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TESTIMONY OF CARL O.
BOSTROM
PANEL MEMBER AND ACADEMY FELLOW,
ACCOMPANIED BY
CAROLE NEVES, PROJECT DIRECTOR,
BEFORE THE
UNITED STATES HOUSE OF REPRESENTATIVES
COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON INTERIOR AND RELATED AGENCIES
MARCH 30, 2000
INTRODUCTION
Mr. Chairman, and members of the subcommittee,
thank you for the opportunity to discuss the findings and
recommendations from the National Academy of Public Administration's
March 2000 report on management in the Office of Energy Efficiency
and Renewable Energy (EERE) of the U.S. Department of Energy
(DOE).
EERE is the federal organization with responsibility,
and I quote from its mission statement, "to lead the
nation in the research, development, and deployment of advanced
energy efficiency and clean power technologies and practices."
Success with this mission should strengthen the American economy,
create a healthier environment, and contribute to a more secure
energy future. It appears that EERE has made important contributions
to the availability and use of more energy efficient and cleaner
technologies and practices. However, as Congress recognized
in calling for the Academy study, EERE may not have done so
as efficiently and effectively as it might because of weaknesses
in its management.
The Academy's intent in carrying out this
study and in formulating recommendations is to support and
further the commendable effort underway within EERE to improve
its management. The Academy's study team and panel recognize
that the assistant secretary and his team are aware of many
of the problems discussed in this report and have already
initiated management reform efforts to respond to them. We
believe that in general EERE is moving in the right direction.
We are concerned, however, that significant portions of the
reform effort exist only on paper. EERE must develop a realistic
plan of action and expend focused attention on the completion
of achievable short-term objectives, albeit without losing
sight of longer term goals. Most important, the assistant
secretary of EERE and his senior staff, and the deputy assistant
secretaries, must all actively support, be involved in, and
show commitment to the reform efforts, for otherwise we fear
they will fail.
KEY THEMES
The study team identified four principal
themes: fragmentation of EERE, emphasis on process rather
than on product, poor communications, and weak decision-making
processes. These factors have been the major sources of EERE's
lack of credibility. The most important in terms of the issues
discussed in the report is EERE's fragmentation: its different
parts operate as independent entities without common purpose
and synergy. EERE speaks with different voices, and it is
hard to derive a clear picture of its programs and priorities.
The focus of the reform effort on the production
of processes, procedures, and paper directives and on specialized
teams and task forces is cause for concern. This approach
does not motivate people to change entrenched behaviors and
does not generate commitment to overall organizational goals.
Personal leadership by top management is necessary for acceptance
and application of the proposed reforms by EERE personnel.
The problem with communications is evident
in the complaints about EERE's inability to deliver the right
amount of information at the right time and at the right level.
Much of the difficulty stems from uncoordinated and poorly
designed information support systems, and from a failure to
determine and articulate clearly what EERE intends to communicate.
In terms of decision-making, EERE does not
make decisions in a systematic way, based on sound analysis.
It is not clear how EERE establishes its goals, sets its priorities,
determines desired outcomes, selects best alternatives for
achieving them, monitors implementation, and decides whether
and at what level to continue activities.
PROGRAM AND BUDGET DEVELOPMENT
When the study team inquired about program
and budget development, the responses did not make clear the
analytic underpinnings of the program plans and budget requests
of the five EERE sector offices. EERE as a whole has not had
a formal program and budget formulation process, supported
by an independent analytic capability. To strengthen planning,
budget formulation, program execution, and independent analysis
and evaluation, in 1999 the assistant secretary set up an
Office of Planning, Budget, and Management and began to put
a Strategic Management System into place, of which planning
and budget formulation and execution are core elements.
EERE needs to:
· Take a more proactive role in defining
program goals, objectives, and content.
· Utilize the newly formed independent analytic capacities
within the Office of Planning, Budget, and Management to assess
the relationship between EERE's stated goals and objectives
and resources assigned.
· Institute a rigorous and efficient system of monthly
reviews with the deputy assistant secretaries and their key
program managers.
PROGRAM AND PROJECT MANAGEMENT
EERE managers operate with different definitions
of what constitutes a program and what constitutes a project,
and with different understandings of the roles and responsibilities
of program and project managers. Similarly, the roles of headquarters,
field offices, and national laboratories require clarification.
