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GAO-02-418R 1 (2002-03-08)

handle is hein.gao/gaobaalya0001 and id is 1 raw text is: I G ~GAO Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 March 8, 2002 The Honorable Jim Gibbons House of Representatives Subject: Department of Energy: Contractor Litigation Costs The Department of Energy (DOE) contracts with not-for-profit universities and private companies to operate its facilities. As part of the cost of operating these facilities, DOE can reimburse its contractors for the legal costs associated with cases brought against them. These cases involve such matters as equal employment opportunity, radiation and/or toxic exposure, personal injury, and wrongful discharge. In a letter dated May 26, 1998, you expressed concern that the federal government might be subsidizing contractors that violate the law. Specifically, you asked us to (1) determine what laws and regulations provide for DOE to reimburse its contractors for the litigation, settlement, and judgment costs in cases brought against them; and (2) provide information on such cases, particularly those involving equal employment opportunity, as to the number of cases and the costs that DOE reimbursed its contractors and that contractors paid themselves. On January 28, 2002, we briefed your staff on information related to the legal basis for DOE's reimbursement of contractor litigation costs and the number of, cost associated with, and disposition of contractor litigation cases. At that time, your staff requested that we transmit this information to you. In summary, the Federal Acquisition Regulation-which governs acquisitions by all federal executive agencies-and DOE acquisition regulations-which supplement the Federal Acquisition Regulation- provide for the Department to reimburse its contractors for reasonable legal costs. (See encl. I.) Such costs are not reimbursable if there is liability related to the contractor's willful misconduct, lack of good faith, or failure to exercise prudent business judgment. In practice, DOE reimburses its contractors for most of the legal costs. From fiscal year 1995 through the third quarter of fiscal year 2001, there have been more than 2,100 cases involving various types of complaints against DOE contractors and the Department has reimbursed its contractors more than $290 million for litigation and disposition (settlement and judgment) costs associated with these cases. (See encls. II through XI.) Conversely, the contractors have spent about $13 million in their defense. In the same time period, there have been nearly 400 equal employment opportunity cases GAO-02-418R DOE Contractor Litigation Costs Page I

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