Page 9

Budget Highlights

Science &
Technology. Ideas
Creating Jobs,
Products and

Industries for
Tomorrow

Department has established an independent oversight committee to review the entire
technology development effort.

In FY 1999, $516.9 million is proposed to continue the Department's Privatization Initiative
begun in FY 1997 in pursuit of alternative financing mechanisms for several of the
Department's large scale environmental cleanup design and construction activities. Under the
privatization approach, many of the technical and performance risks are shifted to the private
contractor, providing greater incentives to complete projects on time and within budget. This
contracting approach also will bring private sector efficiencies, and new and improved
technology to the Department's cleanup program.

Science & Technology - Investing in Our National Scientific Infrastructure DOE is one of the Nation's top supporters of fundamental science research across a broad range of disciplines, including physics, materials science, chemistry, nuclear medicine and structural biology. Advances in science and technology have provided the long-term basis for economic growth, job creation, and improving our quality of life. Recognizing the critical importance of cutting edge science to an increasingly competitive world economy, the Administration is proposing a ten percent increase for the Office of Energy Research in

Science & Technology Funding

FY 1997 Approp. FY 1998 Approp. FY 1999 Request

FY 1999, $246.0 million over the FY 1998 appropriated level, for a total of $2,720 million in FY 1999.

This increase will allow DOE to: initiate a critical addition to U.S. scientific capability in neutron science; continue participation in world scientific activities such as the Large Hadron Collider (LHC) and magnetic fusion; maintain the level of access to our scientific user facilities; and build upon a small but important program in science education.

The Department's FY 1999 proposed request for science activities recognizes the need to bolster America's capabilities in neutron science. Neutron science is a national research priority because of its importance to fundamental discoveries and practical benefits. Chemical companies use neutrons to make better fibers, plastics, and highly efficient and selective catalysts; automobile manufacturers use the penetrating power of neutrons to understand how to cast and forge gears and brake discs to make cars run more efficiently and safely; airplane manufacturers use neutron radiography for nondestructive testing of defects in airplane wings, engines, and turbine blades; and drug companies use neutrons to design drugs with higher potency and fewer side effects. The U.S. currently lags far behind both Europe and Japan in neutron science, and their planned new neutron sources could increase their lead even further in materials science and related research.

The Administration proposes $157.0 million to begin construction of the Spallation Neutron Source, a critical state-of-the-art neutron source which will provide power about six times that of the highest currently available worldwide. The design will allow for significantly higher power at a later stage. This facility will greatly expand current research capabilities in physical, chemical, materials, biological, and medical sciences.

Other investments in the national scientific infrastructure include a $30.0 million increase to support U.S. participation in the Large Hadron Collider, bringing the total request to $65.0 million in FY 1999. On December 8, 1997, Secretary Peña signed, on behalf of the U.S. government, an important agreement with the European Laboratory for Particle Physics, known as CERN, to support a state-of-the-art accelerator, the Large Hadron Collider. Other

Budget Highlights

Page 10 nations that are not members of CERN—Japan, Canada, Russia, India and Israel—also have agreed to join this international scientific effort.

The U.S. investment, over eight years will total $531 million, of which the Department will contribute $450 million and the National Science Foundation will contribute $81 million. The Large Hadron Collider will enable about 25 percent of the U.S. experimental high energy physics community to take advantage of the unique research capabilities of the Collider when it becomes operational in 2005. The Collider will accelerate protons up to speeds just a fraction under the speed of light and smash them together at higher energies than any machine has ever before achieved. The results of the collisions will allow physicists to study in unprecedented detail and precision the structure of matter, and to shed new light on some of the mysteries of the origin of the universe, as well as increase the understanding of the fundamental building blocks of matter.

The Department also supports fundamental research in the biological and environmental
sciences allowing fundamental understanding of energy production and use. An exciting
example of the work these programs support is the recent accomplishment of the complete
genomic sequencing of several microbes of potentially great importance for the production of
energy, improving the understanding of the effect of radiation on living cells, and the cleanup
of radioactive wastes.

