Hanford Waste Treatment Plant
Contractor and DOE Management Problems Have Led to Higher Costs, Construction Delays, and Safety Concerns Gao ID: GAO-06-602T April 6, 2006The Waste Treatment Plant Project at the Department of Energy's (DOE) Hanford site in southeastern Washington state is a massive effort to stabilize and prepare for disposal 55 million gallons of radioactive and hazardous wastes currently held in underground tanks. In 2000, DOE awarded an 11-year, $4.3 billion contract project to Bechtel National, Inc. (Bechtel) to design and construct the plant. Since then, numerous problems and changes have occurred that will significantly increase the project's final cost and completion date. This testimony discusses (1) how and why the project's cost and schedule have changed since 2000; (2) the status of DOE and Bechtel efforts to address these problems and improve project management; and (3) our observations on issues that need to be addressed in going forward. It is based on previous GAO reports and ongoing work.
Since the waste treatment plant construction contract was awarded in 2000, the project's estimated cost has increased more than 150 percent to about $11 billion, and the completion date has been extended from 2011 to 2017 or later. There are three main causes for the increases in the project's cost and completion date: (1) the contractor's performance shortcomings in developing project estimates and implementing nuclear safety requirements, (2) DOE management problems, including inadequate oversight of the contractor's performance, and (3) technical challenges that have been more difficult than expected to address. To address the causes of the cost and schedule increases and regain management control of the project, DOE and Bechtel have taken steps to develop a more reliable cost and schedule baseline; slow down or stop construction activities on some of the facilities to allow time to address technical and safety problems and to advance design activities farther ahead of construction activities; and strengthen both project management and project oversight activities. Despite these actions, we have continuing concerns about the current strategy for going forward on the project. Our main concerns include: (1) the continued use of a fast-track, design-build approach for the remaining work on the construction project, (2) the historical unreliability of cost and schedule estimates, and (3) inadequate incentives and management controls for ensuring effective project management and oversight.
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-06-602T, Hanford Waste Treatment Plant: Contractor and DOE Management Problems Have Led to Higher Costs, Construction Delays, and Safety Concerns
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Testimony:
Before the Subcommittee on Energy and Water Development and Related
Agencies, Committee on Appropriations, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, April 6, 2006:
Hanford Waste Treatment Plant:
Contractor and DOE Management Problems Have Led to Higher Costs,
Construction Delays, and Safety Concerns:
Statement of Gene Aloise, Director, Natural Resources and Environment:
GAO-06-602T:
GAO Highlights:
Highlights of GAO-06-602T, a testimony to the Subcommittee on Energy
and Water Development and Related Agencies, Committee on
Appropriations, House of Representatives:
Why GAO Did This Study:
The Waste Treatment Plant Project at the Department of Energy‘s (DOE)
Hanford site in southeastern Washington state is a massive effort to
stabilize and prepare for disposal 55 million gallons of radioactive
and hazardous wastes currently held in underground tanks. In 2000, DOE
awarded an 11-year, $4.3 billion contract project to Bechtel National,
Inc. (Bechtel) to design and construct the plant. Since then, numerous
problems and changes have occurred that will significantly increase the
project‘s final cost and completion date.
This testimony discusses (1) how and why the project‘s cost and
schedule have changed since 2000; (2) the status of DOE and Bechtel
efforts to address these problems and improve project management ; and
(3) our observations on issues that need to be addressed in going
forward. It is based on previous GAO reports and ongoing work.
What GAO Found:
Since the waste treatment plant construction contract was awarded in
2000, the project‘s estimated cost has increased more than 150 percent
to about $11 billion, and the completion date has been extended from
2011 to 2017 or later. There are three main causes for the increases in
the project‘s cost and completion date: (1) the contractor‘s
performance shortcomings in developing project estimates and
implementing nuclear safety requirements, (2) DOE management problems,
including inadequate oversight of the contractor‘s performance, and (3)
technical challenges that have been more difficult than expected to
address.
To address the causes of the cost and schedule increases and regain
management control of the project, DOE and Bechtel have taken steps to
develop a more reliable cost and schedule baseline; slow down or stop
construction activities on some of the facilities to allow time to
address technical and safety problems and to advance design activities
farther ahead of construction activities; and strengthen both project
management and project oversight activities.
