CHU MOVING TO OVERHAUL DOE MANAGEMENT, CONTRACTOR OVERSIGHT

Todd Jacobson, Nuclear Weapons & Materials Monitor

Preparing to make his first significant stab at streamlining the inner workings of the Department of Energy, Secretary of Energy Steven Chu has initiated a far-ranging effort to examine the way DOE conducts business as a precursor to potential drastic changes, WC Monitor has learned. In the midst of a series of white papers, discussions and briefings, Chu is considering everything from a broad reorganization of the Department's management and regulatory structure to redefining the relationship between the Department and its contractors. Chu, as the former head of Lawrence Berkeley National Laboratory, has experienced first hand a compliance-driven culture that one white paper obtained by WC Monitor described as emphasizing "compliance over performance, prescription over accountability, and more over better," and has indicated internally that he wants to make serious changes. "Steve has signaled quite strongly that he wants to change a lot of things," one official close to the discussions told WC Monitor. "He's talked to the contractors, and he's talked to the lab directors about it. There are definitely people inside Forrestal [DOE headquarters] working on this reform agenda."

When it comes to the organization of the Department itself, Chu is reportedly considering a number of options, such as rebranding DOE as the Department of Energy and Climate, making NNSA more autonomous, and splitting the Office of Energy Efficiency and Renewable Energy into two separate offices, according to officials. On the management side, emphasis is being placed on truly achieving DOE's long-held goal of performance-based contracting through streamlining Department orders and changing the contractor oversight model. Chu, however, has not named anyone to head up the effort. "The real question is which areas do you want to tackle and what kind of authority is given to the person in charge of making it happen," the official said.

"The big test is whether somebody is going to be given the charge to go do this or is it just going to be a bunch of happy talk." The effort would likely be driven through Deputy Energy Secretary Dan Poneman, but Poneman lacks a management background and efforts to hire a "deputy to the deputy" for management that might assume a leadership role on changes to the Department have stalled, the official said.

'Shock to the System' Needed

Attempts to reform the Department of Energy are nothing new, but Chu's experience as a former laboratory director has given some credence to his push for change. The idea has wide support among the contracting community, which has faced increasing hurdles in performing work under what some have said is a heavy burden of DOE rules and regulations.

According to the white paper that has circulated around the Department focusing on culture change between DOE and its national laboratories, "A significant shock to the system is needed to force change in the behavior of both the Department and our contractors."

Lawmakers attempted to strip the bureaucracy from the nation's weapons and nonproliferation programs when the National Nuclear Security Administration was created as a semi-autonomous agency within DOE in 1999. However, the Department's continued oversight of the agency sparked a recent push to reconsider the role of NNSA within the Department, including a study initiated by the White House Office of Management and Budget into whether NNSA might be better served as a part of the Department of Defense or as a completely autonomous agency. The problems that face NNSA contractors are emblematic of issues facing contractors across the Department, and the white paper criticizes the current relationship between the Department and its contractors. What was designed to be a relationship in which DOE specified the goals and requirements and contractors focused on meeting the mission with best business practices has "eroded to the point of invisibility" and "the current nature of the relationship between DOE and its laboratories is far from productive," the white paper says. "In fact, it is now reinforcing unproductive behavior by both DOE and the contractors."

Balancing 'Risk and Process'

Reflecting the Administration's interest in changing the culture at DOE, Under Secretary for Science Steve Koonin criticized the way DOE conducts its business in comments to the Energy Facility Contractors Group late last month.

"I am astounded, both from my business background and then more extensive university background, how the system does or does not do its business. There's a need to make things more transparent [and a] need to speed things up, not only the contractors, but inside the Department itself," he said, adding, "I think overall the Department has become overly conservative in the way it does its business.

We need to get to a reasonable balance between risk and process."

Indeed, the white paper delivers a scathing critique of the Department's management culture, describing it as risk averse and more focused on compliance with regulations than on achieving contractor performance.

The culture has evolved over many years, the white paper says, driven by a combination of contractor missteps, Congressional criticism, internal and external audits and guidance from the Defense Nuclear Facility Safety Board. "In this environment, DOE staff organizations expanded to fill the void and buttress the 'no risk' approach, each time responding to the crisis of the moment with a 'fix' that entailed the layering of additional process and oversight on the contractors," the white paper says This is most evident, the paper says, in the area of safety, where the compliance-driven culture has wreaked the most havoc on the ability of contractors to meet mission requirements.

"The Department and its contractors now find themselves entombed under the weight of innumerable pages of orders, manuals, guides, requirements, processes, etc. that are confusing, conflicting and duplicative," the white paper says. "Thus has the Department evolved into a true bureaucracy with a culture that operates under the presumption that the continual addition of new requirements and more layers of oversight on its contractors are acceptable and good practices."

External or Self-Regulation the Answer?

The white paper suggests shifting to an approach that minimizes the amount of requirements imposed on contractors and focusing on performance outcomes and results while holding contractors responsible for achieving those outcomes. It also suggests that an "appropriate" level of risk should be adopted by finding a way to "institutionalize and defend an appropriate amount of risk-taking in the way the Department does business." That will likely involve "holding the line" against outsideoverseers such as the DNFSB. Over the past several years, DOE has worked to push back against the idea that the board, which does not have a formal regulatory role over the Department, has a "veto" authority over DOE actions. In a 2007 memorandum, then-Deputy Energy Secretary Clay Sell directed that DOE staff would no longer be required to coordinate with Board staff prior to submitting correspondence, a move described at the time as working to ensure that DOE line managers were responsible for safety at Department sites and that the Board served in an oversight function.

External regulation has been suggested as way to simplify DOE's system of regulation and streamline operations- perhaps through the Operational Safety and Health Agency and/or the Nuclear Regulatory Commission-but that option presents its own set of hurdles and challenges, and Chu likely will move to refine the DOE order system instead. The white paper suggests significantly cutting down the documents governing M&O contractors, leaving the Worker Health and Safety Rule (10 CFR 851) and the Quality Assurance Rule (10 CFR 830, Subpart A) to govern the Department's expectations of contractors.

The paper also suggests a "brutal review" of "other relevant requirements documents" like DOE manuals, orders, guides, notices, standards or handbooks, doing away with strict compliance as a benchmark for contractor success and eliminating the system of penalties that hold contractors accountable for compliance failures. It would be replaced with a system that would require contractors to achieve third-party certifications for management systems and would focus accountability and enforcement on maintaining those certifications and meeting mission requirements. "The way the system works it prescribes not only what we are supposed to be doing but also how we're doing it," an industry official said. "Let's go back to the GOCO [government-owned, contractor-operated] model where the government describes the mission, tells the contractors what it wants done, and the contractors bring best business practices in terms of how to achieve those outcomes. That's a fundamentally good model. We have drifted substantially in the last three decades from that model."