[Senate Hearing 110-67]
[From the U.S. Government Publishing Office]
S. Hrg. 110-67
STEVEN J. ISAKOWITZ NOMINATION
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
on
THE NOMINATION OF STEVEN J. ISAKOWITZ TO BE CHIEF FINANCIAL OFFICER OF
THE DEPARTMENT OF ENERGY
__________
MARCH 20, 2007
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota LARRY E. CRAIG, Idaho
RON WYDEN, Oregon CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana RICHARD BURR, North Carolina
MARIA CANTWELL, Washington JIM DeMINT, South Carolina
KEN SALAZAR, Colorado BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
JON TESTER, Montana MEL MARTINEZ, Florida
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Frank J. Macchiarola, Republican Staff Director
Judith K. Pensabene, Republican Chief Counsel
C O N T E N T S
----------
STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 1
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 6
Isakowitz, Steven J., nominee to be Chief Financial Officer,
Department of Energy........................................... 3
Thomas, Hon. Craig, U.S. Senator from Wyoming.................... 1
APPENDIX
Responses to additional questions................................ 11
STEVEN J. JEFFREY ISAKOWITZ NOMINATION
----------
TUESDAY, MARCH 20, 2007
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:05 a.m., in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. Why don't we go ahead here? Senator Thomas
has arrived. I think Senator Domenici is on his way.
This morning's hearing is on President Bush's nomination of
Steven Isakowitz to be the Chief Financial Officer for the
Department of Energy.
Congress created the post of Chief Financial Officer in
each of the major executive agencies in 1990 to, ``Bring more
effective general and financial management practices'' to the
agencies. The act requires Chief Financial Officers to possess
demonstrated ability in general management, as well as
extensive practical experience in financial management
practices, in large governmental or business entities.
If confirmed, Mr. Isakowitz will bring to the Department of
Energy many years of experience as the Chief of Science and
Space Programs at the Office of Management and Budget. As
Deputy Chief Financial Officer and Comptroller at the National
Aeronautics and Space Administration. And, most recently, as
Senior Intelligence Officer in the Science and Technology
Directorate at the CIA. We're glad to welcome him to the
committee and to consider his nomination.
Let me just see if Senator Thomas had any statement he
wanted to make at this point before we swear in the witness.
STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR
FROM WYOMING
Senator Thomas. Thank you, Mr. Chairman.
I want to welcome our victim this morning. We're delighted
to have you here, and certainly the financial management of
these groups is terribly important. I understand that you're
more involved in the actual management of the funding than you
are to the decisions as to where the funding goes, I suppose.
But, we're very concerned about good use of the money, in
energy particularly, where it's going and that it gets to the
places where it's designed to go.
We've been a little frustrated from time to time and we
passed some bills here that would have established some things
that we would like to see happen. Frankly, they haven't
happened and so we look forward to working with you and trying
to cause this to be as efficient as we can in providing
assistance to energy.
Thank you, Mr. Chairman.
The Chairman. Thank you. The rules of the committee, that
apply to all nominees, require that they be sworn in in
connection with their testimony.
Let me ask you to stand and raise your right hand, Mr.
Isakowitz. Do you solemnly swear that the testimony you're
about to give to the Senate Committee on Energy and Natural
Resources shall be the truth, the whole truth, and nothing but
the truth?
Mr. Isakowitz. I do.
The Chairman. Please be seated. Before you begin your
statement, let me ask you three questions that we address to
each nominee before this committee.
First question, will you be available to appear before this
committee and other congressional committees to represent
departmental positions and respond to issues of concern to the
Congress?
Mr. Isakowitz. I will.
The Chairman. Second question, are you aware of any
personal holdings, investments, or interests that could
constitute a conflict of interest, or create the appearance of
such a conflict, should you be confirmed and assume the office
to which you've been nominated by the President?
Mr. Isakowitz. My investments, personal holdings, and other
interests have been reviewed, both by myself and the
appropriate ethics counselors within the Federal Government.
I have taken appropriate action to avoid any conflicts of
interests. There are no conflicts of interests or appearances
thereof, to my knowledge.
The Chairman. And the third question, are you involved or
do you have any assets held in a blind trust?
Mr. Isakowitz. No.
The Chairman. Let me, at this point, invite you to
introduce any family members that are here with you, if you
would like to do that, and then recognize you for your opening
statement.
