[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]
Available via the World Wide Web: http://science.house.gov
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Appendix II
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Additional Material for the Record
Document submitted by Representative Loudermilk
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Document submitted by Representative Lipinski
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Additional responses submitted by Dr. James Old
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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