Under the Contract Reform Initiative, DOE has introduced reforms seeking to
• remove the agency from those activities that are not inherently governmental functions or core business lines
• improve the management of remaining activities
• reduce the costs of doing business
• shift greater performance and financial risk to the private sector (DOE 1997).
Based on these objectives, DOE embraced privatization as a tool that, when applied appropriately, could harness the competitive forces of the marketplace and improve the efficiency and effectiveness of DOE's activities. DOE has pursued three types of privatization: divestiture of functions, contracting out, and asset transfers. The majority of privatization efforts fall into the second category and cover a broad range of activities and contract structures. Some of these projects require investment of significant amounts of capital. In the past, capital-intensive projects were financed on a pay-as-you-go basis, with the contractor assuming little or no performance risk. Under the fully privatized approach, the contractor does not get paid until performance is demonstrated, requiring the contractor to back the project's budget, schedule, and performance with its own funds.