environment at an unprecedented 
level of detail and successfully forecast and respond to these 
changes.
    Despite recent changes to the project, NEON's high-level 
science requirements have not and will not be compromised. We 
are working aggressively to re-scope NEON based on the 
recommendations of NSF, NEON Inc., and community experts 
convened in July 2015. But the discussion did not start then. 
Five months earlier, in February 2015, NEON Inc. staff members 
initiated the discussions to explore strategies for cost 
savings through improved efficiencies and restructured 
processes. During these discussions, NEON Inc. staff proposed 
recommendations that ultimately formed the backbone of the 
current re-scoping. Under the re-scoped configuration, NEON 
will continue to build and then collect data at 81 of its 
original 96 sites. The essential core NEON terrestrial and 
aquatic sites all remain part of the national site 
constellation.
    Your opening statements made clear your interest in 
discussing NEON's construction budget and specifically you cite 
$80 million gap between the construction budget approved in 
2011 and NEON's current construction budget. To be clear, the 
gap is the result of costs that were underestimated, and NEON 
Inc. bears its share of blame.
    While I go into greater detail in my written statement, let 
me list three categories of such underestimated costs. First, 
production costs and technology development. This accounts for 
about 50 percent of the gap. Challenges obtaining permits, this 
accounts for about 25 percent of the gap. And transitioning of 
observatory elements to operations, and that's about 25 percent 
of the gap.
    The gap necessitated the re-scoping completed this past 
July. It's important to note that NEON has not requested nor 
received any additional construction funds. I would also note 
that at least five other NSF MREFC projects have undergone 
scope revisions, management adjustments, and/or instrument 
configuration changes during construction. So in this respect, 
NEON is not unique.
    NEON Inc. is committed to ensuring that further re-scoping 
will not be necessary in the future. Together with NSF and 
independently, we are taking steps not only to develop and 
share better information in a more timely manner but also to 
fundamentally change the processes we undertake in order to 
ensure that NEON is on track and within budget. Let me briefly 
discuss some of these steps.
    First, NEON has addressed the issues that led to the re-
scoping by, among other things, reorganizing its complete 
supply chain to better facilitate the production process and 
imposing new control measures on permitting activities. Second, 
NEON is working closely with NSF as well as independent cost 
and schedule consultants to revise cost estimates and to ensure 
that adequate systems and estimating methodologies are 
implemented.
    Third, NEON is now providing a comprehensive monthly 
financial report to the NSF that includes detailed 
expenditures, explanations of expenditures by budget line item, 
and functional areas with the sources of funding clearly 
identified. In addition, NEON is providing the NSF with 
complete general ledger detail of all transactions. Fourth, 
NEON Inc. is under the guidance of a new interim CEO. We will 
be searching for a new CEO. NEON is developing a comprehensive 
strategy for improving project management and identifying 
potential cost reductions.
    NEON Inc. understands that in its pursuit of scientific 
goals, it must not sacrifice responsible stewardship of 
taxpayer dollars. That is a lesson to which we will strictly 
abide as we continue to monitor our construction schedule and 
budgeting work towards completing the observatory.
    Thank you, and I welcome your questions.
    [The prepared statement of Dr. Collins follows:]
   
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    Chairwoman Comstock. Thank you.
    I thank the witnesses for their testimony, and the Chairman 
recognizes herself for five minutes of questioning.
    Okay. Dr. Olds, we understand that NSF was originally 
informed by NEON that the cost overrun would be $27 million and 
then at that point NSF has further questions in light of that, 
and then the estimates went up to $40 million, then 60, then 
80. How confident are you that we're at the right figure now, 
and that in looking back because the IG has looked at this and 
sort of a lot of this was predicted in this manner, what was 
ignored in the previous analysis and why the process of how we 
can prevent that, given we sort of had the warnings and they 
came true to a large extent? How do we and how can you going 
forward avoid this kind of situation?
    Dr. Olds. Madam Chairwoman, when the February hearing took 
place about NEON, I was deeply troubled, and it wasn't the 
scale of the dollars and the management fee, it was the fact 
that that issue had been raised at all, and so I sent in the 
early spring after that hearing a number of members of my team 
including folks who are expert in finances, and they basically 
sat in a rolling review of what was going on with NEON's 
dollars that lasted from the middle of spring through June 15. 
When it became clear to that NSF team in collaboration with 
NEON folks, that this problem was much larger that had been 
anticipated, that forensics was led by NSF folks. You know, I'm 
a molecular neuroscientist so my expertise is not in financial 
forensics, but we are determined to actually make sure that we 
are sure about the dollars. We accept the NSF Inspector 
General's recommendations, and we plan to in December when we 
finish up looking at the numbers, to get an independent cost 
estimate on those NEON numbers also just to make sure that 
there are other eyes looking at this. But I think this was a 
result of hard work on the part of NSF and NEON during the 
spring to actually elucidate the right number.
    Chairwoman Comstock. And Dr. Collins, could you kind of 
basically answer the same question on how you see--and I know 
you're in a position where you're still looking for somebody to 
run the project here, so we keep inviting you back. Thank you 
for being here. But can you offer us your thoughts on the same 
issue?
