Controlling Federal Costs for Coal Liquefaction Program Hinges on Management and Contracting Improvements

The Federal Government and private industry jointly financed two pilot plants to demonstrate direct liquefaction processes for producing synthetic fuels from coal, which became operational in 1980. The Department of Energy (DOE) has estimated that total costs for each of these solvent-refined coal plants will exceed its baseline estimate. The construction of two larger facilities, which will process up to 6,000 tons of coal a day, is scheduled to begin in 1981.

A review of the two pilot projects revealed inadequacies in DOE contracting practices and a failure by DOE to properly plan, manage, and monitor the projects. On one of the projects, DOE contractual agreements with prime contractors were made before the design scheme for the plant was complete. Several problems were experienced in the construction of this plant due to poor judgment and lack of management over the project by DOE and contractors. The initial agreements regarding the ceilings imposed on sharing in cost growth for the plant lacked sufficient investments from private sponsors. In addition, DOE staffing was inadequate at both projects to effectively monitor progress and contribute to timely decisions.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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