ML20134B435

Review of NRC Justification for Renewing Contract for Ffrdc Operations

ML20134B435
Person / Time
Issue date:	02/08/1993
From:	NRC OFFICE OF THE INSPECTOR GENERAL (OIG)
To:
Shared Package
ML20134B434	List: ML20134B429 ML20134B435
References
OIG-93A-01, OIG-93A-1, NUDOCS 9302260346
Download: ML20134B435 (19)

Text

OFFICE OF THE INSPECTOR GENERAL US NUCLEAR REGULATORY COMMISSION 1(EVIEW OF NitC'S JUSTIFICATION FOlt itENEWING ITS CONTilACT Folt FEDERAL.13 FUNDED RESEAL (Cll AND DEVELOPMENT CENTElt (FFRDC) OPERATIONS OlG/93A.01 Februny 8,1993 9

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Review of NRC's FRRDC Contract Renewal TAlli,E OF CONTENTS 1

INTRODUCrlON . . . ... ... . .......................

2 Hackground .... .... . . ............ .....

3 I:lNDING . . .... ..... .. ..................

4 Technical Needs and hiission ... .. .. .... ..........

4 Consideration of Alternative Sources . . . ..............

5 Efficiency and Effectiveness . .. .. ....... .....

................... 5 Cost Effectiveness . . . .. .

Criteria for Establishing the FFRDC . . . . . . . . . . . . . . . ..... 5 6

CONCLUSION . .. . . ... ........ ........

6 RECON 1NtENDATION .... . . ..... ......

7 AGENCY COhiN1ENTS . . .. . .......... ...... .

APPENDICES I Objectives. Scope, and hiethodology 11 Excerpts From Federal Acquisition Regulation, Part 35 Ill Agency Comm:nts on Draft Report IV U.S. NRC Functional Organization Chart V hiajor Contributors to this Report

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Review of NRC's FFRDC Contract Renewal lNTRODUCTION On September 16,1992 the Office of Federal Procu ement Policy (OFPP),

Office of Management and 13udget, requested the Office of the inspector General (OlG) to review the nature and adequacy of the Nuclear Regulatory Commission (NRC) sole source renegotiation justifications of its Federally Funded Research and Development Center (FFRDC).

OFPP's request followed a July 8,1992 report by the Senate Subcomm'ttee on Oversight of Government Management, in that report, the Subcommittee found:

FFRDC operating contracts are generally awarded without competition. Competition was used in the initial award of operating contracts for 5 of the 9 FFRDCs established since enactment of the Competition in Contracting Act of 1984. Of the 34 FFRDC contracts renewed since 1984, only one was competed. Lack of competition to hold down contract prices increases the importance of cost, accounting and auditing controls to prevent excessive spending by FFRDCs.

For increasing competition, the Subcommittee reconimended that the OFPP revise the appropriate acquisition regulations to enhance competition and to require sponsoring agencies to notify OFPP of a decision to renegotiate an FFRDC operating contract on a sole-source basis and provide a detailed justification for this decision not to compete.

OFPP's subsequent request to OlO contained the following background information and guidance:

We believe that FFRDC contracts are intended to be long-term in nature. Ilowever, the policy' requires that agencies conduct

• 0FP/ Policy Letter 84-1, " Fed.2 ally Funded Research and Developraent Centers," which was incorporated into Federal Acquisition Regulation (FAR), Part 35, "Research and Development Contracting."

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Review of NRC's FFRDC Contract Renewal analyses prior to renewing FFRDCs to determine whether the unique FFRDC relationsHp is still needed. The analyses should address whether the marketplace has changed to the point where competitlen should be sought. They should also evaluate past performance and ar,y future changes to the FFRDC's mission.

Appendix I contains additional details of our audit objectives. scom, and methodology.

IIACKGROUND Currently, 7 Federal agencies sponsor 39 FFRDCs. NRC sponsors one FFRDC through its contract with Southwest Research Institute (SwRI) of San Antonio, Texas. SwRI established the Center for Nuclear Waste Regulatory Analyses in 1987 to provide technical assistance and research to the NRC in its licensing responsibilities under the Nuclear Waste Folicy Act (NWFA) of 1982, as amended.

According to FAR, J.rior to extending the contract with an FFRDC, a sponsor shall conduct a comprehensive review of the use and need for the FFRDC.

FFRDC review requirements include:

(1) An examination of the sponsor's special technical needs and mission requirements that are performed by the FFRDC to determine if and at what level they continue to exist.

(2) Consideration of alternative sources to meet the sponsor's needs.

