Nuclear Weapons
Opportunities Exist to Improve the Budgeting, Cost Accounting, and Management Associated with the Stockpile Life Extension Program Gao ID: GAO-03-583 July 28, 2003As a separately organized agency within the Department of Energy (DOE), the National Nuclear Security Administration (NNSA) administers the Stockpile Life Extension Program, whose purpose is to extend, through refurbishment, the operational lives of the weapons in the nuclear stockpile. NNSA encountered significant management problems with its first refurbishment. NNSA has begun three additional life extensions. This study was undertaken to determine the extent to which budgetary, cost accounting, and other management issues that contributed to problems with the first refurbishment have been adequately addressed.
GAO found that NNSA's budget for the Stockpile Life Extension Program has not been comprehensive or reliable. For instance, the fiscal year 2003 budget for this program was not comprehensive because it did not include all activities necessary to successfully complete each of the refurbishments. As a result, neither NNSA nor the Congress was in a position to properly evaluate the budgetary tradeoffs among the refurbishments in the program. NNSA does not have a system for tracking the full costs associated with the individual refurbishments. Instead, NNSA has several mechanisms that track a portion of the refurbishment costs, but these mechanisms are used for different purposes, include different types of costs, and cannot be reconciled with one another. As a result, NNSA lacks information regarding the full cost of the refurbishment work that can help identify cost problems as they develop or when management intervention in those cost problems may be necessary. Finally, NNSA does not have an adequate planning, organization, and cost and schedule oversight process. With respect to planning, NNSA has not, for instance, consistently developed a formalized list of resource and schedule conflicts between the individual refurbishments in order to systematically resolve those conflicts. Regarding organization, NNSA has not, for example, clearly defined the roles and responsibilities of those officials associated with the refurbishments or given the refurbishments' managers proper project/program management training required by DOE standards. Finally, NNSA has not developed an adequate process for reporting cost and schedule changes or developed performance measures with sufficient specificity to determine the progress of the three refurbishments that GAO reviewed. As a result, NNSA lacks the means to help ensure that the refurbishments will not experience cost overruns potentially amounting to hundreds of millions of dollars or encounter significant schedule delays.
RecommendationsOur 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.
Director: Team: Phone:GAO-03-583, Nuclear Weapons: Opportunities Exist to Improve the Budgeting, Cost Accounting, and Management Associated with the Stockpile Life Extension Program
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Report to Congressional Requesters:
July 2003:
NUCLEAR WEAPONS:
Opportunities Exist to Improve the Budgeting, Cost Accounting, and
Management Associated with the Stockpile Life Extension Program:
GAO-03-583:
GAO Highlights:
Highlights of GAO-03-583, a report to Congressional Requesters
Why GAO Did This Study:
As a separately organized agency within the Department of Energy
(DOE), the National Nuclear Security Administration (NNSA) administers
the Stockpile Life Extension Program, whose purpose is to extend,
through refurbishment, the operational lives of the weapons in the
nuclear stockpile. NNSA encountered significant management problems
with its first refurbishment. NNSA has begun three additional life
extensions. This study was undertaken to determine the extent to which
budgetary, cost accounting, and other management issues that
contributed to problems with the first refurbishment have been
adequately addressed.
What GAO Found:
GAO found that NNSA‘s budget for the Stockpile Life Extension Program
has not been comprehensive or reliable. For instance, the fiscal year
2003 budget for this program was not comprehensive because it did not
include all activities necessary to successfully complete each of the
refurbishments. As a result, neither NNSA nor the Congress was in a
position to properly evaluate the budgetary tradeoffs among the
refurbishments in the program.
NNSA does not have a system for tracking the full costs associated
with the individual refurbishments. Instead, NNSA has several
mechanisms that track a portion of the refurbishment costs, but these
mechanisms are used for different purposes, include different types of
costs, and cannot be reconciled with one another. As a result, NNSA
lacks information regarding the full cost of the refurbishment work
that can help identify cost problems as they develop or when
management intervention in those cost problems may be necessary.
Finally, NNSA does not have an adequate planning, organization, and
cost and schedule oversight process. With respect to planning, NNSA
has not, for instance, consistently developed a formalized list of
resource and schedule conflicts between the individual refurbishments
in order to systematically resolve those conflicts. Regarding
organization, NNSA has not, for example, clearly defined the roles and
responsibilities of those officials associated with the refurbishments
or given the refurbishments‘ managers proper project/program
management training required by DOE standards. Finally, NNSA has not
developed an adequate process for reporting cost and schedule changes
or developed performance measures with sufficient specificity to
determine the progress of the three refurbishments that GAO reviewed.
As a result, NNSA lacks the means to help ensure that the
refurbishments will not experience cost overruns potentially amounting
to hundreds of millions of dollars or encounter significant schedule
delays.
What GAO Recommends:
GAO recommends that NNSA undertake a number of actions to improve the
budgeting, cost accounting, and management associated with the
Stockpile Life Extension Program. Those actions are, among other
things (1) including the Stockpile Life Extension Program as a formal
program in NNSA‘s annual budget; (2) establishing a cost accounting
process that accumulates, tracks, and reports the full costs of each
refurbishment; and (3) implementing a series of management actions
related to improving planning, organization, and oversight of cost and
schedule. NNSA recognized the need to change how the program is
managed and agreed with GAO‘s recommendations.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
NNSA Has Not Provided Congress with a Clear Picture of the Stockpile
Life Extension Program Budget or Reliable Budget Figures:
NNSA Does Not Have a System for Tracking Refurbishment Costs by Weapon
System:
Management Problems Remain Despite NNSA Improvements:
NNSA Has Various Actions Underway to Fix Its Management Problems:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Scope and Methodology:
Appendixes:
Appendix I: Comments from the National Nuclear Security
Administration:
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
Abbreviations:
DOE: Department of Energy:
GAO: General Accounting Office:
NNSA: National Nuclear Security Administration:
SFFAS: Statement of Federal Financial Accounting Standards:
Letter July 28, 2003:
Congressional Requesters:
Nuclear weapons have been and continue to be an essential part of the
nation's defense strategy. However, the end of the Cold War has caused
a dramatic shift in how the nation maintains its planning and support
for such weapons. Instead of designing, testing, and producing new
nuclear weapons, the strategy has shifted to maintaining the existing
nuclear weapons stockpile indefinitely. To accomplish this goal, in
January 1996, the Department of Energy (DOE) created the Stockpile Life
Extension Program. Now administered by the National Nuclear Security
Administration (NNSA), which was created in October 1999 as a
separately organized agency within DOE, this program intends to use a
standardized approach for planning and conducting nuclear weapons
refurbishment activities to extend the weapons' operational
lives.[Footnote 1] While complete cost data on the Stockpile Life
Extension Program does not exist, NNSA requested $476 million in fiscal
year 2004 for life extension program activities.
Within NNSA, the Office of Defense Programs is responsible for
administering the Stockpile Life Extension Program. For those nuclear
weapons that are refurbished, this office must (1) determine which
components, such as the high explosives package, will need
refurbishment to extend each weapon's life; (2) design and produce the
necessary components; (3) install the components in the weapons; and
(4) certify that the changes do not adversely affect the safety and
reliability of the weapons. Because research and development is needed
to refurbish the nuclear weapons, this program requires a coordinated
effort among the design laboratories and production facilities that
comprise the nation's nuclear weapons complex.
As of May 1, 2003, according to NNSA officials, three nuclear weapons
were undergoing research and development activities prior to the
commencement of refurbishment production--the W-80 warhead, the B-61
bomb, and the W-76 warhead. The W-80 warhead is designed to be carried
on a cruise missile launched from an attack submarine or a B-52 bomber
and its first unit is scheduled for refurbishment production beginning
in February 2006. The B-61 bomb is designed to be carried on the B-52
or B-2 bomber. Its first unit is scheduled for refurbishment production
beginning in June 2006. The B-61 also has a nonstrategic variation for
use on the F-15 and F-16 aircraft. The W-76 warhead is designed to be
carried on the Trident II missile. Its first unit is scheduled for
refurbishment production beginning in September 2007.
One nuclear weapon already has begun refurbishment production--the W-87
strategic warhead, which is designed to be carried on the land-based
Peacekeeper missile. In December 2000, we reported that the W-87 had
experienced significant design and production problems that increased
its refurbishment costs by over $300 million and caused schedule delays
of about 2 years.[Footnote 2] At the heart of many of the problems that
contributed to this outcome were an inadequate Office of Defense
Programs management process and unclear leadership, which prevented the
Office from adequately anticipating and mitigating the problems that
arose. We reported that, for the W-87 refurbishment, there was no
overall program plan, cost and schedule baseline, or system to
effectively oversee design and production changes. Moreover, no one
person was expressly accountable for the W-87, and leadership appeared
to move around from one NNSA office to another. As a result, we made a
series of recommendations to improve NNSA management, including that
NNSA assign a manager who is responsible and accountable for each life
extension. In response to our recommendations, NNSA took some actions
to improve its management of the Stockpile Life Extension Program
including designating a program manager for each life extension.
You asked us to determine the extent to which (1) the program's budget
requests for fiscal years 2003 and 2004 were comprehensive and
reliable; (2) NNSA has a system for accumulating, tracking, and
reporting program costs; and (3) other program management problems
exist at NNSA.
Results in Brief:
While NNSA's fiscal year 2003 congressional budget request did not
provide a clear picture of all activity necessary to complete the
Stockpile Life Extension Program, NNSA has begun to take action to
produce a more comprehensive and reliable picture of the program for
fiscal year 2004 and beyond. With respect to fiscal year 2003, NNSA did
not, for example, include activities for high explosives work that is
needed to support three life extension efforts in an unclassified
budget annex that provided data for the program. NNSA developed its
budget by broad function--such as research and development--rather than
by individual weapon system or program activity such as the Stockpile
Life Extension Program. In addition, NNSA officials expressed concern
that dissemination of more detailed program budget information would
encourage the Congress to cut the most expensive weapon system or
systems. Moreover, the numbers in NNSA's budget request for the program
had not been validated--as required by DOE directive. NNSA did not
validate its fiscal year 2003 budget because, according to a NNSA
official, the agency was implementing a new planning, programming,
budgeting, and evaluation process. For fiscal year 2004, a larger
portion, but not all life extension-related work, within NNSA's budget
request has been attributed to the life extension program, resulting in
a more comprehensive request. NNSA officials indicated the agency
decided not to implement further budget changes in fiscal year 2004 in
order to ensure, for instance, that classification concerns are
resolved and contractors have time to modify their accounting systems.
