Making Competition a Priority

Most of the Energy Department's procurement dollars go to contracts for the management of more than 50 major facilities, including nuclear weapons production facilities, national laboratories and sites undergoing environmental cleanup.

In January, the General Accounting Office reviewed Energy's contract management practices. GAO found Energy had improved since January 1999 when the congressional auditors placed the agency's contract management practices on the list of federal programs at high risk of waste, fraud or abuse. Nevertheless, GAO found that Energy still faces "significant performance and accountability challenges." In an effort to tighten up contract management, procurement executives have taken several reform-oriented steps.

For example, the department has conducted a top-to-bottom review of its contracts for management and operations at its sites and facilities. Historically, Energy hasn't opened these contracts to competition. Rather than putting the contracts up for bid, Energy relied upon contract extensions. In 1994, agency officials report, Energy studied all 52 of its maintenance and operations contracts to determine whether they would be better suited to a more conventional contracting process. By last September, the department had cut 50 percent of the contracts, converting some to service contracts, combining some with other contracts and privatizing some of the work. Since 1995, the department has put up for competition 22 of the maintenance and operations contracts, valued at a total of more than $100 billion.

Most maintenance and operations contracts operate on a five-year cycle, and when they expire, Energy procurement officials will decide whether to recompete the contracts or extend them with the incumbent contractors.

In 1999, 94 percent of the department's new non-maintenance and operations contracts went through the competitive process. Today, Energy operates more than 2,500 contracts with a total value of nearly $18 billion.

Energy has reduced its number of federally funded research and development centers, specialized research organizations that are exempt from contract competition. The department now sponsors 16 such centers-such as Oak Ridge National Laboratory in Tennessee and Los Alamos National Laboratory in New Mexico-having eliminated six over the past decade because their work no longer fit with Energy's mission or because the operations were privatized.

Energy has focused heavily on the use of performance-based contracts under which contractors are not paid unless they meet certain predetermined goals.

The agency now requires that contractor fees be tied to performance objectives. Bonuses for key agency managers also are dependent on performance outcomes. Unlike in past years, contract performance objectives now are formally included in the department's overall strategic plan and agency executives are held accountable for effectively managing contractors. Energy and its facility management contractors have established a procurement evaluation and reengineering team to advocate for procurement reforms and training as well as for performance measurement.

Energy has committed to spending 60 percent of its service contracting dollars through performance-based service contracts. The office of the senior procurement executive reports the agency is nearing that goal.

Expanded electronic procurement also is high on the agency's agenda for fiscal 2002. Energy has pledged to increase online procurement so that all acquisitions valued at more than $25,000 will be posted on the Web. This move is in line with an Office of Management and Budget directive that all agencies step up their e-procurement efforts.

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