(3) An assessment of the efficiency and effectiveness of the FFRDC in meeting the sponsor's needs, including the FFRDC's ability to maintain its objectivity, indeperdence, quick response capability, currency in its field (s) of expertise, and familiarity with the needs of its sponsor.

(4) An assessment of 'ae adequacy of the FFRDC management in ensuring a cost-effective operation.

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Review of NRC's FFRDC Contract Renewal (5) A determination that the criteria for establishing the FFRDC continues to be satisfied and that the sponsoring agreement is in compliance with 35.0171 [ requirements that must be addressed in either a sponsoring agreement or agencies' policies and procedurcsl.

Frior to extending its 5-year contract with SwRI in 1992, NRC justified its renewal based on an FFRDC review conducted in accordance with FAR requirements (see Appendix 11). The results of this FFRDC review were issued as an Office of the Secretary of the Commission (SECY) Faper (SECY 91260) on August 16, 1991. This led to an October 31,1991 NRC Commissioners' approval to ex,end the FFRDC operations for an additional 5 years and, subsequently, an October 15, 1992 contract extension. NRC's current FFRDC contract ceiling amount is $134.7 million, including $89.9 million for the 5-year extension through fiscal year 1997. The agreement represents NRC's largest active contract.

NRC staff said they began their review in December 1990, used the FAtt requirements as their eview plan, and SECY-91260 contained their er , ire analysis. They stated that documents generated since 1987 during the normal course of project management (i.e. semiannual performance evaluations, bi-monthly performance monitor reports, and project management meeting minutes) would confirm the results of their analysis. They also told us they sought guidance from other FFRDC sponsors and the OMB on how to perform the FFRDC review.

FINDING We found that NRC addressed all five FAR requirements for an FFRDC review prior to extending the contract with SwRI. Ilowever, NRC was unable to provide adequate support for some of the statements made in addressing the FAR requirements. We are particularly concerned with NRC's effort to explore alternative sources to meet the agency's needs.

We recognize that FAR provides no specific requirements regarding how an FFRDC review is to be conducted or documented. Ilowever, in light of Page 3 olof1M41

Review of NRC's FFRDC Contract Renewal recent Congressional and OMil interest in enhancing competition coupled with the size of NRC's contract with swr 1,we believe it would be prudent for NRC to develop a plan, including documentation needs, that adoresses how NRC intends to meet FFRDC review requirements in the future. Details of our findings for each of the FFRDC review requirements are discussed below.

TECllNICAL NI:El S AND MISSION in its 1985 Commission Faper (SECY-85 388) on the initial sponsorship of an FFRDC, NRC stated that DOE was scheduled to submit a geologic repository license application for review in 1991. Ilowever,in SECY 91260, NRC stated that a license application was expected in 2001, with no mention of the previous forecasted application date of 1991. Therefore, we asked NRC to provide the impact on NRC and its FFRDC in terms of mission, level of effort, and direction of effort as a result of this 10-year license application date slippage. NRC responded that this subject was discussed at a previous project management meeting and it was agreed that changes were required in emphasis although the FFRDC's mission had not changed. No further details or support for NRC's response were provided to us to confirm the level of analysis actually conducted.

CONSint: RATION OF ALTERNATIVI: SOURCES We are particularly concerned with the support provided for this FFRDC requirement. In SEC%91-260, NRC stated that a significant number of contractors have and will c-tinut to pursue more lucrative U.S. Department of Energy (DOE) contracts. Indications were that this would impact NRC's ability to effectively compete for necessary technical assistance and research skills. We asked NRC to describe the basis on which it concluded that a significant number of contractors were pursuing the more lucrative DOE contracts. NRC provided us with excerpts from various U.S. Government and commercial publications that contained references to monies available to DOE for high level waste efforts. The number and names of specific contractors pursuing the DOE contracts, however, were not included in NRC's support to us, olo/VM1 Page 4

Review of NRC's FFRDC Ccnaact Renowal EITICIENCY AND EITECTIVENESS In addressing the third FFRDC review requirement, SECY-91260 says that the criteria NRC used in rating its FFRDC (during semiannual perfortnance evalur.tions) encompass all the requirements prescribed in FAR for FFRDC renewal (with the exception of consideration of alternative sources). We asked NRC to demonstrate how the NRC rating criteria and actual FFRDC performance evaluations relate directly with the FAR requirements.