Mr. Isakowitz. Thank you. I'd like to introduce my family
that's with me here today. This is my wife Monica, whose been a
devoted wife for 20 years and done a wonderful job raising the
kids while I've been busy at work. I have three of my four kids
here with me. Jennifer, who is a junior at Chantilly High
School. I have Rachel, who's a seventh grader at Franklin
Middle School, and my youngest Sophie, who is a sixth grader at
Oak Hill Elementary. I also have with me, my father-in-law,
Mike Sponder, and my sister Cheryl Horowitz.
The Chairman. Well, we welcome all of you. Nice of you to
be here today. Why don't you go ahead with your opening
statement?
TESTIMONY OF STEVEN J. ISAKOWITZ, NOMINEE TO BE CHIEF FINANCIAL
OFFICER, DEPARTMENT OF ENERGY
Mr. Isakowitz. Thank you.
Mr. Chairman and members of the committee, I am sincerely
honored to appear before you today as the President's nominee
to serve as the Chief Financial Officer at the Department of
Energy. I am fully aware of the challenges that face the person
who holds this position, and I am deeply appreciative of the
President and Secretary Bodman's confidence in my abilities to
meet those challenges. I also want to thank the committee for
holding this hearing and considering my nomination. And I'd
also like to recognize and thank Clay Sell, the Department
Deputy Secretary for being here today.
I would also like to recognize my parents for being a
shining example of hard work, honesty, and integrity. My mother
and recently-deceased father are both survivors of the
Holocaust. Indeed, their example has ingrained in me the
importance of freedom, justice, and tolerance, and the desire
to leave our children a better world. I share those principals
and am thankful and honored to serve a government that does,
too.
My career ambitions were instilled in me at an early age.
During my childhood, I was inspired by the Apollo program as I
watched in amazement as this nation, galvanized by a
President's vision, landed a man on the moon. I was compelled
by the notion of a Nation undertaking something that appeared
impossible, yet by ingenuity and partnership of government and
industry, made it happen.
Starting with literally nothing, hardly the ability to
orbit a satellite, we achieved the national goal of stepping on
the moon. Consequently, throughout my career, I have been
driven and motivated by the desire to fulfill large national
goals. In particular, I am drawn to big goals that require the
innovative applications of science and technology to get it
done.
Indeed, after receiving engineering degrees from MIT, my
career has spanned 23 years across a variety of positions both
technical and financial in pursuit of major national goals.
I began my career in the private sector. Wanting to be a
true rocket scientist, I was engaged in the engineering design
and business planning of efforts to privatize and commercialize
space launch vehicles. However, I quickly learned that the
success of such goals can often depend on the Government
establishing the right policies and conditions for enabling
private industry to succeed. So, I decided to join the
Government in 1991.
At the Office of Management of Budget, I had the honor of
serving under three different Presidents, overseeing a roughly
$50 billion budget of science and technology across multiple
Federal agencies, and supporting the development of major
interagency initiatives, such as high performance computing and
nanotechnology research. I learned to appreciate the importance
of establishing clear policies, setting budget priorities,
ensuring the agencies have the wherewithal to execute as
planned, and working closely with the Congress throughout.
After OMB, I chose to work within agencies in pursuit of
major national goals, namely, space exploration and national
security. At NASA, I was Deputy CFO and Comptroller,
responsible for directing the formulation and evaluation of the
agency's $16 billion annual budget, developing the agency's
strategic plan, conducting independent cost analyses for major
programs, and managing first-in-government financial reforms to
improve program performance.
At the CIA, I am working within its Science and Technology
Directorate and am responsible for devising innovative
technical collection systems, strengthening advance research
capabilities within the Agency, and resolving high-priority
issues with other agencies in the intelligence community.
These experiences have taught me the criticality of
achieving success through strong agency leadership, effective
communications, capable workforce and institutions, sound
financial systems and acquisition management, and the close
partnership with private industry and academia.
If confirmed, I plan to apply my experience and excitement
for meeting national challenges as the CFO at the DOE. The
Department stands at the nexus of economic, national security,
and environmental goals that are at the top of the Nation's
goals. I am anxious to roll up my sleeves and join a team that
is focused on getting the job done.
The Department has an impressive array of laboratories,
workforce, major programs, and unique industry and academic
partners. Indeed, it is an agency addressing national goals of
paramount importance, as ambitious as landing an astronaut on
the moon.
If confirmed, I will work hard as the CFO to support the
mission priorities of the Department. I look forward to working
closely with the committee and the Congress and will be fully
available to address the critical issues important to you.