Despite these actions, we have continuing concerns about the current
strategy for going forward on the project. Our main concerns include:
(1) the continued use of a fast-track, design-build approach for the
remaining work on the construction project, (2) the historical
unreliability of cost and schedule estimates, and (3) inadequate
incentives and management controls for ensuring effective project
management and oversight.
Progression of Cost Estimates on the WTP Project:
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that DOE (1) consider the feasibility of completing 90
percent of facility design or facility component design before
restarting construction; (2) ensure that the revised project baseline
fully reflects remaining uncertainties; and (3) improve management
controls.
DOE generally agreed, but was concerned about the costs of delaying
construction to complete design activities.
www.gao.gov/cgi-bin/getrpt?GAO-06-602T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gene Aloise at (202) 512-
3841 or aloiseg@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to appear before the Subcommittee today to discuss our
work on the Department of Energy's (DOE) Waste Treatment Plant Project
(WTP) under construction at DOE's Hanford site in southeastern
Washington state. The purpose of this massive project is to stabilize
and prepare for disposal large quantities of radioactive and hazardous
wastes stored in underground tanks. From the 1940s through most of the
1980s, 9 nuclear reactors operated at the Hanford site, producing
plutonium and other special nuclear materials primarily for DOE's
weapons program. Producing these special nuclear materials generated
large volumes of hazardous and radioactive waste. Some of this waste
was deposited directly into the ground in trenches, injection wells, or
other facilities designed to allow the waste to disperse into the soil;
and some was packaged into drums and other containers and buried. The
most dangerous waste was stored in 177 large underground storage tanks.
DOE has managed this tank waste over the years as high-level waste. The
underground tanks currently hold more than 55 million gallons of this
waste--enough to fill an area the size of a football field to a depth
of over 150 feet. DOE, the Environmental Protection Agency (EPA), and
the Washington state Department of Ecology--have determined that
stabilizing this waste is one of the most urgent cleanup activities at
the Hanford site.
The Hanford site occupies 586 square miles near the cities of Richland,
Pasco, and Kennewick, with a combined regional population of over
200,000. The Columbia River--the second largest river in the United
States and a source for hydropower production, agricultural irrigation,
drinking water, and salmon reproduction--flows through the site for
almost 50 miles. Although the underground storage tanks are several
miles from the river, tank monitoring data and detection techniques
have shown that some of the tanks have leaked in the past. Because the
contamination has reached the groundwater under the tanks, officials
are concerned that it is now making its way to the Columbia River.
To stabilize the approximately 55 million gallons of waste remaining in
the tanks, Hanford's waste treatment project involves (1) designing,
constructing, and testing a waste treatment plant[Footnote 1] (the
construction project) and (2) operating this plant and others in
subsequent years to process and prepare the tank waste for permanent
disposal (the operations project). Schedule milestones for stabilizing
the tank waste and preparing it for disposal, as well as agreements on
the technologies to be used, are set forth in the Hanford Federal
Facility Agreement and Consent Order between DOE, Washington state's
Department of Ecology, and EPA. This agreement, commonly called the
"Tri-Party Agreement," was signed in May 1989.
In 2000, DOE awarded an 11-year, $4.3 billion contract for the
construction project to Bechtel National, Inc. (Bechtel). DOE plans to
solicit bids through a competitive process and award a separate
contract to operate the WTP once the construction project is completed.
Since the contract with Bechtel began in 2000, numerous problems with
and changes to the construction project have occurred, which has
significantly affected the project's final cost and completion date. My
testimony will discuss: (1) how the project's cost and schedule have
changed since the contract was awarded to Bechtel in December 2000, and
the primary causes for those changes; (2) the status of DOE and Bechtel
efforts to address these causes and establish effective management
controls over the project; and (3) our observations on issues that need
to be addressed in going forward on the project.