    Dr. Collins. I can. So for purposes of perspective, it's 
useful if we start in August 2014 actually. So in August of 
2014, as a result of a series of reviews, NEON was given a 
clear bill of health. It was scheduled to be on time and on 
budget as of August of 2014. In November, the period of 
November-December of 2014, as a result of regular financial 
reviews at NEON itself, it was recognized that in fact there 
was an expense of about $11-1/2 million that was not included 
as far as the August review is concerned. So at that point we 
were looking at about $11-1/2 million, and there was another 
expense of about $4.5 million to bring to a total of about $16 
million at that point that should have been accounted for in 
that August 2016--I am sorry--August 2014 review.
    In January of 2015, then, another internal review at NEON 
uncovers that there looks to be a gap developing as far as 
production costs are concerned in the project. So this is 
important to note, that it was a result of internal forensics, 
to use Dr. Olds's words, which is a good thing. The corporation 
itself is reviewing itself, and at that point in January 2015 
informs NSF that it looks like there's this gap that's 
developing within the corporation.
    In February of 2015, then, the board gets notified that 
this gap is developing in terms of something that needs to be 
corrected, and this was at a regularly scheduled board meeting 
that we were informed. The board then took upon itself to call 
a special meeting in March of 2015 to get a better handle on 
what was going on as far as the finances are concerned and to 
make it clear to the corporation that they had to take this 
absolutely seriously and we had to understand what was 
happening. So that was a special board meeting in March. In 
April, then, there's a much better handle on the production 
expense, and that's about $20 million. Put that together with 
the $16 million and now we have about $36 million that's 
developing as a gap, and that's in April of '15.
    NSF then comes in and asks for a directive assistance 
review, which is a good thing to do because at that point now 
you have a whole other set of eyes to begin to look at the 
project and say all right, where are we at on this in order to 
get a better handle on it. In order to do that review, NSF 
asked the project to not go back to August 2014 but to rather 
go back to 2011, February of 2011, and re-baseline the project 
from February of 2011, and it was in the course of re-
baselining the project from February 2011 that you sweep up a 
bunch of additional expenses because you're essentially taking 
costs from 2015 and you're projecting them back over multiple 
years and then you're bringing them forward to project what the 
cost is going to be. So at that point you run it up to $80 
million.
    Chairwoman Comstock. Okay. And those kind of situations, 
are there areas you're able to identify that those costs don't 
have to be? There are, things like you said, with permitting. 
That's a problem there that you just didn't know what the 
permits were going to be and now those are fixed costs that you 
can't adjust in any way?
    Dr. Collins. That's right, and they fall into this category 
of areas where you start out, you expect some difficulties when 
it comes to permitting. Just as when you go into remodel a 
home, you expect some difficulties, but yet there are things 
that still pop up, and in the case of permitting in particular, 
there are things like endangered species that show up on a 
review and you have to deal with that, for example, and with 
permitting when you're doing something across the entire 
country and you have 20 sites, it's prudent and it makes a lot 
of sense to take the easiest sites first so that you can keep 
the construction moving along. But then as you take care of the 
easier sites, it becomes harder to take care of those at the 
end, and especially those where you begin to run into ``not in 
my backyard.''
    Chairwoman Comstock. You know, I'm sorry, I know we're over 
time, but will you continue to highlight for us some of those 
things because I know we often deal with all those things. It 
might be informative for us to know where there are these local 
regulations where they're causing particular problems that we 
might want to know about because we are often doing things in 
other areas to alleviate those problems. So thank you.
    And I now recognize Mr. Lipinski for five minutes.
    Mr. Lipinski. Thank you.
    I want to focus on not only NEON but also more general 
lessons learned. I want to start out with Dr. Olds and the IG 
recommendations. The NSF IG made a series of recommendations 
since 2011 for strengthening cost controls and general 
management oversight of MREFC projects, not just limited to 
NEON. The IG and NSF senior officials have testified on these 
issues in earlier hearings. The NSF had implemented a number of 
the IG's recommendations but continues to disagree with others. 
The IG's Alert Memo issued earlier this week restated all of 
these earlier recommendations and faulted NSF for continuing to 
resist some of them.
    So Dr. Olds, can you please update us as to which IG 
recommendations you have fully complied with and which you 
continue to have some disagreements over, and why--what's the 
nature of the disagreements?
    Dr. Olds. Congressman, the NSF accepts all of the 
recommendations of the IG in the Alert Memo that you just 
received, and the only one that we're delaying is the 
independent cost estimate because we need to get the data to 
have such an independent cost estimate, which we will have in 
December.
    Mr. Lipinski. Okay. So--but you are saying that you agree 
with all of them, and is there anything more that you want to 
tell us about what NSF has done in terms of complying with the 
recommendations?
    Dr. Olds. Sure. Over the past 15 years, NSF has spent 
tremendous effort developing and implementing and detailing 
requirements related to its oversight of large facilities 
projects. These requirements are published in the NSF's Large 
Facilities Manual, which was just recently revised and 
published in June of this year. It's a much tougher document. 
And it must be noted that NSF's primary role is oversight while 
our recipients like NEON Inc. are responsible for the day-to-
day management of construction, operation facilities. So NEON 
is an excellent example of how NSF is implementing its latest 
policy and process improvements in accordance with the IG's 
advice.
    Mr. Lipinski. Okay. Let me use the rest of my time. I want 
to go over to Dr. Collins in regard to lessons learned.
    You started going into some of those, I think, in your 
testimony and then in the--some of your answers to the 
Chairwoman's questions. Is there anything else that you could 
tell us that you think--mistakes that were made by NEON Inc. or 
mistakes by NSF in the whole process of what kind of lessons we 
might be able to learn from these going forward with other 
projects.