It is indeed a high honor and privilege to be considered
for this position and have the opportunity to so serve our
Nation.
Mr. Chairman, this concludes my prepared statement. I would
be glad to answer the committee's questions at this time.
[The prepared statement of Mr. Isakowitz follows:]
Prepared Statement of Steven J. Isakowitz, Nominee to be Chief
Financial Officer, Department of Energy
Mr. Chairman, Senator Domenici, and Members of the Committee, I am
sincerely honored to appear before you today as the President's nominee
to serve as the Chief Financial Officer at the Department of Energy. I
am fully aware of the challenges that face the person who holds this
position, and I am deeply appreciative of the President's and Secretary
Bodman's confidence in my abilities to meet those challenges. I also
want to thank the Committee for holding this hearing and considering my
nomination.
I would like to introduce my wife Monica who has been a wonderful
companion in our 20 years of marriage and deserves my endless devotion
and thanks for taking care of our family and supporting me throughout
my career. Also with us are three of our four children: Jennifer a
junior at Chantilly High School, Rachel a seventh grader at Franklin
Middle School, and Sophie a sixth grader at Oak Hill Elementary. I also
want to recognize my son Matthew who could not be here today because of
his obligations as a sophomore at Princeton University. Monica and I
are very proud of all four of our children.
I would also like to recognize my parents for being a shining
example of hard work, honesty, and integrity. My mother and recently
deceased father are both survivors of the Holocaust. Indeed, their
example has ingrained in me the importance of freedom, justice, and
tolerance, and the desire to leave our children a better world. I share
those principals and am thankful and honored to serve a government that
does too.
My career ambitions were instilled in me at an early age. During my
childhood, I was inspired by the Apollo program as I watched in
amazement as this nation, galvanized by a President's vision, landed a
man on the moon. I was compelled by the notion of a nation undertaking
something that appeared impossible, yet by the ingenuity and
partnership of government and industry, made it happen. Starting with
literally nothing, hardly the ability to orbit a satellite, we achieved
the national goal of stepping on the moon. Consequently, throughout my
career, I have been driven and motivated by the desire to fulfill large
national goals. In particular, I am drawn to big goals that require the
innovative application of science and technology to get it done.
Indeed, after receiving engineering degrees from the Massachusetts
Institute of Technology, my career has spanned 23 years across a
variety of positions both technical and financial in the public and
private sectors in the pursuit of major national goals.
I began my career in the private sector. Wanting to be a true
rocket scientist, I was engaged in the engineering design and business
planning of efforts to privatize and commercialize space launch
vehicles as called for by President Reagan after the failure of Space
Shuttle Challenger. However, I quickly learned that the success of such
goals can often depend on the government establishing the right
policies and conditions for enabling private industry to succeed. So, I
decided to join the government in 1991 and held positions that would
enable me to initiate and support major undertakings of national
importance, applying my interest and skills in engineering, project
management and business planning.
At the Office of Management of Budget, I had the honor of serving
under three different Presidents, overseeing a roughly $50 billion
budget of science and technology across multiple Federal agencies, and
supporting the development of major interagency initiatives such as
high performance computing and nanotechnology research. I worked with
various agencies to establish appropriate funding levels and monitored
their financial and technical performance in getting the job done. I
learned to appreciate the importance of establishing clear policies,
setting budget priorities, ensuring the agencies have the wherewithal
to execute as planned, and working closely with the Congress
throughout.
After OMB, I chose to work within agencies in pursuit of major
national goals, namely, space exploration and national security. At the
National Aeronautics and Space Administration, I was the Deputy Chief
Financial Officer and Comptroller responsible for directing the
formulation and evaluation of the agency's $16 billion annual budget,
developing the agency's strategic plan, conducting independent cost
analyses for major programs, and managing first-in-government financial
reforms to improve program performance. At the Central Intelligence
Agency, I am working within its Science & Technology Directorate and am
responsible for devising innovative technical collection systems for
use against challenging intelligence targets, strengthening advanced
research capabilities within the Agency, and resolving high priority
issues with other agencies in the intelligence community. These
experiences have taught me the criticality of achieving success through
strong agency leadership, effective communications, capable workforce
and institutions, sound financial systems and acquisition management,
and the close partnership with private industry and academia.
