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Printed Hearing The Committee on Energy and Commerce W.J. "Billy" Tauzin, Chairman Review of the University of California's Management Contract for Los Alamos National Laboratory <DOC>
[108th Congress House Hearings]
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REVIEW OF THE UNIVERSITY OF CALIFORNIA'S MANAGEMENT CONTRACT FOR LOS
ALAMOS NATIONAL LABORATORY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
MAY 1, 2003
__________
Serial No. 108-14
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas Ranking Member
FRED UPTON, Michigan HENRY A. WAXMAN, California
CLIFF STEARNS, Florida EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania RICK BOUCHER, Virginia
CHRISTOPHER COX, California EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina SHERROD BROWN, Ohio
Vice Chairman BART GORDON, Tennessee
ED WHITFIELD, Kentucky PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois BART STUPAK, Michigan
HEATHER WILSON, New Mexico ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING, GENE GREEN, Texas
Mississippi KAREN McCARTHY, Missouri
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
Dan R. Brouillette, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
JAMES C. GREENWOOD, Pennsylvania, Chairman
MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida
CLIFF STEARNS, Florida Ranking Member
RICHARD BURR, North Carolina DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire JIM DAVIS, Florida
GREG WALDEN, Oregon JAN SCHAKOWSKY, Illinois
Vice Chairman HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey BOBBY L. RUSH, Illinois
MIKE ROGERS, Michigan JOHN D. DINGELL, Michigan,
W.J. ``BILLY'' TAUZIN, Louisiana (Ex Officio)
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Atkinson, Richard C., President, University of California.... 60
Brooks, Hon. Linton F., Under Secretary for Nuclear Security
and Acting Administrator for Nuclear Security, National
Nuclear Security Administration, U.S. Department of Energy. 9
Darling, Bruce B., Senior Vice President, University Affairs,
Interim Vice President for Laboratory Management,
University of California; Accompanied by Anne Broome, Vice
President for Financial Management, University of
California; and Patrick Reed, University Auditor,
University of California................................... 64
Friedman, Gregory H., Inspector General, U.S. Department of
Energy..................................................... 43
McSlarrow, Hon. Kyle E., Deputy Secretary of Energy, U.S.
Department of Energy....................................... 8
(iii)
REVIEW OF THE UNIVERSITY OF CALIFORNIA'S MANAGEMENT CONTRACT FOR LOS
ALAMOS NATIONAL LABORATORY
----------
THURSDAY, MAY 1, 2003
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:40 a.m., in
room 2123, Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Walden, Tauzin
(ex officio), Deutsch, and Schakowsky.
Also present: Representatives Radanovich, Markey, Eshoo,
Stupak, and Udall.
Staff present: Ann Washington, majority counsel; Michael
Geffroy, majority counsel; Yong Choe, legislative clerk; and
Edith Holleman, minority counsel.
Mr. Greenwood. Good morning. This hearing of the Oversight
and Investigations Subcommittee of the House Energy and
Commerce Committee will come to order. We welcome our witnesses
and our guests, and the Chair recognizes himself for the
purpose of an opening statement.
The subcommittee meets today for the third time this year
to hear testimony related to the management situation at Los
Alamos National Laboratory. Currently operated by the
University of California, the lab is one of the Nation's
premiere research facilities on matters critical to our safety
and security. Yet, as we have learned in the course of our
investigation, the lab has also been a premiere site of serious
property mismanagement and even theft.
Our February and March hearings concentrated on concerns
raised by current and former lab employees about lab
procurement and property management systems. I believe the
issues identified at those hearings as well as the continued
diligence of this committee prompted the unprecedented
Department of Energy announcement yesterday that forms the
backdrop to this hearing. The DOE announced its decision to put
the Los Alamos contract up for competition for the first time
in the lab's 60-year history. This decision is long overdue and
one that members of this committee on a bipartisan basis have
been calling for for many years.
The University of California has operated Los Alamos under
contract with DOE since 1943. At no time during its long reign
as operator of the facility has UC ever been faced with the
possibility of having to compete for this privilege. Given the
length of time UC operated without the threat of competition,
it appears that it has been lulled into a state of
irresponsible complacency.
Let me add that progress has been made to improve the
situation. The university has become much more involved in the
daily operations of the lab in the past 6 months, and I am
pleased with some of its efforts to get lab management back on
track by replacing much of the senior staff, but it remains to
be seen if those efforts will effect any meaningful change at
the lab.
We heard at our last hearing from Joe Salgado, the former
principal deputy director of the lab, who said that Federal
money was treated like monopoly money, which is hardly a
description of the kind of fiduciary responsibility expected
and required of DOE contractors.
The lab argues that the amount of identified abuse of
Federal money is just a drop in the bucket when compared to the
lab's budget as a whole, and that perhaps is why the abuses
have not garnered the required attention. I appreciate the
point, but this multibillion dollar facility is operated on
taxpayers' money, and as a steward of that money for the
American public I am not comfortable with that explanation. As
I have said before, when this same lab is responsible for
safeguarding not only taxpayer money but the Nation's most
sensitive nuclear secrets there is little room for error.
So I salute the Department's decision to compete this
contract, to identify the best administrator for the lab. These
are steps that the prior administration and prior secretaries
have been too afraid to take, even in the face of repeated
scandal and repeated promises of reform. In the testimony today
we will hear from both the Department and the university on
factors associated with this decision and exactly what will be
sought in the competitive process.
On our first panel we will hear from Deputy Secretary of
Energy Kyle McSlarrow and Ambassador Linton Brooks of the
National Nuclear Security Administration. These gentlemen have
been involved in the decision to compete the contract, and they
will explain their rationale for their decision. I look forward
to their testimony and to learning how DOE will improve its own
oversight of UC or its successor.
Next we will hear from the DOE Inspector General, the
Honorable Greg Friedman. Inspector General Friedman's office
has audited various aspects of Los Alamos management, ranging
from nuclear safety to procurement problems. Recently, his
office released an audit questioning over $14 million in costs
charged by the lab to DOE and controls on classified and
unclassified computers. I am particularly interested in his
views regarding what standards the Department should set when
competing this contract.
Finally, we are joined by a panel of senior officials from
the University of California: current University President Dr.
Richard Atkinson; Vice President for Financial Management Ms.
Anne Broome; University Auditor Mr. Patrick Reed; and,
reappearing for the third time before us in this investigation,
Mr. Bruce Darling, Interim Vice President for Laboratory
Management.
The university faces some tough questions if it intends to
put itself in the competition for the LANO contract. What would
UC do to banish what appears to be a lax attitude within the
current lab culture? I trust our witnesses today will be able
to shed some light on these and similar areas of inquiry. Let
me thank all of the witnesses for attending this very important
hearing today.
I now recognize the ranking member, Mr. Deutsch, for his
opening statement.
Mr. Deutsch. Thank you, Mr. Chairman.
This is a historic occasion, one that I know Mr. Dingell
has looked forward to for many years. He apologizes for not
being here but will submit a statement for the record.
For 60 years the Department of Energy's contract to operate
the Los Alamos National Laboratory has been awarded to the
University of California without any competition to see if
another entity could better run the lab. Despite numerous
congressional and other investigations over the years that have
found serious security, safety environmental management
problems at the laboratory, there has not been a single attempt
by the Federal Government to compete that contract until now.
It is my hope that these hearings will ultimately result in
finding the best contract to carefully use the taxpayer's money
and run a laboratory that produces excellent science while
being run like a business.
Like all institutions which are seldom challenged about how
they operate, the university and the laboratory's management
became arrogant and defiant over the years. When problems were
uncovered, they made promises to Congress and others about how
they were going to fix them, promises that the university took
few steps to fulfill, that the Department of Energy did not
enforce.
Whistleblowers who tried to bring problems to management
attention were punished and, even if they won decisions,
finding retaliation, establishing remedies, were hounded by the
university's full legal forces until many of them were ruined
financially and emotionally. Some had been employees for
decades. One person who contacted us recently managed to keep
his job but had been without a work assignment for 7 years.
What happened most recently to Glen Wobb and Steven Dorn,
two former police officers who were hired to professionalize
criminal and security investigations and then fired when they
actually attempted to do so, is only the most recent example in
a long chain of unsuitable behavior by the university and the
laboratory.
Three years ago, UC promised to fix their security
management weaknesses. One of those commitments was to
implement best business practices. Yet today the Inspector
General of the Department of Energy will testify he does not
believe that Los Alamos can provide adequate assurances that
classified, sensitive or proprietary information is
appropriately protected because of poor controls over laptop
computers containing classified information.
In the committee's own investigation we have found missing
hard drives and other classified electronic media for which
there are no acceptable explanations. In addition, the entire
business financial system by which the laboratory is supposed
to document and control how it spends Federal money is in
shambles, as is its internal auditing system.
These systems are so bad that the Inspector General
concluded in a recent report that DOE has less than adequate
assurances that costs claimed by the university for operation
of the laboratory are allowable under the contract. Mr.
Chairman, what that means is that DOE can't have any confidence
in the course claimed under this entire billion dollar
contract.
This is the third year in a row that the IG has come to
this conclusion. That is how you get the thefts like we have
heard about at previous hearings and the careless use of
taxpayer funds by workers who think the Federal Government owes
them top-of-the-line shoes, coats, shirts and gloves. One
employee bought 13 pairs of allegedly work-related shoes in 18
months, 12 of which were running and sports shoes.
Joseph Salgado, the former deputy director of their
laboratory, testified that taxpayers' money often was treated
like monopoly money.
And what has been the response to procurement problems,
poor property management and lack of effective business
controls? There have been many well-publicized investigations.
But while these investigations were ongoing, the Department and
the university were quietly negotiating new fiscal year 2003
performance standards for Los Alamos standards drafted by the
university that put science and technological goals at the
forefront and pay little attention to inadequate business
systems and controls that have brought down the top management
at the laboratory.
There is one sentence, ``Implement effective controls and
business systems by assisting existing controls were needed.
Strengthen controls to insure effective stewardship of public
assets.'' DOE cannot even tell us what percentage of the
performance fee will be allocated to this objective, which was
only one of 40.
Mr. Chairman, we must ask whether any of the problems that
we have been discussing for the last several months are going
to get fixed when it doesn't appear that they would even
seriously affect the performance fee. Despite anything said
today, despite any promises made today by either the Department
of Energy and the University of California, this is the only
document that deserves our attention because it is where the
money is.
I look forward to the testimony.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes the chairman of the full committee, the gentleman
from Louisiana, Mr. Tauzin.
Chairman Tauzin. Thank you, Chairman Greenwood.
