Prepared testimony of Robert E. Coughlan before the Subcommittee on My name is Robert E. Coughlan. I am appearing here today in response to Senator Cohen's July 8, 1983, letter requesting that I testify in my capacity as a former consultant to the United States Synthetic Fuels Corporation. In that connection, I am pleased to note for the record that I have the express written permission of the President of the Corporation to disclose to the Subcommittee and its staff Corporation information other than trade secrets or other business information requested to be maintained as confidential by the sponsors of projects seeking financial assistance from the Corporation. The July 8th letter requesting my appearance asked that I address the 1. The purpose(s) for which I was hired as a consultant 2. My findings concerning the adequacy of communications 3. My views on the effectiveness of the management of 4. My recommendations for improvement of the communica- I will be as responsive as I can to that request. However, the responses In response to item 1 - the purpose (s) for which I was hired by the Synthetic Fuels Corporation: ་་ I initially entered into an intermittent consulting relationship 11 between and among the President, the Chairman, and other I terminated my consulting relationship with the Corporation - In response to item 2 my findings concerning the adequacy of communications within the Corporation: My assignments in such regard were limited to (1) an assessment of information flow as it related to eventual project monitoring, (2) an analysis of information requirements to be addressed by the Corporation's information services functions, (3) a review of communications concerns of the Board of Directors, and (4) such ad hoc discussions of the Corporation's existing or proposed communications activities as were ancillary to the three tasks just cited. My findings in each instance were thoroughly documented in the various materials which describe the Project Control System (a misnomer, in fact, since the system is detailed on the basis of project monitoring, not control); in a report providing an "Overview of Information Management;" and in a memorandum on "Corporate Communications," which I understand the Subcommittee has already received. In all cases findings were accompanied by recommendations for any actions that were considered useful measures for the improvement of communications. In response to item 3 my views on the effectiveness of the management of the Corporation: My earlier description of the services I performed for the USSFC made it clear, I hope, that I was not retained to perform any evaluations of management performance. My ongoing responsibility was concerned with design of a system for project monitoring and reporting. Such additional tasks as I was assigned related to information management and, to a limited degree, communications. In response to item 4 my recommendations for improvement of the communications or the management of the Corporation: - Such recommendations as I have regarding communications and information management have been detailed in the documents to which I have referred in my response to the second question. I suggest they are too involved to recount in this statement except to note that, in most respects, they relate to the flow of information. In closing, I would like to offer two comments as one who has been directly involved for some time in this Nation's attempts to provide for its energy future. In that regard, there is no question in my mind that we must develop alternative energy resources, both renewables and others, and that synthetic fuels must be a part of that scenario provided that environmental require - ments are met and that the States have the final determination as to the disposition and processing of the feedstock resources within their borders. There also is no question in my mind that the directors, officers, and staff of the United States Synthetic Fuels Corporation are providing a vital service in their efforts to implement the essential requirements of the Energy Security Act. Mr. Chairman, that concludes my prepared statement. I will be pleased to answer any questions you may wish to ask. Thank you. Senator COHEN. Our final witness today is Kenric Lessey, Inspector General of the U.S. Synthetic Fuels Corporation. [Witness was sworn.] TESTIMONY OF S. KENRIC LESSEY, Jr., INSPECTOR GENERAL, U.S. SYNTHETIC FUELS CORPORATION, ACCOMPANIED BY ROBERT GAMBINO, DEPUTY INSPECTOR GENERAL; RUSSELL MILLER, DIRECTOR OF INVESTIGATIONS AND INSPECTIONS; AND JOHN J. TRANT, DIRECTOR OF INTERNAL AUDIT, OFFICE OF INSPECTOR GENERAL Mr. LESSEY. Senator, if you would like me to submit the statement for the record, there are a couple of things I might paraphrase, and I will proceed. Senator COHEN. It would be very helpful. Mr. LESSEY. First of all, I would like to compliment and thank you for the courtesy and professionalism of your staff. I have seen the opposite in action, so I am very sensitive to this. And for that reason I am especially appreciative and have a great amount of respect for it. Second, in view of Senator Bingaman's question-and it looks as if I just lost my summer vacation-I might paraphrase the first part of my statement because I was going to say something to you in that connection anyhow. There are three authorities by which I would initiate an audit, investigation, or report of some kind: First, under the direction of the seven-man Board of Directors; second, I have authority to make my own initiatives, and no employee, officer, or Board member is allowed to prohibit me or stop me from doing that. Then, under paragraph h of my section of the statute, which is 122 of the act, by direction of the Congress. I intended to say to you today that my office is at your service, and we would be glad to help in any way that we can. In that connection, your staff indicated that you would probably be interested in my having with me today those of my staff who were directly involved in preparing the reports in which you had a particular interest and which have been filed for the record.1 I have a small staff, intentionally so, because I like to practice what I preach and save the taxpayers' money. They are all very dedicated. Most of us have a national security background and are thoroughly dedicated to the mission and to the success of the U.S. Synthetic Fuels Corporation. I would like to introduce them to you now. Mr. Robert Gambino, the Deputy Inspector General; Mr. Russell Miller, Director of Investigations and Inspections; and Mr. John