Pushing Competition, Performance, Security

he Energy Department is one of the government's Big Four. Energy, the Defense Department, NASA and the General Services Administration accounted for 85 percent of federal procurement spending on prime contracts in fiscal 2001.

If the Big Four were the Rat Pack-even though there were five of those guys-Energy would be Dean Martin: recognizable, yet enigmatic. The department is a big star on the federal stage, but much of what the department does is shrouded in mystery, concealed behind the walls of the dozens of research laboratories and nuclear weapons facilities Energy oversees across the country.

With $19 billion in purchases in fiscal 2001, Energy is the biggest civilian agency buyer in the federal government and ranks second behind Defense overall. About 75 percent of those dollars are spent to pay contractors to run federal facilities.

Competition is fierce for Energy's business. The department's five biggest contractors-giant engineering firms, multinational corporations and the University of California system-got nearly 60 percent of the dollars the department awarded in fiscal 2001.

The next five biggest firms won nearly 20 percent of the pot. These contractors also include large science and engineering firms, as well as the University of Chicago. Institutes of higher learning are some of the most prominent contractors with which the agency does business. A half dozen universities or university systems are among Energy's top 50 contractors. Several research associations, joint efforts of universities that have formed business alliances, are also included.

With the top 80 percent of work controlled by 10 vendors, hundreds of other firms are left to fight it out for the remaining 20 percent of business. Energy continues to work, as it has in years past, to increase competition for its facilities management contracts to run and maintain the department's research institutions and national laboratories.

Small business lobbies argue that they should get a bigger slice of the pie. In recognition of their growing discontent, Energy's Los Alamos National Laboratory in New Mexico, which is run by the University of California, formed a task force in February to assess how well the lab does business with small companies. The task force was scheduled to issue its findings and recommendations in May, but hadn't done so as of late July.

Energy also is seeking to award more performance-based contracts, which compensate vendors based on what they actually accomplish. In 1999, the National Research Council found that Energy lacked the experience, knowledge and procedures to establish performance measurements on its contracts. In March 2000, department officials told the General Accounting Office that Energy had established a program to train future acquisition workforce leaders who would be well-versed in newer styles of negotiation, such as performance-based contracting. Last year, agency officials said they were close to making 60 percent of all service contracts performance-based.

In the future, Energy is likely to increase spending to ensure the security of its facilities around the country. In its fiscal 2003 budget request, the Bush administration sought $21.9 billion for the department, $570 million more than in fiscal 2002. Most of that increase would go to pay for beefing up security at nuclear weapons facilities and strengthening weapons nonproliferation programs with Russia.