The hearing this morning marks a milestone of sorts because
this morning we will talk about the University of California
management contract for Los Alamos not only in terms of what
should happen but in terms of now what will happen, putting the
lab's management contract out for bid for the first time in its
60-year history. The subcommittee's exposure of the management
problems of Los Alamos is truly shaking things up, Mr.
Chairman; and you deserve extreme amounts of credit for
doggedly pursuing this matter on behalf of the full committee
and, by the way, the American public which relies, as we do, on
the sensitive work of the lab to make our lives safer and more
secure.
We should also recognize the decisive actions taken by
Secretary Abraham and his management team at DOE for
confronting the problems at the lab and doing something
meaningful about them. The Secretary's announcement yesterday
to compete the lab's management contract is the equivalent of a
political earthquake. It shouldn't be. Periodic competition
should be normal. It should be the necessary procedure for such
an important contract. But it is a big deal precisely because
it has never been done before, ever; and, as a result, the
pressure of competitive bidding, one of the most powerful
cleansers of management problems, has never really bore down on
those responsible for the lab's contract.
We should commend Secretary Abraham for his aggressive
action to fix Los Alamos, especially because the current 5-year
contract was literally dumped in his lap by the previous
administration just days before they left office. And they knew
better. Remember, it was the prior administration that talked
tough after the last round of lab scandals involving Los Alamos
and the University of California.
Yet not only didn't they follow through on the tough talk,
Secretary Abraham's predecessor took the remarkable step of
ordering this flawed contract be extended for a new 5-year term
without competition literally 2 days before President Bush and
Secretary Abraham took office; and he did so even though that
prior contract was not due to expire for nearly 2 years, when
there was ample time for the new administration and the
Congress to review and to conduct a thorough examination of any
potential contract extensions.
It may be ironic, but one of the very first acts as
chairman of the Commerce Committee in January, 2002, that I
conducted was to call on DOE and request that any action on the
current UC contract be delayed until the new administration
committee had an opportunity to review it. And that simple
request was rejected. I have with me the letter of January 22,
2001, to the Department making that case. Our concerns, of
course, sadly were borne out, and it hasn't been easy to deal
with.
The Secretary has had additional challenges thrust upon him
when he was trying to sort them out. He had to deal with a new
entity, the National Nuclear Security Administration, also
created over this committee's objections. NNSA produced a new
layer of bureaucracy between the Secretary and the managers at
the nuclear weapons labs that was supposed to improve
accountability and oversight. And he had to deal with the long
delay in the confirmation of Kyle McSlarrow, his Deputy
Secretary, who would be his right-hand man on these matters.
Because of that delay, the crucial position in the Department
of the officer in charge of DOE operations was vacant during
much of the lead-up time leading to the recent controversy at
Los Alamos.
Despite all this, the Secretary and his new Deputy
Secretary have stepped up to the plate to address the situation
aggressively, even before the latest announcement, by
pressuring UC to make sweeping changes in the lab's management
and UC's oversight of the lab.
An NNSA colleague, Ambassador Linton Brooks, also has
provided able leadership in this crisis, which is an
encouraging sign that we're finally on the right course. I want
to agree with Ambassador Brooks' own comments yesterday that
NNSA and its oversight of the lab over the past several years
has not been up to par, not what Congress was promised when we
took this gamble by further insulating the nuclear weapons lab
from central DOE management.
I look forward to hearing from both of you on this morning.
Mr. Chairman, let me welcome the witnesses today, with
three excellent and knowledgeable panels, to discuss these
important developments to provide some answers about the future
of Los Alamos and of the University of California's contract
with it and to provide, perhaps, some sense that when we're
finally closing a very sad chapter in the history of the lab so
that we finally open a new one.
In a conversation I had with Senator Domenici yesterday I
congratulated him on reaching the same conclusion that
Secretary Abraham had, that it's time to bid this contract out,
that it's time to give Los Alamos a credible platform upon
which it can proceed, instead of having this specter of poor
management and the questions always being asked about what's
being done about it and what's being done to correct it
constantly on the shoulders of the managers of that most
important lab for this Nation's safety and security.
Mr. Chairman, again, my very deep thanks on behalf of the
full committee for your subcommittee's actions and doggedly
pursuing this matter and leading to this conclusion by the
Department; and hopefully this wrap up hearing where we can
look forward now to a new chapter, as I said, in the history of
this extraordinarily important asset to America.
I yield back the balance of my time.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes for an opening statement the gentleman from
Michigan, Mr. Stupak.
Mr. Stupak. I'll waive my opening statement, Mr. Chairman.
Mr. Greenwood. The Chair recognizes the vice chairman of
the subcommittee, Mr. Walden of Oregon.
Mr. Walden. Thank you, Mr. Chairman. I, too, will waive my
opening statement so we can proceed with the hearing.
Mr. Greenwood. Very well. We appreciate that.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Thank you, Mr. Chairman, for holding this hearing to discuss the
very significant decision by the Department of Energy (DOE) to
competitively bid the contract to operate the Los Alamos National
Laboratory. Although we do not have details about how the competition
is going to be run, I applaud Secretary Abraham for this decision.
Prior Energy Secretaries tried, but failed, to force needed changes
short of this step. They did not realize that the University of
California was too obstinate, arrogant, and entrenched to make needed
changes.
The most recent failed DOE effort was Appendix O, which was added
to the contract by the University after the Wen Ho Lee and the lost
hard drive incidents, and the cost overruns and schedule delays of the
National Ignition Facility. These were just the latest in two decades
of ``chronic security and other management-related problems.'' On
October 26, 2000, then Committee Chairman Tom Bliley and I wrote a
letter to then-DOE Secretary Bill Richardson after he had decided to
extend the UC contract for another three years. We knew then that the
promises made by the University in Appendix O, which included a new
vice president for laboratory management, would not work, and we asked
the Secretary to compete or renegotiate the contract. As we stated:
``As the briefing the Members last week amply demonstrated,
these five action items [in Appendix O] fall far short of the
fundamental restructuring necessary to bring new management
expertise and accountability into the operations of these labs.
Indeed, these actions are, for all practical purposes, either
meaningless or already provided for in the current contract.
When pressed about the details of these five actions, or how
they would be implemented, neither DOE nor UC was able to offer
any substantive explanations--saying only that the specifics
would be worked out during contract negotiations.''
(October 26, 2000, letter from Reps. Tom Bliley and John Dingell to
Secretary Bill Richardson, p. 2. (emphasis added))
In July of 2000, Dr. John McTague, who became the University's vice
president for laboratory management, had written to Secretary
Richardson proposing this position for a person who would ``assess and
assure the performance of the laboratory directors, as well as
technical excellence of programs, major project management, personnel
systems, safety, security, and business practices.'' Dr. McTague said
the UC oversight role of the laboratories was ``poorly defined and
inadequately manned.'' (July 16, 2000, letter from Dr. John McTague to
Secretary Bill Richardson, p. 2.)
Dr. McTague got that job, but promptly used it to negotiate FY 2003
performance standards for the laboratory that elevated scientific tasks
and denigrated even further the value placed on adequate security,
safety, environment, financial controls, and business practices. These
standards were adopted lock, stock, and barrel by the Department barely
a month ago--after the procurement scandal had broken, after the broken
property management system was identified, after Messrs. Walp and Doran
were fired in just the latest maltreatment of whistleblowers and
problem-raisers, after the lab director and more than a dozen other
people were removed from their jobs, and after the audit function at
Los Alamos was taken over by the University's auditor. Yesterday,
Ambassador Brooks claimed that these standards were negotiated before
any of this happened--although the University did not sign off on the
implementation plan until April 13--and that perhaps they would have to
be renegotiated to reflect current events.
There is a great deal of blame to spread around, but most of it
belongs on the backs of the University of California, which never
integrated the laboratories into its financial and management control
structures, and the Department of Energy, which failed to hold the
University accountable. Los Alamos must make real change--a change in
which employees who in good faith bring problems to management's
attention and openly discuss them without paying for it with their
careers and their financial and emotional well-being. Until this
happens, there will not be a free and open discussion of problem areas,
nor will there be proper remedies. But the University's recent
responses on questions Rep. Markey and others have raised about
specific whistleblower cases are not particularly encouraging. As this
competition goes forward, the issue of openness and responsiveness
should be a critical factor in assessing bids.
Mr. Greenwood. In that case, the Chair welcomes our guests.
Our first witnesses are the Honorable Kyle E. McSlarrow, Deputy
Secretary of Energy at the Department of Energy, and Ambassador
Linton F. Brooks, Under Secretary for Nuclear Security and
Acting Administrator for Nuclear Security at the National
Nuclear Security Administration within the Department.
We welcome both of you gentlemen. Thank you for being here.
I think you're aware that this is an investigative hearing,
and it is the practice of the subcommittee when holding
investigative hearings to take testimony under oath. Do either
of you object to giving your testimony under oath this morning?
Mr. McSlarrow. No, Mr. Chairman.
Mr. Brooks. No, sir.
Mr. Greenwood. Okay. Pursuant to the rules of the committee
and the House, you are entitled to be represented by counsel.
Do either of you wish to be represented by counsel this
morning?
Mr. McSlarrow. No.
Mr. Brooks. No.
Mr. Greenwood. In that case, if you would stand and raise
your right hand, I'll give you the oath.
[Witnesses sworn.]
Mr. Greenwood. You're under oath.
We will start with you, Secretary McSlarrow. You're
recognized for your opening statement.
TESTIMONY OF HON. KYLE E. MCSLARROW, DEPUTY SECRETARY OF
ENERGY, U.S. DEPARTMENT OF ENERGY; AND HON. LINTON F. BROOKS,
UNDER SECRETARY FOR NUCLEAR SECURITY AND ACTING ADMINISTRATOR
FOR NUCLEAR SECURITY, NATIONAL NUCLEAR SECURITY ADMINISTRATION,
U.S. DEPARTMENT OF ENERGY
Mr. McSlarrow. Mr. Chairman, distinguished members of the
committee, thank you for the opportunity to discuss with the
committee our review of the University of California's
management of Los Alamos National Laboratory, the
recommendations we have made to the Secretary and his
decisions.
The starting place for our inquiry is our national
security. Secretary Abraham has said repeatedly that he has no
more important responsibility than his obligation, together
with the Secretary of Defense, to certify to the President the
safety and reliability of the nuclear weapons stockpile. The
basis for our security is in obvious and important ways
dependent on the credibility of our nuclear deterrent, and
those laboratories and facilities and the people who manage and
work in them are rightly considered national treasures. Thus,
when the problems of last fall surfaced, Secretary Abraham
viewed the various investigations, whether ones directed by the
Inspector General or Congress, whether civil or criminal, as
necessary but additional to his responsibilities. He therefore
directed us to conduct a review and make recommendations with
the goal of ensuring that the management of the lab was one in
which he, Congress and the public could have total confidence.
