Table Of Content\
DEPARTMENT OF ENERGY PROPERTY
MANAGEMENT PRACTICES
Department of Energy Property Hanagement Practices,
September 19, 1994 I 103-2 Hearing) HEARING
BEFORE THE
AND
ENVIKONMENT, ENERGY,
NATURAL RESOURCES SUBCOMMITTEE
OF THE
COMMITTEE ON
GOVERNMENT OPERATIONS
HOUSE OP REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
SEPTEMBER 19, 1994
Printed for the use of the Committee on Government Operations
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DEPARTMENT OF ENERGY PROPERTY
MANAGEMENT PRACTICES
HEARING
BEFORE THE
AND
ENVIRONMENT, ENERGY,
NATURAL RESOURCES SUBCOMMITTEE
OF THE
COMMITTEE ON
GOVERNMENT OPERATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
SEPTEMBER 19, 1994
Printed for the use of the Committee on Government Operations
U.S. GOVERNMENT PRINTING OFFICE
49-514 WASHINGTON : 1998
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice.Washington,DC 20402
ISBN 0-16-057196-0
COMMITTEE ON GOVERNMENT OPERATIONS
JOHN CONYERS, Jr. Michigan, Chairman
CARDISS COLLINS, IlUnois WILLIAM F. CLINGER, Jr., Pennsylvania
HENRY A. WAXMAN, CaUfornia AL McCANDLESS, CaUfornia
MIKE SYNAR, Oklahoma J. DENNIS HASTERT, IlUnois
STEPHEN L. NEAL, North Carolina JON L. KYL, Arizona
TOM LANTOS, California CHRISTOPHER SHAYS, Connecticut
MAJOR R. OWENS, New York STEVEN SCHIFF, New Mexico
EDOLPHUS TOWNS, New York CHRISTOPHER COX, CaUfornia
JOHN M. SPRATT, Jr., South Carolina CRAIG THOMAS, Wyoming
GARY A. CONDIT, CaUfornia ILEANA ROS-LEHTINEN, Florida
COLLIN C. PETERSON, Minnesota DICK ZIMMER, New Jersey
KAREN L. THURMAN, Florida WILLIAM H. ZELIFF, Jr., New Hampshire
BOBBY L. RUSH, Illinois JOHN M. McHUGH. New York
CAROLYN B. MALONEY, New York STEPHEN HORN, CaUfornia
THOMAS M. BARRETT. Wisconsin DEBORAH PRYCE, Ohio
DONALD M. PAYNE, New Jersey JOHN L. MICA, Florida
FLOYD H. FLAKE. New York ROB PORTMAN, Ohio
JAMES A. HAYES, Louisiana FRANK D. LUCAS, Oklahoma
CRAIG A. WASHINGTON, Texas
BARBARA-ROSE COLLINS, Michigan BERNARD SANDERS, Vermont
CORRINE BROWN, Florida (Independent)
MARJORIE MARGOLIES-MEZVINSKY,
Pennsylvania
LYNN C. WOOLSEY, California
GENE GREEN, Texas
BART STUPAK, Michigan
Julian Epstein, StaffDirector
Matthew R. Fletcher, Minority StaffDirector
Environment, Energy, and Natural Resources Subcommittee
MIKE SYNAR, Oklahoma, Chairman
KAREN L. THURMAN. Florida J. DENNIS HASTERT, IlUnois
CAROLYN B. MALONEY, New York JOHN M. McHUGH, New York
JAMES A. HAYES. Louisiana DEBORAH PRYCE, Ohio
CRAIG A. WASHINGTON, Texas JOHN L. MICA. Florida
EDOLPHUS TOWNS. New York
BERNARD SANDERS. Vermont
(Independent)
Ex Officio
JOHN CONYERS. Jr.. Michigan WILLIAM F. CLINGfiR, JR., Pennsylvania
Sandra Z. Harris, StaffDirector
David Berick, Professional StaffMember
Elisabeth R. Campbell, Clerk
Charli Coon, Minority Professional StaffMember
(II)
CONTENTS
Page
Hearing held on September 19, 1994 1
Statement of:
Durham, Maj. Gen. Archer, (USAF, Ret.), Assistant Secretary for Human
Resources and Administration, U.S. Department of Energy, accom-
panied by Patricia Dedik, Director, Export Control Operations Division,
Office of Nonproliferation and National Security; and Stephen J.