My testimony is based on our past reviews of DOE's Environmental
Management program and the Hanford project, especially our 2004 report
on the project,[Footnote 2] and our currently ongoing work for this
Subcommittee. Regarding our ongoing work, in order to understand how
the project's cost and schedule estimates have changed, the reasons for
those changes, and efforts to address any problems, we obtained and
analyzed project documents and records developed by DOE and Bechtel as
well as evaluations of various aspects of the project conducted by the
U.S. Army Corps of Engineers and other independent reviews. We also
interviewed DOE and Bechtel project and technical managers about the
main causes of the cost increases and schedule delays and steps they
are taking to address the problems. We also toured the construction
site to observe the actual condition of the facilities. A more complete
discussion of our scope and methodology is presented in appendix II. We
conducted our review from June through September 2005 and from January
through April 2006 in accordance with generally accepted government
auditing standards. We are continuing our work on this project and plan
to issue a final report in October 2006.
In summary, we found the following:
The Hanford waste treatment plant construction project's estimated cost
has increased over 150 percent to about $11 billion since 2000, and the
completion schedule has been extended by 6 years to at least 2017.
There are three main causes for these results--contractor performance
problems, DOE management shortcomings, and difficulties addressing
various technical challenges encountered during design and
construction.
Regarding the contractor's performance:
* Bechtel has performed poorly on several aspects of the project. For
example, Bechtel significantly underestimated the price of steel and
how much engineering effort would be needed to complete facility
designs. These mistakes, and others like them, have added about $2
billion to project costs. Bechtel also continues to need increased
contingency funding for unexpected problems. Adjusting for additional
contingency funding added over $2 billion to the cost estimate.
Importantly, Bechtel failed on several occasions to ensure that nuclear
safety requirements were being met, including allowing design changes
to be made without following nuclear safety procedures and failing to
detect serious construction flaws in tanks that will hold radioactive
material in the facilities.
Regarding DOE management:
* DOE has followed an approach to constructing the project known as
"fast-track," design-build ---where design, construction, and
technology development occur simultaneously. However, this approach is
not recommended for designing and constructing one-of-a-kind, complex
nuclear facilities because, among other things, it increases the risk
of encountering problems that can adversely affect a project's cost and
schedule. DOE also did not establish project management requirements
and DOE headquarters staff was not involved in evaluating the project
or the contractor's performance.
Regarding technical challenges:
* Bechtel and DOE have encountered many technical problems with
facility design and equipment that are taking considerable more time
and money than expected to address and correct. These problems include
reengineering plant facilities to withstand earthquakes; correcting
design and operation problems with waste mixing pumps; and preventing
flammable hydrogen gas from building up to unsafe levels in tanks and
pipes. Although final cost estimates are not yet available, as of April
2005, these technical challenges have added about $1.4 billion to
project cost estimates.
To address project cost and schedule problems, DOE and Bechtel have
focused on three main areas--slowing down construction while addressing
technical and safety problems; establishing new project cost and
schedule estimates; and strengthening project management and oversight.
For example, DOE directed Bechtel to slow down or stop construction
activities on the two facilities affected by changing earthquake
protection requirements--the pretreatment facility and the high-level
waste treatment facility. Slowing the pace of construction will allow
more time to address technical and safety problems and make any needed
design changes before construction is restarted. DOE also directed
Bechtel to develop a new project cost and schedule baseline starting
with an analysis of material and labor quantities and costs, and
incorporating more contingency funding to address future uncertainties.
DOE's project management improvements have included developing a
headquarters oversight board that includes several senior DOE
executives and funding independent reviews of (1) the new project
baseline by the Corps of Engineers and (2) the technical feasibility of
the treatment project by a panel of outside experts. These initiatives
are ongoing. Bechtel has focused on improving its project performance
information, implementing several management and organizational
changes, and strengthening safety and quality assurance practices.
Despite the steps DOE and Bechtel have taken to address technical,
safety, and other management problems on the construction project, we
have continuing concerns about the current strategy for going forward.