Ambassador Brooks will provide more detail on our report in
a moment, but let me highlight a few conclusions.
First, the problems identified, while unacceptable, are
primarily related to management of business systems. There is
no indication that the science performed by the lab and the
university is anything other than world class.
Second, the University of California, under the personal
direction of its President, Dick Atkinson, has responded
forcefully and effectively. This is in no small measure also
due to the leadership of the university Senior Vice President,
Bruce Darling, and the lab's Interim Director, Admiral Pete
Nanos.
Third, both the fact that the university contributes
enormous value to the science that underpins the national
security mission of the lab and the great strides they have
made over the last 5 or 6 months lead us to conclude that
termination is not in the interest of our country.
Fourth, though this is a much more complex issue than is
present in even very large government procurements normally,
our conclusion is that our administration's presumption of
competition is not overcome in circumstances where business
systems have fallen so short of an acceptable level; and we
therefore recommended and the Secretary approve a decision to
announce yesterday our intent to compete the LANL contract
which expires in September, 2005.
Finally, Mr. Chairman, we recognized that this issue is
part of a larger set of issues about competition of the so-
called federally funded research and development centers, our
national laboratories. The Secretary recognized last year that
there is some fundamental policy issues that need to be
explored.
On the one hand for example, long-term, enduring
relationships are likely to be extremely valuable in accruing
the intellectual capital in which this country has invested. On
the other hand, lack of competition can lead to complacency, as
you mentioned.
Because these are issues that the Secretary needed to be
confronted, he established a blue ribbon commission which is
due to report to him in the late summer on its recommendations
on how we should approach performance oversight and competition
in the context of bidding on national laboratories. Thus, how
we compete this contract with regard to Los Alamos will be
informed by the results of that commission as well.
Mr. Chairman, I will conclude there and let Ambassador
Brooks provide you more detail on the decisions made by the
Secretary. Thank you.
Mr. Greenwood. Thank you, Mr. Secretary.
Mr. Brooks. Ambassador Brooks.
TESTIMONY OF HON. LINTON F. BROOKS
Mr. Brooks. Mr. Chairman, members of the subcommittee,
thank you for the opportunity to appear on this important
issue.
The Deputy Secretary has addressed the Department's
approach to competition and the immense importance Secretary
Abraham and all of us place on maintaining the highest
standards for our nuclear facilities. I'd like to turn to the
conclusions that we've reached and the actions we are taking
with respect to the future relationship between the University
of California and Los Alamos National Laboratory.
These conclusions and recommendations are set forth in our
joint report to the Secretary of Energy which was released
yesterday, and with your permission I would like to formally
submit that report and the Secretary' response for the record.
I want to state also for the record that we have received
superb cooperation from both the University of California and
the Los Alamos National Laboratory in conducting our review.
Our report covers the details of the problems uncovered at Los
Alamos and the university's response. The problems are well-
known to this committee, and Dr. Darling has outlined the
university action in great detail in previous testimony, so I
am not going to cover those here.
As the Secretary of Energy has made clear, the problems
represent a systemic management failure. I would only note the
conclusions of the report, that the university's actions were
broad, forceful and effective and that, ``It is difficult to
see how any organization could have done more to deal with the
problem than the University of California has since December,
2002.''
Our review suggests that there are multiple causes of the
failure of business systems at Los Alamos.
First, prior to November of last year, the university's
supervision of Los Alamos was ineffective in the area of
business process. The university focus was almost entirely on
other areas, including science, security, environment and
project management.
Second, the National Nuclear Security Administration's
direct Federal oversight was narrowly focused on specific
performance measures called out in the contract, rather than on
overall effectiveness and the interface between different
areas; and I will say more about this in a moment.
Third, in hindsight, warning signs appear to have been
ignored. Following the problems of several years ago involving
Wen Ho Lee and the hard drives, neither the university, the
laboratory, the National Nuclear Security Administration, nor
the Department examined in sufficient detail whether these were
symptomatic of broader management problems.
Finally, cultural problems beyond the control of the
university or the Department played an important role. The Los
Alamos culture exalted science and devalued business practices;
and changing this culture will be the most difficult long-term
challenge facing the laboratory, no matter who runs it.
As Deputy Secretary McSlarrow indicated, our review also
confirmed that the university brings substantial value to the
mission of Los Alamos. Los Alamos' mission depends on
attracting and retaining world-class scientific talent, and the
academic prestige of association with a world-class university
is a clear benefit in both recruiting and retention.
In addition, there are formal agreements for scientific
cooperation with four of the component campuses of the
university. These areas of cooperative research directly
advance the national security mission of the laboratory.
And, finally, an important and often overlooked benefit of
the university is to foster a culture of scientific skepticism
and peer review. That attitude within the laboratory and
between Los Alamos and Livermore National Laboratories is, in
my view, absolutely crucial to the success of the stockpile
stewardship program and to the ability to certify the safety
and reliability of the nuclear weapons stockpile.
Our report recommends and the Secretary has approved a
series of actions.
The most important of these are, first, that the university
continue to manage Los Alamos through the end of the current
contract in September, 2005. The vigorous action the university
is taking to correct the problems, the significant value the
university brings in the area of science and the disruption to
the mission of the laboratory and morale from early termination
all make retaining the university through the end of the
current contract the most appropriate course. Termination of
the contract would not improve the management of Los Alamos in
the near term, because the university is fully engaged in an
effective and comprehensive program.
Second, we recommended and the Secretary approved that the
Department announce its intent to compete the Los Alamos
contract when it expires in September, 2005. Given the
Department and the administration's strong preference for
competition and the widespread nature of the problems
uncovered, it's difficult to argue for any other course.
Third, however, we urged that the University of California
compete for the contract in 2005 perhaps in association with
another entity with business and project management experience.
The university has brought immense benefits to the laboratory
and the country over the past 60 years, and it is important to
note that a decision to compete is not a repudiation of the
university but simply a recognition that its performance in the
area of business management did not rise to the exceptionally
high standards required to overcome the presumption of
competition in the Department's policy.
Next, we begin now to develop the appropriate criteria for
evaluating the future competition. Normally, those criteria
would not be developed until next year, but the results of the
competition are going to have to preserve the many advantages
offered by the current association with the university, while
also ensuring continuation of the reforms now being initiated;
and finding the proper criteria to achieve these results will
be complicated and should begin at once.
Further, we recommend that the Secretary reject in advance
any notion of split responsibility for the laboratory in which
different contractors perform the science and business
operation functions. Some have argued that having the science
and business portions of the laboratory managed by separate
contractors would let us have the best of both worlds. I do not
believe that the laboratory director should report to two
entities. Indeed, a major part of the problem at Los Alamos is
fragmentation between the science and the business communities;
and a dual reporting approach would make the problem worse, not
better.
We also recommend, finally, that if we devise a mechanism
to insure that if the university does not continue to operate
Los Alamos following 2005 the pension benefits of current Los
Alamos employees are fully protected. Failing to do this could
lead to a significant challenge to morale and potentially to a
devastating exodus of the most experienced employees. It is
important to note that the vast majority of Los Alamos
employees have done nothing wrong and are continuing to perform
in an exceptional manner.
Let me turn now to the Federal role of discovering and
correcting problems of this type.
One element of the Federal responsibility, of course, is to
insure the university lives up to its own obligations. But, as
the report makes clear, the National Nuclear Security
Administration shares responsibility for allowing these
problems to develop.
Prior to November of last year, the Federal oversight role
was limited to a stove-piped review of performance set forth in
specific elements of the contract, when in fact what was called
for was a broader, more cross-cutting and more aggressive role.
Our reviews focused on performance in individual areas, rather
than in the intersection and relationship among those areas.
The report, recognizing this weakness, recommends that all
current and future DOE contracts be reviewed in order to insure
that performance reviews capture the cross-cutting information
necessary to form a complete picture of performance.
The National Nuclear Security Administration has begun this
process through our revised approach to evaluating Los Alamos
and Livermore National Laboratories. Under Appendix F of the
contract, we review broad cross-cutting areas and involve the
laboratory directors, the senior leadership of the university
and the senior leadership of my organization, including myself
personally, in these reviews.
In your opening statement, Mr. Chairman, you noted that we
had not established a weights for the criteria within those
reviews. That's by design. We believe that one should look at
cross-cutting areas in order to gauge overall performance and
that we run the risk of falling into the trap that got us here
if we start looking mechanically at business services as some
specific percentage, and so we believe that this overall
approach to review and most particularly the engagement of the
senior leadership will let us focus on the relationship of all
the performance elements.
Federal oversight in the past was also hampered by
fragmentation and lack of clarity in roles and responsibilities
within the National Nuclear Security Administration. For
example, before December of last year, the Albuquerque
operations office assessed business practices performance of
Los Alamos, while the Los Alamos site office assessed other
practices. This fragmentation has long been recognized,
including by Congress.
As a result and unrelated to the specific problems of Los
Alamos, in December of last year I implemented a major
reorganization of the National Nuclear Security Administration,
abolishing a layer of management and placing authority and
responsibility for Federal oversight in site office managers--
in the case of Los Alamos, Ralph Erickson, who has appeared
before this committee, who will now report directly, without
any intervening layers of management, to my Principal Deputy.
I expect that, in the aggregate, these changes will
significantly improve the quality of Federal oversight.
Mr. Chairman, let me conclude with two points.
First, it is important to recognize that the overwhelming
majority of Los Alamos employees in all areas, including
business services, are honest, dedicated, competent and hard-
working. Ultimately, the value of this laboratory does not lie
in expensive technology, it lies in people. And the failures of
Los Alamos were real, but they are the failures of a few, and
as we move to correct these failures it is important to keep
that fact in mind.
Second, I want to reiterate Secretary McSlarrow's emphasis
on the overriding importance of national security in all of the
decisions we've made. In approving our report, Secretary
Abraham said, ``The management of the nuclear weapons complex
is my most important responsibility as Secretary of Energy.
Under the university's stewardship, the science of Los Alamos
has consistently been of the highest caliber. But it is
important that business services be as good as the science. In
approving your recommendations it is my intention to make it
clear that, in dealing with nuclear weapons, only the highest
standards of performance are acceptable.'' All of us in the
Department remain committed to that goal.
Thank you for your attention, sir; and I look forward to
your questions.