NRC was unable to support how its FFRDC performance rating critena related to FAR's FFRDC review requirements. This support could have been used to link the results of actual FFRDC operations for the first 31/2 years with the specific FAR requirements and provide an historical basis for assessing the efficiency and effectiveness in meeting NRC's needs.

COST Erl Ecrl.TNESS in SECY 91-260, NRC said the FFRDC was slow in identifying problems with cost variances, schedule variances, and the technical development of some products. Although overall costs were within budget, NRC stated that spending on some projects was higher than estimated, whereas other projects were well below the estimated cost. NRC could not provide supporting ~

details on cost variances mentioned. The identification of and explanations for differences between actual costs and budgeted costs are important steps in assessing whether the FFRDC is operating efficiently.

Citiltitir loit ESTAnt IsillNG Tile FFRDC -

As part of its FFRDC review, NRC is required to determine that the criteria for establishing the FFRDC continues to be satisfied and that the sponsoring agreement [ contract] is in compliance with FAR. We found little support for the analysis performed by NRC in this area.

NRC referred to previous statements made in SECY-91260 and the original FFRDC justification paper (SECY-85-388) as support that the criteria used to establish the FFRDC continued to be satisfied. liowever, NRC did not specifically identify which previous statements in either SECY-91-260 or clo/V3M1 Page 5

1 l Review of NRC's FFRDC Contract Renewal SECY 85 388 were applicable. Additionally, in addressing whether the sponsoring agreement is in compliance with FAR, NRC merely referred to the original contract between NRC and SwRI that was prepared when the FFRDC was established. During our review, we asked NRC staff what support was available to demonstrate how the sponsoring agreement met the FAR requirements. We were told that the current contract paragraphs are identified with FAR requirement references and that no NRC actions were required.

CONCLUSION Although we found that NRC addressed all five FAR requirements for an FFRDC review prior to extending the contract with SwHI, NRC was unable to provide adequate support for some statements made in its renewal justification. Of particular concern was NRC's limited efforts in evaluating the availability of alternative sources to meet the agency's needs.

We recognize that FAR provides no specific requirements regarding how an FFRDC review is to be conducted or documented. Ilowever, we believe it would be prudent for NRC to develop a plan, including documentation needs, that addresses how NRC intends to meet FFRDC review requirements in the future. This is especially important in light of Congressional and OMll interest in enhancing competition and the size of NRC's contract with SwRI.

Additionally, the need for procedures becomes increasingly important to preserve contract management continuity as changes occur in NRC's FFRDC project management. For example, both coauthors of SECY-91-260 have been reassigned to non FFRDC work.

RECOMM ENDATION To sufficiently plan and document the level of analysis necessary to support conclusions as the result of any future FFRDC review, we recommend that NRC develop a plan, or procedures, that covers justification requirements.

Minimally, the plan should:

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Review of NRC's FFRDC Contract Ronewal

• Adduss the five FAR FFRDC review criteria; special emphasis should be placed on ensuring a full consideration of alternative sources to meet the agency's needs.

• Include steps to ensure that all criteria are compared with actual conditions; if certain criteria are not applicable, reasons for not covering the criteria should be provided.

• Require that the justification effort and all analyses be documented.

AGENCY COMMI:NTS On February 4,1993, the Deputy Executive Director for Nuclear Materials Safety, Safeguards and Operations Support (DEDO) provided comments on our draft report. Appendix 111 contains a copy of the DEDO's comments.

The DdDO agreed with our recommendation. lie also hoped that the results of our review and other agency OlG reviews will be used by the OFPP to ,

provide guidance on how the review should be conducted, the level of documentation required, and especially the threshold for considering alternative sources.

A'though the DEDO agreed with this recommendation, he indicated that NRC will develop the procedures following receipt of OFPP guidance.

OFPP's schedule indicates that any additional guidance may not be finalized until January 1994. To effectively use and apply the experience gained during NRC's initial FFRDC contract notification review, we believe NRC should begin to develop procedures now. If additional guidance is received from OFPP at a later date, the procedures should then be revised accordingly.

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Appendix !

Review of NRC's FFRDC Contract Renewal OlUECTIVES, SCOPE, AND METilODOLOGY In response to a Sept.:mber 16, 1992 request from the Office of Federal Procurement Policy (OFPP), Office of Management and Budget, we conducted a review of Nuclear Regulatory Commission (NRC) sole source renegotiation justifications of its Federally Funded Research and Development Center (FFRDC) prepared since 1985. OFPP's request was prompted by a recent Senate Subcommittee report of FFRDCs and -

recommendations made to strengthen Federal controls over FFRDC operations.