Our main concerns include: (1) the continued use of a fast-track,
design-build approach for the remaining work on the construction
project; (2) the reliability of the revised project cost and schedule
estimates, and whether there is enough flexibility in the revised
schedule to address remaining project uncertainties during the
construction and commissioning phases; and (3) the adequacy of
management actions taken to ensure effective project management and
oversight. DOE is continuing with the fast-track approach to try and
stay as close as possible to milestone dates agreed to in the Tri-Party
Agreement and to keep costs down. However, the technical, safety, and
management problems on the project make it clear that a fast-track
approach is not appropriate. In our view, proceeding with a project
construction plan more closely aligned with nuclear industry
guidelines, which suggest completing at least 90 percent of the design
before restarting construction provides a better chance of successfully
completing the project and controlling the cost and completion date.
Furthermore, the cost and schedule baseline is being revised before all
of the technical issues are understood and the cost and time needed to
address them is known. For example, it is not clear whether DOE has
allowed sufficient time for testing of all the facilities during the
commissioning phase of the project. Also, in our view, the revised cost
estimate should contain cost and schedule contingencies that are
sufficient to ensure that no further re-baselining of the project will
be needed in the future. Finally, regarding overall project management,
it is unclear whether the actions taken by DOE and Bechtel are adequate
to bring the project under control and create greater overall
accountability for results. Specifically, it is unclear how DOE will
modify contractor incentives once the cost and schedule baselines are
finalized. The current contract incentives are no longer meaningful
because the current cost and schedule goals are no longer achievable
and are being revised. However, modifying the contract to provide new
incentives could be viewed as rewarding Bechtel's past performance. It
remains to be seen whether DOE can establish a combination of project
incentives and management controls that will lead to the successful
completion of the construction project.
We are recommending that the Secretary of Energy take steps to prevent
further use of a fast-track, design-build approach to the project;
ensure that facility design or facility component design have reached
at least 90 percent completion and that technical and safety problems
have been satisfactorily addressed before restarting construction; and
take other management actions to help ensure that the new project
baseline will be reliable and that controls and accountability are such
that Bechtel will safely and effectively complete the project.
On April 4, we met with DOE officials, including the Assistant
Secretary for Environmental Management, to obtain oral comments on this
testimony. DOE generally agreed with the testimony findings and
conclusions and two of the three recommendations. DOE agreed with our
recommendations to ensure that the new project baseline fully reflects
all remaining uncertainties on the project and to strengthen management
controls over the project. However, regarding our recommendation that
DOE not restart construction until facility design has reached 90
percent and the project's major technical and safety problems have been
satisfactorily addressed, DOE only partially agreed. DOE said that it
would discontinue using a fast-track, design-build approach to
completing the project and acknowledged that use of this approach has
led to increased costs and schedule delays on the project. DOE's
Assistant Secretary for Environmental Management said that DOE has
already taken some initial steps to discontinue the fast-track approach
by widening the gap between facility design and construction to at
least one year or longer. However, the Assistant Secretary expressed
concern about delaying construction of WTP facilities until the
facility design has reached at least 90 percent completion and the
project's major technical and safety problems have been satisfactorily
addressed. He said that DOE has not studied the extent to which such a
delay in restarting construction could potentially increase the overall
cost of the project. Accordingly, we modified our recommendation to
ensure that DOE evaluates the feasibility of completing at least 90
percent of the facility design or facility component design, and that
major technical and safety issues have been satisfactorily addressed
before restarting construction.
Background:
DOE carries out its high-level waste cleanup program at Hanford under
the auspices of the Assistant Secretary for Environmental Management
and in consultation with a variety of stakeholders. The EPA and the
Washington State Department of Ecology provide regulatory oversight of
cleanup activities at the site. The Defense Nuclear Facilities Safety
Board (Safety Board) also oversees DOE's operations. The Safety Board
was created by the Congress in 1988 to provide an independent
assessment of safety conditions and operations at defense nuclear
facilities, including DOE's Hanford site. Other stakeholders involved
in the Hanford cleanup project include county and local governmental
agencies, citizen groups, advisory groups, and Native American tribes.
These stakeholders advocate their views through various processes,
including site-specific advisory boards. DOE manages the tank waste at
Hanford through its Office of River Protection, which Congress directed
DOE to establish in 1998. The office has a staff of about 110 DOE
employees and a fiscal year 2006 budget of about $1 billion. It manages
Hanford's tank waste through two main contracts: a tank farm operations
contract with CH2M Hill Hanford Group[Footnote 3] to maintain safe
storage of the waste and to prepare it for retrieval, and a
construction contract with Bechtel to design, construct, and commission
the operation of a waste treatment plant. For additional information on
Hanford's tank wastes, see appendix I.