[The prepared statement of Hon. Linton F. Brooks follows:]
Prepared Statement of Hon. Linton F. Brooks, Acting Under Secretary of
Energy for Nuclear Security and Acting Administrator, National Nuclear
Security Administration
Mr. Chairman, members of the subcommittee. Thank you for the
opportunity to appear before you on this important issue. Deputy
Secretary McSlarrow has addressed the Department's approach to
competition and the immense importance Secretary Abraham and all of us
place on maintaining the highest standards at our nuclear facilities. I
would like to turn to the conclusions we have reached and the actions
we are taking with respect to the future relationship between the
University of California and Los Alamos. Theses conclusions and
recommendations are set forth in our joint report to the Secretary of
Energy which was released yesterday. With your permission, I would like
to submit that report and the Secretary's response for the record.
Before I do, I want to formally state for the record that we have had
superb cooperation from both the University of California and the Los
Alamos National Laboratory in conducting our review.
Our report covers the details of the problems uncovered at Los
Alamos and the University's response. The problems are well known to
this Committee and Dr. Darling has outlined the University actions in
great detail, so I will not cover them here. As the Secretary of Energy
has made clear, they represent a ``systemic management failure.'' I
would only note the conclusion of the report that the University's
actions were ``actions were broad, forceful, and effective'' and that
``It is difficult to see how any organization could have done more to
deal with the problem than the University of California has since
December 2002.''
Our review suggests that there are multiple causes of the failure
of business systems at Los Alamos:
<bullet> Prior to November 2002, the University's supervision of Los
Alamos was ineffective in the area of business processes.
University supervision was almost entirely focused on other
areas including science, security, environment, and project
management.
<bullet> The Department of Energy and the NNSA's direct Federal
oversight was narrowly focused on specific performance measures
called out in the contract, rather than on overall
effectiveness. I will say more about this in a moment.
<bullet> In hindsight, warning signs may have been ignored. Following
the Dr. Wen Ho Lee and hard drive incidents, neither the
Laboratory, the University, NNSA, nor the Department examined
whether broader problems existed at Los Alamos.
<bullet> Finally, cultural problems beyond the control of the
University or the Department played an important role. The Los
Alamos culture exalted science and devalued business practices.
Changing this culture will be the most difficult long-term
challenge facing the Laboratory no matter who manages it.
As Deputy Secretary McSlarrow indicated, our review also confirmed
that the University brings substantial value to the mission of Los
Alamos. Los Alamos missions depend on attracting and retaining world-
class scientific talent. The academic prestige of association with a
world-class university is of clear benefit in both recruiting and
retention. In addition, there are formal agreements for scientific
cooperation with four of the component campuses of the University of
California. These areas of cooperative research directly advance the
scientific mission of the Laboratory. Finally, an important, little-
noted benefit of the University is to foster a culture of scientific
skepticism and peer review. This attitude, both within the Laboratory
and between Los Alamos and Lawrence Livermore National Laboratories, is
absolutely crucial to the success of the Stockpile Stewardship Program
and to the ability to certify the stockpile.
Our report recommends, and the Secretary has approved, as series of
actions. The most important include:
<bullet> That the University of California continue to manage Los
Alamos through the end of the current contract in September
2005. The vigorous action the University is taking to correct
the problems uncovered at Los Alamos, the significant value the
University brings in the area of science, and the significant
disruption to the mission of the Laboratory and the morale of
the employees from early termination all make retaining the
University through the end of the current contract the most
appropriate course. Termination of the contract would not
improve the management of Los Alamos in the near-term; the
University appears to be fully engaged in an effective and
comprehensive program.
<bullet> That the Department announce its intent to compete the Los
Alamos contract when it expires in September 2005. Given the
Department's and the Administration's strong preference for
competition, and the widespread nature of the problems
uncovered at Los Alamos, it is difficult to argue for any other
course of action.
<bullet> That we urge the University of California to compete for the
contract in 2005, perhaps in association with another entity
with business and project management experience. The University
has brought immense benefits to the Laboratory and the country
over the past 60 years. It is important to note that a decision
to compete is not a repudiation of the University, but simply a
recognition that the University's performance in the area of
business management did not rise to the exceptionally high
standards required to override the presumption of competition
in Department orders.
<bullet> That we begin now to develop appropriate criteria for
evaluating a future competition. The results of the competition
in 2005 should preserve the many advantages offered by the
current association with the University while also ensuring
continuation of the reforms now being initiated and
strengthening business functions. Devising the proper criteria
to achieve these results while avoiding unforeseen consequences
will be complicated and should begin at once.
<bullet> That we reject in advance any notion of split responsibility
for Laboratory operations in which different contractors would
perform the science and business operations functions. Some
have argued for having the science and business portions of the
Laboratory supervised by different contractors. The Laboratory
Director should not report to two entities. A major part of the
problem at Los Alamos is fragmentation between the science and
business communities within the Laboratory. A dual reporting
approach would make this problem worse, not better.
<bullet> That we devise a mechanism to ensure that, if the University
does not continue to operate Los Alamos following the 2005
competition, that the pension benefits of current Los Alamos
employees are fully protected. Failing to do this could lead to
a significant challenge to morale and, potentially, a
devastating exodus of the most experienced employees. It is
important to note that the vast majority of Los Alamos
employees have done nothing wrong and continue to perform in an
exceptional manner.
Let me turn briefly to the Federal role in discovering and
correcting problems of this type. One element of our Federal
responsibility, or course, was to ensure that the University lives up
to its own obligations. But as the report makes clear, National Nuclear
Security Administration shares responsibility for allowing these
problems to develop. Prior to November 2002, the Federal oversight role
was limited to a mechanistic review of performance as set forth in the
contract when in fact a broader, more aggressive role was called for.
Our reviews focused on performance in individual areas rather than the
intersection between those areas. The report, recognizing this
weakness, recommends that all current and future DOE contracts be
reviewed in order to ensure that performance reviews capture the
crosscutting information necessary to form a complete picture of
performance. NNSA has begun this process through our revised approach
to evaluation of Los Alamos and Livermore National Laboratories under
Appendix F of the contract. We review broad, crosscutting areas and
involve the Laboratory Directors, the senior leadership of the
University, and the senior leadership of NNSA, including myself,
personally in these reviews.
Federal oversight was also hampered by fragmentation and lack of
clarity in roles and responsibilities within the National Nuclear
Security Administration. For example, before December of 2002, the
Albuquerque Operations Office assessed business practices at Los
Alamos, while the Los Alamos Site Office assessed other performance
areas. This fragmentation problem has long been recognized, including
by the Congress. As a result, on December 20, 2002 I implemented a
major reorganization within NNSA, abolishing a layer of management and
placing authority and responsibility for Federal oversight in the site
office managers, who will now report directly to my Principal Deputy. I
expect that these changes will significantly improve the quality of
Federal oversight.
Mr. Chairman, let me conclude with two points. First, it is
important to recognize that the overwhelming majority of Los Alamos
employees--in all areas, including business services--are honest,
dedicated, competent, and hard working. Ultimately, the value of the
Laboratory lies not in expensive technology, but in people. The
failures at Los Alamos are real, but they are the failures of a few. As
we move to correct these failures, it is important to keep this fact in
mind.
Second, I want to reiterate Secretary McSlarrow's emphasis on the
overriding importance of national security in all of the decisions we
have made. In approving our report, Secretary Abraham said
The management of the nuclear weapons complex is my most
important responsibility as Secretary of Energy. Under the
University's stewardship, the science at Los Alamos has
consistently been of the highest caliber. But it is important
that business services be as good as the science. In approving
your recommendations, it is my intention to make it clear that,
in dealing with nuclear weapons, only the highest standards of
performance are acceptable.
All of us remain committed to that goal.
Thank you for your attention and I look forward to your questions.
______
Department of Energy
Washington, DC 20585
April 26, 2003
MEMORANDUM FOR THE SECRETARY
FROM:
Kyle McSlarrow, Deputy Secretary
Linton F. Brooks, Acting Administrator,
National Nuclear Security Administration
SUBJECT: Los Alamos National Laboratory
On December 24, 2002, you concluded that events at Los Alamos
National Laboratory reflected a ``systemic management failure.''
Although this conclusion was primarily aimed at the management at Los
Alamos itself, you also directed us to conduct an examination of the
relationship between the University of California, as the responsible
contractor, and the Los Alamos National Laboratory. We have also
explored the relationship among the University of California, Los
Alamos, and the National Nuclear Security Administration, Department of
Energy.
The University and the National Nuclear Security Administration
share responsibility for allowing these problems to develop. Prior to
November 2002, the University's supervision of Los Alamos was
ineffective in the area of business processes. The Federal oversight
role was limited to a mechanistic review of performance as set forth in
the contract when, in fact, a broader, more aggressive role was called
for, particularly in light of the problems that developed at Los Alamos
in the late 1990s.
Although the University was slow to take action to correct these
failures, once it became engaged its actions were broad, forceful, and
effective. It is difficult to see how any organization could have done
more to deal with the problem than the University of California has
since December 2002. Further, the University brings substantial value
to the mission of Los Alamos, in science, recruiting, retention and
fostering a culture of scientific skepticism and peer review.
Therefore, given the extraordinary disruption that would flow from an
immediate termination, we do not believe contract termination is in the
best interests of the national security missions conducted at Los
Alamos.
We recommend:
<bullet> That the University of California continue to manage Los
Alamos through the end of the current contract in September
2005.
<bullet> That you direct the NNSA Administrator to examine the utility
of a contract modification institutionalizing some of the
reforms made by the University over the last few months.
<bullet> That the Department announce its intent to compete the Los
Alamos contract when it expires in September 2005.
<bullet> That we urge the University of California to compete for the
contract in 2005, perhaps in association with another entity
with business and project management experience.
<bullet> That you direct the NNSA Administrator to begin now to develop
appropriate criteria for evaluating a future competition,
taking into account the results of the Blue Ribbon Panel when
available.
<bullet> That you further direct the NNSA Administrator to ensure that
any future competition includes provisions for retaining the
current Los Alamos workforce following September 2005.
<bullet> That you reject in advance any notion of split responsibility
for Laboratory operations in which different contractors would
perform the science and business operations functions.
<bullet> That you direct the NNSA Administrator to devise a mechanism
to ensure that, if the University does not continue to operate
Los Alamos following the 2005 competition, the pension benefits
of all Los Alamos employees on the rolls as of September 30,
2005, or previously retired, are fully protected.
<bullet> That in dealing with future competitions, the Department
explore ways in which to not only take into account truly
outstanding performance but also to encourage contractors who
might fall short during a contract term to strive to develop
plans to correct problems so that they may compete and succeed.