NNSA officials also stated that a formal budget validation process
would be reintroduced for the fiscal year 2005 budget cycle. Our report
recommends that the NNSA Administrator further improve the budgeting
associated with the Stockpile Life Extension Program by including this
program as a formal and distinct part of NNSA's budget submission.
NNSA does not have a system for accumulating and tracking refurbishment
costs that comports with federal accounting standards. Specifically,
according to the Statement of Federal Financial Accounting Standards
Number 4, "Managerial Cost Accounting," federal agencies should
accumulate and track the cost of their activities on a regular basis
for management information purposes. Such information is important to
the Congress and federal managers as they make decisions about
allocating federal resources, authorizing and modifying programs, and
evaluating program performance. To date, NNSA has not developed a
managerial cost accounting system that aligns with the program and its
activities and provides the full cost of the refurbishments. NNSA has
several mechanisms to track various portions of the refurbishment
costs, but these mechanisms are used for different purposes, include
different types of costs, and cannot be reconciled with one another.
This report recommends that the NNSA Administrator take steps to
improve cost accounting associated with the Stockpile Life Extension
Program.
Finally, despite NNSA's efforts at improvement, other program
management problems remain in the areas of planning, organization, and
oversight of cost and schedule for the Stockpile Life Extension
Program. For instance, NNSA does not yet have an adequate planning
process to guide and fully integrate the individual life extensions for
each warhead into an overall program. In this regard, NNSA has yet to
establish the relative ranking of the Stockpile Life Extension Program
among the Office of Defense Programs' priorities or to establish a
consistent priority among the individual life extension efforts. Absent
a prioritization scheme that had been disseminated and understood
throughout the weapons complex, we identified cases where NNSA field
contractors unilaterally decided to transfer funds from one
refurbishment to another only to be formally questioned by NNSA
regarding those decisions. The contractor decisions impacted NNSA's
ability to complete refurbishment work on schedule. With respect to
organization, despite a December 2002 overall reorganization, NNSA
still has not adequately fixed accountability and responsibility for
each life extension. In particular, the roles and responsibilities
between the individual life extension program and deputy program
managers and the site contractor project managers have not yet been
clearly defined. Finally, with respect to oversight of cost and
schedule, NNSA does not have an adequate process for reporting cost and
schedule changes against established baselines. Such a process would
help NNSA provide more comprehensive information to the Congress
regarding the program's performance goals and accomplishments. Each of
the three ongoing refurbishments, we determined, has already
experienced some cost growth and schedule changes. For instance, the W-
76 refurbishment is slightly behind schedule because of various missed
commitments such as deciding whether to reuse or remanufacture certain
components. This reuse or remanufacture decision did not occur on
schedule, according to the W-76 program manager, primarily because NNSA
personnel neglected to perform certain calculations as directed. The W-
76 refurbishment will also need an additional $10.75 million in fiscal
year 2004 to purchase certain parts that were previously not authorized
or budgeted for. NNSA has recently completed or is in the process of
completing various management improvement actions, such as the
implementation of an overall planning, programming, budgeting, and
evaluation process. While those actions should help improve management
to some degree, they will not address all outstanding stockpile life
extension program management issues, such as clarifying the roles and
responsibilities of those officials associated with the program.
Consequently, this report recommends that the NNSA Administrator
improve certain specific management-related activities associated with
the Stockpile Life Extension Program, such as clarifying roles and
responsibilities and providing the program managers with the authority
to properly manage the refurbishments.
We provided NNSA with a draft of this report for review and comment.
Overall, NNSA stated that it recognized the need to change the way the
Stockpile Life Extension Program was managed and that it generally
agreed with the report's recommendations. For instance, NNSA stated
that it had independently identified many of the same concerns, and,
over the past 12 months, it had made significant progress in
implementing plans, programs, and processes to improve program
management. NNSA indicated that while full implementation of our
management and budgeting recommendations will take several years, NNSA
is committed to meeting these objectives. NNSA also provided some
technical comments which it believed pointed out factual inaccuracies.
We have modified our report, where appropriate, to reflect NNSA's
comments.
Background:
The nation's nuclear weapons stockpile remains a cornerstone of U.S.
national security policy. As a result of changes in arms control, arms
reduction, and nonproliferation policies, the President and the
Congress in 1993 directed that a science-based Stockpile Stewardship
Program be developed to maintain the stockpile without nuclear testing.
After the establishment of that program, DOE, in January 1996, created
the Stockpile Life Extension Program. The purpose of this program is to
develop a standardized approach for planning nuclear weapons
refurbishment activities to enable the nuclear weapons complex to
extend the operational lives of the weapons in the stockpile well
beyond their original design lives.
Within NNSA, the Office of Defense Programs is responsible for the
stockpile. This responsibility encompasses many different tasks,
including the manufacturing, maintenance, refurbishment, surveillance,
and dismantlement of weapons in the stockpile; activities associated
with the research, design, development, simulation, modeling, and
nonnuclear testing of nuclear weapons; and the planning, assessment,
and certification of the weapons' safety and reliability. A national
complex of nuclear weapons design laboratories and production
facilities supports the Office of Defense Programs' mission. This
complex consists of three national laboratories that design nuclear
weapons: Lawrence Livermore National Laboratory in California, Los
Alamos National Laboratory in New Mexico, and Sandia National
Laboratories in New Mexico and California. The complex also includes
the Nevada test site and four production sites: the Pantex plant in
Texas, the Y-12 plant in Tennessee, the Kansas City plant in Missouri,
and the Savannah River site in South Carolina.
NNSA refurbishes nuclear weapons according to a process called Phase
6.X, which was jointly developed with the Department of Defense. This
process consists of the following elements:
* Phase 6.1, concept assessment. This phase consists of studies to
provide planning guidance and to develop information so that a decision
can be made on whether or not to proceed to a phase 6.2.
* Phase 6.2, feasibility study. This phase consists of developing
design options and studying their feasibility.
* Phase 6.2A, design definition and cost study. This phase consists of
completing definition of selected design option(s) from phase 6.2
through cost analysis.
* Phase 6.3, development engineering. This phase consists of conducting
experiments, tests, and analyses to validate the design option and
assess its potential for production.
* Phase 6.4, production engineering. This phase consists of making a
strong commitment of resources to the production facilities to prepare
for stockpile production.
* Phase 6.5, first production. This phase consists of producing a
limited number of refurbished weapons and then disassembling and
examining some of them for final qualification of the production
process.
* Phase 6.6, full-scale production. This phase consists of ramping up
to full-production rates at required levels.
As of May 1, 2003, according to NNSA officials, four nuclear weapons
were undergoing phase 6.X refurbishment activities. The W-80 warhead,
the B-61 bomb, and the W-76 warhead are all in phase 6.3, development
engineering, while the W-87 warhead is in phase 6.6, full-scale
production.[Footnote 3]
Prior to its budget submission for fiscal year 2001, the Office of
Defense Programs divided the operating portion of the Weapons
Activities account into two broad program activities--stockpile
stewardship and stockpile management. Stockpile stewardship was defined
as the set of activities needed to provide the physical and
intellectual infrastructure required to meet the scientific and
technical requirements of the (overall) Stockpile Stewardship Program.
Stockpile management activities included DOE's historical
responsibilities for surveillance, maintenance, refurbishment, and
dismantlement of the enduring stockpile. However, each category was
dominated by a single large activity known as core stewardship and core
management, which made it difficult to determine precisely where funds
were being spent. For example, in the Office of Defense Programs'
budget submission for fiscal year 2000, core stewardship accounted for
48 percent of the stockpile stewardship activity's budget request,
while core management accounted for 73 percent of the stockpile
management activity's budget request. The lack of clarity associated
with this broad structure caused concern both at DOE and in the
Congress.
In February 1999, the Deputy Assistant Secretary for Research,
Development, and Simulation, who manages the stockpile stewardship
activity, began to develop a new program activity structure to improve
the planning process for his program and more closely integrate the
program with the needs of the stockpile. The new structure was built
around three new program activities--Campaigns, Directed Stockpile
Work, and Readiness in Technical Base and Facilities.
* Campaigns are technically challenging, multiyear, multifunctional
efforts conducted across the Office of Defense Programs' laboratories,
production plants, and the Nevada test site. They are designed to
develop and maintain the critical capabilities needed to enable
continued certification of the stockpile into the foreseeable future,
without underground testing. Campaigns have milestones and specific
end-dates or goals, effectively focusing research and development
activities on clearly defined deliverables.
* Directed Stockpile Work includes the activities that directly support
specific weapons in the stockpile. These activities include the current
maintenance and day-to-day care of the stockpile, as well as planned
life extensions.
* Readiness in Technical Base and Facilities includes the physical
infrastructure and operational readiness required to conduct Campaign
and Directed Stockpile Work activities at the production plants,
laboratories, and the Nevada test site. This includes ensuring that the
infrastructure and facilities are operational, safe, secure, compliant,
and ready to operate.
Within each of these three activities is a set of more detailed
subactivities. For example, within the Campaigns activity are
individual campaigns to study, among other things, the primary[Footnote
4] in a nuclear weapon or to develop a new capability to produce
nuclear weapons pits.[Footnote 5] Similarly, the Directed Stockpile
Work activity includes subactivities to conduct surveillance or produce
components that need regular replacement within nuclear weapons.
Finally, the Readiness in Technical Base and Facilities activity
includes subactivities to capture the costs for the operation of its
facilities. In submitting its new program activity structure to the
Office of the Chief Financial Officer for review and approval for use
in the budget submission for fiscal year 2001, the Office of Defense
Programs believed that the new structure would, among other things,
better reflect its current and future missions; focus budget
justification on major program thrusts; and improve the linkage between
planning, budgeting, and performance evaluation. Budget requests
developed since fiscal year 2001 have been presented using the
Campaigns, Directed Stockpile Work, and Readiness in Technical Base and
Facilities activity structure.
Within the Office of Defense Programs, two organizations share the
responsibility for overall weapons refurbishment management. Those
organizations are the Office of the Assistant Deputy Administrator for
Research, Development, and Simulation and the Office of the Assistant
Deputy Administrator for Military Application and Stockpile Operations.
The first office directs funding to the laboratories for research and
development, while the second office directs funding for engineering
development and production to the laboratories and production sites.