    Dr. Collins. Sure. One of the lessons--and to echo 
something that Dr. Olds said, is to bring more outside 
expertise in, and in particular, outside expertise on the 
accounting side as far as these projects are concerned as 
opposed to the performance side. So the reviews often emphasize 
performance as far as the science is concerned relative to 
outcomes, relative to the goals that you're looking for, and is 
the project proceeding towards those goals. What we could use 
is a deeper analysis of the accounting side, the expense side, 
individuals who are really familiar with the ins and outs of 
the accounting on these large projects. That would be one point 
in terms of something that would be very, very helpful.
    The other thing is to--just to expand on that in terms of 
estimates where you really get to the ground truth of what 
those estimates are. So the estimates are made early on using 
the best information that's available, inflation indicators, 
for example. But you have to be willing to go in and reach into 
the project and keep adjusting those on really an adaptive 
management basis in order to keep constant track of what those 
expenses are on an ongoing basis. That's really the biggest 
lesson it seems to come out of this as far as I'm concerned as 
I watch all these reviews that are taking place, and yet in 
some ways there are details that are slipping through the 
fingers of the referees in these cases, and we need to do a 
better job and understand probably on the accounting side 
what's going on.
    Mr. Lipinski. Thank you. My time's up, so I yield back.
    Chairwoman Comstock. Thank you, and the Chair now 
recognizes Mr. Loudermilk.
    Mr. Loudermilk. Thank you, Madam Chair.
    Before I get into my questions, I'd like to make a 
statement and have something entered into the record.
    According to a September 2015 Cato Institute report on 
federal government cost overrun, the statement is: ``Cost 
overruns on large government projects are pervasive. The 
problem appears to stem from a mixture of deception and 
mismanagement. It has not diminished over time. One of the many 
consequences is that taxpayers are likely footing the bill for 
many projects that cost more than the benefits delivered.'' And 
I ask that a copy of the Cato report be entered into the 
record.
    Chairwoman Comstock. No objection.
    [The information appears in Appendix II]
    Mr. Loudermilk. Dr. Olds, thank you for being here today. 
I've got a couple of questions, and I appreciate your 
commitment that you and I have met about and you have stated 
here today to make sure that this project comes in within the 
budget level or we move on, and I think that's what the 
taxpayers are expecting.
    First question. Before this cooperative agreement was 
signed, there was an ongoing audit of NEON's initial cost 
proposal. However, the NSF didn't wait for the audit to be 
completed before awarding the contract. The first question is, 
why did we not wait, and if we would have waited, would that 
audit of the initial cost proposal uncovered some of the 
potential cost overruns?
    Dr. Olds. Congressman, NSF has worked to resolve the OIG 
recommendations. Based on our review of the audits conducted, 
only approximately five percent, or $19.8 million, of the costs 
questioned in the audits were ultimately determined by NSF to 
not be properly documented and justified. It is important to 
note that this amount is associated with differences in the 
estimated costs necessary to complete the project and not 
actual expenditures. NSF has required that NEON provide 
additional justification for these costs. The bottom line is, 
we need to pay really careful attention to the cost estimates 
that are the basis for these large projects. It's something 
that's essential so that we deliver to the taxpayer what they 
deserve, and I think that's really where our eyes need to be on 
the ball in the future.
    Mr. Loudermilk. But in the initial cost estimate of the 
project, you know, the audit of the project estimate, if we 
would've waited for that audit to be done, would that have 
uncovered some of the overruns we have now?
    Dr. Olds. Congressman, I think that the key aspect is, 
these audits as a result as a rule are really important lest we 
go off course. I think it's always possible to look back in 
time and say could we have done something different or better. 
What I am prepared to say is, we have to redouble our efforts, 
redouble our efforts to actually take numbers, get them looked 
at not only by us but independent auditors so that the basis 
for these cost estimates is as solid as possible for the 
American people. That's the goal going forward. And what I can 
promise you is that in the months leading up to the December 
decision point, we're going to be doing just that. We're going 
to be putting as many eyes as possible on these cost estimates 
so that those dollar figures are not fuzzy.
    Mr. Loudermilk. Dr. Collins, can you answer the question? 
Would an audit of the cost proposal have uncovered some of 
these cost overruns?
    Dr. Collins. I'll go back to the example that you used 
yourself in terms of when you put up a building, you do wind up 
with these costs that are just unexpected. So part of the 
answer is, sure, we could have, and indeed, the project, as I 
suggested earlier in response to Mr. Lipinski, by having 
additional external eyes, especially when it comes to folks 
really skilled in accounting. Yes, you probably could have 
taken care of some of the variance there. There's going to be 
some of the variance, though, that's going to be left over that 
it's the nature of doing larger construction projects that you 
still have to be able to pick up and be able to deal with.
    Mr. Loudermilk. But isn't that what the $60 million in 
contingency was for, those unintended, unexpected----
    Dr. Collins. Those $60 million in contingency, that is what 
it's for as far as unexpected is concerned, and that takes care 
of that level of unexpected costs that in a way you expect to 
have, you expect to be showing up. But in a project like this 
where you're developing new technology, you're of necessity 
going to have new costs added on top.
    Mr. Loudermilk. So the $60 million is for expected 
unexpected costs is what you're saying?
    Dr. Collins. You can put it that way.
    Mr. Loudermilk. Okay. Okay. I'm running out of time, but 
one other question. Is this standard operating procedure for 
NSF to award these agreements without first completing an audit 
of the cost proposal?
