The Worker and Community Transition Program was established to support the President's commitment to assist in the transition of the employees and facilities of the Department's nuclear weapons production complex to the post-Cold War era, and to oversee implementation of section 3161 of the National Defense Authorization Act for Fiscal Year (FY) 1993. Initially these responsibilities were performed by a Secretarial Task Force, but as the scope of the task expanded, Secretary O'Leary determined that the functions needed the increased focus and stability of a formal organization. This decision resulted in the establishment of the Office of Worker and Community Transition in September of 1994.

The core mission of the Office of Worker and Community Transition is to provide policy guidance and oversight of the Department's efforts to mitigate the effects of work force reductions on the workers and communities near Departmental facilities. Planning for the Department's future work force needs, maintaining open communications with affected parties, and providing economic development support to local communities affected by reductions are crucial tasks in accomplishing this mission.

In section 3161 of the National Defense Authorization Act for FY 1993, the Congress contemplated the need for work force restructuring in response to the cessation of nuclear weapons production and the subsequent reduction in our Defense Programs budget. The Department of Energy now faces the additional challenge of restructuring our contractor work force to achieve new missions, including cleaning-up the legacy of nuclear weapons production, more efficiently and cost-effectively. The Office of Worker and Community Transition intends to play a vital role in achieving the shared goal of the President and the Congress of reducing the Federal Government's cost of doing business. By working with those affected to achieve successful economic transitions, the Government can recognize cost savings while offering new opportunities to these workers and communities.

REQUIREMENTS AND OBJECTIVES OF SECTION 3161

Section 3161 provides the statutory mandate for the Department of Energy's work force restructuring activity. For this reason it is important to understand its objectives and requirements. Whenever there is a change in the work force at a defense nuclear facility, section 3161 requires that the Secretary of Energy: (1) develop a plan for restructuring the work force; (2) consult with the Secretary of Labor and appropriate representatives of local and national collective bargaining units of the affected employees, appropriate representatives of departments and agencies of State and local governments, appropriate representatives of State and local institutions of higher education, and appropriate representatives of community groups; (3) submit to Congress a work force restructuring plan for a defense nuclear facility within 90 days of the employees being notified of the work force changes; and (4) issue an annual update to a plan and submit the update to Congress.

In addition to these requirements, section 3161 requires the Secretary to take into account the following objectives when preparing work force restructuring plans: (1) accomplish the work force change so as to minimize social and economic impacts; (2) provide notice of work force changes to employees and communities at least 120 days before the commencement of changes; (3) accomplish the changes, when possible, through use of retraining, early retirement, attrition, and other options that minimize layoffs; (4) provide preference, to the extent practicable, in any future hiring by the Department of Energy to involuntarily separated employees; (5) retrain employees, to the extent practicable, for work in environmental restoration and waste management activities at such facilities or other facilities of the Department of Energy; (6) provide relocation assistance to employees who are transferred to other Department of Energy facilities as a result of the plan; (7) assist terminated employees in obtaining appropriate retraining, education, and reemployment assistance; and (8) provide local impact assistance to communities that are affected by the restructuring plan.

To assure that the requirements and objectives are met and to assure that the commitment of the President and the Secretary to assist displaced workers is honored, the Department has issued planning guidelines for work force restructuring activities. These guidelines were developed with extensive input from stakeholders, and are designed to assist Department personnel in preparing work force restructuring plans. They are currently being revised as a result of concerns raised by stakeholders. I would like to highlight some of the major provisions of those guidelines:

Management flexibility: Each site is provided flexibility in preparing its work force restructuring plan. Section 3161 directs the Department to consult with a broad range of stakeholders in preparing each work force restructuring plan. Actual plans necessarily vary in benefits offered based on this consultation, management objectives, work force demographics and other conditions at the sites. The Department has been questioned about this variance; however, our goal, and our statutory charge, is to prepare work force restructuring plans that best accommodate the workers, the communities and the Department's management objectives at each site. We believe that this flexibility must continue to assure that the Program remains responsive not only to the workers but also to the Department's management needs.