Michelsen, Director, Office ofContractor Management and Administra-
tion, Office ofProcurement and Assistance Management 60
Layton, John C, InspectorGeneral, U.S. Department ofEnergy 10
Rezendes, Victor, Director for Energy and Science Issues, Economic De-
velopment Division, U.S. General Accounting Office 26
Skaggs, Hon. David, a Representative in Congress from the State of
Colorado 4
Letters, statements, etc., submitted forthe record by:
Durham, Maj. Gen. Archer, (USAF, Ret.), Assistant Secretary for Human
Resources and Administration, U.S. Department of Energy, prepared
statement of 64
Layton, John C, Inspector General, U.S. Department ofEnergy, prepared
statement of 13
Michelsen, Stephen J., Director, Office of Contractor Management and
Administration, Office of Procurement and Assistance Management:
Information concerningArgonne National Laboratory 202
List ofcontractorsystems 198
List ofcontracts with deviations 242
Rezendes, Victor, Director for Energy and Science Issues, Economic De-
velopment Division, U.S. General Accounting Office: prepared state-
mentof 28
Skaggs, Hon. David, a Representative in Congress from the State of
Colorado, prepared statement of 7
S3mar, Hon. Mike, a Representative in Congress from the State ofOkla-
homa, prepared statement of 2
Thurman, Hon. Karen L., a Representative in Congress from the State
ofFlorida:
Article dated June 27, 1994 171
Exhibits 2 and 3 52
Exhibits 174
Exhibits 6-19 93
Exhibit 20 182
Exhibits 21-26 184
Exhibit 27 197
Exhibit 29 246
Exhibit 30 251
Exhibit31 259
(III)
DEPARTMENT OF ENERGY PROPERTY
MANAGEMENT PRACTICES
MONDAY, SEPTEMBER 19, 1994
House of Representatives,
Subcommittee on Environment, Energy,
AND Natural Resources,
Committee on Government Operations,
Washington, DC.
The subcommittee met, pursuant to notice, at 11 a.m., in room
2247, Rayburn House Office Building, Hon. Karen L. Thurman pre-
siding.
Present: Representatives Thurman and Mica.
Staff present: Sandra Harris, staff director; David Berick, profes-
sional staff member; Elisabeth Campbell, clerk; and Charli Coon,
minority professional staffmember.
Mrs. Thurman. The hearing will come to order. The chairman of
the subcommittee, Mr. Synar, is unable to be with us today, so
without objection I would like to enter the chairman's statement in
the hearing record.
[The prepared statement ofHon. Mike Synar follows:]
(1)
STATEMENT OF CONGRESSMAN MIKE SYNAR, CHAIRMAN
Subcommittee on Environment, Energy and Natural Resources
Hearing on the MismanagementofGovernment Property
M&O
by U.S. DepartmentofEnergy Contractors
September 19, 1994
In 1983, this Subcommittee held hearings on series ofmanagementproblemsinvolving the
Department of Energy's Strategic Petroleum Reserve. One of the more serious problems was
property management. DOE's contractors were missing over$700,000 worth ofproperty. An
additional $2.09 million worth ofproperty on hand was not in the contractors' inventory data
basesandmillionsofdollarsworthofequipmentwasbeingstoredoutside,exposedtheelements,
and literallyrusting and corroding away. Property management was simply nota priority with
DOE oritscontractors.
Here we are more than a decade later. And the property management problems at the
Strategic Petroleum Reserve may have improved, butin today's hearing the Subcommittee will
once again hear about millions ofdollarsworth ofgovernment-owned property thatis missing.
Once again, we will hearabout millions ofdollars worth ofgovernment-owned propertythatis
literally rusting and corroding away. And once again, we will hear evidence that the
managementofproperty purchased with taxpayers money is simply nota priority with DOEor
itscontractors.
DOE's fifty management and operations (M&O) contractors are currently responsible for
$11.5billionworthofpersonalpropertyfrompersonalcomputerstoautomobilestoone-of-a-kind
scientific or nuclear weapons production equipment. Additional billions of dollars worth of
propertyhavepassedthroughtheirhandsoverthelastdecade. Anduntoldamountsofproperty-
-
- apparently inthehundreds ofmillions ofdollars are unaccounted for, lost,stolen, orwritten
offatthe taxpayersexpense. Hundreds ofmillionsofdollars moresitunused incontractor-run
warehouses, laboratories, and outside storage lots depreciating and deteriorating.
Throughout, DOE has been at best disinterested, and at worse, culpable in this waste and
abuse. The DOE Inspector General, the General Accounting Office, and DOE's own property
managementauditorshaverepeatedlyreportedproblemsthroughouttheDOEcomplexwithlittle
result.
To make matters worse, the end oftheCold Warhas brought about the end ofmanyDOE
missionsandresultedinnumerousprojectterminations. SomeDOEfacilitiesnowhaveonlyone
mission, to decommission and decontaminate themselves. The result is a dramatic increase in
the amountofgovernment-owned property that needs to be processed, reutilized, and sold. As
we will hear today, DOE lacks procedures to insure that our economic and national security
interests are protected in the process.
TherecentdisclosurethatDOEcontractorsattheIdahoNationalEngineeringLaboratorysold
nuclear fuel reprocessing equipment in the absence of safeguards to prevent its export to a
foreign country, along with otherexamples we will hear about today, arc indeed signs that the
property management at DOE is on the verge ofbeing outofcontrol.
Mrs. Thurman. This morning the subcommittee will be examin-
ing management problems with Government-owned property by
U.S. Department ofEnergy management and operation contractors.