    Dr. Olds. I think NSF has to strive for all projects going 
forward to audit the cost estimates multiple times so that we 
are really sure of those numbers. That's our obligation to the 
American people.
    Mr. Loudermilk. I yield back the balance of my time.
    Chairwoman Comstock. Thank you, and I now recognize Mr. 
Beyer.
    Mr. Beyer. Thank you, Madam Chair.
    I want to begin, Dr. Olds, by thanking you for at least 
four things. First, for the many, many steps taken both in your 
oral testimony and your written to get the project back on 
track, both in time and in costs, and you're very committed to 
that and you've done lots of things to do that.
    Second, I want to congratulate you on the accountability. 
We had a very painful hearing yesterday with EPA Administrator 
Gina McCarthy in Natural Resources and the Oversight and 
Government Reform Committees in which mirroring an earlier 
hearing that we had here on accountability on the same spill on 
August 5 out in Colorado, three million gallons of acid mine 
wastewater, and they kept coming back to say who was fired, who 
was fired, who was fired. Well, I can tell them the head of 
NEON was fired for these cost overruns.
    The third thing I'd like to thank you for is for adopting 
all of the IG recommendations, even those that you weren't 
exactly excited about, and three of them implemented already.
    And finally, to match up with Chairman Loudermilk's 
comments on Cato, I wonder if we could send a no-cost-overrun 
policy to Cato and they could figure out how we could apply 
this to the rest of the federal government, and also I'm 
thinking about our own household budget, and how we could apply 
that.
    And Dr. Collins, in your written testimony also, you talked 
about the $80 million broken and $40 million of it was the 
establishment of sustainable supply chain for procurement 
production. It seems that that was largely you didn't realize 
the contractors there to build the sensors, the quality needed 
at the time just weren't there.
    Dr. Collins. That's right.
    Mr. Beyer. And the second $20 million was permits. I was 
fascinated by the fact that you needed ten times as many 
permits as you'd anticipated originally, and even the Inspector 
General pointed out that the permitting was something that was 
factors outside your control.
    Dr. Collins. Exactly.
    Mr. Beyer. The third $20 million, the last 25 percent, was 
transition of observatory elements to operations. Could you 
explain that to us? That's the one thing I don't understand.
    Dr. Collins. Sure. So the observatory, the NEON 
observatory, basically has two pieces to it in the sense that 
first you have to build it. You're going to put up the towers, 
you're going to build the sensors and so on, put them on the 
towers, and you're going to develop the sampling regimes, and 
that's largely what's going on now and has been going on for 
the past 18 months, two years. And now the observatory is in a 
position of transitioning away from the construction part so 
the towers will be up, the sensors will be hung, and you're 
moving into individuals that will be now operating the system, 
will be collecting data. Now, there are already individuals in 
place to do that, and it's in the bringing the transition 
through that gets hard because you have to switch personnel. 
The same individuals who are doing the construction--engineers, 
technicians and so on--are not necessarily the same individuals 
who are going to be doing the operating part of the 
observatory. So there are whole new hirings that have to be 
done. Some individuals may transition but others will not.
    Mr. Beyer. Were the operating costs ever intended to be in 
the original $430 million budget, though?
    Dr. Collins. No, the operating costs are handled separately 
from the original construction budget.
    Mr. Beyer. Thank you, Dr. Collins, very much.
    Dr. Olds, much has been made of the $257,000 in lobbying 
costs, the Christmas party, the entertainment, visas and meals. 
How much of the--when you put all that together, how much of 
the $80 million is represented by these controversial costs?
    Dr. Olds. The controversial costs are not represented at 
all in the dollars that were uncovered looking at the 
trajectory to a cost overrun. Those are, as Dr. Collins said, 
related to these really substantive scientific and engineering 
issues, permitting and the like.
    Mr. Beyer. Thank you.
    Dr. Olds, one of the things in the IG's letter, she talked 
about the NSF hadn't required the incurred cost submissions 
from NEON nor has it conducted an incurred-cost audit of NEON, 
and if NSF had taken either action, NSF could have been able to 
identify unallowable or poor spending mby on NEON, and yet I 
think what we've just heard is, the $80 million wasn't 
unallowable or poor spending, that it was permitting, it was 
the shift to operations, and it was the absence of a secure 
supply chain. Am I reading that correctly, and does that make 
this particular IG recommendation less meaningful?
    Dr. Olds. Congressman Beyer, so I want to make sure that I 
give you a very full and accurate answer to that question so 
I'm going to ask to get back to you on that one for the record.
    Mr. Beyer. You're a thoughtful, careful person.
    One last thought. None of the proposed cost elements for 
labor, overhead, equipment and other costs reconciled to the 
supporting data in the proposed budget. Again, a direct quote 
from the IG's report. I'm just about out of time, but it 
concerns me greatly that the budget didn't match up with the 
underlying data.
    Dr. Olds. I think it's always a challenge to get these 
things right on really complicated projects where you're 
building a distributed instrument that extends from Barrow, 
Alaska, to Puerto Rico, and you're using bleeding-edge state-
of-the-art technology and trying to network it all together. So 
that's always a challenge, and it's very--it's qualitatively 
very different from building something like a ship or an 
airplane that we've had a lot of experience with, so I think 
that relates to those challenges.
    Mr. Beyer. Thank you.
    Thank you, Madam Chair.