Trant, who is the Director of Internal Audit. Those gentlemen, in addition to myself, were the gentlemen responsible for preparing the reports in which you expressed an interest. Senator COHEN. Let me say, as long as we are passing bouquets, that Susan Collins and Mary Gerwin, who were chiefly responsible for gathering the information, also hold not only you but your associates in very high regard. They requested information, and I must say for those who were here from the Synfuels Corporation as well, 1See pp. 213-227, 237-251. that we got the information requested on time and actually ahead of time, which is a very unusual thing to occur up here on Capitol Hill. Usually, when we are dealing with our own agencies, we might get it the day of the hearing, and maybe during the course of the hearing, but we rarely get it on time. So that was to your credit. Mr. LESSEY. Thank you, sir. Senator COHEN. Mr. Lessey, in your report on that industry survey which you conducted, you stated there was "almost"-I am quoting "complete agreement among respondents that the decisionmaking process at the SFC was too slow." Could you perhaps elaborate on why the respondents characterized the Corporation's work in that way? Mr. LESSEY. I think one of the first reasons is one that I outlined in my opening statement, and I think it's also appropriate at this time, sir, in view of the confusion in the earlier testimony today about the time schedule, that I should specify that the period covered by the report was essentially from December 1980 to December 1982, the period of the first and second solicitations. One of the purposes of doing the report was to look to see how industry viewed the way the Corporation had done its business in that time period, so as to benefit and learn from it as we moved ahead into the third and other types of solicitations. Senator COHEN. I was aware that that was the time frame. Even though the report that I have, your memo- Mr. LESSEY. The report is dated April because the actual work on it was done in January, February, and March. Senator COHEN. But your report dealing with the industry has to be placed in the chronological context of the problems the Board was having among itself or within itself in terms of how its assessment was. So you have to place your report also within the context of Mr. Coughlan's report as well. Mr. LESSEY. Absolutely. But I did want to note that, because it was historical in nature and went back to the earlier period, part of that caused the slowness and the criticisms of delay or the difficulty of doing business. It goes back to the fact that we had the early management, the transition period of management and the slow start, and definitely a learning curve as the corporation moved ahead with its business. Senator COHEN. I might point out just for the record again in terms of timeframe, that the Committee on Appropriations, the Subcommittee on Appropriations for the Interior, also filed its report in December of 1982, reflecting similar types of concerns or criticisms about the Corporation. So it is all within the very same timeframe. And we are not dealing from January on. Mr. LESSEY. We were aware of that report, and a sense of coordination was one of the reasons we were interested in doing Project Indigo, because of that. Senator COHEN. All right. Tell me again about the reasons why you feel the Corporation was characterized in the way of moving too slow. Because of the delay in confirmation, is that one of the reasons? Mr. LESSEY. Yes, sir, because the act was passed on June 30, 1980. The first employee of the Corporation wasn't hired until No vember 1980. You had the early management started. The Board, of course, left January 20, 1981. Mr. Noble wasn't confirmed, I believe, until May 1981; the other Directors making a quorum not until, I think, September 28, 1981. Then came the formation of the new management as they moved along. Senator COHEN. But essentially, that management was the same as the project's transition team? Mr. LESSEY. No. By management, I mean the people who were involved in the projects office, T&E, the engineers, and the financial analysts and so forth, the middle management level of the Corporation. Senator COHEN. But in terms of the management at the top level, the administrative level, that was essentially the same from the time of November 1980. You had the same personnel involved from, let's say, November 1980 all the way through; namely, Mr. Noble, the Chairman, you had Mr. Schroeder, the President, you had others who were associated who came in at essentially the same time. Did they not? Mr. LESSEY. I see what you're saying. I would not have characterized it as management. I also wish to stress here that I did not come into office until May 1982. So perhaps I had better stay off ground with which I am not very familiar. Senator COHEN. In the survey you stated that the communications within the Corporation do not get high marks from industry representatives. Again, would you identify for me some of the specific observations that were cited by the respondents that you interviewed to come to this conclusion about not getting high marks? Why was that so? Mr. LESSEY. Maybe the best way to answer that is to say that the industry, which has been interested in doing business with the Corporation, is very perceptive of what goes on inside the corporation. So therefore, all of the things, I would say, which you have brought forth in your hearing today are things off which industry was well aware. My list might parallel what you have already elicited. But the industry was aware that there were problems of communication among Directors. There were also many comments of poor communications between staff and the Board, between staff and senior management, and between senior management and the Board. Senator COHEN. Was there also a perception on the part of industry that there were divided or mixed signals coming out of the administration with respect to synfuels? Mr. LESSEY. Yes, sir, there was. Senator COHEN. On the one hand you had the administration that was, let's say, lukewarm at best about synthetic fuels. You had a Director of OMB who is quite vocal in opposition to it. You had the Chairman of the Corporation who was on record, at least quoted in the papers that I read, as saying he recommended abolition of the Corporation, the man who was put in charge of it. Were those some of the factors that contributed? Mr. LESSEY. By the comments which we received, industry was reading the same newspapers which you were, yes, sir. Well aware of them. |