IG: Energy needs to improve contractor oversight

When auditors from the Energy Department's inspector general office met with officials in the Office of River Protection to review the government's administration of a major service contract, the officials never told the auditors that they were not federal employees, but contractors working on the very contract the IG was investigating.

The distinction is important. Federal policy issued by the Office of Management and Budget prohibits contractors from drafting agency responses to inquiries from Congress, IG offices, and the Government Accountability Office because of the appearance of private influence on the public interest.

That was just one of the problems auditors reported after reviewing Energy's contract with Project Assistance Corp. for plutonium waste disposal at the Hanford Site in southeastern Washington state. Overall, auditors found that Energy had not established adequate controls to effectively oversee the contractor and its many subcontractors.

Energy hired PAC in 2003 to perform a range of services, including project management; risk and program assessments; quality assurance; safety, cost and schedule estimating; budgeting and finance; and engineering associated with the storage, treatment and disposal of more than 53 million gallons of highly radioactive waste from more than 40 years of plutonium production at Hanford.

Between 2005 and 2008, the annual cost for the contract with PAC almost doubled from $4.7 million to $9.2 million.

The auditors reported that "PAC employees developed their own scope of work for services to be provided to the Office of River Protection and approved funding authorizations for procurement requests related to PAC's own contract."

Specifically, the contractors prepared statements of work for 16 of the 27 requests to change elements of its contract and established the federal requirements for work performed under the contract. Contractors also operated as the program budget official and/or the certifying official for 29 of 80 procurement requests and authorizations between 2006 and 2008.

In addition, contractors shared offices with government personnel -- another violation of OMB policy.

"The close proximity of contractor and federal employees increased the risk that the federal managers over-relied on contractors to define work to be performed and approve funding for such work," the report said.

J.E. Surash, Energy's deputy assistant secretary for acquisition and project management, largely concurred with the IG's findings in an April 3 memo to George Collard, assistant inspector general for performance audits.

Many of the issues the IG raised were discovered in a self assessment by the Office of River Protection prior to the audit, Surash noted. As a result, the office is in the process of developing stronger internal controls to prevent contractor conflicts of interest and plans to physically separate contractors from federal employees by the end of the fiscal year.

The office also has assigned a federal employee responsibility for responding to inquiries from Congress, the IG and GAO.