The job attachment test: We have developed a job attachment test to ensure that benefits contemplated by section 3161 are made available to former weapons production workers. Benefits are to be provided to employees who were employed at a defense nuclear facility on September 27, 1991 (the day that President Bush announced the first unilateral reductions of the Nation's nuclear weapons stockpile), and also were employed at the time of the 120-day work force restructuring notice that led to the employees separation. This test determines those employees eligible to receive the widest range of benefits; and, in some cases, significantly lower levels of benefits may be offered to displaced employees who do not meet this test.

Preference in hiring: The Department has decided to offer a preference in any future hiring to employees who meet the job attachment test, and are involuntarily separated. The preference continues until termination by action or inaction of the employee. Application of this preference has clearly been the most contentious issue we have had to deal with because of its potential conflict with traditional trade jurisdiction decisions. The Department encourages local, site-by-site negotiations to achieve accommodations of internal union work rules that may otherwise serve as obstacles to implementing this preference.

Application to other Department facilities: In the Secretary's early review of plans to implement section 3161, she determined that the objectives of section 3161 should be applied to any change in the work force of the Department, not just those at defense nuclear facilities. As a result, we are looking at all changes in the Department and encouraging each program to include consideration of the objectives contained in section 3161 in planning for work force restructuring.

WORK FORCE RESTRUCTURING ACCOMPLISHMENTS

To date, the Department has approved plans and actions that have resulted in over 11,000 contractor positions eliminated. Of the approximately 11,000 positions reduced, roughly 20 percent resulted from involuntary layoffs. The average cost of each position eliminated has been less than $27,000. This figure is consistent with the experience of the Department of Defense and of many private sector work force restructuring efforts. I have included, at the conclusion of my testimony, Table 1 that details work force restructuring plans approved through February 1995 at 11 major sites that account for the bulk of reductions made to this point. We estimate that the cost savings in salary to the Department from these reductions is roughly $600 million per year. From this perspective, a one-time cost of $300 million to provide reasonable transition assistance for the workers and the communities is a good investment for the taxpayers. These results were accomplished through a 120-day work force restructuring planning process that includes consultation with stakeholders such as employees, elected officials, and union representatives. Public meetings are held in each affected community to allow Department representatives to answer questions and address concerns. The result of this process has been work force restructuring plans that address the unique needs of our displaced employees by offering transition assistance in various forms. Plans may offer retirement incentives for eligible workers, allowing them to remain in communities where they contribute a great deal. Plans may provide the means to retrain workers to help the Department to achieve its future mission at some sites. They may specify an offer for tuition assistance to prepare displaced employees for new careers outside of the Department. These plans also offer medical benefit extensions for families at a graduated scale until other coverage is secured. The key components of these plans, however, are an assessment of the Department's future work force needs, an evaluation of the existing skills, and clear-headed strategies for making the transition necessary to efficiently accomplish the Department's missions.

LOCAL ECONOMIC DEVELOPMENT

In addition to addressing the impacts of work force reductions on individual workers, our Program also seeks to lessen the impacts on local communities, many of which are economically tied to Department of Energy facilities. The Department has achieved several successes that demonstrate the benefits of investment in economic development in these communities.

Let me take a moment to discuss an example involving the Pinellas Plant in Florida. In November 1994, the Department began negotiations to sell the Pinellas Plant to the Pinellas County Industry Council. The negotiations culminated in an agreement in principle announced December 21, 1994. That agreement was reduced to a formal sales contract and lease on February 27, 1995 and the property was transferred on March 8, 1995. The sale provides benefits to the community, the remaining workers at the Plant and to the Department. We expect to avoid between $9 and $34 million in costs compared with disposing of the facility through the General Services Administration.

The Pinellas County Industry Council is a government agency chartered to promote economic development in the County. By conveying the property at this time, we have made it possible for the Industry Council to aggressively market it, improving the probability of attracting new tenants to the Plant.