If confirmed, I plan to apply my experience and excitement for
meeting national challenges as the Chief Financial Officer at the
Department of Energy. The Department stands at the nexus of economic,
national security and environmental goals that are at the top of the
nation's agenda. I am anxious to roll up my sleeves and join a team
that is focused on getting the job done. The Department has an
impressive array of world class labs, highly specialized workforce
skills, major multi-year programs, and unique industry and academic
partners. Indeed, it is an agency addressing national goals of
paramount importance, as ambitious as landing an astronaut on the moon.
If confirmed, I will work hard as the CFO to support the mission
priorities of the Department. I look forward to working closely with
the Committee and the Congress and will be fully available to address
the critical issues important to you.
It is indeed a high honor and privilege to be considered for this
position and have the opportunity to so serve our nation.
Mr. Chairman, this concludes my prepared statement. I would be glad
to answer the committee's questions at this time.
The Chairman. Thank you very much. Before we start
questions, let me just call on Senator Domenici for any opening
statement that he would have at this point.
STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR
FROM NEW MEXICO
Senator Domenici. Thank you very much. I have a very brief
statement. Good morning to you and welcome to the committee.
Mr. Isakowitz. Thank you.
Senator Domenici. First, I want to thank the chairman,
Senator Bingaman, for promptly holding this hearing for the
Chief Financial Officer position at the Department of Energy.
The position has been open for some months and it is difficult
for the Department to continue without a permanent appointment.
Mr. Isakowitz, I want to thank you for your willingness to
understand this responsibility. The Department's program and
facilities are critical to almost all of the energy policy that
we develop here in Congress. New management of the financial
part of the Department's resources will be crucial to
successful implementation of the energy policy that we craft. I
welcome your testimony today, and hope that we can quickly move
your nomination to the floor of the Senate.
Thank you, Mr. Chairman.
And thank you, sir.
Mr. Isakowitz. Thank you.
The Chairman. Thank you.
Let me just start with a couple of questions. One issue
that we have come back to many times here in the committee in
the last couple of months is this issue of the loan guarantee
program that was in our Energy Policy Act of 2005. The
Department's been slow in getting that program started. I think
many on the committee have expressed their frustration about
that.
The Government Accountability Office has also voiced
concerns that the Department has not done a great deal to put
in place the policies and procedures and mechanisms needed to
ensure that the financial risks involved in this loan guarantee
program are well managed.
If you're confirmed as the Chief Financial Officer for the
Department, what would you believe your role might be in
ensuring both that the program get up and running, but also
that the financial risks are well managed in that program?
Mr. Isakowitz. Thank you, Mr. Chairman.
Indeed, over the last couple weeks I've had a chance to
meet with members of this committee and their staff and I don't
think there's been a single meeting I have gone to where this
issue of the loan guarantee hasn't been raised as a top
priority of the committee.
So, given that it clearly is important to the committee,
given that I see it's important as part of the Energy Policy
Act of 2005, it's clearly going to be a priority of mine, if
confirmed, for CFO for the Department.
Once I get there, clearly, this will be something that I
know that the Department has started to put in place those
procedures, has begun to request the money to stand up an
office. I understand that the CFO will have a key role in that
regard. I'm not at the Department yet, but certainly, once I
get there, I will try to--quick as I can get up to speed and
certainly be happy to come back to you, your office, and have
discussions on how best to go forward.
The Chairman. Thank you for that answer.
One of the recent jobs you had is with NASA. You were the
Deputy Chief Financial Officer and Comptroller from 2002 to
2005, early 2005.
The Government Accountability Office has been very critical
of NASA's financial management system since, at least, 1990.
GAO's concerns arose long before you arrived at NASA and they
continue today after you've left NASA. But, could you elaborate
for the committee some of the steps that you took to try to
address GAO's concerns and improve the financial management, at
NASA, while you were the Deputy CFO?
Mr. Isakowitz. Yes. Thank you. As you point out, financial
management has been, not only a challenge, actually at NASA,
but other major agencies. Particularly agencies that are like
NASA, having a lot of contract activity. Financial management
systems are critical when you're trying to operate,
particularly multiple laboratories.
Contract management is an issue that has been raised by the
Government Accountability Office, and faces Departments like
Defense, Energy, and NASA. And, at NASA, we were one of the
first in the Federal Government to introduce a new financial
management system. As has been the case, whether it's in
private industry or in government, the introduction of these
new systems can often be disruptive at first, but ultimately
they provide high dividends.
In the case of NASA, when I got there in 2002, we had 10
NASA centers, each operating their own financial management
system. And indeed, at the time, the auditors thought that
things were okay until we brought on-line this new financial
management system that all centers were required to use. And as
a result, we started to uncover a lot of problems across the
board, not only with the system itself, but some of the ways
the accounting was done at the various centers.