<bullet> That you direct that all current and future contracts be
reviewed in order to ensure that performance reviews capture
the crosscutting information necessary to form a complete
picture of performance.
<bullet> That you direct us to continue to monitor progress and
subsequent information from either internal or external reviews
in order to provide additional recommendations as facts and
circumstances develop that warrant additional action.
Attachment: Complete report
Report by the Deputy Secretary of Energy and the Acting Administrator
of the National Nuclear Security Administration on the Ruture
Relationship between Los Alamos National Laboratory and the University
of California
April 26, 2003
Introduction. In accordance with your direction in your letter of
December 24, 2002, we have conducted an examination of the relationship
between the University of California and the Los Alamos National
Laboratory. Our examination included the following:
<bullet> Review of briefings to the University Regents, internal
University of California reports, and similar documents between
2001 and the time of the relief of the Los Alamos National
Laboratory Director in 2003.
<bullet> Review of all relevant Inspector General and Office of
Independent Assessment and Oversight reports covering Los
Alamos. We paid particular attention to those Inspector General
reports covering the period since the problems at Los Alamos
surfaced; a list is attached.
<bullet> Review of the Appendix O process and material (Appendix O was
put in place during contract renewal in 2001 to correct
perceived security problems; it is further discussed below).
<bullet> Review of testimony given by witnesses to the Subcommittee on
Oversight and Investigations of the House Energy and Commerce
Committee.
<bullet> Interviews with former Vice President for Laboratory
Management, John McTague, former National Nuclear Security
Administration (NNSA) Administrator, General John A. Gordon,
and the Los Alamos Site Manager, Ralph Erickson.
<bullet> A daylong meeting with senior Los Alamos and University
officials at Los Alamos, including a separate meeting with
Federal site office management officials who have contract
oversight responsibilities.
<bullet> A number of meetings with Senior Vice President for University
Affairs Dr. Bruce Darling, who also serves as Interim Vice
President for Laboratory Management, along with phone calls
with Dr. Darling several times a week.
<bullet> A similar set of meetings and phone calls with Interim
Laboratory Director, Dr. George ``Pete'' Nanos, and his senior
staff.
<bullet> Conversations with various Regents of the University of
California to review our conclusions.
This memorandum reports the results of our assessment and our
recommendations for the future Los Alamos--University of California
relationship.
Background. The University of California has operated the Los
Alamos National Laboratory since 1943 under contract with the
Department of Energy and its predecessors. The contract has routinely
been extended without competition, most recently in January 2001 just 2
days before the Bush Administration took office. The University also
operates Lawrence Livermore National Laboratory under an identical, but
separate contract, as well as the Lawrence Berkeley National
Laboratory. The University has traditionally regarded its management of
the laboratories as a public service to the nation. As one indication
of this, the University has taken the position that its operation of
the laboratories should be revenue neutral. That is, the University
retains no fee for operating the laboratories and seeks to use no
University of California funding to do so. The fee paid by the
Government is returned to the laboratories for additional laboratory-
directed research and development, after deducting the costs of that
portion of the University Office of the President involved with
overseeing the laboratories, paying expenses not otherwise
reimbursable, and establishing a reserve to cover significant losses.
During the late 1990's two major concerns arose with Los Alamos
National Laboratory, both involving security. The first was the case of
Dr. Wen Ho Lee, a Los Alamos scientist who was ultimately convicted of
mishandling classified material. This case raised extensive questions
about the adequacy of security at the Laboratory. These concerns were
reinforced in May 2000 when two hard drives containing Restricted Data
could not be located for an extended period of time. The hard drives
were ultimately located in a secure area within Los Alamos, but the
Laboratory's inability to locate them, coming on top of the concern
raised by the Wen Ho Lee case, further exacerbated security concerns.
Security concerns were among the reasons that Congress created the
National Nuclear Security Administration. Despite this, no senior Los
Alamos manager was terminated, reassigned, or demoted as a result of
either of these incidents, although some formal reprimands were issued
and two lower-level employees were reassigned.
Notwithstanding these security concerns, the University's contract
to manage Los Alamos was extended non-competitively in January 2001.
The current contract expires on September 30, 2005. In extending the
contract, the Department imposed a number of requirements to correct
the perceived problems with the management of Los Alamos. The new
requirements were codified in a separate appendix to the Los Alamos
contract called Appendix O. An identical appendix was included in the
contract for Lawrence Livermore National Laboratory.
Appendix O committed the University to establish a position of Vice
President for Laboratory Management and made the first incumbent of
that position subject to departmental approval. It also committed the
University to take a series of discrete steps to improve management. To
enforce these commitments, Appendix O established a series of quarterly
reviews between the Department, the University, Los Alamos, and
Livermore. By its own terms, Appendix O expired on September 30, 2002.
At that time, the NNSA, on behalf of the Department, concluded that all
the requirements of the Appendix had been met. None of these
requirements related to business services.
The precipitating incidents. Beginning in the summer of 2002, a
series of problems with business services at Los Alamos came to light.
The problems themselves originated several months earlier, but were not
widely recognized outside the Laboratory until the summer of 2002.
These problems included:
<bullet> Questions concerning the effectiveness of controls over
Government purchase cards (credit cards). Several laboratory
employees (all now terminated except one, where disciplinary
action is pending) used a laboratory-issued purchase card to
make fraudulent purchases, including an attempt to purchase an
automobile. Actual loss to the Government was only about $3000,
but the massive audit conducted by the University in response
to the issue revealed an additional $195,246 worth of purchases
where documentation was inadequate or missing (some
documentation was destroyed in the Cerro Grande fire) along
with $125,000 in employee recognition awards that exceed the
approved DOE threshold. Although no additional cases of fraud
were uncovered, the University chose to reimburse the
Government the entire sum of both questionable items for a
total of about $320,000.
<bullet> A scheme by two employees (both now terminated) apparently
used doctored purchase orders to order material for their
personal use. The incident is still under investigation by the
FBI. The amount of the apparent theft exceeded $300,000, but
all but about $50,000 has been recovered. The University has
reimbursed the Government for the loss.
<bullet> Questions concerning the adequacy of property controls.
Newspaper revelations indicated that the laboratory was unable
to account for $1.3 million worth of controlled property,
including such pilferable items as computers. Although the most
spectacular allegations (a missing fork lift, for example) were
ultimately resolved, substantial amounts of property remained
un-located.
<bullet> The Laboratory's action in firing two investigators within a
few days of those same investigators raising concerns with the
Inspector General. You, the University and the Inspector
General have all stated that the Laboratory's action in firing
the inspectors was ``incomprehensible.'' We share that
assessment. While the Inspector General's investigation did not
substantiate the allegation that Laboratory management
deliberately hid criminal activity, this incident (in which the
University played no role) demonstrated the degree to which the
Laboratory's management was out of touch and ineffective.
Taken individually, it is possible that none of these incidents
would call into question the adequacy of Laboratory management. Taken
in the aggregate, however, they revealed systemic weaknesses in
business practices at Los Alamos. These weaknesses were further
confirmed by additional Inspector General audits in unrelated areas,
including:
<bullet> An audit of firearms control that revealed significant
weaknesses in procedures and accountability, although all
firearms were ultimately located.
<bullet> An interim audit that determined that control over laptop
computers was inadequate. Computers were not properly
controlled, not adequately safeguarded against theft, and not
always acquired in accordance with approved procedures.
Computers that could not be located were written off without a
formal inquiry and theft of laptop computers was not always
reported to the appropriate office.
<bullet> An audit of the allowability of incurred costs that assessed
that just over $14 million (about 0.3 percent out of the total
of $5.4 billion examined) was improperly charged to the
government under existing rules. The three areas of concern
were travel and conference costs not adequately documented,
provision of business meals, and an audit function evaluated as
inadequate.<SUP>1</SUP>
---------------------------------------------------------------------------
\1\ Although the Laboratory has generally agreed with all the
findings of outside audits, it disagrees with this specific audit,
contending that virtually all the costs should be allowable. Final
determination of allowability will be made by the Contracting Officer
in accordance with established DOE procedures.
---------------------------------------------------------------------------
The fact that there was not greater fraud and theft at Los Alamos
is a tribute to the character of the vast majority of men and women
working there, and not to the efficacy of the management systems in
place. The actual loss to the Government could have been far greater
and the business practices in place in 2002 would not have been able to
identify and therefore prevent such a loss.
There is no evidence that the lax approach to business processes
and business issues extended to science or security. The fear that such
practices might spread, however, was--justifiably--a primary motivation
for insisting that the University of California move promptly to
correct the problems.
University of California response. The University was relatively
slow to respond to the public allegations of business practices
problems. University response was initially limited to providing
assistance as requested by the Laboratory Director and did not include
any action to ensure that the Laboratory Director was taking sufficient
steps to examine the problem. The University engagement began in
earnest in mid-November following the commissioning of an Inspector
General investigation (requested by the Laboratory) and a series of
increasingly embarrassing press accounts. University engagement
increased still further following the intervention of the Secretary of
Energy in November and December 2002.
Once the University became engaged its actions were broad,
forceful, and effective. The University made significant personnel
changes in Laboratory management, including accepting the resignation
of the Laboratory Director, terminating the Principal Deputy Director,
and transferring, downgrading, or terminating 16 other officials
including the Chief Financial Officer, Laboratory Auditor, Security
Office Director, and the heads of the procurement and purchase card
programs. Given the size of the Los Alamos management team, these
represent sweeping changes.
The University mobilized substantial auditing resources to examine
issues in depth. It used teams of extremely senior officials to
investigate the issues. University senior officials (for example the
University Auditor) essentially devoted full time to Los Alamos issues.
The University permanently subordinated the Laboratory auditor to the
University Auditor and temporarily subordinated all Laboratory business
functions to the University Vice President for Financial Management. It
directed a series of external reviews by Ernst and Young,
PriceWaterhouseCoopers, and a team headed by a former DOE Inspector
General. These were major reviews; the Ernst and Young review, for
example, involved 20 people at the Laboratory. It is difficult to see
how any organization could have done more to deal with the problem than
the University of California did after about mid-December 2002. In
particular, we have been impressed with the performance to date of both
the Interim Vice President for Laboratory Management, Dr. Bruce
Darling, and the Interim Los Alamos Director, Dr. George ``Pete''
Nanos.
The University's steps were not limited to Los Alamos. Although we
did not investigate actions at other laboratories, the University
appears to have been vigorous in taking the lessons from Los Alamos and
applying them to the Lawrence Livermore and Lawrence Berkeley National
Laboratories. The University required these Laboratories, as well as
the University auditor, to examine their own internal procedures to
ensure similar problems did not arise elsewhere. The University also
used senior officials at these Laboratories to assist at Los Alamos.