According to NNSA's Life Extension Program Management Plan, both
organizations also share responsibilities. Both oversee life extension
program execution; ensure that the life extension program baseline, if
successfully accomplished, will meet customer requirements; and provide
life extension program information to higher levels for review. The
management plan also stipulates that each life extension shall have one
program manager and one deputy program manager, with one being assigned
from each of the two aforementioned organizations, and that these two
individuals will share program management responsibilities.
NNSA Has Not Provided Congress with a Clear Picture of the Stockpile
Life Extension Program Budget or Reliable Budget Figures:
While NNSA's fiscal year 2003 budget request did not provide a clear
picture of all activity necessary to complete the Stockpile Life
Extension Program, NNSA has begun to take action to produce a more
comprehensive and reliable picture of the program for fiscal year 2004
and beyond. With respect to fiscal year 2003, NNSA did not develop a
comprehensive Stockpile Life Extension Program budget because
historically it has developed its budget by broad function--such as
research and development--rather than by individual weapon system or
program activity such as the Stockpile Life Extension Program. NNSA
provided the Congress with supplementary information in its fiscal year
2003 budget request that attempted to capture the budget for the
Stockpile Life Extension Program; however, this information was not
comprehensive because it did not include the budget for activities
necessary to successfully complete the life extension efforts. For
example, the budget for high explosives work needed to support three
life extension efforts was shown in a different portion of NNSA's
budget request. Recently NNSA has decided, after forming a task force
to study the issue, to budget and manage by weapon system beginning
with its fiscal year 2004 budget request, with this transition
officially taking place with congressional approval of the fiscal year
2005 budget request. As a result, NNSA's fiscal year 2004 budget
request was more comprehensive because it attributed a larger portion
of the Defense Programs' budget to the life extension program. NNSA's
fiscal year 2003 and 2004 budget requests were also not reliable
because the data used to develop them had not been formally reviewed--
through a process known as validation--as required by DOE directive.
Instead, NNSA relied on more informal and less consistent analyses.
NNSA officials have stated that a formal budget validation process
would be reintroduced for the fiscal year 2005 budget cycle.
NNSA Developed Its Budget Requests by Broad Function Rather Than by
Individual Weapon System:
NNSA's congressional budget request for fiscal year 2003 did not
contain a comprehensive, reliable budget for the Stockpile Life
Extension Program or the individual weapon systems undergoing
refurbishment. NNSA developed its budget by broad function--such as
Campaigns, Directed Stockpile Work, and Readiness in Technical Base and
Facilities--rather than by individual weapon system or program activity
such as the Stockpile Life Extension Program.
While the Congress has accepted previous NNSA budget submissions as
structured, it also has requested detailed information on NNSA's
stockpile life extension efforts. Specifically, the fiscal year 2002
Energy and Water Development Appropriations Act conference report
directed NNSA to include detailed information by weapon system in the
budget justification documents for its fiscal year 2003 and subsequent
presidential budget requests to Congress. The conference report also
indicated that the budget should clearly show the unique and the fully
loaded cost of each weapon activity, including the costs associated
with refurbishments, conceptual study, and/or the development of new
weapons.
NNSA responded to the congressional requirement by providing an
unclassified table in an annex to its fiscal year 2003 budget that
contained data on the budget request for the four individual life
extensions. This data, however, did not contain budget funding for work
outside the Directed Stockpile Work program activity that is required
to carry out the life extensions. For example:
* The narrative associated with the High Explosives Manufacturing and
Weapons Assembly/Disassembly Readiness Campaign indicates that $5.4
million, or an 80 percent funding increase, was needed in fiscal year
2003 to support the B-61, W-76, and W-80 refurbishments. The narrative
did not provide a breakdown by individual refurbishment. However,
NNSA's implementation plan for this campaign indicated that nearly $50
million would be needed to support the three refurbishments over fiscal
years 2002 through 2006.
* The narrative associated with an expansion project at the Kansas City
plant within the Readiness in Technical Base and Facilities program
activity indicated that $2.3 million was needed in fiscal year 2003 and
$27.9 million was needed in the outyears to support the B-61, W-76, and
W-87 refurbishments. The narrative also indicated that this expansion
was required in order to meet first production unit schedules
associated with the refurbishments.
In addition, a significant portion of the funding in the annex table
was not assigned to any specific refurbishment but rather was included
under a budget line item termed "multiple system." NNSA officials told
us they did not ask field locations to break down the multiple system
funding by individual refurbishment because this funding was for
"general capability" activities that would continue to be required even
if a weapon system were cut. Further, they said that there was
currently no good allocation scheme, so a breakdown by weapon system
would be inaccurate and, therefore, serve no useful purpose. However,
NNSA officials provided us no information indicating that NNSA had ever
studied possible allocation schemes or showing that allocation was not
feasible. Moreover, according to the DOE's chief financial officer,
NNSA can and should break out the multiple system funding by weapon
system. This official indicated that doing so would put the budget in
line with presidential guidance and Office of Management and Budget
objectives that advocate presenting a budget by product rather than by
process. In commenting on our report, NNSA stated that DOE's chief
financial officer had no basis for making any assertions about whether
NNSA should break out the multiple system funding by weapon system.
However, the chief financial officer has responsibility for ensuring
the effective management and financial integrity of DOE's programs.
More broadly, because NNSA provided the Congress with a table by weapon
system in a budget annex and in Nuclear Weapon Acquisition Reports, the
agency questioned the need for further identification of the Stockpile
Life Extension Program in the fiscal year 2003 budget.[Footnote 6]
Agency officials, including the Deputy Administrator for Defense
Programs, told us that NNSA was reluctant to budget by weapon system
because it would like to retain the "flexibility" the current budget
structure affords the agency in responding to unanticipated demands and
shifting priorities in the Stockpile Stewardship Program. Officials
expressed concern that dissemination of more detailed Stockpile Life
Extension Program information would encourage the Congress to cut the
most expensive weapon system or systems. Furthermore, they asserted
that eliminating a weapon system would not save all of the funds
associated with that weapon system, because a certain portion would be
fixed costs that would have to be transferred to the remaining users.
During the course of our work, however, NNSA has begun to take action
to produce a more comprehensive budget for the Stockpile Life Extension
Program. Specifically, NNSA decided, after forming a task force to
study the issue, to begin budgeting and managing by weapon system in
the fiscal year 2004 budget. Starting with that budget, the agency
supplied to the Congress a classified annex that allocated more of the
costs that were in the multiple system line item to individual weapon
systems. In addition, NNSA officials said that more than $100 million
that had been included in the Readiness in Technical Base and
Facilities activity was moved to the Directed Stockpile Work activity.
However, for fiscal year 2004, no refurbishment-related work in the
Campaigns activity has been moved. NNSA officials said that during the
fiscal year 2005 budget cycle the agency will review the Readiness
Campaigns activity to determine which portion of that activity could
also be attributed to weapon systems. NNSA officials indicated the
agency decided not to implement all budget changes in fiscal year 2004
in order to ensure that classification concerns are resolved,
contractors have time to modify their accounting systems as needed, and
NNSA has time to fully understand the costs and characteristics of
managing, budgeting, and reporting by weapon system.
NNSA Plans to Resume Activities to Validate Program Budget Estimates:
NNSA's budget requests for fiscal years 2003 and 2004 were not reliable
because the data used to develop the budgets have not been formally
reviewed--through a process known as validation--as required by DOE
directive. Instead, NNSA has relied on a review that has become more
informal and less consistent.
Specifically, DOE Order 130.1, on budget formulation, requires budget
requests to be based on estimates that have been thoroughly reviewed
and deemed reasonable by the cognizant field office and headquarters
program organization. The order further requires field offices to
conduct validation reviews and submit documentation and to report any
findings and actions to headquarters. A proper validation, as described
by DOE's Budget Formulation Handbook, requires the field office to
review budget data submissions in detail, sampling 20 percent of the
submissions every year such that 100 percent would be evaluated every 5
years.
NNSA officials indicated that no formal validation has been done with
respect to refurbishment research and development funding. With respect
to refurbishment production funding, NNSA officials described their
validation review as a "reasonableness" test regarding the budget's
support of a program's needs based on a historical understanding of
appropriate labor, materials, and overhead pricing estimates. NNSA
officials acknowledged that, in recent years, the agency has not
fulfilled the budget validation requirement as specified in DOE Order
130.1, and that the validation review that has been used has become
increasingly less formal and less consistent. Prior to this reduction
in the quality of the review process, the DOE Albuquerque Operations
Office performed formal validation reviews at production plant
locations through fiscal year 1996. Since then, the Albuquerque office
has relied on a pilot project by which the four contractors directly
under its jurisdiction--Sandia National Laboratories, Los Alamos
National Laboratory, Kansas City plant, and the Pantex plant--submitted
self-assessments for Albuquerque's review. For the fiscal year 2003 and
2004 budgets, however, NNSA officials said headquarters no longer
requested field validation as the agency commenced implementation of a
new planning, programming, budgeting, and evaluation process.
One NNSA field office, we found, still chose to perform validation
reviews of the contractors under its jurisdiction. Specifically, the
Oakland office performed a validation review of the Lawrence Livermore
National Laboratory. However, other locations, such as the Kansas City
plant, the Y-12 plant, and the Savannah River site did not have their
budgets reviewed by any NNSA field office. We also were informed by
NNSA officials that NNSA headquarters staff did not review the
validation reports that were done, as required by DOE Order 130.1,
before transmitting the fiscal year 2003 and 2004 budgets to DOE's
budget office, which then submitted them to the Office of Management
and Budget.
NNSA's director of the Office of Planning, Programming, Budgeting, and
Evaluation said that her office plans to introduce a formal validation
process for the fiscal year 2005 budget cycle, adding that such a
process was not used for the fiscal year 2004 budget cycle because of
time constraints. NNSA documentation regarding the validation process
to be used specifies that validation teams will be led by field federal
staff elements working with headquarters program managers; the Office
of Planning, Programming, Budgeting, and Evaluation staff; and others.
However, NNSA documentation is silent on how the validation process
will be conducted. Therefore, it is unclear if the validation process
will be performed thoroughly and consistently across the weapons
complex and if the process will be formally documented, as required by
DOE Order 130.1.