So, in the 3\1/2\ years that I was there, we were able to
uncover a number of the problems, working with the auditors. We
did get qualified opinions on audit statements, but at least we
were able to address issues that heretofore, actually, some did
not even know existed. And, I felt that that was a major step
forward.
Also, in that regard, the financial management system has
been critical for tracking the performance of contractors. And,
knowing that it would take time to get the financial management
system up, we actually had gone forward, while I was
Comptroller, and began to institute changes that would put more
rigor and discipline on how we provide the oversight of
contracts.
For example, when I got there we had a major problem on the
Space Station program. It was about a $4.5 billion cost overrun
and we made it one of our top priorities. By the time we had
left, we had significantly reduced the size of that overrun and
even as of today, the program is on much more sound financial
footing just based on the interim capabilities we were putting
in place.
The Chairman. Thank you very much. My time's up.
Senator Domenici.
Senator Domenici. Well, Senator, I think, since we're on
the subject, maybe we will stay on it just a while longer.
I can't imagine how a department can get a mission charge,
like it has in the new bill that created the Energy Policy Act.
I don't understand how it can--and not have a position and an
office to fill this mandate that's there, and part of its
operation. It seems to me that it's almost negligence on the
part of somebody not to do it.
I don't understand where--where does it come from? Have you
had enough time to look at what's going on and determine why we
can't get it established after all this time? We will soon be
in the third year. There are loan guarantee offices throughout
government, aren't there? Am I mistaken, I thought there have
been loan guarantees at agriculture for a long, long time? They
never closed them down, one Administration to another. They
just kept them, right? To my knowledge, I don't understand
what's going on. Do you have an explanation for what's going
on, or is it nobody wants to squeal on anybody else, or what's
the story?
Mr. Isakowitz. Senator, I appreciate the importance and
urgency you're putting behind the loan guarantee program. I'm
not at the Department yet. As soon as I get there, I will have
the opportunity to find out, you know, what are the obstacles
and what are the issues before it.
Senator Domenici. I understand that's not a great question
to put to somebody who hasn't been approved yet and will soon
be joining them. It would be better to answer that question in
a way in which we would get your answer, but they would not,
but that can't happen.
Actually, I think there's also been some arguing between
the appropriators on the House side and here as to where they
should--House arguing that they should not let the money, let
any money out of the appropriation programs to take care of
this. Without that, obviously you don't have the--the way that
the program works is with setting it up with an operating
budget and the like.
You don't, without answering with specificity, just
generally, if charged with setting up an office for this
purpose and with this mission you accede, you have no reason to
be against doing that. Is that a fair statement?
Mr. Isakowitz. Yes sir, that's a fair statement.
Senator Domenici. All right. I have no further questions,
maybe one.
Do you know how long it might, under normal circumstances,
take to get an office going and open so that those out in
hinderland trying to establish this kind of activity know that
we have one up and running, ready to go? Do you have any
feelings on that?
Mr. Isakowitz. The short answer is, no. I do know that the
Department has asked for funding to, in fact, establish an
office. And, it was my understanding that when USDA also had
created their loan guarantee program, it took them 3 years to
stand it up.
Having said that, I'm sure the circumstances vary by
department and they are unique to departments, so I can't speak
to how long it would take for this Department until I get
there.
Senator Domenici. Good luck.
The Chairman. Senator Thomas.
Senator Thomas. Thank you.
You mentioned in your statement that you would be involved
in making independent cost analysis of various kinds of things.
DOE has seen increasing costs of a 50 to 60 percent FutureGen.
Now these new costs will split, of course, between the Agency
and others. What role would you have as CFO in projecting these
costs and do you believe we could do a better job of managing
these kinds of costs?
Mr. Isakowitz. Yes, if confirmed, this is one of the things
I will, personally, have a strong interest in, is to better
establish what my role will be in exactly that. In the case of
NASA, it was a high priority of mine, because cost growth is
not a unique problem to the Department of Energy. You see it at
all the major departments that are, particularly, trying to
build one of a kind, high-risk hardware and new systems.
At NASA, what we had tried to put in place--practices--best
practices, that would empower the program management to kind of
make the decisions so they can move expeditiously, make sure
that we had milestone reviews, and acquisition strategies, so
at the appropriate points in time we could review the status of
a program.
