Audt: DOE-OIG-25-27

The Department of Energy and Sandia National Laboratories Took Corrective Actions, but Additional Actions Would Further Improve Subcontract Management

Office of Inspector General

August 7, 2025
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8/4/2025

The Department of Energy and Sandia National Laboratories Took Corrective Actions, but Additional Actions Would Further Improve Subcontract Management

Prior Office of Inspector General audit work found that Sandia National Laboratories (SNL) excluded fixed-price subcontracts with flexible cost elements from audit, that decisions not to sustain (allow) questioned subcontract costs were not fully supported, and that Federal oversight did not ensure questioned costs were resolved appropriately.

We conducted this follow-up audit to determine whether: (1) the Department of Energy and National Technology and Engineering Solutions of Sandia, LLC (NTESS) took corrective actions related to the recommendations in our prior report; and (2) actions taken to correct the deficiencies resulted in improved transparency for the contracting officer, proper classification of contracts, and improved determination of allowability and resolution of questioned costs by NTESS procurement.

We found that the National Nuclear Security Administration, NTESS (SNL’s managing and operating contractor), and the Department’s Office of Acquisition Management took corrective actions and made improvements to deficiencies identified in the prior Office of Inspector General report, Sandia National Laboratories Subcontract Closeout Process (DOE-OIG-22-16). As a result, the Department’s contracting officers had more insight into SNL’s sustainment decisions for questioned subcontract costs, SNL improved its classification of subcontracts, and SNL improved its process for reviewing costs claimed by its subcontractors. SNL corrective actions included updating policies, providing summations of questioned costs, submitting Unsustaining Memoranda to the contracting officer when unsustained costs are greater than $25,000, increasing training requirements for subcontract personnel to prevent reoccurrence of audit findings, establishing requirements for a kickoff meeting for subcontracts that meet specific criteria, and creating the Expert Invoice Reviewer process to reduce risk and mitigate audit findings.

The National Nuclear Security Administration, NTESS, and the Office of Acquisition Management took corrective actions and improved upon previously identified deficiencies. However, additional steps would further improve the subcontract management.

We have made two recommendations that, if fully implemented, should improve subcontract management and reduce the risk of reimbursing unallowable subcontractor costs.