NNSA Does Not Have a System for Tracking Refurbishment Costs by Weapon
System:
Once a budget is established, having reliable information on the cost
of federal programs is crucial to the effective management of
government operations. Such information is important to the Congress
and to federal managers as they make decisions about allocating federal
resources, authorizing and modifying programs, and evaluating program
performance. The Statement of Federal Financial Accounting Standards
(SFFAS) Number 4, "Managerial Cost Accounting Standards," establishes
the framework under which such cost information is gathered. In
particular, the standard states that federal agencies should accumulate
and report the costs of their activities on a regular basis for
management information purposes. The standard sees measuring costs as
an integral part of measuring the agency's performance in terms of
efficiency and cost-effectiveness. The standard suggests that such
management information can be collected through the agency's cost
accounting system or through specialized approaches--known as cost-
finding techniques. Regardless of the approach used, SFFAS Number 4
states that agencies should report the full costs of the outputs they
produce. However, under Federal Acquisition Regulations and SFFAS
Number 4, NNSA's contractors do have the flexibility to develop the
managerial cost accounting methods that are best suited to their
operating environments.
NNSA does not have a system for accumulating and tracking stockpile
life extension program costs. Similar to its approach in the budget
arena, NNSA currently does not collect cost information for the
stockpile life extension program through the agency's accounting
system. This is because NNSA has defined its programs and activities,
and thus the cost information it collects, at a higher level than the
stockpile life extension program. Specifically, DOE collects cost
information to support its Defense mission area.[Footnote 7] The
Defense mission area includes the types of broad activities mentioned
earlier, such as Campaigns, Directed Stockpile Work, and Readiness in
Technical Base and Facilities. Moreover, DOE's current accounting
system does not provide an adequate link between cost and performance
measures. Officials in DOE's Office of the Chief Financial Officer
recognize these shortcomings and are considering replacing the agency's
existing system with a system that can provide managers with cost
information that is better aligned with performance measures.
Moreover, NNSA does not accumulate life extension program cost
information in the agency's accounting system because NNSA does not
require its contractors to collect information on the full cost of each
life extension by weapon system. Full costs include the costs directly
associated with the production of the item in question--known as direct
costs--as well as other costs--known as indirect costs, such as
overhead--that are only indirectly associated with production. SFFAS
Number 4 states that entities should report the full cost of outputs in
its general-purpose financial reports. General-purpose financial
reports are reports intended to meet the common needs of diverse users
who typically do not have the ability to specify the basis, form, and
content of the reports they receive.
Direct costs are captured within NNSA's Directed Stockpile Work
activity and include such things as research and development or
maintenance. However, NNSA's Directed Stockpile Work activity also
includes indirect costs that benefit more than one weapon system or
life extension. Examples of indirect costs within Directed Stockpile
Work include evaluation and production support costs. Indirect costs
are also found within Campaigns and Readiness in Technical Base and
Facilities activities. Specifically, as noted earlier, NNSA's budget
justification identifies certain Campaign activities, which represent
an indirect cost, that support individual life extensions. A portion of
both of these sources of indirect costs could be allocated to
individual weapon systems; however, NNSA does not currently require
such an allocation by its contractors.
It is important to recognize that under SFFAS Number 4, NNSA's
contractors do have the flexibility to develop the cost accounting
methodologies that are best suited to their operating environments. The
contractors involved in the life extension program are structured
differently and have different functions. For example, Lawrence
Livermore National Laboratory is run by the University of California
and conducts mostly research that may or may not produce a tangible
product. In contrast, the production plants are run by private
corporations which produce parts, as is the case at the Kansas City or
Y-12 plants, or assemble the parts into a completed weapon, as is done
at the Pantex plant. As a result, even if NNSA required contractors to
report the full cost of individual refurbishments, some differences in
the data, which reflects the contractor's different organizations and
operations, would still exist.
While the agency's accounting system does not accumulate and report
costs for the Stockpile Life Extension Program or its individual
refurbishments, NNSA has developed several mechanisms to assist the
Congress and program managers who oversee the life extension effort.
Specifically:
* In previous years, NNSA has requested that its contractors provide
supplemental data on actual costs by weapon system. These data have
been used to respond to congressional information requests. However,
similar to the way NNSA addresses its budget request, NNSA has not
required its contractors to allocate the supplemental cost information
in the multiple system category to individual refurbishments. In
addition, also similar to the way it approached its budget
presentation, NNSA has not required its contractors to include the
costs for supporting activities, such as Campaigns and Readiness in
Technical Base and Facilities in the reports.
* Some life extension program managers require their contractors to
provide them with status reports on the individual refurbishments they
are overseeing. However, these reports are prepared inconsistently or
are incomplete. For example, while the W-76 program manager requires
monthly reports, the B-61 program manager requires only quarterly
reports. In contrast, the W-80 and W-87 program managers do not require
any routine cost reporting. NNSA is trying to develop a consistent
method for its life extension program managers to request cost
information; however, NNSA officials have stated that NNSA has to first
define what its needs are. Similar to the supplemental cost data
described above, these status reports do not contain all of the costs
for supporting activities, such as Campaigns and Readiness in Technical
Base and Facilities.
* Finally, as part of the production process, NNSA's contractors
prepare a report known as the Bill of Materials. The Bill of Materials
accumulates the materials, labor, and manufacturing costs of the
production of a weapon, starting with an individual part and
culminating in the final assembly of a complete weapon. NNSA uses the
resulting Master Bill of Materials to record--capitalize--the
production costs of each weapon system in its accounting system.
However, the costs accumulated by the Bill of Materials include only
production costs and do not include costs such as related research and
development costs or costs associated with Campaigns and Readiness in
Technical Base and Facilities.
Finally, despite the importance of reliable and timely cost information
for both the Congress and program managers, similar to the situation we
found with the budget, life extension program costs are not
independently validated either as a whole or by individual weapon
system. Specifically, neither the DOE Inspector General nor DOE's
external auditors specifically audit the costs of the life extension
program. While both parties have reviewed parts of the life extension
program--for example, the Inspector General recently reviewed the
adequacy of the design and implementation of the cost and schedule
controls over the W-80 refurbishment--their work has not been
specifically intended to provide assurance that all life extension
program costs are appropriately identified and attributed to the life
extension program as a whole or to the individual refurbishments.
Management Problems Remain Despite NNSA Improvements:
The management of critical programs and projects has been a long-
standing problem for DOE and NNSA's Office of Defense Programs.
According to NNSA's fiscal year 2001 report to the Congress on
construction project accomplishments, management costs on DOE projects
are nearly double those of other organizations, and DOE projects take
approximately 3 years longer to accomplish than similar projects
performed elsewhere. As a result, NNSA has repeatedly attempted to
improve program and project management. For instance, in September
2000, the Office of Defense Programs initiated an improvement campaign
to develop solutions to its project management problems and to enact
procedural and structural changes to the Defense Programs' project
management system. Later, in August 2002, the Office of Defense
Programs established a project/program management reengineering team.
As the basis for assembling that team, its charter noted that NNSA does
not manage all projects and programs effectively and efficiently.
However, despite these NNSA attempts at improvement, management
problems associated with the stockpile life extension program persist.
NNSA Does Not Have an Adequate Planning Process to Guide the Individual
Life Extensions and the Overall Program:
Front-end planning is, in many ways, the most critical phase of an
activity and the one that often gets least attention. The front-end
planning process defines the activity. The decisions made in this phase
constrain and support all the actions downstream and often determine
the ultimate success or failure of the activity. NNSA, we found, does
not have an adequate planning process to guide the individual life
extensions and the overall program. Specifically, NNSA has not (1)
established the relative priority of the Stockpile Life Extension
Program against other defense program priorities, (2) consistently
established the relative priority among the individual refurbishments,
(3) developed a formalized list of resource and schedule conflicts
between the individual refurbishments in order to systematically
resolve those conflicts, and (4) finalized the individual refurbishment
project plans on a timely basis.
Priority ranking is an important decision-making tool at DOE. It is the
principal means for establishing total organizational funding and for
making tradeoffs between organizations. DOE uses such a ranking at the
corporate level to make departmental budget decisions. To perform that
ranking, DOE formally requires each of its organizational elements to
annually submit to the DOE Office of Budget reports that provide a
budget year priority ranking and a ranking rationale narrative. In
discussing this matter with an NNSA budget official, we found that NNSA
had not submitted these priority-ranking reports for fiscal years 2002,
2003, and 2004, and this official was also unable to explain why. NNSA
officials, in commenting on our report, indicated that NNSA is not
required to follow the DOE requirement regarding priority budget
ranking; however, these officials could not provide us with any policy
letter supporting their position that NNSA has been officially exempted
from this requirement.
Prioritization is also an important part of NNSA's strategic planning
process. According to that process, priorities must be identified in an
integrated plan developed by each major NNSA office. This integrated
plan links sub-office program plans, such as the plan for refurbishing
the B-61, to NNSA's strategic plan. With respect to the Office of
Defense Programs, however, we found that this office has not finalized
an integrated plan. According to an NNSA official, Defense Programs
developed a draft plan in January 2002 but has not completed that plan
and has instead devoted itself to working on the sub-office program
plans. Absent a finalized integrated plan, it is unclear how sub-office
program plans could be developed and properly linked to NNSA's
strategic plan.
According to the director of Defense Programs' Office of Planning,
Budget, and Integration, prioritizing Defense Programs activities is
essential. This is because the priorities of Defense Programs, its
contractors, and the Department of Defense, which is Defense Programs'
customer for life extension refurbishments, may not necessarily be the
same. In this official's view, the issue of setting priorities needs to
be addressed. This official indicated that the Office of Defense
Programs developed a draft list of activities in August 2001, but did
not prioritize those activities. Included among those activities were
efforts to continue stockpile surveillance activities and to complete
planned refurbishments on schedule. For fiscal years 2003 and 2004,
according to this official, Defense Programs published budget-related
guidance regarding priorities, but he did not believe the guidance was
specific enough. This official added that, for fiscal year 2005, the
guidance would have sufficient detail.
While prioritizing work among Office of Defense Programs activities
such as stockpile surveillance and refurbishment is important, it is
also important to prioritize work within those activities. In the
competition for budget funds, the Office of Defense Programs must
continually ask which of the three refurbishments undergoing research
and development work is a higher priority and should be given funding
preference. However, NNSA has not taken a consistent position on
prioritizing the life extensions. For instance, in October 2002, NNSA
indicated by memorandum that, because of the continuing resolution for
fiscal year 2003, the priority order for the three refurbishments would
be the W-76, followed by the B-61, followed by the W-80. In November
2002, however, NNSA indicated by memorandum that the three
refurbishments had the same priority. In neither memorandum did NNSA
identify the criteria or reasons for these two contradictory decisions.
According to NNSA officials, no priority criteria have been developed,
and each of the three refurbishments is equal in priority.
