July 27, 2016

Battelle’s Pacific Northwest National Laboratory Procurement Activities

Since 1965, Battelle Memorial Institute (Battelle) has operated the Pacific Northwest National Laboratory, which performs research in the areas of environmental protection and cleanup, energy resources, and national security.  The Department’s Pacific Northwest Site Office manages Battelle under a performance-based management and operating contract.  To achieve the Department’s mission, Battelle procures services and equipment through subcontracts.  For fiscal year 2015, Battelle had over $318 million (33 percent of laboratory funding) in subcontracts.

The Department of Energy Acquisition Regulation specifies that purchasing systems and methods must be well-defined, consistently applied, and follow the appropriate purchasing practices.  Furthermore, Federal regulations require that management and operating contractors maintain effective systems of management controls for both administrative and programmatic functions, such as procurements.  Some of these controls are outlined in Battelle’s acquisition guidelines and in Federal regulations.  The controls include contract thresholds relating to various contract requirements, such as records retention, Department notification, and management review.  These controls are in place to ensure that costs incurred are in compliance with regulations and are for the intended purposes of the contract, and that resources are safeguarded against waste, loss, mismanagement, or misappropriation.  Battelle documents all procurement activities in either official hard copy or paperless files.  We initiated this audit to determine whether Battelle effectively managed its procurement activities.  This audit is part of a planned series of audits focusing on management and operating contractor subcontract administration.

Our audit identified instances in which Battelle did not effectively manage its procurement activities.  In particular, we found the following:  paperless procurement files were not always reliable in that the paperless system did not record the origination, approvals, changes, and review of changes to documents; paperless procurement files did not always contain the necessary documentation to support contracting decisions; Battelle split procurements into multiple awards, which appeared to allow Contracts Specialists to award procurements that exceeded their authority; and contracts did not always receive the appropriate level of review and approval when they were modified.

The issues we identified were due to weaknesses in Battelle’s policies and procedures as well as inconsistent implementation of the policies and procedures by Battelle procurement officials.  Policies and procedures did not provide guidance for maintaining required documents in the official procurement file or sufficient management review of accuracy and completeness in the files.  They also proved insufficient in preventing or detecting split purchases under Purchase Orders.

Topic: Management & Administration