The Hanford waste treatment construction project includes the
construction of three primary processing facilities, a large analytical
laboratory, and 23 supporting buildings on a 65 acre site. The three
primary processing facilities are:
* the pretreatment facility, which receives the waste from the tank
farms and separates it into its low-activity and high-level waste
components;
* the high-level waste facility that immobilizes high-level waste for
offsite disposal through a process known as vitrification, which mixes
nuclear waste with molten glass;[Footnote 4] and:
* the low-activity waste facility, which vitrifies the low-activity
waste for onsite disposal.
The waste treatment plant facilities are large and complex. For
example, Bechtel estimates that the completed project will contain
almost 270,000 cubic yards of concrete and nearly a million linear feet
of piping. The largest building, the pretreatment facility, has a
foundation the size of four football fields and is expected to be 12-
stories tall.
Contractor Performance Problems, DOE Management Shortcomings, and
Technical Challenges Have Resulted in Significantly Higher Cost
Estimates and Longer Completion Dates for the Construction Project:
In just over 5 years, the estimated cost of the project has increased
more than 150 percent to about $11 billion and the schedule has been
extended from an 11-year project to a 17-year project. Three main
factors were responsible for the cost and schedule increases: (1) poor
contractor performance in developing project estimates and implementing
nuclear safety and other requirements, (2) management weaknesses in
DOE's approach to and oversight of the project, and (3) technical
challenges that have been more difficult than expected to address.
Project Cost and Schedule Have Increased Significantly:
Since DOE awarded the contract to Bechtel in 2000, both the contract
price and the completion date have increased significantly. In 2000,
the contract price was $4.3 billion, including contractor fee and
project contingencies. In 2003, Bechtel revised the estimate to $5.7
billion, based on changes DOE wanted to make in plant capacity and to
correct for estimating errors and other problems that were already
occurring on the project. Since then, the cost estimate has continued
to climb. For example, Bechtel's December 2005 estimate of the cost to
complete the project, an estimate that DOE has not yet approved, totals
about $10.5 billion plus contractor fee, a significant increase from
the initial estimate in 2000. Bechtel is still revising its estimate of
the project costs, and the final estimate will very likely be higher.
For example, in a February 2006 hearing before the Senate Armed
Services Committee, the Secretary of Energy said that the final cost
for the project could be nearly $11 billion. Figure 1 shows this
progression of cost estimates for the construction project.
Figure 1: Progression of Cost Estimates for WTP Construction Project.
[See PDF for image]
[End of figure]
The estimated completion date has also been extended. In 2000, the
estimated date to complete the construction of the waste treatment
project was 2011. This date corresponded to the work schedule agreed to
by DOE in the Tri-Party Agreement under which DOE was to begin
operating the waste treatment facilities by 2011. However, Bechtel's
latest estimate, not yet approved by DOE, is that the construction
project will be completed by 2017 or later, at least a 6-year extension
and a 50 percent increase in the project's schedule.
Furthermore, the revised cost and schedule estimates Bechtel developed
in December 2005 are not final and will likely increase further. At
least through the rest of 2006, DOE and Bechtel will continue to
address identified technical and safety issues and incorporate
additional design changes into its estimates. For example, Bechtel is
currently reviewing several technical issues recently raised by a panel
of experts DOE invited to study the project.[Footnote 5] Bechtel plans
to incorporate changes resulting from the review into a new cost
estimate. This revised estimate is expected to be complete in late May
2006. Once that estimate is available and DOE has completed its review
of the estimate, DOE and Bechtel will need to agree on a revised
contract price that incorporates any changes made to the project,
including any changes to the fee that Bechtel can potentially earn. DOE
officials do not expect to have these activities completed until late
2006.