The DOE management and operations contractors are responsible
for procurement, maintenance, a—nd disposal of billions of dollars
worth of property on DOE sites everything from file cabinets to
sophisticated nuclear weapons production equipment. This property
is purchased with taxpayers' dollars.
Almost all of DOE's scientific and nuclear weapons research and
production at civilian energy facilities is run by contractors. Simply
put, the Department of Energy's contractors' property management
systems are riddled with serious problems. The most troubling as-
pect of the situation is that we may never know how much prop-
DOE
erty is missing because contractors' inventory control systems
have proven to be woefully inadequate and incomplete.
This will be one ofthe main areas we will be studying this morn-
ing. The DOE inspector general recently concluded that more DthOaEn
100 million dollars worth of property is missing from just one
site alone, Los Alamos National Laboratory. The General Account-
ing Office also has studied this problem.
In a recent study the GAO analyzed 20 DOE contractors and dis-
covered that the contractors reported $74.2 million in missing prop-
erty from their most recent inventory reports. This is inexcusable
waste of taxpayers' money. At DOE sites throughout the country,
surplus Government-owned property, which could be resold on the
open market is destroyed or placed in inadequate storage facilities
left to be forgotten and eventually ruined.
Even more disturbing is a recent case of DOE property mis-
management that would have posed a grave national security
threat. The Idaho National Engineering Laboratory sold surplus
nuclear reprocessing equipment and related technical manuals to a
scrap metal dealer. The dealer then attempted to resell the pack-
age overseas.
We will certainly be asking questions about this matter. We will
also examine all phases of the contractors' property management
system and whether there is adequate protection for taxpayer-pur-
chased property. In addition, we will see if the Department of En-
ergy is fulfilling its responsibility to review and approve contrac-
tors' property management systems.
Our first witness today will be Congressman Skaggs, who along
with Chairman Synar and Senator Campbell requested that the
General Accounting Office study the property management system
at DOE's Rocky Flats site at Colorado. GAO reported that a sub-
stantial amount of Government-owned property at the Rocky Flats
plant is missing.
We will also be hearing from John Layton, the inspector general
of the Department of Energy, and Victor Rezendes, director of en-
ergy and science issues at the General Accounting Office.
Our last witness will be Archer Durham, Assistant Secretary for
Human Resources and Administration at the U.S. Department of
Energy. We look forward to the testimony from today's witnesses
and hope that we can begin to identify solutions to prevent further
waste ofthe taxpayers' money.
Mr. Skaggs, we are very pleased to have you here today. I know
you have a very busy schedule and have been actively involved in
some other issues the last couple of days, so we especially appre-
ciate you taking this time and certainly appreciate your interest in
this issue.
STATEME^^^ of HON. DAVID SKAGGS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Skaggs. Thank you very much, Madam Chairman. I am
pleased to be here this morning, grateful to you and the sub-
committee Chairman, Mr. Synar, for deciding to hold these hear-
ings. I am an alumnus ofthis subcommittee, so it is nice to be back
before you. I will have prepared testimony which I ask to be made
a part ofthe record.
Mrs. Thurman. Without objection.
Mr. Skaggs. I am reminded in all of this about my first experi-
ence with Government property and responsibility when I was
going through boot camp in the Marine Corps and learning my gen-
eral orders, and the first general order, I think I still recall, was
to take charge of this post and all Government property in view.
Fundamental, No. 1, take charge ofthis post a—nd all Government
propert—y in view. What we have here is a failure and a systematic
failure on the part of the Department of Energy until relatively
recently to live up to the first general order, and that is our respon-
sibility, whether as a private in the Marine Corps or as manager
of a multimillion dollar nuclear weapons facility, to see that the
taxpayers' investment in equipment, machinery, and property is
protected.
I originally requested and secured Mr. Synar's and Senator
Campbell's cosigning of the request for the General Accounting Of-
fice to look into the problems at Rocky Flats after hearing many
anecdotal stories from workers about how much property was being
neglected at that plant site. Stories abounded about computers, re-
cently purchased office—furniture being stockpiled in trailers and
out in the open weather and even though we are proud ofour Col-
orado climate, it is not exactly the place to leave things. Equipment
of all types was being lost, perhaps in some cases stolen or other-
wise misplaced, and poor or little control was being exercised over
all ofit.
I felt this was something that warranted a complete and inde-
pendent investigation, and the results of t—hat investigation by the
General Accounting Office were stunning millions of dollars in
tGhoevnercnomnetrnatctporropEeGrt&yGwetroepmriospesrilnyg mfraonmagteheGfoacvielirtny;mefnaitluprreopoefrttyh,e
or even initiate a written property management system as was re-
quired by its contract; and DOE's failure itself to properly oversee
property management by its contractors at the facility and evi-
dently elsewhere around the nuclear weapons complex.
What did all of this amount to? Well, among the missing items
were, "thousands of pieces of computer-related equipment as well
as numerous cameras, pagers, radios, typewriters and even heavy
equipment such as forklifts," according to the GAO. In all, they re-
ported close to 13 million dollars' worth of property missing, an-
other 16.5 million dollars' worth that couldn't be physically located.