The University and the new Laboratory leadership are viewing the
necessary improvements broadly, not narrowly. Although the specific
issues that came to light in late 2002 dealt with business practices,
the University and the Interim Laboratory Director are taking the
opportunity to look at Laboratory practices in all areas, including
project, program, environmental, procurement, and nuclear facilities
management. While the responsibility for implementing this broad
approach belongs to the Interim Director, the University selected that
Director and has been strongly supportive of examining all areas of Los
Alamos management. This increases the chance that the changes being
made will endure.
Finally, the University is in the process of putting in place a new
governance model involving strengthened internal management and
oversight and a strong external governing Board with members having
strong backgrounds in industry, defense and science. The new Board will
have some of the responsibilities of the Regents and will be able to
hold both the University administration and Laboratory Management
accountable. We are not yet able to evaluate the efficacy of this new
governance model, but it is a clear indication that the University sees
its task not simply as implementation of a temporary ``get well''
program but as a transformation of its model of oversight.
The cause of the problems. Our review suggests that there are
multiple causes of the failure of business systems at Los Alamos:
<bullet> Prior to November 2002, the University's supervision of Los
Alamos was ineffective in the area of business processes.
University supervision was almost entirely focused on other
areas including science, security, environment, and project
management. Briefings to the Regents never discussed business
practices nor was the subject a focus of the former Vice
President for Laboratory Management. Internal documentation
relating to University oversight in this period is silent on
business practices.
<bullet> The Department of Energy and the NNSA's direct Federal
oversight was narrowly focused on specific performance measures
called out in the contract, rather than on overall
effectiveness. Appendix O was focused on issues other than
business services. Most discussions were in areas of safety or
of having Los Alamos and Livermore work together. NNSA's own
supervision focused on areas such as safety and security,
rather than business services and tended to assess performance
within ``stovepipes,'' while many of the actual problems were
failures of appropriate connections between stovepipes. A
division of responsibility between the Los Alamos Site Office
and the former Albuquerque Operations Office further weakened
NNSA oversight, with oversight of business practices coming
almost exclusively from Albuquerque.<SUP>2</SUP>
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\2\ The NNSA reorganization implemented in December 2002 is
designed to centralize responsibility to the Site Manager and thus
avoid this fragmentary oversight in the future.
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<bullet> In hindsight, warning signs may have been ignored. Following
the Dr. Wen Ho Lee and hard drive incidents, neither the
Laboratory, the University, NNSA, nor the Department examined
whether broader problems existed at Los Alamos. For years,
there has been general acknowledgement of a ``Los Alamos way''
that was unique and that devalued business practices.
Evaluations of Los Alamos in recent years always showed it
slightly inferior in overall performance to the other two
weapons laboratories, but never by enough to cause strong
concern. Because there was no precipitating event, no one at
any level acted on these indicators.
<bullet> Cultural problems beyond the control of the University or the
Department played an important role. The Los Alamos culture
exalted science and devalued business practices. Changing this
culture will be the most difficult long-term challenge facing
the Laboratory no matter who manages it.
The value of the University. In evaluating our options, it is
important to recognize that the University brings substantial value to
the mission of Los Alamos, in both obvious and less obvious ways.
Stockpile Stewardship and other Los Alamos missions depend on
attracting and retaining world-class scientific talent. The academic
prestige of association with a world-class university is of clear
benefit in both recruiting and retention.<SUP>3</SUP> In addition,
there are formal agreements for scientific cooperation with four of the
component campuses of the University of California. These areas of
cooperative research directly advance the scientific mission of the
Laboratory.
---------------------------------------------------------------------------
\3\ At least some prospective employees at both Los Alamos and
Livermore in recent months have stated that they were uninterested in
affiliating with a national laboratory that is not connected with the
University. We lack data on how extensive this belief is.
---------------------------------------------------------------------------
Finally, an important, little-noted benefit of the University is to
foster a culture of scientific skepticism and peer review. This
attitude, both within the Laboratory and between Los Alamos and
Lawrence Livermore National Laboratories, is absolutely crucial to the
success of the Stockpile Stewardship Program and to the ability to
certify the stockpile. A senior laboratory official at Los Alamos has
told us, for example, that the culture of peer review is the only thing
that allowed the successful dual revalidation of the W76 warhead
conducted a few years ago.
In addition to the actual value that the University brings, an
important consideration is the widespread perception among Laboratory
employees at both Los Alamos and Lawrence Livermore National
Laboratories that the University association is critical to the mission
of the Laboratory. Examples of this perception abound and have been a
constant theme of our discussions with laboratory employees. We
received petitions from 2,500 Los Alamos employees and 3,000 Livermore
employees stressing the value of the University association. We
received a similar, separate communication from the Los Alamos Fellows,
those senior scientists at Los Alamos not part of management. We have
reviewed public statements by distinguished figures such as Edward
Teller, arguably the most famous living nuclear weapons designer. Even
if we disagreed with these assertions of the University's value (which
we do not), we need to take account of the widespread perception among
the people who actually carry out the important national security
mission of the Laboratory that the University association is critical
to that mission.
At the same time, the national security missions carried out at Los
Alamos require the total confidence of Congress and the public as well
as of Los Alamos employees. An erosion of that public trust undermines
not only the University but our national security as well. Our
recommendations are, therefore, premised on a view that ensuring public
confidence is merited is crucial for our country, the University and
Los Alamos.
Problems with immediate termination. We are aware of forceful calls
that the University contract with Los Alamos be terminated immediately.
While the University can be faulted for having allowed the problems to
develop, we believe that immediate termination would undermine the
national security mission at the lab without measurably addressing the
problems that Los Alamos faces today. Further, the Department, and
since its creation, the NNSA, share responsibility for lax oversight of
business practices. In our view, immediate termination is undesirable
for several reasons. Such a step would be highly disruptive to the
things that are going well at Los Alamos, especially science. It would
also hamper the implementation of the internal reforms the University
has put in place. Immediate termination would lose the very real
benefits of the University association and, because of this, would be
devastating to morale.<SUP>4</SUP> Finally, any decision for immediate
termination would almost certainly have a counterproductive effect on
other contractors facing similar problems in the future. If this
vigorous get well program put in place by the University leads only to
termination, no future contractor will have any incentive to put this
much of an effort into remediation of major problems.
---------------------------------------------------------------------------
\4\ The prospect of termination may already have had an adverse
effect. As of April 8, 266 Los Alamos employees (68 with critical
skills) have applied for retirement. In contrast, there were only 177
retirements during all of 2002. Retirement requests at Livermore are
currently running at roughly twice the 2002 rate.
---------------------------------------------------------------------------
Recommendations. Based on the above, we recommend:
<bullet> That the University of California continue to manage Los
Alamos through the end of the current contract in September
2005. The vigorous action the University is taking to correct
the problems uncovered at Los Alamos, the significant value the
University brings in the area of science, and the significant
disruption to the mission of the Laboratory and the morale of
the employees from early termination all make retaining the
University through the end of the current contract the most
appropriate course. Termination of the contract would not
improve the management of Los Alamos in the near-term; the
University appears to be fully engaged in an effective and
comprehensive program.
<bullet> That you direct the NNSA Administrator to examine the utility
of a contract modification institutionalizing some of the
reforms made by the University. If the University continues to
operate Los Alamos through 2005, it will be important to ensure
that the current momentum for improvement continues. Some
institutionalization of the reforms may assist in this area. We
believe that discussions between Los Alamos, the NNSA, Los
Alamos Site Office, and the University are necessary before
determining exactly what changes require codification.
<bullet> That the Department announce its intent to compete the Los
Alamos contract when it expires in September 2005. Given the
Department's and the Administration's strong preference for
competition, and the widespread nature of the problems
uncovered at Los Alamos, it is difficult to argue for any other
course of action. Because the question of competition for
National Laboratories is the subject of your recently chartered
Blue Ribbon Panel, the mechanics of implementing this decision
should take into account the results of the Panel's
report.<SUP>5</SUP>
---------------------------------------------------------------------------
\5\ The Blue Ribbon Panel, formally the ``Blue Ribbon Commission on
Use of Competitive Procedures at the Department of Energy
Laboratories,'' was established on January 3, 2003 as a subsidiary body
to the Secretary of Energy Advisory Board. It is tasked with examining
the Department's policy on competition for management of national
laboratories and is expected to make its report by July 2003.
---------------------------------------------------------------------------
<bullet> That we urge the University of California to compete for the
contract in 2005, perhaps in association with another entity
with business and project management experience. The University
has brought immense benefits to the Laboratory and the country
over the past 60 years. It is important to note that a decision
to compete is not a repudiation of the University, but simply a
recognition that the University's performance in the area of
business management did not rise to the exceptionally high
standards required to override the presumption of competition
in Department orders.
<bullet> That you direct the NNSA Administrator to begin now to develop
appropriate criteria for evaluating a future competition,
taking into account the results of the Blue Ribbon Panel when
available. The results of the competition in 2005 should
preserve the many advantages offered by a world-class academic
institution while also ensuring continuation of the reforms now
being initiated and strengthening business functions. Devising
the proper criteria to achieve these results while avoiding
unforeseen consequences will be complicated and should begin at
once.
<bullet> That you further direct the NNSA Administrator to ensure that
any future competition includes provisions for retaining the
current Los Alamos workforce following September 2005. The
staff of Los Alamos is a national treasure that must be
preserved. It is important to establish now that a competition
in 2005 will not result in a changed workforce. Otherwise we
will face both a serious morale problem and the prospects of a
significant exodus of staff in the mistaken belief that their
jobs are at risk.
<bullet> That you reject in advance any notion of split responsibility
for Laboratory operations in which different contractors would
perform the science and business operations functions. Some
have argued for having the science and business portions of the
Laboratory supervised by different contractors. We urge you to
reject this approach. While the University might well benefit
from a partnership with industry, the Laboratory Director
should not report to two entities. Further, the Interim
Laboratory Director believes that a major part of the problem
at Los Alamos is fragmentation between the science and business
communities within the Laboratory. A dual reporting approach
would make this problem worse, not better.
<bullet> That you direct the NNSA Administrator to devise a mechanism
to ensure that, if the University does not continue to operate
Los Alamos following the 2005 competition, that the pension
benefits of all Los Alamos employees on the rolls as of
September 30, 2005, or previously retired, are fully protected.
While the Los Alamos employees who have contacted us are
generally concerned about the impact on science and mission of
losing the association with the University of California, many
are also concerned with their benefits under the University's
pension system. It is important to reassure employees, that,
regardless of the outcome of the future competition, those
benefits will be protected. Otherwise, we could face a
significant challenge to morale and, potentially, a devastating
exodus of the most experienced employees.