    Chairwoman Comstock. Thank you, and the Chair now 
recognizes Mr. Johnson.
    Mr. Johnson. Thank you, Madam Chairman.
    Dr. Olds, you testified that NSF started having concerns 
with the NEON project's budget and timeline management as early 
as January 2013. The NSF Inspector General first noted concerns 
about NEON's cost proposal in 2011 and recommended that NSF 
require annual incurred cost submissions and conduct annual 
incurred cost audits. NSF did not follow this recommendation. 
So in hindsight, could annual audits have caught NEON's cost 
issues earlier and helped preserve more of the budget as 
designed?
    Dr. Olds. Congressman, I'll freely admit that we could have 
done a better job, and what I'm determined to do is make sure 
that going forward we are as rigorous as we can possibly be in 
terms of auditing, getting cost estimates and getting 
independent eyes on on those so that we don't have these issues 
in the future.
    Mr. Johnson. Hindsight's always 20/20, isn't it?
    Dr. Olds. Yes, sir.
    Mr. Johnson. Again, Dr. Olds, the NSF Inspector General has 
previously recommended that NSF should retain contingency funds 
for projects like NEON and pay the contractor as those expenses 
are approved as appropriate contingency costs. The NSF has not 
agreed with this recommendation. Would retaining contingency 
funds for NEON have helped NSF notice the cost overrun at NEON 
sooner?
    Dr. Olds. Congressman, once again, that's an issue which is 
outside my area of molecular neuroscience, so I want to make 
sure I get you an accurate and full answer to that, so I'd like 
to get back to you on that one.
    Mr. Johnson. Take that one for the record. Okay.
    Let's see. Dr. Olds, in dealing with management and 
oversight, what alternative options does NSF have with respect 
to the existing NEON cooperative agreement? If you determine 
that you're not capable of delivering the project on budget and 
on time, is relieving NEON as the managing entity one of those 
options that would be considered?
    Dr. Olds. Congressman, I don't want to presuppose what the 
answer is going to be to the answer that we will receive in----
    Mr. Johnson. I'm not asking you for the answer. I'm asking 
you what options you might consider.
    Dr. Olds. I think that there are a variety of options that 
would quite substantive in terms of getting this project 
through to completion in a way that deals with the management 
issues that you put forward. I don't want to lock on to any one 
in particular at this time.
    Mr. Johnson. I'm not asking you to do that. I'm asking 
you----
    Dr. Olds. But I----
    Mr. Johnson. --is relieving NEON is the managing entity one 
of the options that would be considered?
    Dr. Olds. That's certainly an option.
    Mr. Johnson. Okay. All right. That's fair enough.
    Dr. Olds, it appears that NEON has moved $35 million of 
contingency funds into the base construction budget. The 
cooperative agreement requires approval by NSF for NEON to use 
contingency funds. Did NSF approve the transfer of contingency 
funds?
    Dr. Olds. That issue has been previously identified and 
addressed with NEON Inc. with regard to the process.
    Mr. Johnson. So did NSF approve?
    Dr. Olds. The organization had incorrectly concluded that a 
prior initial approval of their contingency estimate had 
provided authorization of contingency expenditures. That 
situation has been corrected. We do plan to do a full 
accounting of the documentation to ensure contingency 
allocations were not actually spent in advance of approvals.
    Mr. Johnson. Okay. So let me make sure I understood. You're 
telling me that NSF, the finding is that NSF did approve the 
transfer of contingency funds?
    Dr. Olds. I want to make sure that I get that exactly 
accurate so I'm going to have to get back to you on that 
answer.
    Mr. Johnson. I'm very interested in the answer to that 
because obviously there would be a violation of the cooperative 
agreement if that approval is not there.
    Dr. Olds. Understood.
    Mr. Johnson. Okay. Mr. Chairman, I yield--Madam Chairman, I 
yield back.
    Chairwoman Comstock. Thank you, and the Chair now 
recognizes Mr. Tonko.
    Mr. Tonko. Thank you, Madam Chair.
    While I have concerns regarding NEON's budget and 
management challenges, I also want to take this time to express 
my gratitude to the many people who had the vision for this 
type and scale of research and coordination. I recognize that 
NEON will have real implications for our understanding of 
climate science, of agriculture and infectious diseases, water 
use, and so many other areas that affect all of our lives. 
Improving our understanding of our world and how it's changing 
and how we effect that change will allow us to better evaluate 
our actions and priorities. For instance, the scale of this 
project will allow us to have a baseline of data that will 
inform us long before catastrophic events occur so that we can 
better prevent and prepare for these occurrences. So can you 
further describe why it is significant that this research is 
happening on such a large scale? Dr. Collins?
    Dr. Collins. Well, you said it very well in terms of the 
implications of the sort of research that's being done. It has 
the expectation to affect our understanding of the dispersal of 
infectious disease, emerging infectious diseases, exotic 
species. It has--it's designed to help understand the way in 
which various sorts of gases will move across the continent. 
So, as you've said, it really has these much larger 
implications in terms of grand challenge questions in the 
ecological sciences.
    Mr. Tonko. Now, we know that with the will and necessary 
resources, America will lead the way in continued exploration 
in research and development. When our Nation leads by investing 
and innovating, we also inspire our next generation of 
scientists and engineers. We must retain the will to learn 
about our world as well as the human infrastructure needed to 
make the proposed research a reality.