In addition, the Department's current contractor, Martin Marietta, was initially reluctant to pursue new business activities at the site, but has now started serious discussions with the Industry Council, and is prepared to invest corporate resources in the facility. The agreement reached between these two parties will not be dependent on Department of Energy commitments. Because a portion of Martin Marietta's new business takes advantage of the defense technology, neutron generators, that they perfected at the site, the new business will provide job opportunities for a number of present workers at the Plant. Those jobs could result in continued employment, and save the Department money by avoiding contractually-required work force restructuring costs. We estimate that up to 400 of the current workers may be offered new opportunities, and as a result the Department may save as much as $19 million in work force restructuring costs. The Department will also benefit by reducing its overhead to the minimum necessary as soon as possible. Under the agreement, the Pinellas County Industry Council will assume some of the maintenance of the Plant immediately, and will increase its responsibilities over time as we reduce our occupancy. We believe the Government will save a minimum of $9 million when comparing this sale to traditional property disposal through the General Services Administration. If the Industry Council is successful in attracting new tenants, and if Martin Marietta's new businesses are successful, those savings could climb to $34 million (including avoided costs of work force restructuring and unnecessary cleanup). In summary, the sale of the Pinellas Plant has benefits for everyone. The Industry Council obtains the property at a time when they can best attract new business opportunities to the site. This gives the community the best chance to attract new jobs, offsetting the impact of the end of the Department's presence at the site. It also enhances the probability of defense conversion, by giving Martin Marietta the incentive to develop the commercial applications of the neutron generator technology that was developed at Pinellas. Finally, the Government saves money over traditional approaches to the disposal of Federal real property. While the Pinellas sale is clearly our hallmark accomplishment to date, there have been other economic development successes. Seven commercial leases at the Mound facility in Ohio have been signed creating new business opportunities for Mound employees; three more leases are in the works. At Rocky Flats in Colorado, the Department has initiated a demonstration project to determine if the existing work force can be reemployed to recycle waste into commercial products. Continued investment in opportunities arising from the end of nuclear weapons production can lead to novel solutions that are good for the affected workers and communities, and save the Government money in the long-run.

