A key to implementing performance-based contracting is having a clear picture of what needs to be accomplished. In addition, DOE reported during 1997 on its assessment of the implementation of performance-based incentives. DOE Has Incorporated Lessons Learned Into Fiscal Year 1998 Incentives

In developing its fiscal year 1998 incentives, DOE incorporated the lessons learned from the OIG’s reviews, its own assessment, and prior years’ experiences with performance-based incentives. DOE Has Taken Corrective Action to Improve the Performance-Based Incentive Process

DOE’s October 1997 assessment of its performance-based incentives also noted that the guidance on the development and administration of these incentives was limited and generally did not address such issues as establishing baselines and allocating fee amounts to specific incentives. Furthermore, all four sites allocated fees to individual performance incentives on the basis of their relative importance and their contribution towards the site’s mission and objectives. At three of the four sites we visited, DOE’s performance incentives incorporated the baseline measures in DOE’s 10-year plans for environmental cleanup. The fourth site has not yet developed any incentives in environmental management because it is still validating the baseline information. However, Idaho Falls has a process to link its annual work plans to the 10-year plan and DOE’s strategic plan, and the goals and objectives of the site do incorporate the performance measures from the 10-year plan for environmental cleanup. However, DOE and contractor officials stated that these successes may be due to the Department’s increased emphasis on program management rather than the result of performance-based incentives. Because the total contract amount for the Rocky Flats Site includes the amounts paid to the major subcontractors, we believe that it does not make any difference in the presentation of the information to show that the fees are separately negotiated. Scope and Methodology

To determine the extent to which DOE has incorporated lessons learned in developing the fiscal year 1998 performance-based incentives, we interviewed DOE’s Deputy Assistant Secretary for Procurement and Assistance Management and officials from planning and procurement organizations at DOE’s Hanford, Idaho Falls, Rocky Flats, and Savannah River sites. To determine whether the incentives incorporate DOE’s baseline measures in its 10-year plan for environmental cleanup and how fees are allocated to the incentives, we interviewed DOE’s planning and procurement personnel at the four sites. To determine how DOE evaluates completed incentive measures and determines their effectiveness, we interviewed DOE personnel at the four sites, reviewed procedures and other documentation provided by them, and reviewed supporting documentation for completed incentive measures.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the performance-based incentives at the Department of Energy's (DOE) Hanford, Idaho Falls, Rocky Flats, and Savannah River sites to determine: (1) the extent to which DOE has incorporated lessons learned in developing its fiscal year (FY) 1998 performance-based incentives; (2) whether these incentives incorporate the baseline measures in DOE's 10-year plan for environmental cleanup, and how fees are allocated to the incentives; and (3) how DOE evaluates completed incentive measures and determines their effectiveness.

What GAO Found

GAO noted that: (1) during the past year, DOE has taken steps to correct the problems identified in the Office of the Inspector General reports and its own assessment of performance-based incentives; (2) these steps have included issuing guidance, conducting training, and incorporating lessons learned into the FY 1998 incentives; (3) however, DOE believes that FY 1998 represents a transitional period to better performance-based incentives because it plans to continue to make improvements to the incentives; (4) for FY 1998, at three of the four sites GAO visited, DOE's performance-based incentives incorporated the baseline measures in the Department's 10-year plan for environmental cleanup and were generally linked to both DOE's strategic plan and the site-specific plans; (5) the fourth site, Idaho Falls, has not yet developed performance incentives in environmental management, but its goals and objectives do incorporate the 10-year plan's baseline measures; (6) furthermore, each of the four sites generally allocates fees to individual performance incentives in proportion to their relative importance and on the basis of the site's missions and objectives; (7) DOE evaluates completed actions that were tied to performance-based incentives through reviews by its technical, financial, and contracting personnel to determine whether the contractor satisfied the criteria and earned the amount of fee to be paid; (8) overall, DOE maintains that performance-based incentives have been effective in achieving desired end results; (9) however, it is not clear whether the successes reported in the departmentwide assessment have been due to the performance-based incentives or to the accompanying increased emphasis on program management; and (10) furthermore, it is too soon to assess the effectiveness of the FY 1998 incentives because the evaluation of these incentives will not be complete until the end of the fiscal year.