And, particularly, what helped us is a--what we looked at
in the case of NASA--we found that usually it's at the front
end of programs that the cost growth occurs. That is usually
when you get past about 20 percent in spending on your program,
the program tends to settle down. So, the key is understanding
up front where your risks are, to address those risks, to
identify early, so that the program manager and contractors
understand, and to establish decision gates along the way to
make sure that they're meeting the promises that are made, and
then you approve of them at the appropriate points.
It's not a unique problem, and it's a hard one to fix, but,
I think, we've learned a lot in the Federal Government in the
last few decades on things that work well, and not so well, and
I hope to be able to apply some of those best practices.
Senator Thomas. That's good.
What is the CFO's responsibility and role? I mean, is it
just simply allocating and overseeing the expenditures that are
approved by someone else, or is there a role in ensuring and
having ways to ensure that the programs are done as efficiently
from a financial standpoint as possible?
Mr. Isakowitz. You raise an excellent point, Senator. It's
much more than just tracking where the dollars go. It's
ensuring that the programs meet the objectives that they've set
before them and the promises made to the Congress.
One of the key responsibilities of a CFO is to track the
performance of programs, in fact, to report them to the
Congress as part of the budget submission that is sent up every
February.
I personally see it as a very high priority of mine to
understand the programs and to provide independent counsel to
the Deputy Secretary and the Secretary on those issues, if
confirmed.
Senator Thomas. Well, of course, it's a little difficult
when you're just entering into it, where we've been dealing
with some of these issues. But, the increasing cost thing that
I mentioned on FutureGen is very much a concern and Global
Nuclear Energy Partnership, as well. Now, I don't believe these
are bad programs. The clean coal technology and recycling
nuclear waste are essential components of that, but we need to
know what we're getting ourselves into. And, are there ways to
ensure that the Global Nuclear Partnership does not balloon in
cost, as FutureGen has?
Mr. Isakowitz. I'm not sure that we could ever provide
guarantees for programs that are of a risky nature, such as a
GNEP and some of the other significant R&D activities at the
Department.
But, I do think that there's practices that you can put in
place to identify risks up front, to bring in people who have
outside expertise to look at programs, to help you identify
where those risks are, and to set up, as I said earlier, those
milestones to ensure that those risks are addressed up front so
that before you give a final contract and just let things move
out--only to find out halfway through that you've got a big
problem--we try to identify those problems as early as
possible.
And problems will occur, but if you can catch them at the
front end it usually costs a lot less to fix it, then when
you're halfway through these activities.
Senator Thomas. Well, that's good. I hope we do remember
that in the management of government programs, that over here
there's the decision makers with regard to where we're going on
policy. And, then there's somebody overseeing how that is
implemented in terms of the finances. And, I think that's a
very key issue.
We, of course, are faced with something of a dilemma, in
terms of looking out in the future for alternative sources of
energy, which is a good idea. On the other hand, understanding
that that--those are a number of years away and that we have to
provide for incentives, and loan guarantees, and other things
for the things that we do know how to do--like clean coal, and
nuclear power, and all those things in the mean time.
In any event, welcome to the area of interest and
difficulties. But really, I think, the opportunity to do a
great deal for our country and for our people to provide long-
term energy opportunities and at the same time, provide the
energy sources that we need to keep our economy going. So, we
look forward to working with you. Thank you.
Mr. Isakowitz. Thank you.
Senator Thomas. Thank you, Mr. Chairman.
The Chairman. Thank you very much. There may be some
additional questions that members of the committee want to have
answered and we will allow that. Such additional questions may
be filed with the committee staff up until 5 o'clock this
evening. So, if any such questions are forthcoming, we would
hope you could respond to those quickly and then we would hope
we could act quickly on your nomination.
Thank you very much for being here, and we appreciate the
Deputy Secretary being here with you.
And, we will conclude the hearing with that.
Thank you.
Mr. Isakowitz. Thank you very much.
[Whereupon, at 10:35 a.m., the hearing was adjourned.]
APPENDIX
Responses to Additional Questions
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Response of Mr. Isakowitz to Question From Senator Bingaman
Question. The Department of Energy is the largest civilian
contracting agency in the Federal Government. It spends 90 percent of
its annual budget on contracts to operate its facilities and carry out
its many missions. The Government Accountability Office has reported
that the Department takes much longer than anticipated to award most
contracts, and that at least some of the delays are avoidable. GAO
recommended that the Department develop more accurate and comprehensive
performance measures for awarding contracts. Are you familiar with the
GAO's recommendations and do you agree that these or similar steps need
to be taken?