EERE needs to:
· Define what in EERE constitutes
a program and what constitutes a project, and develop and
maintain a list of programs and projects approved by the assistant
secretary.
· Clarify the roles and responsibilities of program
and project managers, and make clear that their responsibilities
are much broader than those of securing funds and authorizing
funding actions, but continue through all phases of activities,
including program and project execution and evaluation.
· Continue to refine the roles and responsibilities
of headquarters, the Golden Field Office, and the National
Renewable Energy Laboratory, as well as other field organizations,
with regard to program and project management.
PROGRAM AND BUDGET EXECUTION
Flow of Program and Funding Authorizations
The Department of Energy's chief financial
officer does not have a formal system for officially notifying
EERE and other major program offices of actual fund availability.
The offices learn of actual availability from congressional
actions and reports and interaction with the chief financial
officer's staff.
The Department of Energy's system for providing
program and funding authorizations to obligating offices in
the field involves a once-a-month process using an approved
funding plan and allotments. Most major program offices in
the department provide inputs based on a spend plan so that
the approved funding plan and allotments to field offices
can occur at the beginning of the fiscal year. They then send
the programmatic documents required for the obligation of
funds directly to the field organizations. In contrast, EERE
generally provides its inputs to the system in relatively
small increments based on specific programmatic documents.
This authorization and funding approach takes 40 to 80 days
from initiation of an action to availability of funds for
obligation.
EERE should:
- Develop an annual spend plan in time
for inclusion in the initial approved funding plan to minimize
the need for incremental additions to the approved funding
plan during the year.
- Issue work authorizations, procurement
requests, and guidance letters directly from EERE to the
appropriate operations offices, Golden Field Office, and
regional offices within the amounts of the spend plan and
approved funding plan.
- Hold EERE and the sector offices accountable
for assuring that these actions remain within the assigned
availability.
Cost Reporting
Problems with the format and timeliness
of the cost data in the official Department of Energy financial
reports make them difficult for EERE managers to use, and
internal EERE reports are hard to reconcile with official
department reports. There is an apparent under-reporting of
accrued costs for much of the fiscal year and an over-reporting
in the final quarter. Accrued costs are a measure of the amount
of human and material resources applied in the time period
reported to accomplish a project or activity.
EERE's internal cost reports vary in quality
and relevance; they tend to focus on uncosted balances rather
than on costs in conjunction with progress. By uncosted balances
is meant the amounts appropriated but not yet obligated, and
the amount obligated but not yet costed. A further issue is
that the cost data for work performed under grants and other
financial assistance awards, are not always meaningful, for
legitimate reasons. Yet the status of progress under these
awards still needs to be monitored in a useful manner.
EERE needs to:
- Structure a regular EERE-level review
in which program progress and accrued cost are reported
for all significant activities. It should review accrued
costs in relation to technical progress to the extent that
appropriate data are available.
- Recognize the present limitations of
cost reporting for work accomplished under grants and similar
arrangements, and continue efforts to provide more meaningful
reporting of performance for major grant activities.
Unobligated and Uncosted Balances
EERE's heavy emphasis on uncosted balances
in response to external pressures appears to be counterproductive.
For example, it shifts management attention from getting funds
obligated in a timely manner, and from monitoring the accomplishment
of planned work. It appears that EERE has now realized most
of the benefits of eliminating unused pockets of EERE funding.
With management attention focused on the right things, such
as program performance and accountability, the uncosted balances
should be a matter of secondary concern.
EERE needs to:
- Consider accrued costs in relation to
the accomplishment of program objectives in an efficient
manner, and recognize that reasonable levels of uncosted
obligations are necessary to avoid disruptions of activities.
- Allow performing organizations to carry
a sufficient level of uncosted obligations in each major
program area to avoid work disruptions, and ensure that
sector offices comply with that policy.
Multi-year Versus Annual Funding
The Energy Supply appropriation provides
for one-year funds. Because R&D work does not always proceed
as planned for legitimate reasons, it is generally recognized
that the appropriation of funds for most R&D activities
needs to be on a multi-year basis that affords needed flexibility.
