Case Study 2: Divestiture of the National Institute for Petroleum and Energy Research

Background

The DOE National Institute for Petroleum and Energy Research (NIPER) is located in Bartlesville, Oklahoma. NIPER has been the Government’s principal petroleum research facility and has supported DOE’s fossil energy research and development efforts by providing project administration assistance to oil technology projects. The Secretary’s Strategic Alignment announcement in August 1995 required DOE to explore opportunities to privatize this research laboratory, with a target date of June 1996. At that time, BDM-Oklahoma, Inc., was the management and operating (M&O) contractor at the site.

The Effort

The objectives of the privatization include reducing DOE oil program costs, allowing for the disposition of the federally owned buildings (some of which are more than 50 years old) and real estate in Bartlesville, and minimizing the impact on the Bartlesville community. The privatization will be accomplished in two steps.

First, BDM-Oklahoma’s parent company is establishing a state-of-the-art commercial petroleum research facility—named BDM-Petroleum Technologies, a subsidiary of BDM-Federal—at another location in Bartlesville. The purpose of the new facility is to provide research on a competitive basis for a wide variety of private-sector and government customers.

Second, BDM-Oklahoma and DOE have modified their existing M&O contract to provide for the performance of specified oil research activities previously planned for performance under the M&O contract to be performed at the new commercial facility. The term of the new contract arrangement is the 2-year period that was remaining in the term of DOE’s contract with BDM-Oklahoma. During these two years, some BDM-Oklahoma personnel at the Federal site will be transferred to the new research center and become employees of BDM-Federal. BDM-Oklahoma personnel remaining at the Federal site will perform environmental restoration and other activities needed to allow DOE to declare the site “excess” and transfer it to the General Services Administration for disposal. Finally, upon expiration of the M&O contract, the new commercial research center is not guaranteed any work from DOE, but it is eligible to compete for new work from DOE.

As a result, DOE will privatize its oil research functions, dispose of unnecessary facilities and their associated costs, and minimize the cost of workforce transition and economic impact on the community.

Current Status

On August 1, 1996, Secretary O’Leary announced that the Department had reached an agreement with BDM-Oklahoma and BDM-Federal, leading to the privatization of the NIPER research, development, and demonstration activities. This action will save taxpayers an estimated $25 million over the next 5 years.

Lessons Learned

At DOE, there often are numerous offices, both in the field and at Headquarters, that have a stake in a proposed privatization action. This was the situation with NIPER. Due to a coordinated team effort, actions leading to the signing of the contract modification were completed on an accelerated basis. The early buy-in and active participation of all groups with a stake in the stated objectives expedited the process and led to a far better resolution.