In August 1996, a research institute funded by the Department announced it had sequenced the
genome of a "methane producing microbe" that lives 8,000 feet deep in ocean thermal vents at
250 atmospheres (a pressure that would collapse ordinary submarines as if made of papier
mache) and close to the boiling point of water at sea level. This microbe lives without
sunlight, without oxygen and without organic carbon, but it produces methane, and proteins
that can bind heavy metals, which is why DOE is interested in it.

As a way to leverage the Department's scientific resources for future generations, the
Department's FY 1999 budget request proposes a small, but important investment in science
education that builds on educational initiatives already underway throughout the various
programs. The advantages are clear-in 1997, Secretary Peña announced a partnership with
the National Science Foundation to afford science teachers throughout the nation access to the
latest scientific information, training and instruction from the Department's nearly 30,000
scientists and engineers. In addition, the Secretary announced a partnership with the National
Science Teachers Association to recruit 1,000 scientists, engineers, and technicians from the
national laboratories and DOE's facilities by the year 2000 to volunteer as on-line mentors.
These mentors will answer teachers' questions on: basic science and technology; energy use
and efficiency; environmental studies; engineering, and computer science and math.
Our Continuing Commitment to Reengineering

The Department's FY 1999 request maintains the commitment, made in 1995, to downsize
DOE's federal infrastructure and reengineer administrative functions. This budget is based on
a federal staffing level at the end of FY 1999 of 10,613 (excluding FERC and the PMAs) –
more than 2,900 people (22 percent) below its high point in May 1995.

Similarly, the Department will continue in FY 1999 to bring greater efficiency to its Management and Operating (M&O) contracts which are the primary mechanism through which the Department manages the day to day operations of its facilities in 35 states. Beginning in FY 1993, the Department began an effort to reduce the size of its M&O infrastructure consistent with the general downsizing of the agency. This budget reflects staff reductions in M&O contractors of approximately 43,000 (29 percent) since 1992.

Page 11

Detailed Budget
Summary

Budget Highlights

The Department initiated its contract reform effort in 1994 to increase competition, move
toward performance-based contracting, and improve practices to reduce the cost of operating
the Department's facilities. Since 1994, the Department has competed eight M&O contracts.
At least four additional contracts will be competed in the next two years. Comparatively, only
six competitions were conducted in the previous 10 years prior to the initiative-three of
which had to be competed because the incumbent contractor ended work with the Department.
"Overhead" costs at 22 sites were reduced by more than $600 million between 1994 and
1996.

In addition to its reform measures for M&O contracts, the Department has streamlined its
procurement systems, reengineered acquisition processes, reduced lead times, and overhauled
regulatory burdens. The budget also reflects the Department's efforts to generally reduce
expenditures for support services. Since the initiation of the Strategic Alignment Initiative in
1995, the Department has reduced its obligations for support services by $429 million, more
than a one-third reduction in two years.

Moving Toward Performance-Based Budgeting

The Department's FY 1999 preliminary Performance Plan, which is included with these
highlights, is submitted in accordance with the Government Performance and Results Act
(GPRA). This law requires that federal budgets, beginning in FY 1999, be developed from a
strategic planning process and contain performance-based results for proposed spending
requests. The Performance Plan identifies specific measures of success which directly tie to
the requested program levels.

The Department of Energy has been using strategic planning and performance-based
budgeting since the beginning of the Clinton Administration, enabling this budget to begin
implementation of the provisions of GPRA to manage federal taxpayer dollars more
effectively. This budget was developed by linking the Department's strategic planning
process to performance-based planning and budget proposals. Decisions on how best to
invest taxpayer funds are based on which programs deliver the most beneficial results and
accomplish the President's strategic objectives. The Department will continue to work with
the Office of Management and Budget and the Congress to develop improved performance
measures for the FY 2000 budget submission.

The following sections, organized by appropriations, discuss in detail our proposed FY 1999 budget request which is a strong portfolio of investments for a better future. Up front, you will see both the funding request and the performance outcomes for the work proposed for funding in FY 1999. The FY 1999 budget request is prepared on a comparable basis. This means that the FY 1997 and FY 1998 amounts are adjusted to reflect the FY 1999 budget structure. The FY 1999 budget request and Performance Plan shown in the following pages implement our strategic objectives and provide the Congress and the American people with information on the real results we propose to achieve with this request.