EERE should:
- Continue to seek appropriation of Energy
Supply funds on a two-year or no-year, rather than an "annual
account," basis. Energy Conservation funding should
continue to be appropriated on a multi-year basis.
Cost-sharing
A significant portion of the EERE work involves
cost-shared activities. In general, EERE handles the negotiation
of cost-shared activities well and typically requires cash
or direct labor for the partner's share. However, the study
team found no consistent auditing to assure that participants
actually provide what they agree to.
EERE should:
- Provide for periodic verification or
audit of the actual application of resources as agreed upon
by participants in the cost-sharing.
- When internally reviewing the status
of cost-shared activities, include the costs of all participants,
not just the costs funded by EERE. When reporting the non-EERE
participant's share of cost-shared activities externally,
calculate the share as a percentage of the total cost of
the project, rather than as a percentage of EERE's share.
Department of Energy Financial Management
Systems
The study team believes that the Department
of Energy Office of the Chief Financial Officer could provide
better services to the program offices to help them carry
out their work. The study team understands that that office
has been studying ways to make the program authorization and
allotment system more responsive to the program offices and
is working to improve the department's financial reporting
systems.
A further issue, cited by a number of interviewees,
is that the office's staff drive much of the overemphasis
on uncosted balances.
EERE should:
- Collaborate with the chief financial
officer's staff to identify and implement desired improvements
in financial reports.
Procurement
EERE has significantly increased the level
of competition in the last two years and is continuing this
effort. It does not, however, appear to have defined targets
for desired level(s) of competition, although some non-competitive
procurement is probably necessary. EERE is also taking many
steps to improve its internal procurement planning and initiation.
The study team believes that EERE needs to review the high
number of awards it makes and the small size of so many awards.
EERE should:
- Develop a specific action plan that incorporates
key milestones for implementing the recommendations of the
EERE Working Group on Procurement Execution.
EVALUATION AND PERFORMANCE MEASUREMENT
EERE works in areas where results to a large
extent depend on the actions and achievements of others. EERE's
accomplishments are therefore challenging to measure and evaluate.
Meaningful evaluation requires identification of intermediate
goals and objectives, with incremental and measurable steps
against which progress can be evaluated, as well as review
of longer term progress and the validity of goals in light
of changing external factors. There is considerable variation
across sector lines and programs in performance measurement
and evaluation and in the use of findings. Strengthening program
evaluation is an EERE priority, but EERE has not provided
staff with needed training on new systems.
EERE should:
·As appropriate, use performance
information to:
- Identify improvements and criteria for
starting and stopping processes, policies, and programs.
- Hold employees and contractors accountable
for performance.
MANAGEMENT REFORMS
A key part of EERE's management reforms
is implementation of the Strategic Management System. The
system is intended to provide EERE with an integrated system
and schedule for planning, budget formulation, budget execution,
and evaluation. Other parts of the reform include the publication
of EERE's first strategic plan in March 2000 and the establishment
of the Office of Planning, Budget, and Management to strengthen
those management functions. EERE is beginning to use an integrated
annual operating plan and an annual spend plan. It has taken
the first steps in defining the roles and responsibilities
of program and project managers and of headquarters and field
implementation organizations. The assistant secretary sees
a need for more attention to performance evaluation and accountability
and has named a chief operating officer.
The management reform effort may, however,
be more ambitious, complicated, and detailed than EERE can
achieve in a one-year timeframe, and may over-emphasize systems
rather than personal involvement. The assistant secretary
needs to provide continuing interest and active involvement
in the reform effort.
The Office of the Assistant Secretary should:
- Identify the most critical changes, and
develop an action plan and timeline to ensure that those
changes are accomplished.
- Make improving internal management the
primary emphasis of the Strategic Management System, rather
than responding to external criticisms.
CONCLUSION
Mr. Chairman, on behalf of the Academy I
want to thank you for the opportunity to present this testimony
on the EERE study, which is intended to further the good work
being carried out to strengthen our energy future through
cost-effective, clean energy sources, technologies, and energy-efficient
practices. Your committee has long advocated effective, efficient
management, and wise investment in federal programs designed
to improve the standard of living of the American people and
the state of the U.S. economy. The Academy is again pleased
to compliment you on your interest in results-based management
and your insistence that it be a fundamental characteristic
of federal government.
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