Our specific audit objective was to determine the nature and adequacy of NRC's one and only FFRDC sole source renegotiation justification prepared in 1991. That renegotiation justification was incorporated into an FFRDC review in accordance with Federal Acquisition Regulation (FAR).

FAR, Part 35.017,EeAgrallv Funded Rfcatch and Development Centers, was used as criteria for our review, in particular, FAR 35.017-4, Reviewing FFRDC's, describes the requirements of an FFRDC review. FAR 35.017-4 is shown in Appendix 11.

We conducted our audit at NRC lleadquarters between September and December 1992. We interviewed managers and administrative staff at the i

Office of Nuclear Material Safety & Safeguards, the Office of Nuclear Regulatory Research, and the Division of Contracts & Property Management, Office of Administration. Our audit of NRC's justification incluc'ed an examination of an August 16,1991 Office of the Secretary of the Commission (SECY) Paper (SECY 91-260, " Staff Review of the Use and Need for Continued Sponsorship of the Center for Nuclear Waste Regulatory Analyses"), the current FFRDC contract and contract files, and project files containing project management information such as Performance Monitor Reports. Performance Evaluation Reports, Fee Determination Reports, and Periodic Progress Reports submitted by the FFRDC contractor, Page 1 or 2 alo/VM41

Appendix i Review of NRC's FFRDC Contract Renewal We also contacted Inspector General representatives at the National Science Foundation, the Department of Energy, and the Department of Defense to learn how other Federal agencies justify their FFRDC renewals.

Our audit was performeJ in accordance with generally accepted Government auditing standards and included st ch tests of the data and records and other auditing procedures as we considered necessary.

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Appendix 11 Review of NRC's FFRDC Contract Renewal

]ERPTS FROM FEDERAL ACQUISITION REGULATION, PART 35 33A W 4 FEDERAL ACQUISITION REGULATION GAR) 35417 4 Reveg FTRDC's. the FFRDC ccconue o be saus5ed aid that the spoo-(a) The spann, pnar e exten6ag the contnet or sanng artemes is in compLarse =th 35.011 1.

aptancet *,th an FFRDC, shad conduct a cxxngsthcarve renew of the ese and aced is the FFRDC. The review wi2 he cocrdmazed tmh any co spwes and niay te per-fore 5 in conjuncooo with the toiset prtress. If the N spana dert.mit'es that as spx.xntsp is to kmgtr apprt> ,

grwr,it shad spprue c&r agencies stich tise the FFRDC (,

of the derenrunacon and a5ard than an cpparumity to y nemme %

(b) A ,W e cononuc a imminata the sp:rtsarstnp shan ren wun the head of the spmscnns agency. This d der.ermitatios. shM1 he based upz the resab d the rtview

&_*M in aeradance sub reapsph (c) d this subsec-txm.

j (c) An FTRDC revses sLecid i:elu&: the fo0 meg:

(1) An eurnir.a:ian c(ibe spxeds specnal techncal i

needs and misia requittments tLv at prfcnned by

! tLe FTRDC e dee.runne if and a wa le ci thef eco-CDDP. O C13sl (r Ccnnderaten of aussauw sou:p:s to izxcx the sponsor's needs.

O) An assessraex d A c&mry and efective-te.as of the FFFDC in toccang the spoescr's avis, including the FTRDC4 aNlry e omrtam as obycus ty. in& pawn.a. qcci respartse cg@, curmry in i:s twid(s) of experust, and fr:nilianty siih tbc needs of i:s sponn.

(4) An n=e of the adequacy of & FFRDC naaagemern in casunng a cast <fectw geraucrt

($) A deter'zunamn that the cntena fu esabbshg

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OIG/93A41 Page 1 of 1

Apper.dtx ill Rwiew of NRC's FFRDC Contract Renewal AGENCY COMMENTS ON DRAFT REPORT

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NUCLEAR REGULATORY COMMIS$10N F4 ASH seGT04. D. C. 7066a e

%**** February 4,1993 MEM0P>NDUM FOR: Thomas J. Barchi Assistant insoector General fo- Audits Of t;*e of the inspector Gee" 'ai FROM: Hugh L. Thompson, Jr. $

Deputy Executive Directo.- fen' Nuclear Materials Safety, Safeguards  ;

and Operations

SUBJECT:

DRAFT REPORT - REVIEW OF NRC'S JUSTIFICATION FOR RENEWING ITS CONTRACT FOR FEDERALLY FUNDED RESEARCH MD DEVELLMENT CENTER (FFRDC) OPERATIONS This responds to your January 15, 1993, memorandum transmitting the subject dratt audit report. We are pleased that you found NRC addressed all Federal Acquisition Regulations (FAR) requirements for an FFRDC renewal prior to extending its centract with Southwest Research Institute for operation of the Center for Nuclear Waste Regulatory Analyses (CNVRA).