<bullet> That you direct us to continue to monitor progress and
subsequent information from either internal or external reviews
in order to provide additional recommendations as facts and
circumstances develop that warrant additional action.
Lawrence Livermore National Laboratory. The University of
California also manages the Lawrence Livermore National Laboratory
under a separate, but essentially identical, contract as the contract
with Los Alamos. Our review did not explicitly cover Lawrence Livermore
National Laboratory and we believe that there is no need to make even a
preliminary decision on whether to extend or compete the Lawrence
Livermore contract when it expires in September 2005. Such a decision
can clearly be deferred and can await, among other things, the results
of the recently established Blue Ribbon Panel. There is no legal reason
why the Department could not choose to compete the Los Alamos contract
and extend the Lawrence Livermore contract, and the Secretary should
continue to hold that option open.
Additional issues. An important aspect of the problems of Los
Alamos has been the potential loss of Congressional and public trust
resulting from the revelations of the serious management deficiencies
at the Laboratory. This problem was exacerbated by two factors:
<bullet> The current Government rules on property accountability
significantly overstate the value of the unaccounted for
property. Government rules require that property be carried at
its original cost. Thus, for example, an obsolete computer that
would not fetch $50 at a yard sale is carried at its original
purchase value of several thousand dollars. A 35 year-old
forklift, which any business would have written off as an asset
through depreciation years ago, is carried at its original
cost. As a result, the apparent dollar value of un-located
property overstated the actual magnitude of the problem and
diverted the attention from the more systemic problems. The
Secretary should direct that the Department seek authority to
revise government property accounting rules to be more
consistent with those used in the private sector.
<bullet> The grading system at Los Alamos, adapted from other
Government systems, is based on a scale of Outstanding,
Excellent, Good, Satisfactory, and Unsatisfactory. This scale
suffers from what might be called ``rhetorical grade
inflation.'' Thus, a mark of ``Excellent'' conveys a sense of
exceptional performance, when, in fact, it is used for routine
performance. The Secretary should direct that in future
contracts the NNSA Administrator use a descriptive system that
will more accurately reflect the intent of a particular grade.
The grading problem is simply one example of a broader set of
concerns raised over the issues relating to competition of Federally
Funded Research and Development Centers such as Los Alamos. Although it
was not specifically established with any one facility in mind, the
Blue Ribbon Panel discussed above was created in part because it became
clear that any decision to compete was increasingly perceived as a
repudiation of an incumbent contractor. This is a view that has
undoubtedly grown over many decades, but it has had unfortunate
consequences. Incumbent contractors view their choices as being either
a series of contract extensions, or loss of the contract. As a result,
incumbent contractors often assert that they will be unwilling to
participate in a competition.<SUP>6</SUP> We recommend that the
Department explore ways in which to not only take into account truly
outstanding performance but also to encourage contractors who might
fall short during a contract term to strive to develop plans to correct
problems so that they may compete and succeed.
---------------------------------------------------------------------------
\6\ The wide spread perception that no incumbent DOE contractor has
ever prevailed in a competition is one manifestation of this attitude.
The perception is wrong. There are at least four instances where
incumbents have retained contracts following competition, including one
Federally Funded Research and Development Center (National Renewable
Energy Laboratory). Still, the perception exists and needs to be
dispelled.
---------------------------------------------------------------------------
An equally important concern is the overall ``stove piped'' nature
of the NNSA evaluation system in place at Los Alamos (and elsewhere).
The contract entered into in January 2001 established a performance
review process that considered individual areas in isolation. By
failing to consider relationships between different processes, it
failed to detect overall systemic problems and thus failed to capture
the type of management failures that we are addressing in this
memorandum. As a result, the performance review process assigned an
``Excellent'' rating to the Laboratory management almost simultaneously
with the Secretary of Energy stating publicly that there was a
``systemic management failure.'' We therefore recommend that all
current and future contracts be reviewed in order to ensure that
performance reviews capture the crosscutting information necessary to
form a complete picture of performance.<SUP>7</SUP>
---------------------------------------------------------------------------
\7\ Recent changes in NNSA evaluation procedures are designed to
ensure a focus on broad management issues. It is important that these
changes be pursued vigorously.
---------------------------------------------------------------------------
Concluding observation. We believe it is important to recognize
that the overwhelming majority of Los Alamos employees--in all areas,
including business services--are honest, dedicated, competent, and hard
working. Ultimately, the value of the Laboratory lies not in expensive
technology, but in people. The failures at Los Alamos are real, but
they are the failures of a few. As we implement changes, we urge that
all levels of the Department emphasize this fact at every opportunity.
Inspector General Reports consulted
Completed reports
------------------------------------------------------------------------
Report Number Title Date Issued
------------------------------------------------------------------------
L-03-06............................ Recruitment and 11/27/2002
Retention at the Los
Alamos and Lawrence
Livermore National
Laboratories.
S02IS013........................... Inspection of 2001 01/12/2003
Safeguards and
Security Survey of
Los Alamos National
Laboratory.
IG-0584............................ Special Inquiry: 01/28/2003
Operations at Los
Alamos National
Laboratory.
IG-0587............................ Inspection of Firearms 02/21/2003
Internal Controls at
Los Alamos National
Laboratory.
IG-0591............................ Allegations Concerning 03/20/2003
the Reporting of a
Radiological Incident
at LANL.
IG-0596............................ University of 04/16/2003
California's Costs
Claimed And Related
Internal Controls for
Operation of Los
Alamos National
Laboratory.
IG-0597............................ Inspection of Internal 04/24/2003
Controls Over
Personal Computers at
Los Alamos National
Laboratory (Interim
Report).
------------------------------------------------------------------------
Reports not yet made public but where we have reviewed draft findings
The Dual Axis Radiographic Hydrodynamic Test Facility (Draft
Report)
Ongoing reports to which we have not yet had access <SUP>8</SUP>
---------------------------------------------------------------------------
\8\ We have no reason to believe that any of the ongoing
investigations and audits would change the recommendations of this
report.
---------------------------------------------------------------------------
LANL's Nuclear Materials Stabilization Program
Various Law Enforcement Sensitive reports on criminal activity
Mr. Greenwood. Thank you, Ambassador.
The Chair recognizes himself for 10 minutes for the purpose
of inquiry.
From the Wen Ho Lee situation in 1999 to the missing hard
drive management failures at Los Alamos, consistent gender and
minority employment discrimination lawsuits, billion dollar
cost overruns and the most recent allegations of
counterintelligence and business operations problems, the
University of California has faced a variety of challenges in
its management of its national laboratories over the past 5
years. A question for both of you gentlemen is what caused DOE
and NNSA to finally decide to compete the Los Alamos contract?
What was the proverbial straw that broke the camel's back? What
was the most important consideration in the decision to pursue
competition?
Mr. McSlarrow. There were a number of factors, but in terms
of isolating the central precipitating factor I would say it
was a recognition that the management itself at Los Alamos was
not on top of the problems and a recognition that, if that were
true, it required the university to step up to the plate and
insure that it was fixed; and we didn't see that. That's
something that took place over a period of meetings and
discussions last fall.
This country made a decision fundamentally a long time ago
that this kind of big-time science and national security work
is going to be done with contractor-operated facilities, and
that places an enormous burden on the actual management of any
facility and the contractor who's responsible for oversight. So
it's hard to isolate a particular incident, but I think that
would be the central point.
Mr. Brooks. I would add, Mr. Chairman, that in some ways
the focus on particular incidents is what got us into this
problem, that the incident standing alone can be looked at and
there are reasons for each of them. The problem has been that
the aggregate revealed a broad pattern of management problems,
and I think that probably was the most important recognition
and that's what in my statement I alluded to, trying to focus
our future oversight more on interrelations and broad issues
rather than dealing on an incident-by-incident event. So I
think it was the interrelationship of everything, rather than
any specific incident that, at least in my mind, led to this
conclusion.
Mr. Greenwood. Mr. Ambassador, you, in your opening
statement, referred to the culture at the lab and said that
that is the most difficult thing--the most difficult challenge
is to change that culture. A culture like that does not develop
in a vacuum. It develops fundamentally, it seems to me--I think
it's human nature for cultures to develop when there are no
consequences either in sufficient oversight or no consequences
to actions. We hold the management at the lab responsible for
that. We hold the university responsible for that. We also have
to hold the Department responsible for that.
Now I know that the top management of the Department
changes with elections. But who were the folks who have been
consistently at the Department whose job it was to provide this
oversight? And what consequences do they face?
Mr. Brooks. Mr. Chairman, I believe that the problem with
the Department oversight was not primarily failure of
individuals but failure of structure.
Mr. Greenwood. Well, somebody has a responsibility to
create that structure. An individual has the responsibility to
create that structure.
Mr. Brooks. Yes, sir, I do; and that's what I'm doing. And
that's what my predecessor had determined to do. So we had a
structure in NNSA which Secretary Abraham and Deputy Secretary
McSlarrow inherited and my predecessor inherited when he
started to stand up NNSA in which there was confused roles and
responsibilities between headquarters and the field and
multiple layers of organization within the field; and,
therefore, it is not possible to point with certainty to the
single individual. We're changing that. We're right now looking
forward.
You point to two people. You can point to me, and I can
point to my site manager, and everybody else in my organization
is supposed to support one or the other of us. So I have not
attempted to go back and identify specific individuals in the
past, because I think the problems in the past were
organizational and structural and that's the reason we are in
the process of implementing this major reorganization that we
announced in December.
Mr. Greenwood. I think you said that there was not a focus
on business management. Did you mean to say that the University
of California was not focusing on business management or the
Department was not focusing on business management?
Mr. Brooks. The university was not focused on business
management. And, to be fair, in looking back at our
interactions with the university since this administration came
in, I don't think we were encouraging them to focus on business
management. We were----
Mr. Greenwood. Well, in fact, they were rated on business
management; and I think they were given an excellent rating.
Mr. Brooks. They were.
Mr. Greenwood. So I guess what I'm trying to figure out, is
it that no one was focusing on it? Is it that a review that
granted them an excellent rating, was that--in retrospect, was
that a cursory and superficial review? How can you rate--how
can you rate--decide to rate business management, rate it
excellent and then our committee staff over a short period of
time takes a cursory look and finds the kinds of things that we
found.
Mr. Brooks. Because we were using a mechanistic approach
which set up criteria; and if you met those criteria, didn't
look at whether they tracked with other criteria and didn't
look back to say are you doing a sensible result. So that our
problem with the former rating system was that it was narrow
and stove-piped.
