Renewing Energy

A big fish is about to enter the pond. Make that several big fish. For the first time, the Energy Department is putting up for competition more than $4 billion in contracts to run the Los Alamos, Lawrence Livermore, Lawrence Berkeley, Ames and Argonne laboratories.

The University of California, which has had the contracts for the Los Alamos, Lawrence Livermore and Lawrence Berkeley labs for decades, has long been Energy's No. 1 contractor and has the most to lose. Iowa State University has the Ames Laboratory contract, and the University of Chicago runs Argonne National Laboratory.

The decision to put the contracts out for competition marks the culmination of years of discussion about, and criticism of, Energy's contracting practices. The Government Accountability Office has long argued that Energy's contracting has been badly flawed. GAO, along with Energy's inspector general, has documented a litany of botched contracts, in which projects were completed late or not at all, costs skyrocketed beyond initial estimates and environmental cleanup efforts flopped.

The labs conduct a variety of research projects related to energy use, including nuclear power, the environment and defense. Much of the work has military and homeland security applications.

For years, Energy has spent more of its budget on contracting than has any other agency, about 90 percent, with nearly $20 billion earmarked for contracts in both 2003 and 2004. In 1994, Energy launched a wide-ranging effort to safeguard contracts from fraud and abuse. The department implemented reforms that have led to more competition for contracts and more performance-based incentives in those agreements.

But of the 16 research laboratories managed by the department, Energy has put only six up for competition. In most cases, the department has not done that for lab contracts held by universities, and some of the contracts have been held by one incumbent since the 1940s.

Energy Secretary Spencer Abraham took note of the lab contracts in 2002 when two investigators at the Los Alamos laboratory accused managers there of ignoring fraudulent use of government purchasing cards and attempting to thwart internal and outside investigators.

In April 2003, Abraham decided to put the Los Alamos contract up for bid. Congress included language in Energy's 2004 budget requiring the department to do that for all lab contracts. But the budget allowed the agency to continue with existing contracts for up to two years while competitions are arranged.

Another issue on the horizon is whether Energy will continue to reimburse contractors for costs they incur from legal wrangles. Legislation pending in Congress would restrict Energy's ability to continue the practice. The department reimburses contractors for expenses stemming from a variety of lawsuits, including whistleblower, discrimination and workers' compensation cases. Under the proposal, put forth by Rep. Edward Markey, D-Mass., energy would reimburse contractors only for the cases they win.

At the same time, Energy is working with Homeland Security to better focus DHS' use of the labs. When Congress created DHS in 2002, it added counter-terrorism technology to the labs' research portfolio. But GAO reports that the research has been unfocused to this point. Energy lab officials worry that DHS' focus on short-term, applied research might deter talented scientists, many of whom prefer basic research, from coming to work at the labs, GAO says. After Congress expressed concern, DHS said in March it would review its policies for working with the labs.