Your recomendation and our response are:

Recommendation To sufficiently plan ano document the level of analysis necessary to support conclusions as the result of any future FFkDC review, we recomend that NRC develop a plan, or procedures, that covers justification requirerents. Minimally, the plan should:

o Address the F AR FFRDC review criteria; special emphasis shoulet be placed on ensuring a full consideration of alternative sources to meet the agency's needs.

o include steps to ensure that all criteria are compared with actual conditions; if certain criteria are not applicable, reasons for not covering the criteria shouid be provided.

o Require that the justification effort and all analyses be documented.

Resconse We agree with your recomendation that a plan or procedures for future reviews is desirable, even though, as you noted, no specific requirements regarding how an FFRDC review is to be conducted or documented currently exist. We believe that such a plan is desirable froen the perspective of upgrading NRC standards. It is hoped that the OIGpnA-01 Page 1 of 2

Appendix !!!

Review of NRC's FFRDC Contract Renewal , _ _ _ _

Thomas J. Barchi results of your review and other Inspector General reviews will be used by the Office of Federal Procurement Policy (0FPP) to provide guidance on how the review should be conducted and the level of documentation required. We would especially welcome guidance from 0FPP on the threshold for considering alternative sources. This guidance should distinguis5 between a contractor-owned / contractor-operated FFRDC and a government-owned / contractor-operated FFRDC since costs associated with terininating and reumpeting a cot; tractor-owned / contractor-operated FFRDC are considerably greater. This 0FPP guidance will be evaluated and ref'ected in our procedures. We propose to develop these procedures following receipt of 0FPP guidance. If your audit has revealed any areas where the information is deficient such that procedures are needed earlier, please advise. Completion date: Within 60 days of receipt of 0FPP guidance.

Ifyouhavehnyadditionalquestionsorrequireadditionalinformation,piease contact Shirley Fortuna on 504-2427.

M ug L. Thomps , J..

0(putyExecutie r tor for Nuclear Materials fety, Safeguards and Operations s

0; *.i/9M41 P3re 2 d 2

Appendt< IV Review of NRC's FFRDC Contract Renewal U.S. NRC FUNCTIONAL ORGANIZATION CHART EXECUTIVE DIRECTOR FOR OPERATIONS A14LST ANT FOR O PERATION S DEPUTY DECUTivt OIRECTOR FOR DEPUTY EXECUTIVE DSRECTOR FOR OFFICE OF NUCLEAR M ATERf ALS S AFtTY. NUCLEAR RE AC TOR REGULATION. POUCY PLAN %WQ SA8tGUARDS & OPERATIONS $UPPORT REGON AL OPERAflONS & RESEARCH I

I I  ! I I I l r-OFFICt OF O*FICE OF OFHCE OF OFF'CE OF +

OFFICS OF OFHCE OF OFFICE OF

$1 ATE PROGR AMS ENFORCEM(NT INVESTIG A TION S ADMINt1TR A TION j PERSONNEL CON $OUO 4 TION THE CONTROLLER t,

g< m i

L OFFtCE OF SMALL &

OFFICE OF NWLEAR IG OFFICE OF m$ ADVAN1 AGED SU$mtsg OFFICE FOA M ATERIALS S AFETY $ INFORM ATION RESOURC ES UT1U.ZATION AND ClVIL RIGHTS ANALYr11 AND EVALUATION f~ S AF LQU ARD s

} M AN AGEMENT OF OPTRATION AL DATA

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• anmm m a MM OFFiCt OF 3 OFHCE OF REClONAL OFFICES NUCLEAR Pf GULATC A f $ NUCLE AR RE ACTOR RESE ARC H $ PEGU' ATION 1

REGON 1 PHILADELPHI A REGON il ATLANTA RIGO.4 Ri ClSC AGO RE GON IV DALLAS REGON V S AN FR ANCISCO AREAS AUDITED www 01G/73A41 Page 1 of I

Appendix V I

Review of NRC's FFRDC Contract Renewal MAJOR CONTRlllUTORS TO TIIIS REPORT .-

William L Glenn, Jr., Team Ixader Russell Irish, Senior Auditor George Pourchot, Contract Auditor I

s Page 1 of 1 010/91 % 1

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