    I recently learned that Rensselaer Polytechnic Institute, 
which is in New York's 20th Congressional District, was one of 
19 academic institutions selected to receive a grant to do 
research that will leverage data from NEON. Can you further 
describe how these awards and NEON's efforts will ensure that 
our Nation's research pipeline, so to speak, will remain 
vibrant for the decades to come?
    Dr. Collins. Sure, sure. So NEON employs some 320 
individuals at the Boulder site, but then there are another 120 
individuals dispersed throughout the system in the United 
States in terms of gathering data and sampling various sorts of 
biological material across the country.
    Relative to your pipeline point, though, it's especially 
notable that in the summer, NEON brings on as many as 100 and 
even more summer interns, students, who work in the system and 
are learning the basic biological sciences, and therefore can 
go on to careers in the sciences themselves or basically are 
STEM-capable students. They know what science is about. They're 
dealing with leading-edge questions and they're dealing with 
leading-edge technology. Your example from RPI is really a good 
one in that one of my colleagues at RPI, who just moved there 
recently, is working with IBM to monitor a lake system in that 
area, and they're using comparable leading-edge technology to 
begin to understand what these ecological processes are looking 
like on a 24/7 basis and involving young people in doing this 
sort of work right from the very beginning.
    Mr. Tonko. What other types of data or research 
capabilities is NEON already providing to the larger scientific 
community, and who can access these resources?
    Dr. Collins. NEON is providing data from the airborne 
observing platform. This is a series of sophisticated 
instruments that are flown on airplanes over the NEON system. 
They'll eventually be flown over the entire NEON system. The 
planes are flying over eight domains, and those data are freely 
available to the entire community.
    Likewise, as far as the NEON system is concerned, when 
those data come online, and they're already coming online--they 
will be freely available on a 24/7 basis to the entire research 
community to use as they see fit.
    Mr. Tonko. Okay. I thank you very much, and with that, 
yield back, Madam Chair.
    Chairwoman Comstock. The Chair now recognizes Mr. Posey for 
five minutes.
    Mr. Posey. Thank you, Madam Chairman.
    Dr. Collins, since we last met, has NEON Inc. paid back the 
federal government any of the thousands of dollars spent on 
liquor and parties for the unintended benefit of the employees 
who enjoyed the endeavors?
    Dr. Collins. NEON has not used any management fee dollars 
since the last time I was here.
    Mr. Posey. Okay, but they haven't paid the government back? 
They haven't reimbursed the government for the unintended 
squandering of the tax dollars on parties and liquor?
    Dr. Collins. Well, as we discussed last time, there is this 
issue in terms of how management fees can be used, and we could 
not use management fees to pay back the federal government at 
this point. That's my understanding. I'm not an accountant when 
it comes to these details.
    Mr. Posey. Have there been any fears of repercussions from 
the IRS for the misuse of that money?
    Dr. Collins. Not that I'm aware of.
    Mr. Posey. You're a 501(c)(3) nonprofit corporation?
    Dr. Collins. That's correct.
    Mr. Posey. Who are the principals of the corporation, just 
out of curiosity?
    Dr. Collins. Well, the principals of the corporation would 
be--well, the board of directors has fiduciary responsibility, 
if that's what you mean.
    Mr. Posey. Yeah. Whose name is--who's the president of the 
company?
    Dr. Collins. Well, there's a chief executive officer of the 
company----
    Mr. Posey. Who's that?
    Dr. Collins. --who at the moment, the interim, is Gene 
Kelly, Dr. Eugene Kelly from Colorado State University.
    Mr. Posey. What state is it incorporated in?
    Dr. Collins. Colorado.
    Mr. Posey. Colorado? Given the total mismanagement by NEON 
Inc. of this project to date, why should it continue to manage 
the project? You know, wouldn't taxpayers and the research 
community be better served by another qualified organization 
taking over the management of the project?
    Dr. Collins. So we've--I've explained to you some of the 
details in terms of where the discrepancies occurred, and it's 
important, I believe, at a moment like this to appreciate the 
degree to which there is learning going on within the 
corporation and learning by the individuals. So we admit 
mistakes were made. We admit we could do a better job. I 
admitted that the last time. And therefore I believe the key is 
to look forward, and as Dr. Olds has suggested, put in place 
those kinds of things----
    Mr. Posey. Well, you know, when you were here in February, 
you testified ``We pledge going forward to redouble our efforts 
to be good stewards of the taxpayers' funds we receive.'' Yet, 
according to the National Science Foundation Inspector General, 
since that time they continue to discover inappropriate charges 
by NEON and its leadership.
    Dr. Collins. Well, inappropriate charges in----
    Mr. Posey. I think those they referred to as legal fees and 
lobbyist expenses.
    Dr. Collins. I'll have to get back to you on that because, 
as I said, there are no management fees that have been used 
since the last time I was here.
    Mr. Posey. Not a dime spent for lobbyists or legal fees, 
not one penny?
    Dr. Collins. Again, I would have to get back to you, but in 
terms of my understanding, that's true.
    Mr. Posey. Okay. Mr. Olds, do you care to comment?
    Dr. Olds. Well, I think it's extremely important that any 
federal monies that were misspent needs to be made right to the 
American people.
    Mr. Posey. You know, I think we can't spend the management 
fees to reimburse the federal government for wasting their 
money. Maybe you could just divide it among the participants 
that enjoyed the liquor and the parties and have them ante up 
and just repay the government for a party that wasn't intended, 
was authorized, certainly wasn't ethical, useful or in any way 
positive for the taxpayers who funded it. Does it sound like a 
good idea to you?