This lack of a definitive decision on the priority of the three
refurbishments has caused confusion. For example, the Los Alamos
National Laboratory decided in early calendar year 2002 to unilaterally
transfer funds from the W-76 refurbishment to the B-61 because Los
Alamos believed that the B-61 work was more important. As a result of
that decision, the W-76 had to slip a research reactor test from fiscal
year 2002 to fiscal year 2003. Although this test was not on the
critical path for completing the W-76 refurbishment, NNSA had
identified the reactor test as a fiscal year 2002 metric for measuring
the refurbishment's progress. In February 2002, NNSA questioned Los
Alamos regarding its decision. In its March 2002 reply, Los Alamos
indicated that it had found a mechanism to fully fund the W-76
refurbishment. However, because the reactor test had been cancelled,
Los Alamos indicated that it was no longer possible to complete the
test in fiscal year 2002, as planned. Therefore, Los Alamos stated that
its goal was to begin this test in the first part of fiscal year 2003.
In another case, the Y-12 plant decided to suspend or not initiate four
projects at the beginning of fiscal year 2003 in support of the W-76
refurbishment because Y-12 believed that these projects were a lower
priority than other work to be conducted. In a November 2002
memorandum, NNSA questioned this decision. NNSA indicated that these
projects were integrated with another project, which was needed to
ensure a complete special material manufacturing process capability in
time to support the W-76 refurbishment. Accordingly, NNSA stated that
it was providing $2.9 million in unallocated funds so that work on the
projects could resume as soon as possible to support the refurbishment
schedule.
While these examples represent only two documented funding conflicts,
according to each of the refurbishment program managers, additional
resource and schedule conflicts exist among the three refurbishments.
Specifically, the refurbishment program managers agreed that conflicts,
or areas of competition, existed on many fronts, including budget
resources, facilities, and testing. For example, the three
refurbishments compete for certain testing facilities at Los Alamos
National Laboratory and at the Sandia National Laboratories, and for
the use of certain hardware at the Y-12 plant. Additional conflicts are
also present that may affect only two of the three refurbishments.
Those identified included such activities as campaign support,
research, and development at the Los Alamos National Laboratory, and
use of hardware production at the Y-12 plant. The Deputy Assistant
Administrator for Military Application and Stockpile Operations
confirmed that the areas of competition identified by the individual
refurbishment program managers represented a fair portrayal of the
conflicts that exist between the refurbishments. He indicated that
while no formalized list of resource and schedule conflicts exist, the
subject of refurbishment conflicts is routinely discussed at each
refurbishment program review meeting. These meetings are held monthly
to discuss one of the refurbishments on a rotating basis.
Finally, fundamental to the success of any project is documented
planning in the form of a project execution plan. With regard to the
Stockpile Life Extension Program, NNSA has had difficulty preparing
project plans on a timely basis. In its report on the lessons learned
from the W-87 refurbishment, NNSA noted that one cause of the W-87's
problems was that the project plan was prepared too late in the
development cycle and was not used as a tool to identify problems and
take appropriate actions.[Footnote 8] As to the W-76, W-80, and B-61
refurbishments, we found that NNSA had not completed a project plan on
time and with sufficient details, as stipulated in NNSA guidance for
properly managing the reburbishments.
According to NNSA's June 2001 Life Extension Program Management Plan, a
final project plan is to be completed at the end of Phase 6.2A
activities (design definition and cost study). The Life Extension
Program Management Plan offers numerous guidelines detailing the
elements that should be included in the project plan. Those elements
include, among others, team structure and the roles of each team and
individual members; an integrated program schedule identifying all
tasks to be accomplished for the success of the project; life cycle
costs; and a documentation of the facility requirements needed to
support all portions of the refurbishment. This management plan was
issued as guidance, rather than as a formally approved requirements
document, pending the resolution of role and responsibility issues
within NNSA.
Of the three refurbishments, only the B-61 has completed its project
plan on schedule. According to NNSA documentation, the B-61 reached the
end of phase 6.2A in October 2002. We confirmed that a project plan had
been completed at that time, but the project plan did not include all
life cycle costs, such as Campaign costs and Readiness in Technical
Base and Facilities costs. In this regard, DOE's project management
manual defines life cycle costs as being the sum total of the direct,
indirect, recurring, nonrecurring, and other related costs incurred or
estimated to be incurred in the design, development, production,
operation, maintenance, support, and final disposition of a project.
Conversely, an assessment of the W-76 refurbishment indicates that the
project plan for that refurbishment is 3 years late and also does not
include all life cycle costs. According to NNSA documentation, the W-76
reached the end of phase 6.2A in March 2000. As of July 2003, a final
project plan had not yet been completed. The W-76 project manager told
us that he has been using a working draft of a project plan dated
August 2001. He indicated that he did not finalize the project plan
because the Life Extension Program Management Plan published in June
2001 had yet to be issued as a formal requirement. With the reissuance
of the management plan as a requirement in January 2003, an NNSA
official said that a finalized project plan should be completed by the
end of fiscal year 2003.
Likewise, an assessment of the W-80 refurbishment indicates that the
project plan for that refurbishment is more than 2 years late and also
does not include all life cycle costs. According to NNSA documentation,
the W-80 reached the end of phase 6.2A in October 2000. As of July
2003, a complete project plan had not been prepared. According to the
W-80 program manager, the refurbishment does not yet have an integrated
project schedule as described in the Life Extension Program Management
Plan. The W-80 program manager said that a finalized project plan with
this integrated schedule, which shows all tasks associated with the
refurbishment as well as all linkages, should be completed by mid-to-
late summer 2003. The W-80 program manager added that this integrated
schedule was not completed earlier because of personnel changes on this
refurbishment.
NNSA Does Not Yet Have an Adequate Management Structure that Fixes
Roles, Responsibilities, and Authority for Each Life Extension:
DOE's portfolio of projects demands a sophisticated and adaptive
management structure that can manage project risks systematically;
control cost, schedule, and scope baselines; develop personnel and
other resources; and transfer new technologies and practices
efficiently from one project to another, even across program lines.
With respect to the Stockpile Life Extension Program, NNSA does not
have an adequate management structure which ensures rigor and
discipline, fixes roles, responsibilities, and authority for each life
extension, or develops key personnel. Specifically, NNSA has not (1)
defined the life extensions as projects and managed them accordingly,
(2) clearly defined the roles and responsibilities of those officials
associated with the Stockpile Life Extension Program, (3) provided
program managers with sufficient authority to carry out the
refurbishments, or (4) given program and deputy program managers proper
project/program management training.
DOE projects commonly overrun their budgets and schedules, leading to
pressures for cutbacks that have resulted in facilities that do not
function as intended, projects that are abandoned before they are
completed, or facilities that have been delayed so long that, upon
completion, they no longer serve any purpose.[Footnote 9] The
fundamental deficiency for these problems has been a DOE organization
and culture that has failed to embrace the principles of good project
management. The same can be said for NNSA's view of the individual life
extension refurbishments. Specifically, NNSA has not established that
the individual refurbishments are projects and managed them
accordingly.
According to the DOE directive, a project is a unique effort that,
among other things, supports a program mission and has defined start
and end points. Examples of projects given in the DOE directive include
planning and execution of construction, renovation, and modification;
environmental restoration; decontamination and decommissioning
efforts; information technology; and large capital equipment or
technology development activities. To the extent that an effort is a
project, the DOE directive dictates that the project must follow a
structured acquisition process that employs a cascaded set of
requirements, direction, guidance, and practices. This information
helps ensure that the project is completed on schedule, within budget,
and is fully capable of meeting mission performance and environmental,
safety, and health standards.
According to the Deputy Assistant Administrator for Military
Application and Stockpile Operations, the individual life extension
refurbishments are projects but have not been officially declared so.
This official indicated that the primary reason for the lack of such a
declaration is an organizational culture, including those working at
NNSA laboratories, which often does not grasp the benefits of good
project management. This official also said that the organization is
moving in the direction of embracing project management but is doing so
at an extremely slow pace.
If NNSA declared the individual life extension refurbishments to be
projects, many useful project management tools would become available
to the NNSA program mangers who are overseeing the refurbishments.
Those tools include, for example, conducting an independent cost
estimate, which is a "bottom-up" documented, independent cost estimate
that has the express purpose of serving as an analytical tool to
validate, cross-check, or analyze cost estimates developed by the
sponsors of the project. Another tool is the use of earned value
reporting, which is a method for measuring project performance. Earned
value compares the amount of work that was planned at a particular cost
with what was actually accomplished within that cost to determine if
the project will be completed within cost and schedule estimates. A
further tool is the reporting of project status on all projects costing
over $20 million to senior DOE and NNSA management using DOE's Project
Analysis Reporting System. NNSA refurbishment program managers with
whom we spoke indicated that management of the refurbishments would be
improved if tools such as independent cost estimates and earned value
reporting were used.
With respect to roles and responsibilities, clearly defining a
project's organizational structure up front is critical to the
project's success. In a traditional project management environment, the
project manager is the key player in getting the project completed
successfully. But other members of the organization also play important
roles, and those roles must be clearly understood to avoid redundancy,
miscommunication, and disharmony. With respect to the Stockpile Life
Extension Program, NNSA has yet to clearly define the roles and
responsibilities of all parties associated with the program.
NNSA's Life Extension Program Management Plan dated June 2001 was the
controlling document for defining refurbishment roles and
responsibilities from its issuance through calendar year 2002. Our
review of that plan, however, found a lack of clarity regarding who
should be doing what. For instance, the plan is unclear on which NNSA
office is responsible for each phase of the 6.X process. Illustrating
that point, refurbishment program managers with whom we spoke generally
said there is confusion as to which NNSA office--either the Office of
Research, Development, and Simulation or the Office of Military
Application and Stockpile Operations--has the primary responsibility
when the refurbishment moves to phase 6.3 (development engineering) of
the 6.X process. In addition, according to the plan, the program
manager and deputy program manager have identical responsibilities. The
plan states that the program manager and deputy program manager shall
discuss significant aspects of the refurbishment with each other and
should reach consensus concerning important aspects of the scope,
schedule, and cost. The plan further states that absent consensus on an
issue, the program manager may decide; however, any unresolved
conflicts between the two can be addressed to senior management for
resolution. Further, the plan is silent on the roles and
responsibilities of the NNSA program and deputy program managers versus
the project manager at a laboratory or at a production plant site. What
actions the laboratory or plant project managers can take on their own,
without NNSA review and concurrence, are not specified in the plan.