Answer. A GAO report issued on June 30, 2006, entitled ``DOE
Contracting: Better Performance Measures and Management Needed to
Address Delays in Awarding Contracts,'' underscores the importance in
planning and carrying out the contract award process and awarding
contracts in a timely manner, since delays in awarding contracts could
increase costs both to DOE and to companies competing for DOE work. The
report cites a sampled set of competitive contracts and states that
delays in some could have been avoided.
I share the GAO concern that Federal agencies, including DOE, need
to be as accurate as reasonably possible in projecting dates for
contract awards. Such dates are important to contractors in forming
their teams and in maintaining the availability of critical personnel
until the contract award date. As for DOE's performance on this matter,
if confirmed, I will work with DOE's Office of Management, which is the
DOE office primarily responsible for contract management, and seek to
better understand the Department's metrics for assessing timeliness and
the results to date. It is certainly in the interest of the CFO that
resources be used as efficiently as possible by both the government and
the contractor.
Responses of Mr. Isakowitz to Questions From Senator Wyden
Question 1. Contract management: Both at OMB and as the Deputy CFO
at NASA you have been in key position to shape how NASA operates. I am
not going to hold you responsible for everything that's happened at
NASA for the past 17 years since you started at OMB, but I also can't
ignore the fact that NASA is a very troubled agency, a dysfunctional
agency. NASA has been on GAO's ``High Risk'' list since 1990. And
that's been on your watch. DOE has also been on that list since 1990,
for much the same reason--its inability to manage its contractors. Both
agencies are completely dependent on contractors to carry out their
missions and both are unable to manage them effectively. What
assurances can you provide me that you can turn things around at DOE in
terms of contract and contractor management when NASA's record is so
poor and much of that poor management occurred on your watch?
Answer. I fully agree that contract management is a critical
function of Federal agencies. Unfortunately, contract management issues
are not new to the Federal government, as three of the most procurement
intensive agencies--Department of Defense, NASA, and DOE--have all been
cited by GAO as having contract management as a high risk. Although
contract management was not my direct responsibility during my time at
OMB and NASA, I worked very closely with OMB's Office of Federal
Procurement Policy and NASA's Office of Procurement to address the
issues. Similarly, if confirmed as CFO of DOE, I look forward to
working with DOE's Office of Management to improve the performance of
contract management.
GAO has cited contract management as a high risk issue for NASA
since 1990, and I was at NASA from 2002-2005. GAO acknowledges in its
more recent report that in the last few years progress has been made.
This progress is a result of, among other things, instituting a new
financial management system that began during my time at NASA. The new
financial management system, although with its own challenges, has been
a pathfinder for many other federal agencies that seek to modernize
their business operations. The NASA core financial system consolidated
ten different financial systems into one, an ambitious undertaking.
During my tenure at NASA, we were in the process of deploying a new
contract management module to be added to the core financial system to
improve program management and contractor oversight.
While the module was being developed, I led initiation of improved
cost estimation procedures and tools, including creation of a new cost
estimation cadre, new procedures for conducting independent cost
analysis, and information technology tools for monitoring development
projects. With these and other changes to include earned-value
management and cost-risk analysis, we successfully reduced earlier
projected cost overruns on the International Space Station program, and
instituted changes that kept the program within budget. Moreover, my
team received a White House award for being the first in the Federal
government for getting a ``green'' rating on the President's Management
Agenda for budget performance integration, which is vital for linking
resource decisions to program performance. Contract management is a
major challenge for the Federal government, and I look forward to
having the opportunity, if confirmed, to help address the issue at DOE.
Question 2. Energy expertise: Energy made it into the President's
State of the Union speech both this year and last year, but I couldn't
find even a single reference to energy in your resume. Basic research,
yes. Energy, no. Not once. Yet, you're being nominated as the CFO for
the Energy Department. Oil is almost $60 a barrel. There is a
compelling need to address climate change. Have effective energy
programs is not a luxury, it's a necessity. What assurance can you give
me that you have a working knowledge of industry? How do I know that
programs like the new loan guarantee program called for by EPACT 2005
are not going to end up soaking the taxpayers?
Answer. I believe that I have the qualifications to be an effective
Chief Financial Officer at the Department of Energy.
First, I have a solid technical background having graduated
from MIT with engineering degrees, and worked in both the
private and public sector on major development projects,
similar to DOE in terms of being high-risk and one-of-a-kind.