    Dr. Collins. And so your question is whether there should 
be some retroactive effort to gather in the individuals who 
were at the party and have them contribute?
    Mr. Posey. I know it's a foreign concept to some, but it's 
called justice. You know, you take something that doesn't 
belong to you, and as a minimum, you pay it back. Like the 
lawyers behind you today--are they lawyers for you? Are they 
your lawyers?
    Dr. Collins. There is one--I have one counsel representing 
me, yes.
    Mr. Posey. Okay. Do they get paid?
    Dr. Collins. Yes.
    Mr. Posey. Okay. Who pays them?
    Dr. Collins. NEON.
    Mr. Posey. And from what funds does NEON pay them?
    Dr. Collins. We have fees within the corporation to be used 
in order to ensure that the corporation is acting in ways that 
are consistent with the laws of the United States, and so we do 
have legal counsel.
    Mr. Posey. But you haven't used any since you told me since 
the last time we met here on lobbyists or legal fees, correct?
    Dr. Collins. I said that I--that we have not used any 
management fee money for lobbyists since the last time I was 
here.
    Mr. Posey. Okay.
    Dr. Collins. And we haven't spent any management fees at 
all.
    Mr. Posey. Okay. And the lawyers behind you, they prepared 
your testimony for today?
    Dr. Collins. I had help as far as the testimony and 
preparation from a variety of individuals, not just legal 
counsel, but individuals at NEON as well. It was a real team 
effort.
    Mr. Posey. Just to come in and tell us what's going on?
    Dr. Collins. Well, I guess I wouldn't say just to come in. 
I believe that the issues that you're raising are indeed 
important and serious issues, and so we put in a good deal of 
preparation in order to be ready to help you out----
    Mr. Posey. Tell me that you don't know the answer?
    Dr. Collins. --to help you understand.
    Mr. Posey. I understand. All right. Sorry I went over, 
Madam Chair.
    Chairwoman Comstock. Okay. Thank you, and the Chair now 
recognizes Ms. Bonamici.
    Ms. Bonamici. Thank you very much, Chair Comstock.
    Dr. Olds, large construction projects often run into some 
unanticipated challenges. The NEON project in particular is 
unprecedented in size and scope for the ecological sciences 
community, and it required, of course, significant technology 
development. I share the concerns raised today about the 
troubles with NEON but also that they were allowed to progress 
to the point that we find ourselves today. So in your 
testimony, you described for us the series of increasingly 
aggressive oversight steps that NSF took in an effort to keep 
NEON on track. I know there's been some talk about hindsight 
and retrospect, but could you talk a little bit about what 
might you have done even sooner or more aggressively to avert 
such a significant re-scope of the project? And I also want to 
hear about what the lessons are that have been learned for 
future projects.
    Dr. Olds. Well, I think you raise a really good question, 
Congresswoman, and I would say what we've learned really comes 
down to this. If you think about the large projects 
scientifically that NSF does, they're over a spectrum. 
Oceanographic research vessels, we've done those before. Things 
like NEON, that's at the other end of the spectrum. We've never 
built anything like NEON before. So I would say in terms of 
lessons learned going forward, projects like NEON that involve 
technologies and instrumentation and distribution that we have 
not done before deserve a much greater level of scrutiny from 
the very beginning going forward so that we have a better 
handle on how the project's doing and when it starts to get off 
the rails.
    When we're looking at something that we've done before, 
that's a different story, but NEON and projects in the future 
that may be like NEON I think deserve a much higher level of 
scrutiny.
    Ms. Bonamici. Thank you. I was among the group of Committee 
Members who went to the South Pole this last year and saw the 
IceCube Neutrino project. That one went pretty well, didn't it?
    Dr. Olds. It certainly did. That's a terrific example of a 
large project that is delivering to the American people as we 
hoped it would.
    Ms. Bonamici. So, Dr. Olds, a group of former Ecological 
Society of America presidents published an open letter strongly 
supporting the NEON project. I believe Mr. Lipinski already has 
entered that into the record. They support the project even as 
re-scoped but they express some concern that NSF has not 
sufficiently engaged the community in decision-making for NEON 
since construction began. So I fully appreciate the tension 
between keeping a large construction project on time and on 
budget and wanting to be responsive to the evolving scientific 
and technological opportunities that come from that.
    I don't think anyone wants to delay the project for a 
length of time or increase its budget but we're at a sort of 
unplanned pause here as NEON develops a new cost proposal. So 
the scientific and technological opportunities have changed 
since 2010 when the project design was approved. So is there an 
opportunity here to more directly engage the community in the 
final re-scoping decisions so that the science meets the needs 
of the user community? And I'll get Dr. Collins in on this as 
well and ask him about that.
    Dr. Olds. Congresswoman, that's a terrific idea. Just weeks 
ago, I personally went to the Ecological Society meeting in 
Baltimore. A little bit after that, I went out to Estes Park, 
Colorado, to meet with a long-term ecological network of 
scientists community so I believe that actually that engagement 
needs to start from the very top of the Biological Sciences 
Directorate and permeate everything that we do. Really, the 
community needs to be fully engaged scientifically in this 
project so that the data that is delivered back is as valuable 
to them as possible.
    Ms. Bonamici. And Dr. Collins, what role are you playing or 
is NEON playing in making sure that the community is engaged in 
the re-scoping?