Instead, the plan simply states that laboratory and plant project
managers provide overall management of life extension refurbishment
activities at their facilities.
In January 2003, NNSA reissued the Life Extension Program Management
plan after making only minor changes to the document. The reissued
management plan indicates that the program manager's role will
transition from the NNSA Office of Research, Development, and
Simulation to the NNSA Office of Military Application and Stockpile
Operations during phase 6.3. However, the reissued plan does not
specify when, during phase 6.3, this transition will occur. In
addition, the reissued plan does not further clarify the roles and
responsibilities between the program and deputy program managers and
the project manager at a laboratory or at a production plant site.
In addition to clear roles and responsibilities, project managers must
have the authority to see the project through. Regarding project
management, authority is defined as the power given to a person in an
organization to use resources to reach an objective and to exercise
discipline. NNSA's lessons learned report on the W-87 refurbishment
noted that there was an air of confusion in resolving issues at the
Kansas City plant because project leaders were not formally assigned
and provided with the tools (authority, visibility, and ownership)
necessary to properly manage the effort.[Footnote 10] Our report on the
W-87 refurbishment prepared in calendar year 2000 found similar
problems regarding the lack of authority.[Footnote 11] With respect to
the Stockpile Life Extension Program, NNSA has still not yet given the
program managers the authority to properly manage the refurbishments.
Five of the six program or deputy program managers associated with the
B-61, W-76, and W-80 refurbishments believed they had not been given
the authority to properly carry out the refurbishments.[Footnote 12]
For instance, one program manager said he has neither the control nor
the authority associated with his refurbishment. He added that the
program managers ought to be given the authority so that the
laboratories report directly to them. As the situation currently
stands, the laboratories will go over the heads of the program manager
to senior NNSA management to get things done the laboratories' way.
According to a deputy program manager on another refurbishment, the
program managers do not have enough authority and should have control
of the refurbishments' budgets. He elaborated by explaining how one
laboratory unilaterally decided to take funds away from one
refurbishment and give it to another without consulting with any of the
program managers. In this deputy program manager's view, if funds need
to be transferred from one refurbishment to another, then the
laboratories should be required to get the concurrence of NNSA
management. A program manager on another refurbishment stated that he
does not have sufficient authority because he lacks control of the
budget. He indicated that funds for his refurbishment are allocated to
the various laboratory and plant sites, but he is not included in the
review and concurrence loop if the sites want to transfer funds from
one activity to another.
The Assistant Deputy Administrator for Military Application and
Stockpile Operations said he recognized the program manager's concerns
and has advocated giving the program managers greater authority. He
also indicated that greater authority might eventually be granted.
However, he explained that at the moment, the Office of Defense
Programs is focused on a recently completed NNSA reorganization. After
that matter is sufficiently addressed, greater authority for the
program managers may result.
Turning to the issue of training, competent project management
professionals are essential to successful projects. Other federal
agencies and the private sector realized long ago that project
management is a professional discipline that must be learned and
practiced. To ensure that projects are well planned and properly
executed, DOE created in 1995 a competency standard for project
management personnel. According to this standard, it is applicable to
all DOE project management personnel who are required to plan and
execute projects in accordance with departmental directives regarding
project management. The standard identifies four categories of
competencies that all project management personnel must attain and
states that attainment must be documented. The categories are (1)
general technical, such as a knowledge of mechanical, electrical, and
civil engineering theories, principles, and techniques; (2) regulatory,
such as a knowledge of applicable DOE orders used to implement the
department's project management system; (3) administrative, such as a
knowledge of the project reporting and assessment system as outlined in
DOE orders; and (4) management, assessment, and oversight, such as a
knowledge of DOE's project management system management roles,
responsibilities, authorities, and organizational options.
Of the six program and deputy program managers assigned to the W-76, B-
61, and W-80 refurbishments, NNSA records indicate that only one of the
six (the program manager for the W-76) has achieved 100 percent
attainment of the aforementioned standards. Regarding the other five,
NNSA records indicate that the deputy program manager for the B-61 has
achieved 30 percent attainment of the required competencies contained
in the standard, while the remaining four are not enrolled under the
qualification standards program. According to one of the three program
managers with whom we spoke, the problems with the W-87 refurbishment
were caused, in part, because the assigned program manager was not
qualified to perform all required tasks. NNSA records confirm that that
particular W-87 program manager was also not enrolled in the project
management qualification program.
Whereas NNSA program managers are required to meet qualifications
standards to discharge their assigned responsibilities, contractor
project management personnel we contacted are not required to meet any
project management standards. According to W-76, B-61, and W-80
refurbishment project managers at the Sandia National Laboratories,
Lawrence Livermore National Laboratory, and Los Alamos National
Laboratory, their respective laboratories have no requirements that
must be met before a person becomes a project manager, and none of the
managers had attained project management certification through their
previous work assignments and experiences. NNSA officials also
acknowledge that neither DOE nor NNSA orders require contractor project
management personnel to be properly trained and certified.
NNSA Does Not Have an Adequate Process for Overseeing Life Extension
Program Costs and Schedules:
Effective oversight of project performance is dependent on the
systematic and realistic reporting of project performance data. Senior
management need such data to be able to detect potentially adverse
trends in project progress and to decide when intervention is
necessary. With respect to the Stockpile Life Extension Program, NNSA
does not have an adequate process for reporting life extension changes
and progress, despite the fact that cost growth and schedule slippage
are occurring.
In July 2002, the Office of Defense Programs issued program review
guidance to enable advance planning, provide consistency, set clearer
expectations, and establish a baseline process on which to improve life
extension, program reviews. Various review meeting formats were
articulated including a full program review of each refurbishment to be
conducted monthly on a rotating basis. The goals and objectives of the
full program review were to inform management of project status,
convince management that the refurbishment is well managed, gain
management's assistance in resolving issues that require its
involvement, and identify management decision points and obtain
authority to execute risk mitigation plans.
Our review of the most recent program review reports prepared on the
individual refurbishments showed that they contained limited
information regarding cost growth and schedule changes against
established baselines. These reports, which are prepared for senior
NNSA management, show whether the respective refurbishment is on track
to spend all fiscal year funding, but not whether the actual work
completed has cost more or less than planned. For example:
* According to W-76 program review reports presented in November 2002
and February 2003, the refurbishment was on track to spend all funding
allocated for fiscal year 2003. In addition, the refurbishment was
slightly behind schedule but manageable and within budget. On the other
hand, the presentations gave no specifics on how much the refurbishment
is behind schedule or how well the refurbishment was progressing
against a life cycle cost baseline. Specifically, costs associated with
certain procurements, Campaign costs, Readiness in Technical Base and
Facilities costs, construction costs, and transportation costs which
make up the life cycle costs of the refurbishment were not included.
The presentations also showed that the refurbishment had not met at
least two commitments during fiscal year 2002.
* According to the W-80 program review report presented in December
2002, the refurbishment was on track to spend all funding allocated for
fiscal year 2003. In addition, the refurbishment was within cost and
within scope, but behind schedule. On the other hand, the report gave
no specifics on how much the refurbishment was behind schedule or how
well the refurbishment was progressing against a life cycle cost
baseline. The presentation further mentioned that the refurbishment had
high risks because, for instance, the Air Force was currently not
funding certain work that must be performed in order to meet the
established first production unit date of February 2006.
* As opposed to the above reports, the B-61 program review reports
presented in January and March 2003 made no summary statements
regarding the refurbishment's cost and schedule status against
established baselines. The presentations also indicated that the
refurbishment is on schedule to spend all funding allocated for fiscal
year 2003. On the other hand, the presentations showed that the
refurbishment has already not met several commitments for fiscal year
2003, suggesting that the refurbishment may be behind schedule.
Absent the periodic reporting of specific cost growth and schedule
information to senior NNSA management, we interviewed cognizant NNSA
officials to document any cost growth and schedule changes associated
with the individual refurbishments. These officials recognized that
certain cost growth and schedule changes had occurred for each of the
refurbishments. These officials added that cost growth and schedule
changes are routinely discussed during meetings on the refurbishments.
According to the W-76 program manager, this refurbishment is slightly
behind schedule. In particular, the W-76 did not conduct certain
activities on schedule, such as deciding whether to reuse or
remanufacture certain components, conduct a certain reactor test at Los
Alamos National Laboratory, and construct certain facilities at the Y-
12 plant. The reasons why these activities were late varied. For
instance, the decision to reuse or remanufacture certain components did
not occur on schedule, according to the W-76 program manager, primarily
because the NNSA person assigned to do the necessary calculations
neglected to perform that task. Conversely, the reactor test at the Los
Alamos National Laboratory did not occur on schedule because the
laboratory unilaterally transferred funds from the W-76 refurbishment
to the B-61. As to cost growth, the W-76 will need about $10.75 million
in additional funding in fiscal year 2004. The funding is necessary to
purchase certain commercial off-the-shelf parts that were previously
not authorized or budgeted for.
According to NNSA field and Sandia National Laboratory officials, it is
unlikely that the W-80 will meet its scheduled first production unit
delivery date. Echoing those sentiments, according to the NNSA program
manager, the W-80 was scheduled to enter phase 6.4 (production
engineering) on October 1, 2002. Now, however, it is hoped that phase
6.4 will commence in 2003. The NNSA program manager indicated that the
W-80 has been impacted by a lack of funding for the refurbishment from
the Air Force. This lack of funding, the NNSA program manager said, has
occurred because of a disconnect in planning between the 6.X process
and the Department of Defense budget cycle. The Air Force had made no
plans to allocate money for the W-80 in either its fiscal year 2001 or
2002 budgets. Therefore, several important joint NNSA and Air Force
documents have not been completed. Certain ground and flight tests also
lack funding and have been delayed. In addition, the W-80 will need an
additional $8 million to $9 million in fiscal year 2003 to buy certain
commercial off-the-shelf parts that had been planned but not budgeted
for. According to the Air Force's Lead Program Officer on the W-80, the
Air Force, because of an oversight, had no money for the W-80 in its
fiscal years 2001 and 2002 budgets. As a result, he anticipated that
the first production unit delivery date will need to be slipped. He
also indicated that he was working on a lessons learned report due in
early 2003 to document the situation with the W-80 and help ensure that
a similar funding problem does not occur with future refurbishments.