NEW CHALLENGES

The President and the Congress have issued a challenge to create a Federal Government that works more efficiently and costs less. The Department has committed to meeting this challenge by saving some $14.1 billion over the next five years. The Office of Worker and Community Transition has a major role to play in meeting this commitment. We are planning to reduce the contractor work force by approximately 19,000 positions by the end of FY 1996. Most of these reductions will come from our environmental programs, and are estimated to result in budget savings of approximately $4 to $5 billion over five years. We are also continuing the post-Cold War transition that section 3161 was written to address: the Department is closing nuclear weapons facilities at the Mound Plant in Ohio, the Pinellas Plant in Florida, and part of our Rocky Flats facility in Colorado. In addition, our readiness for nuclear weapons testing is being down-graded at the Nevada Test Site. This massive downsizing is possible, prudent, and desirable for a number of reasons. First, we simply cannot afford the levels of employment we currently have. The overall federal budget is being reduced, the Department's budget is being reduced, and program budgets are being reduced. Second, we do not need that level of employment. Our contractor employment at many sites actually exceeds levels that existed at the height of weapons production. In fact, between 1988 and 1992, as environmental spending increased, layers of contractor employees were added on top of the existing defense production work force to perform the environmental clean-up mission. It has become increasingly apparent that the Department's environmental clean up programs have an excessive number of management and oversight layers compared to the number of people who are performing actual remediation work. Finally, we must reduce the work force to be more efficient and effective in doing our job. We believe we can achieve this reduction without affecting the scope of the clean-up program while ensuring that remediation tasks with the greatest risk are not adversely impacted. Part of the strategy to become more efficient considers privatization of functions and activities traditionally performed by our on-site contractors. This strategy has raised questions from those concerned about the impact of this initiative on our in-house work force. The Department is in the process of developing specific guidance regarding our privatization initiatives. While the process of developing guidance is not complete, the cost-benefit assessment of privatization actions will take into account work force restructuring costs. This planned reduction of 19,000 contractor jobs between 1995 and 1996 is roughly 14 percent of its overall management and operations contractor work force. At Richland, Washington, a reduction of 4,800 positions represents a quarter of the current work force in an isolated community. The Savannah River site at Aiken, South Carolina faces a cut of 4,200 employees, nearly 20 percent of its total. Rocky Flats, outside Denver, will decline by 2,400 positions, 36 percent of its total. Nevada and Idaho will also see a quarter of their workers separated. A detailed breakdown of employment history and anticipated reductions at major Departmental sites is provided in Tables 2 and 3. Our goal in undertaking these reductions is to maintain a work force qualified to achieve program objectives. Each site is undertaking a comprehensive review of its future skill requirements to make certain this goal is met, and the Office of Worker and Community Transition will place special focus on this aspect of the restructuring process during the next year. The Department is improving its work force planning by adopting a five phase process: First, the sites evaluate present and future mission requirements. Second, we project the work force skills mix necessary to achieve these missions. Third, workers with appropriate skills are maintained. Forth, employees who can be retrained to perform future missions are identified. Finally, workers whose skills are redundant or excess are identified, and a work force restructuring plan is developed to accommodate them. This process is designed to ensure that the remaining work force is more efficient and cost-effective. We are also committed to mitigating the effects of work force reductions on affected workers and communities. Since most sites have already undergone work force reductions that included voluntary separation incentives, and because of the magnitude of the cuts that will be made by the end of FY 1996, we expect that a higher percentage of the employment reductions will be involuntary. In response, the Department will focus on providing effective outplacement assistance programs, including training and educational assistance, that utilize demonstrated best practices available to all separated employees.

PROGRAM FUNDING

The Department of Energy budget requests $100 million specifically for the Worker and Community Transition Program. This is a reduction of $15 million from the funding provided in FY 1995. It reflects our best assessment of what will be required for work force restructuring that is related to the cessation of nuclear weapons production mission, which is the specific focus of the guidance provided in section 3161. In the case where work force restructuring results from efforts to increase operating efficiency, the affected program will provide funds for benefits associated with the work force transition. For Fiscal Years 1995 and 1996, these reductions will occur primarily in the Environmental Management Program, and up to $200 million has been identified in that Program's FY 1996 budget request for this purpose, an increase of $85 million over the $115 million identified for these purposes in FY 1995. Overall, counting funding from FY 1995 and 1996, about $500 million is available for mitigating the 19,000 reduction in contractor employment, or roughly $25,000 per separated employee. This funding is essential if we are to realize long-term savings in this area approaching $5 billion over the next five years. A breakout of recent budget levels is included in Table 4. Because much of the cost of work force restructuring will be directly borne by the program -- necessitating a trade off between the generosity of incentives and the numbers of people that would have to be separated -- we expect that future work force plans implementing these reductions will be increasingly sensitive to cost implications. Many sites are also seeking to achieve necessary reductions as soon as possible in order to realize maximum savings in FY 1996, and so reduce the number of workers who would otherwise have to be separated to meet budget targets. The Office of Worker and Community Transition will have oversight responsibility, and coordinate final restructuring plan approvals regardless of funding source.

CONCLUSION

The Department remains committed to investing in the futures of the workers and communities who helped maintain our Nation's nuclear deterrent during the Cold War. When the costs of this Program are weighed against the resources that these workers and communities represent, it is, in the Department's view, a wise investment. The Office of Worker and Community Transition plays a vital role in achieving these goals. We are helping to shape successful transitions that can ensure future economic health for the families and communities affected by the end of the Cold War, and we are committed to helping restructure the Department's work force in a manner that improves efficiency and cost-effectiveness, while maintaining the safety of Departmental operations. Your support of the budget request for the Office of Worker and Community Transition is critical to achieving these goals.