Mr. Greenwood. Let me ask you this question. How many labs
does the Department oversee?
Mr. Brooks. The Department oversees 10; the National
Nuclear Security Administration oversees three of those.
Mr. Greenwood. Okay. Is what's true--just in talking about
the way reviews are conducted, whether they're mechanistic,
whether they can be described otherwise and whether they are
adequate or not, does that apply to the other labs for which
the Department has responsibility? Are their things done
differently?
Mr. Brooks. I can only speak for the two other labs which I
have responsibility for, and I'll let the Deputy speak for the
rest of the Department.
The system at Livermore is essentially identical to Los
Alamos both in its past and in its future. The system at
Sandia, because that's a separate contract, is comparable; and
in all of those cases we are moving to a broader new method of
oversight.
Evaluation, in my opinion, always walks between two
dangers. One is, if you try to be very, very objective,
quantifiable, X percent of that, Y percent of this, you can
lead to a result where you're not looking at the connections
between areas. That's the problem we're in now. The other thing
is, if you use broad, subjective judgment, you run the risk of
that judgment being influenced by external factors. What we are
trying to do now is apply broad subjective judgment but in
areas where we can actually tell.
I believe that the system that we have put in place with
Appendix F with the University of California, the new model of
oversight that we are putting in place with the Federal
employees is going to be substantially better. But we'll know
that better in a year. We'll know that really well in 2.
So I think we are moving in the right direction, but I
don't want to assert that I can prove that all the problems are
solved because I can't prove that yet.
Mr. Greenwood. Well, to make it very simple, we in the
Congress are responsible to make sure, and particularly this
committee, that taxpayers get the most bang for the buck.
Mr. Brooks. Yes, sir.
Mr. Greenwood. I think what everybody said is the bang is
pretty good. Okay. The science, the work that's done there has
been excellent. But its stewardship of the taxpayers' dollar
has not. And I think what we're looking for not only at Los
Alamos about across the board is that the Department of Energy
has in place individuals who get up in the morning and think
about whether or not the taxpayers dollars are being well
protected there and not used like monopoly money but used like
the hard-earned dollars that the taxpayers provide to the
project.
Mr. Brooks. At the three labs that I supervise I'm
confident I have people like that because I picked them.
Mr. Greenwood. Okay. Let me just let the Deputy Secretary
respond with regard to the supervision of the other labs.
Mr. McSlarrow. Like the Ambassador, I'm confident that we
have the right people who get what you just said. The Secretary
has made very clear to me and I've made very clear to everybody
else one of the things that we were not happy with when we came
into office was a lack of line management control.
We've made a number of organizational changes. Obviously,
the most difficult was NNSA, standing up that organization, but
we've made great strides. But it's been true on the other side
of the Energy Department as well; and I know exactly who to go
to and who's responsible for these kinds of decisions. The
President, through his management agenda and what we've done in
terms of contract management, have made a number of changes
that lead me to be very confident. That's not to say we're not
going to have any problems. But if you're going to have
problems, you've got to identify them early, and you have to
fix them. You've got to know who's responsible, and I think
we're well on our way to achieving that.
Mr. Greenwood. The Chair recognizes the gentleman from
Florida for 10 minutes.
Mr. Deutsch. Thank you, Mr. Chairman.
Thank you, Ambassador Brooks, and thank you for your
personal work and your staffs' work on the enriched uranium
issue. I appreciate your help.
Ambassador Brooks, it appears that you and Mr. McSlarrow
think that most of these problems were of relatively recent
origin, even though the DOE Inspector General has been bringing
business control problems to DOE's attention for years. For
example, the Inspector General said in 2000 and 2001 that it
could not sign off on the allowability of costs for Los Alamos.
Where was DOE, where was NNSA at that point in time?
Mr. Brooks. I tried to say in my statement that, in
hindsight, there were a number of warning signs where the
reaction was to deal with the specific problem and not look to
see if it was systemic. And the answer is that, in failing to
look and see if we had systemic problems, we were not where we
should have been.
On the other hand, with the greatest respect, 2001 was a
different leadership team, and so I wasn't there, and I don't
want to try and characterize why people made particular
decisions that they made.
We have been trying to look at this broadly. We have looked
at the past Inspector General reports, and that's one of the
things we discovered, was this pattern.
Mr. Deutsch. Right. I guess the question, though, is that
the IG--this is not the first year that the IG has not signed
off and, you know, acknowledged these problems. And I guess the
question in 2000 and 2001 also is why should we believe that
this year is going to be any different than the prior 2 years?
Mr. Brooks. I don't think you should. I don't think there
is any reason for you to. I think you should wait for a year
and see because you're going to be able to tell by then.
As I attempted to make clear in my opening statement and as
the university has made clear in its discussion, we are
beginning a process. None of the witnesses you hear today will
suggest that we have, ``solved the problems at Los Alamos.''
What we will suggest, I believe, is that we are on the right
direction to solve them with the right management attention and
the right sense of urgency. But as both you and the chairman
commented in your opening statement, it took us a long time to
get here and I think it is going to take us a while to get off.
So I can't speak for failures before I got here. All I can tell
you is that Secretary Abraham has made it very clear to me, Mr.
McSlarrow has made it very clear to me that he doesn't expect
us to fail this time. And I spent a long time in the military.
I understand direct orders very well.
Mr. Deutsch. Right. Appendix O agreed to in 2000 which was
supposed to fix all problems included a provision that the Vice
President of Management was supposed to implement best business
practices in support of core mission requirements. We didn't
find any evidence that Dr. McTague made any attempt to do this,
nor do we find any evidence that DOE followed up on this
requirement. Can you explain the response--your response of
allowing the university's activity or no follow-up on this
issue?
Mr. Brooks. I think you've just quoted my statement, sir.
That's exactly the problem, that neither the university nor we
followed up on that part. And I can't explain it. I mean, in
hindsight, knowing where we are now, we should have been more
vigorous on that. We were focused--in our minds, on the
problems that led to Appendix O were primarily in other areas,
and that's where we focused.
I think the lesson that you get out of this is that high-
level attention tends to fix problems. We focused on problems
of security, and largely those problems have improved. We
didn't focus on business services.
The idea of the new model of oversight is to make sure we
focus on everything. One of the things we have to do that we
have not yet done that is alluded to in our report is look to
see whether we need to change the contract, including Appendix
F, to make sure we don't fall into that trap again.
Mr. Deutsch. Okay. I think this is a really different
question, and I'm just trying to get to the same failures that
occurred. Can you explain to us why DOE didn't seem to care
about the lack of independence of the lab's auditors and its
failure to complete literally hundreds of audits on time?
Mr. Brooks. No, I can't explain that, sir. And let me tell
you what I can say. As you know, while it's a matter of some
dispute in terms of cost allowability terms, the Inspector
General has consistently found that the audit function at the
lab was ineffective. The university has found that. I cannot
explain now, of my own knowledge, why we didn't stumble on that
fact earlier. I mean, in hindsight, it's glaringly obvious; and
I can't explain why my oversight didn't find that.
Mr. Deutsch. All right. Thank you.
Mr. Greenwood. The Chair recognizes the gentleman from
Oregon for 10 minutes for questioning.
Mr. Walden. Thank you very much, Mr. Chairman.
Ambassador, you've recommended that Los Alamos contract not
shift between science and--not be split, I mean, between
science and management. My understanding is that there are
other national labs like Oak Ridge and even Hanford out in the
Northwest, for example, that have managed to sever significant
portions of their management responsibilities among different
contractors. Why is it that you've rejected that concept out of
hand at the beginning? Or Mr. Secretary.
Mr. McSlarrow. If I could just--because I'm much more
familiar than the Ambassador with those other sites. I would
say while the site may actually have some different
contractors, when you look at a lab and the facility that's
doing the science there they do have a contractor who has
integrated business and science. So what's different about Los
Alamos, for example, is it's the same contractor at the same
site and all the missions are all there. As you well know, at
Hanford and sites like that, you've got a lot of different
things going on. At least for the Los Alamos lab it is
integrated.
Mr. Walden. But you don't think that could happen. You
don't think it makes any sense to look at----
Mr. Brooks. No, because the mission is so integrated at the
lab, I don't. And I do believe, as I tried to say in my opening
statement, that if the problem is that science and business
services are not connected, you don't solve that problem by
having them report to different people. You solve that problem
by having the people they report to value both of them as the
interim laboratory director does now and then by having the
overall management be somebody who has expertise in both of
them.
Now our report, in urging the university to compete for the
contract, acknowledges that it may want to bring in some kind
of partner. But that's a decision for the future. So I don't
mean to reject drawing on outside expertise, but these are at
the macro level single mission laboratories, and I think they
need to be run by a single person.
Mr. Walden. All right. In your statement, apparently to
committee staff, you said you were trying to work around the
problems related to the costs of bidding on a project the size
of Los Alamos and that you wanted all the entities who bid to
be on a level playing field. I've heard estimates that it may
cost as much as $25 million to simply bid on this contract. Is
that an accurate number, a ball park number and how would you
work around that?
Mr. Brooks. That is a higher figure but not dramatically
higher than estimates I have heard. I've heard numbers more
like 10. But large procurements are very expensive. We believe
that it is possible to find the mechanism which would allow the
university to compete without--the university's operation of
the lab financially has all been on a cost-neutral basis.
Mr. Walden. I understand.
Mr. Brooks. The State doesn't make any money off of it. The
State doesn't spend any money. The current rules on what the
university can use retained earnings for were drafted in an era
when, as several of your colleagues stated, there was a de
facto assumption that this was going to go on noncompetitively
forever.
We believe that it is quite possible to modify those rules,
but when you're dealing with things that involve procurement
regulations and law, I really am reluctant to get into any kind
of detail in an area in which I lack expertise.
One of the reasons I want to start now is to make sure
that, on the one hand, I'm positive I can do this. But I can do
it in a way that is both seen and actually is fair to both the
incumbent contractor and somebody else who wants to do it. A
level playing field means just that to us.
Mr. Walden. I guess as I read some of the information here
today from--I think it was the Secretary, perhaps, and the
documentations or the memorandum from the Deputy that I just
wondered, if I'm a university taking a look at this or some
other group taking a look at this contract, do you think what's
written here basically says that the University of California
has done a great job or a good job, has addressed the
management problems--I mean, I read that in here--and should be
encouraged to reapply? Would those be words of discouragement
to anybody else taking a look at it if, in fact, they have got
to also roll the dice on maybe $10 million or more? I mean, is
it a----
Mr. Brooks. Well, they're not intended to be.
Mr. Walden. But if you were an outside per |