This Air Force official added that in December 2002 the Air Force
finally received the funding necessary to support the W-80
refurbishment. According to the NNSA director of the nuclear weapons
stockpile, the W-80 will need to slip its first production unit date
from February 2006 to April 2007. As a result, NNSA was rebaselining
the W-80 refurbishment. As of July 2003, cost data submitted to NNSA
headquarters from contractor laboratory and production site locations
indicate that the cost to refurbish the W-80 may increase by about $288
million. NNSA officials were in the process of determining whether this
cost increase was due to schedule slippage or other factors, such as
the sites underestimating costs in the past.
Finally, certain schedule slippage has already occurred for the B-61.
According to NNSA's June 2001 Life Extension Program Management Plan,
the original first production unit delivery date was September 2004.
Now, according to the B-61 program manager, the new delivery date is
June 2006. The program manager indicated that this change was made
because NNSA determined that the September 2004 date was not
attainable. As it is, the B-61 program manager said, the June 2006 date
represents an acceleration of the phase 6.X process where activities
within phases 6.3 (design definition and cost study) and 6.4
(development engineering) will be conducted concurrently. Because of
that, certain risks are involved. For instance, some design development
will not be fully completed before production must be initiated to keep
the refurbishment on schedule. The B-61 program manager indicated that
the commencement date for phase 6.3 has already changed from August
2002 to December 2002 because of the Air Force's lack of timely action
in reviewing certain documentation. As to cost changes, a decision
needs to be made regarding the production of a particular material. Two
NNSA locations, which differ in cost, are being considered. If the
location with the higher cost is selected, then an additional $10
million will be needed in fiscal year 2004 and beyond.
To gauge the progress of the refurbishments within the Stockpile Life
Extension Program, NNSA, like all federal agencies, uses performance
measures. Performance measures, which are required by the Government
Performance and Results Act of 1993, are helpful to senior agency
management, the Congress, and the public. Performance measures inform
senior agency management as to whether progress is being made toward
accomplishing agency goals and objectives. They are also used by the
Congress to allocate resources and determine appropriation levels.
Performance measures are further used by American taxpayers as a means
for deciding whether their tax funds are being well spent.
Unfortunately, NNSA has not developed performance measures with
sufficient specificity to determine the progress of the three
refurbishments that we reviewed. As mentioned earlier, the agency's
current accounting system does not provide an adequate link between
cost and performance measures.
NNSA identifies performance measures for the W-80, B-61, and W-76 in
three separate and distinct documents.[Footnote 13] One document is the
narrative associated with NNSA's fiscal year 2004 budget request for
the Directed Stockpile Work account. Another is the combined program
and implementation plans for the stockpile maintenance program for
fiscal years 2002 through 2008. A third is the Future Years Nuclear
Security Plan. Performance measures used in these documents do not
identify variance from cost baselines as a basis for evaluating
performance.
Performance measures identified in NNSA's fiscal year 2004 budget
request are general in nature and provide no details regarding cost
performance. According to that budget request, for instance, a
performance measure listed for the B-61, W-76, and W-80 is to complete
100 percent of the major milestones scheduled for fiscal year 2004 to
support the refurbishments' first production unit date. None of the
performance measures listed in the budget request mention adherence to
cost baselines.
Performance measures identified in the combined program and
implementation plans for the Directed Stockpile Work maintenance
program dated September 3, 2002, are equally minimal, vague, and
nonspecific regarding refurbishment work. These plans identify
performance measures at three levels--level 1, the Defense Program
level, which is the highest level of actions/milestones/deliverables;
level 2, which is the supporting level of actions/milestones/
deliverables on the path toward achieving level 1 measures; and level
3, which is the site level of actions/milestones/deliverables on the
site path toward achieving level 2 measures. According to these plans,
there are no level 1 performance measures associated with the three
refurbishments. For levels 2 and 3, the plans specify that the three
refurbishments should meet all deliverables as identified in other NNSA
documents. These plans, we noted, do not discuss adherence to cost
baselines as a deliverable.
Performance measures identified in the Future Years Nuclear Security
Plan are also vague and nonspecific. This plan describes performance
targets that NNSA hopes to achieve in fiscal years 2003 through 2007,
but the plan does not associate funding levels with those targets. Some
of the performance targets apply to the Stockpile Life Extension
Program in general or to particular refurbishments. Regarding the
latter, for example, in fiscal year 2003, NNSA intends to commence
production engineering work (phase 6.4) for the B-61, W-76, and W-80
refurbishments, and to eliminate W-76, W-80, and W-87 surveillance
backlogs. The plan, however, does not associate funding estimates with
these performance targets.
According to the Assistant Deputy Administrator for Military
Application and Stockpile Operations, the refurbishment performance
measures contained in the three aforementioned documents are admittedly
not very good. He indicated that the Office of Defense Programs is
moving toward linking key performance measures to appropriate NNSA
goals, strategies, and strategic indicators. The Assistant Deputy
Administrator stated that he hoped that the performance measures for
fiscal year 2005 would provide a better basis for evaluating the
refurbishments' progress in adhering to cost baselines.
NNSA Has Various Actions Underway to Fix Its Management Problems:
While NNSA management problems are many and long-standing, so too have
been NNSA attempts to effect improvement. NNSA has repeatedly studied
and analyzed ways to ensure that mistakes made in the past regarding
the safety of nuclear weapons, the security of nuclear facilities, and
the protection of nuclear secrets are not repeated in the future.
Accordingly, NNSA has various actions underway to fix its management
problems.
Foremost of those actions has been the December 2002 completion of a
reorganizational transformation campaign. In announcing this
reorganization, the NNSA administrator said the reorganization follows
the principles outlined in the President's Management Agenda, which
strives to improve government through performance and results. The new
reorganization will reportedly streamline NNSA by eliminating one layer
of management at the field office level. It will also improve
organizational discipline and efficiency by requiring that each element
of the NNSA workforce will become ISO 9001 certified by December 31,
2004. ISO 9001 is a quality management standard that has been
recognized around the world. The standard applies to all aspects
necessary to create a quality work environment, including establishing
a quality system, providing quality personnel, and monitoring and
measuring quality.
In concert with NNSA's overall reorganization has been the creation of
a program integration office in August 2002. This new office will be
working to create better coordination and cooperation between NNSA
Office of Defense Program elements. The new office is composed of three
divisions: one that will be performing strategic planning and studies;
one that will be looking at the strategic infrastructure; and one that
will be doing planning, budgeting, and integration work. The
implementation plan for this new office, as of July 2003, had not yet
been approved and disseminated because of a major personnel downsizing
that is underway.
Nonetheless, this new office has already embarked on various
initiatives. One initiative is to decide on a cost baseline for the
Stockpile Life Extension Program. According to the Director of Defense
Programs' Office of Planning, Budgeting and Integration, a completion
date for this work has not yet been set. A second initiative is to
develop an integrated master schedule for the Stockpile Life Extension
Program that will help identify and resolve schedule and resource
conflicts. The director indicated that such a schedule should be
available at the end of calendar year 2003. A third initiative is to
develop consistent criteria for reporting schedule activities and
critical milestones. The director indicated that without such criteria
there is no assurance that consistent information is being reported on
the individual refurbishments. The director indicated that these
criteria would be developed during the summer of 2003.
Of no less importance to the organizational changes, NNSA has
implemented an overall planning, programming, budgeting, and evaluation
process. The goal of this process is to obtain and provide the best mix
of resources needed to meet national nuclear security objectives within
fiscal restraints. Through planning, the process will examine
alternative strategies, analyze changing conditions and trends,
identify risk scenarios, assess plausible future states, define
strategic requirements, and gain an understanding of the long-term
implications of current choices. Through programming, the process will
evaluate competing priorities and mission needs, analyze alternatives
and trade-offs, and allocate the resources needed to execute the
strategies. Through budgeting, the process will convert program
decisions on dollars into multiyear budgets that further refine the
cost of the approved 5-year program. Through evaluation, the process
will apply resources to achieve program objectives and adjust
requirements, based on feedback. This process was partially rolled out
for the fiscal year 2004 budget cycle, with full implementation
scheduled for fiscal year 2005.
A separate effort has been the establishment of a project/program
management reengineering team in August 2002. According to the team's
charter, NNSA does not manage all its programs effectively and
efficiently. Therefore, the mission of this team was to develop a
program management system, including policies, guides, procedures,
roles, responsibilities, and definitions that would enable NNSA to
achieve excellence in program management. The observations of the team,
as of September 2002, were that the state of health of the NNSA program
management processes is very poor, and this condition significantly
affects the ability of NNSA to achieve its missions effectively and
efficiently. In the words of the team, many essential elements of an
effective program management system do not exist. Examples given
included no documented roles and responsibilities and no documented
overarching process for program management. According to the team
leader, an implementation plan to improve NNSA program management was
submitted to the administrator for approval in October 2002. As of July
2003, the implementation plan had not been approved. According to the
Director of Defense Programs' Office of Program Integration, no action
has been taken on this implementation plan while NNSA has been
addressing its recent reorganization. It is now hoped, according to
this official, that project/program improvement actions can be
identified and implemented by the start of fiscal year 2004.
Conclusions:
Extending the life of the weapons in our nation's nuclear stockpile
represents one of the major challenges facing NNSA. It will demand a
budget of hundreds of millions of dollars annually for the next decade.
Considerable coordination between the design laboratories and the
production facilities will be necessary as the four life extensions
compete for scarce resources. Where conflicts occur, trade-offs will be
required--trade-offs that must be made by federal managers,
contractors, and, ultimately, the Congress. All of these things cannot
occur without sound budgeting. Likewise, all parties involved in the
oversight of the Stockpile Life Extension Program must be able to
determine the true cost to complete the life extensions throughout the
refurbishment process, identify cost overruns as they develop, and
decide when intervention in those cost overruns is necessary. This
cannot occur without sound cost accounting. Finally, the life
extensions must be properly managed because the consequences of less
than proper management are too great. Those consequences, as seen on
the W-87 life extension, include potential cost overruns in the
hundreds of millions of dollars and refurbishment completion occurring
beyond the dates required for national security purposes. To avoid
these consequences, the life extensions must have adequate planning; a
clear leadership structure which fixes roles, responsibilities, and
authority for each life extension; and an adequate oversight process.
While NNSA has begun to put in place some improved budgeting and
management processes, additional action is necessary if it is to
achieve the goal of a safe and reliable stockpile that is refurbished
on cost and on schedule.
Recommendations for Executive Action:
To improve the budgeting associated with the Stockpile Life Extension
Program, we recommend that the Secretary of Energy direct the NNSA
Administrator to:
* include NNSA's stockpile life extension effort as a formal and
distinct program in its budget submission and present, as part of its
budget request, a clear picture of the full costs associated with this
program and its individual refurbishments by including the
refurbishment-related costs from Campaigns, Readiness in Technical Base
and Facilities, and multiple system work, and:
* validate the budget request in accordance with DOE directives.