Second, I can bring to DOE a diverse background and fresh
perspective on major management issues such as financial
operations, contract management, program evaluation, and
project management. Having a different background from most at
DOE may help avoid groupthink on issues and allow me to raise
important questions that may otherwise be inadvertently omitted
during decision meetings.
Third, I am a quick learner, but I also know that it is
often more important to find experts in various subject matters
to help resolve issues than to try to do it alone. I look
forward to reaching out to the expertise within DOE as well as
those outside the Department to help address the tough issues.
Lastly, my background applies to the type of issues that I
would face at DOE. For example, at NASA I dealt with issues
regarding major national labs, a highly technical workforce,
complex development projects, and large procurement activities.
At OMB, I worked on large interagency initiatives such as high
performance computing and nanotechnology as well as policies to
enhance fundamental research. In the private sector, I worked
on commercial projects and development activities that depended
on clear Federal policies and regulations.
I believe these experiences have direct relevance to DOE and will
help prepare me for my responsibilities should I be confirmed as CFO at
DOE.
I also understand that it is important that good procedures and
practices be put in place for programs to succeed, such as the DOE loan
guarantee program. The Federal government has a mixed history of
success on such programs and there are many lessons learned to be
applied. I look forward to working with the Committee and Congress and
other key players to ensure that the program will ultimately prove
successful for the U.S. taxpayer.
budget issues
Question 3a. For the second year in a row, the DOE requires BPA
customers to make extra payments to the Treasury to reduce the Federal
debt. These aren't appropriated dollars. These are electric customers'
dollars. What assurance can you give me that these budget tricks are
going to end?
Answer. If confirmed to be the CFO at DOE, I will place a high
priority on the integrity, accuracy, and completeness of the
Department's budget submission to the Congress and the need to be
honest and forthright. I appreciate the importance of the Power
Marketing Administrations and look forward to working with the Congress
on matters affecting the PMAs' and their customers.
Question 3b. For the second year in a row, the DOE budget has
zeroed out funding for two very promising energy technologies--
geothermal and the next generation of hydroelectric technologies--
tidal, wave, and ocean currents. MIT, which you attended, came out with
a report saying we could have 100,000 megawatts of electricity--100
nuclear power plants worth--geothermal in the next 50 years if
geothermal received adequate funding over the next 10 to 15 years. But
the Department zeroed out the program. EPRI, in a 2005 study, said
developing ocean wave energy technology in the U.S. could essentially
equal the output of our conventional hydroelectric capacity, but DOE
asked for zero for hydro technologies. As CFO what assurance can you
give me that there is going to be a more objective, more balanced, more
transparent process for deciding what energy research is funded? And
that we are going to see funding for technologies like geothermal and
ocean energy?
Answer. DOE certainly has an important role in shaping our nation's
energy policy and investing in renewable energy technologies. Should I
be confirmed as CFO, I will have a strong interest in a budget process
that will be clear, credible and forthright when deciding and
describing how decisions are made in providing the best possible
portfolio of research programs with the limited funds we have to work
with. As CFO, I work with the DOE leadership team to help articulate
why the promising energy technologies are important, relevant, and
appropriate for Federal investment; how funds will be allocated to
ensure quality; and how programs will be monitored for performance. I
will examine and learn more about promising energy technologies such as
geothermal and ocean energy and the possible role for DOE.
Question 4. NASA Climate change: As you know, there has been a
great deal of concern that NASA and White House officials have tried to
muzzle NASA's scientists working on climate change and climate research
such as Dr. James Hansen. What role, if any, did you play in overseeing
NASA's climate research activities since 2000? What role, if any, did
you play in overseeing the scientific integrity and independence of
NASA's climate research since 2000?
Answer. Since 2000, I was involved in resource issues associated
with NASA's earth science program while at the Office of Management and
Budget (OMB) and NASA.
At OMB, I was the Branch Chief for Science and Space
Programs through 2002 and addressed budget issues associated
with NASA's overall budget, including specific programs such as
earth science.
At NASA, I was the Deputy Chief Financial Officer and
Comptroller and the Deputy Associate Administrator for
Exploration from 2002 to 2005. When I was NASA Deputy CFO and
Comptroller, I was responsible for the formulation and planning
of the agency's budget, including earth science. When I was
NASA's Deputy Associate Administrator for Exploration, I had no
involvement with earth science.
For both my positions at OMB and at NASA, I had no direct role in
overseeing the scientific integrity and independence of NASA's climate
research.