    Dr. Collins. I agree entirely with Dr. Olds. I was also 
there in Baltimore with him. It is a moment to bring along even 
greater engagement by the scientific community. You put your 
finger on exactly the issue early on. You're balancing this 
tension between getting the facility built and therefore 
controlling a scope creep as far as the construction is 
concerned. But now at this moment, and it is just right as you 
transition from construction to operations, that you want to 
bring the community in even more deeply and take advantage in 
the course of doing the re-scope to look at new instrumentation 
that's available, new potential that you have in order to make 
it an even better facility than you thought it could be at the 
beginning.
    Ms. Bonamici. Thank you.
    My time is expired. I yield back. Thank you, Madam Chair.
    Chairwoman Comstock. Thank you, and I now recognize Dr. 
Abraham for five minutes.
    Mr. Abraham. Thank you, Madam Chairman.
    Dr. Collins, I'll certainly agree with your suggestion that 
we bring more private accountants in to monitor these projects. 
I'm looking at some notes I have, and it's my understanding 
that since 2011, the NSF has had at least seven expert--I'll 
use that tongue in cheek with the word ``expert''--reviews of 
these projects, and in August 2014, they're telling us that you 
guys are on target, on time, on budget, and then 3 months later 
we're $16 million in the hole and it has just escalated since 
then. So I think it's an excellent idea.
    Dr. Collins, on NEON Inc., I understand it's a private 
enterprise. Is that a correct statement?
    Dr. Collins. Well, it's a 501(c)(3).
    Mr. Abraham. Okay. How many employees does Neon Inc. have?
    Dr. Collins. There are approximately 320 individuals in 
Boulder and about another 120 individuals throughout the United 
States.
    Mr. Abraham. And to your knowledge, were there any 
employment bonuses given in 2014 and 2015?
    Dr. Collins. That's a detail that would be left to the 
financial individuals in the corporation, and I can get you 
that information.
    Mr. Abraham. I would appreciate that.
    Dr. Olds, hearing the testimony that you and Dr. Collins 
both gave, and we appreciate your presence here, at least I do, 
I hear this term over and over, we're learning, we're learning. 
But we're learning on the taxpayers' dollars here, guys, and 
you need to learn somewhere else, not on the taxpayers' 
dollars. I mean, you guys should be past the learning into the 
doing stage.
    Of these projects that have been--or this entire project 
that has been de-scoped--I'll use that term--we use a different 
term, a more direct term in private business. We're down to 60 
or 80 sites. How many of those sites are projected to be in the 
United States?
    Dr. Olds. All of them are in the United States, 
Congressman.
    Mr. Abraham. And with--Dr. Olds, I'll go to you. The CEO, 
it's my understanding, of NEON Inc. was just relieved of duty, 
and that's a pretty big strike when you take out a CEO of a 
300- to 450-employee company. That shows that there some basic 
large mismanagement. Do you have confidence that NEON Inc. can 
do the job?
    Dr. Olds. Well, we are going to be sitting on NEON Inc. 
over the next three months and putting them through some pretty 
difficult hoops, and we will know very quickly whether this 
organization is going to be successful under new leadership in 
changing its course, and if they aren't, we'll act.
    Mr. Abraham. Have you guys got a timeline that says hey, 
you've got to be at this point at this time or----
    Dr. Olds. Yes, sir.
    Mr. Abraham. --game over? Okay.
    Dr. Olds. Yes, sir.
    Mr. Abraham. Fair enough.
    Dr. Collins, the CEO that was just relieved of his duties, 
how much--and I know it's an opinion but I'm asking it--in your 
opinion, how much of the mismanagement was attributed directly 
to him?
    Dr. Collins. Well, the issue is a personnel issue, of 
course, so I'm only going to go into certain kinds of details, 
but let's put it this way. We have a corporation that is 
changing. It is dynamic. And it was the judgment of the board 
that at this time we needed to bring on, to go back to some 
points that we made earlier--an individual who could deal with 
this transition from construction to operations.
    Mr. Abraham. But come on, Doc. I mean, you know, this guy 
should have already been vetted to--he should have been--if 
he's a CEO of a company of this size, he should have known from 
A to Z how this project was going. I mean, he is the CEO.
    Dr. Collins. Yes.
    Mr. Abraham. And I guess that's my frustration is that 
maybe he didn't know all the particulars, but the board 
should've done a better job of vetting this guy before he was 
hired. I think that's just basic business acumen there.
    Dr. Collins. So it was a previous board that hired the CEO, 
but the important thing is that I'm confident that they did the 
best job that they could at the time. Then you work with the 
individual in order to bring the individual along. Now we're at 
a point where we're going to look for a new individual.
    Mr. Abraham. I would probably respectfully disagree that 
they did the best job at that time in hiring this guy.
    Madam Chairman, I yield back.
    Chairwoman Comstock. Thank you.
    I thank the witnesses for their testimony today and the 
Members for their questions. We very much appreciate your 
diligence in looking at this and responding to us and 
appreciating the concerns here.
    And the record will remain open for two weeks for 
additional written comments and written questions from Members.
    So the hearing is now adjourned.
    [Whereupon, at 10:26 a.m., the Subcommittees were 
adjourned.]

                               Appendix I

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                   Answers to Post-Hearing Questions
Responses by Dr. James Old

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                              Appendix II

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                   Additional Material for the Record




            Document submitted by Representative Loudermilk

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             Document submitted by Representative Lipinski

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            Additional responses submitted by Dr. James Old

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