To improve cost accounting associated with the Stockpile Life Extension
Program, we recommend that the Secretary of Energy direct the NNSA
Administrator to:
* establish a managerial cost accounting process that accumulates,
tracks, and reports the full costs associated with each individual
refurbishment, including the refurbishment-related costs from
Campaigns, Readiness in Technical Base and Facilities, and multiple
system work.
To improve the management of the Stockpile Life Extension Program, we
recommend that the Secretary of Energy direct the NNSA Administrator
to:
With respect to planning:
* finalize the Office of Defense Programs' integrated program plan and,
within that plan, rank the Stockpile Life Extension Program against all
other defense program priorities, establish the relative priority among
the individual life extension refurbishments, and disseminate the
ranking across the nuclear weapons complex so that those within that
complex know the priority of the refurbishment work;
* develop a formalized process for identifying resource and schedule
conflicts between the individual life extension efforts and resolve
those conflicts in a timely and systematic manner; and:
* finalize individual refurbishment project plans.
With respect to management structure:
* establish the individual refurbishments as projects and manage them
according to DOE project management requirements;
* clearly define the roles and responsibilities of all parties
associated with the Stockpile Life Extension Program;
* provide the life extension program managers with the authority and
visibility within the NNSA organization to properly manage the
refurbishments; and:
* require that life extension program managers and others involved in
management activities receive proper project/program management
training and qualification.
With respect to oversight of cost and schedule:
* institute a formal process for periodically tracking and reporting
individual refurbishment cost, schedule, and scope changes against
established baselines, and:
* develop performance measures with sufficient specificity to determine
program progress.
Agency Comments:
We provided NNSA with a draft of this report for review and comment.
Overall, NNSA stated that it recognized the need to change the way the
Stockpile Life Extension Program was managed and that it generally
agreed with the report's recommendations. For instance, NNSA stated
that it had independently identified many of the same concerns, and,
over the past 12 months, had made significant progress in implementing
plans, programs, and processes to improve program management. NNSA
indicated that full implementation of our management and budgeting
recommendations will take several years; however, NNSA is committed to
meeting these objectives. NNSA also provided some technical comments
which it believed pointed out factual inaccuracies. We have modified
our report, where appropriate, to reflect NNSA's comments. NNSA's
comments on our draft report are presented in appendix I.
Scope and Methodology:
We performed our work at DOE's and NNSA's headquarters and Sandia
National Laboratories, Los Alamos National Laboratory, and the Kansas
City plant from July 2002 through July 2003 in accordance with
generally accepted government auditing standards. To determine the
extent to which the Stockpile Life Extension Program's budget requests
for fiscal years 2003 and 2004 were comprehensive and reliable, we
reviewed those requests as well as NNSA supporting documentation, such
as guidance issued to develop those requests, information related to
NNSA's planning, programming, budgeting, and evaluation process, and
budget validation reports. We also discussed those budget requests with
DOE and NNSA budget officials and an official with the Office of
Management and Budget. To determine the extent to which NNSA has a
system for accumulating, tracking, and reporting program costs, we
identified how cost data is tracked in DOE's information systems and in
selected contractors' systems by interviewing key DOE, NNSA, and
contractor officials responsible for the overall Stockpile Life
Extension Program and the individual refurbishments and by reviewing
pertinent documents. We also identified how DOE and NNSA ensure the
quality and comparability of cost and performance data received from
contractors by interviewing DOE and NNSA officials, DOE Office of
Inspector General officials, and selected contractors' internal
auditors, and by reviewing pertinent documents including previously
issued GAO and DOE Office of Inspector General reports. To determine
the extent to which other management problems related to the Stockpile
Life Extension Program exist at NNSA, we reviewed pertinent NNSA
documentation, such as NNSA's Strategic Plan, the Office of Defense
Programs' draft integrated plan, the Life Extension Program Management
Plan, and project plans and variance reports required by the Life
Extension Program Management Plan for the B-61, W-76, and W-80
refurbishments. We also interviewed key DOE, NNSA, and contractor
officials involved with the Stockpile Life Extension Program, and, in
particular, the program and deputy program managers of the B-61, W-76,
and W-80 refurbishments. Finally, we attended the NNSA quarterly
program review meetings on each of the refurbishments.
Signed by:
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 10 days
after the date of this letter. At that time, we will send copies of the
report to the Secretary of Energy, the Administrator of NNSA, the
Director of the Office of Management and Budget, and appropriate
congressional committees. We will make copies available to others on
request. In addition, the report will also be available at no charge on
the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please call
me at (202) 512-3841. Major contributors to this report are listed in
appendix II.
Robin M. Nazzaro
Director, Natural Resources and Environment:
Signed by Robin M. Nazzaro:
List of Congressional Requesters:
The Honorable David L. Hobson
Chairman,
Energy and Water Development Subcommittee
House Committee on Appropriations:
The Honorable Peter J. Visclosky
Ranking Minority Member,
Energy and Water Development Subcommittee
House Committee on Appropriations:
The Honorable Terry Everett
Chairman,
Subcommittee on Strategic Forces
House Committee on Armed Services:
The Honorable Silvestre Reyes
Ranking Minority Member,
Subcommittee on Strategic Forces
House Committee on Armed Services:
[End of section]
Appendixes:
Appendix I: Comments from the National Nuclear Security
Administration:
National Nuclear Security Administration:
Department of Energy:
National Nuclear Security Administration Washington, DC 20585:
JUL 17 2003:
Ms. Robin M. Nazzaro Director, Natural Resources and Environment:
U.S. General Accounting Office Washington, D.C. 20548:
Dear Ms. Nazzaro:
The General Accounting Office's (GAO) draft report GAO-02-583, "NUCLEAR
WEAPONS: Opportunities Exist to Improve the Budgeting, Cost Accounting,
and Management Associated with the Stockpile Life Extension Program,"
has been reviewed by the National Nuclear Security Administration
(NNSA). We understand that the Armed Services and Appropriations
Committees of the House asked the GAO to determine (1) how well NNSA's
budget identifies Life Extension Program costs; and, (2) the mechanisms
in place to both manage and accumulate costs for the Life Extension
Program.
NNSA has recognized the need to change the way the Life Extension
Program is managed, and we generally agree with the report's
recommendations. NNSA had independently identified many of the same
concerns, and over the past 12 months the agency has made significant
progress in implementing plans, programs and processes to improve
program management. The improvements suggested by the GAO in management
of the weapon refurbishment activities are already underway; for
example, NNSA is re-engineering in Headquarters and the field elements,
by formalizing the roles and responsibilities and training of all NNSA
program managers, and by implementation of PPBE as the core operating
concept for NNSA. The PPBE requirements for Planning, Programming,
Budgeting and Evaluation encompass essentially all of the GAO's
recommendations.
The improvements in budgeting will begin in FY 2005 by: restructuring
the Directed Stockpile Work activities to a system-by-system
orientation; re-evaluating the content of the Campaigns to realign
direct weapons work if necessary; and by implementing a budget and
reporting (B&R) structure for accounting based on individual weapon
systems. Also, Life cycle costs are now formalized through Selected
Acquisition Reports, modeled after the DOD Selected Acquisition Report,
subject to change control, annual review, and validation. Full
implementation of GAO's management and budgeting recommendations will
take several years but NNSA is committed to meeting these objectives.
I have enclosed technical comments to this letter which point out some
factual inaccuracies, erroneous conclusions, and provide additional
general comments. Should you have any questions, please contact Richard
Speidel, Director, Policy and Internal Controls Management, at 202-586-
5009.
Sincerely,
Michael C. Kane:
Associate Administrator for Management and Administration:
Signed by Michael C. Kane:
Enclosure:
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
James Noel (202) 512-3591:
Acknowledgments:
In addition to the individual named above, Sally Thompson, Mark
Connelly, Mike LaForge, Tram Le, Barbara House, and Stephanie Chen from
our Financial Management and Assurance mission team and Robert Baney,
Josephine Ballenger, and Delores Parrett from our Natural Resources and
Environment mission team were key contributors to this report.
(360195):
FOOTNOTES
[1] Though NNSA is a separately organized agency within DOE, NNSA
Policy Letter NAP-1, dated May 21, 2002, stipulates that DOE directives
are applicable to NNSA unless or until a NNSA policy letter is
provided.
[2] Nuclear Weapons: Improved Management Needed to Implement Stockpile
Stewardship Program Effectively, GAO-01-48 (Washington, D.C.: Dec. 14,
2000).
[3] Currently, the U.S. nuclear weapons stockpile consists of nine
types of bombs and missile warheads, numbering several thousand
devices, which are either stored at strategic military locations or
deployed on military aircraft, missiles, or submarines.
[4] The primary is the fission stage of a nuclear weapon. Detonation of
the primary produces the extremely high temperatures and pressures
required to produce fusion in the weapon's secondary.
[5] A pit is the initial, subcritical assembly of fissile material in a
nuclear weapon. In such an assembly, a fission chain reaction can be
sustained only by the addition of neutrons from an independent source.
[6] Nuclear Weapon Acquisition Reports are intended to provide a
comprehensive look at program progress by providing information on past
performance, anticipated changes, and variances from planned cost,
schedule, and performance estimates from program inception to
completion, regardless of the program's stage of development. In our
report, NNSA: Nuclear Weapon Reports Need to Be More Detailed and
Comprehensive, GAO-02-889R (Washington, D.C.: July 3, 2002), we
commented on the adequacy of these reports.
[7] DOE has defined its goals according to four mission areas, which
are Energy, Defense, Science, and Management.
[8] Preliminary Lessons Learned Report for the W-87 Life Extension
Program, Sept. 23, 2001.
[9] Improving Project Management in the Department of Energy, National
Research Council, 1999.
[10] Preliminary Lessons Learned Report for the W-87 Life Extension
Program, Sept. 23, 2001.
[11] Nuclear Weapons: Improved Management Needed to Implement Stockpile
Stewardship Program Effectively, GAO-01-48 (Washington, D.C.: Dec. 14,
2000).
[12] The sixth individual, a deputy program manager on one of the
refurbishments, was not available to us for discussions due to an
illness.
[13] NNSA also prepares a Selected Acquisition Report on an annual
basis on each of the refurbishments, but these reports do not contain
performance measures.
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