Bechtel and DOE Share Responsibility for the Main Causes of the Cost
Increases and Schedule Delays:
In our view, Bechtel and DOE both share in the responsibility for the
problems with the Hanford waste treatment plant.[Footnote 6]
Contractor performance. Poor contractor performance in the areas of
developing and revising cost estimates and adhering to nuclear safety
and other requirements contributed to cost and schedule increases.
Bechtel made a number of miscalculations on a broad range of activities
when developing and revising its cost estimates for the project.
Specifically, we found that Bechtel:
* underestimated by more than 50 percent the engineering hours needed
to design the facilities (a small portion of this increase was due to
changes in seismic design criteria). The current estimate for design
hours is now over 14 million hours.
* underestimated the cost of key commodities like steel. Steel prices
climbed sharply once project construction started.
* incorrectly assumed that it could obtain an exception to the fire
code and avoid applying a protective coating on some of the structural
steel used in the facilities and instead use a less expensive sprinkler
system.
In April 2005, Bechtel estimated that the estimating errors
collectively added about $845 million to the estimated contract price.
Additionally, Bechtel also incorrectly estimated the amount of
contingency funds that would be needed to account for project
uncertainties. In 2000, Bechtel estimated that $500 million in
contingency was needed. However, in its December 2005 estimate, Bechtel
proposed that a total of $2.8 billion in contingency be allocated to
the project. The $2.8 billion in contingency funds included $1.76
billion to address technical and programmatic risks outside the current
scope of the project and an additional reserve of about $1 billion for
potential future problems not yet identified.
Finally, Bechtel was ineffective at ensuring that the completed
facilities would meet nuclear safety requirements. In March 2006, DOE's
Office of Enforcement issued a report documenting a number of different
safety problems with the construction project, including a failure to
(1) include safety requirements in design documents, (2) identify and
use the correct design codes and safety standards, and (3) track design
changes to ensure purchased materials and supplies were consistent with
those changes.[Footnote 7] These failures led to significant problems.
For example, Bechtel ordered approximately 70 tanks with incorrect
structural specifications to ensure the quality of their welds. These
tanks, that will be located in inaccessible areas of the waste
treatment plant, were in various stages of fabrication. Had this
problem not been identified, the quality of welds for all of these
tanks could have been flawed. One tank had already been installed using
these incorrect specifications before the problem was discovered. The
tank was installed because neither the supplier nor Bechtel had
performed the required weld inspection. Furthermore, when the welds
were first repaired the subcontractor used incorrect welding rods,
requiring more rework to repair the repairs.
In addition, in September 2005, Bechtel discovered errors that had been
made in structural steel calculations for the laboratory facility.
These potentially serious errors included design specifications that
were incorrect and discrepancies between engineering calculations and
design drawing specifications, which led to replacing steel already
purchased and correcting hundreds of engineering drawings. Of
significant concern, a 2005 DOE-sponsored survey found that some
construction and engineering employees were reluctant to raise safety
concerns to Bechtel management, fearing reprisal. Bechtel is now
developing a strategy for cultivating a more rigorous culture of safety
among its workforce that it expects to complete by June 2006.
DOE management. In our view, DOE's management of the project has been
flawed, as evidenced by (1) adopting a fast-track approach to design
and construction activities that both created and exacerbated problems
and (2) failing to exercise adequate and effective oversight of
contractor activities, both of which contributed to cost and schedule
increases.
DOE's decision to pursue a fast-track, design-build approach under
which technology development, facility design, and construction
activities were carried out concurrently has proven to be regrettable.
DOE adopted the fast-track approach because of commitments made under
the Tri-Party Agreement to have facilities operating by 2011, and to
treat all of the tank waste by 2028. However, using a fast-track
approach for nuclear facilities is considered "high risk," and is not
recommended for designing and constructing one-of-a-kind, or first-of-
a-kind complex nuclear facilities. DOE's own project management
guidance cautions against using this approach for complex facilities.
For example, DOE Order 413.3 cautions that a design-build approach
should only be used in limited situations, such as when work scope
requirements are well defined, projects are not complex, and technical
risks are limited.
Furthermore, the project approach included optimistic assumptions that
virtually every major safety, technology, regulatory, and nuclear
material acquisition uncertainty could be resolved while facilities
were being constructed at an unusually fast pace for the largest, most
complex, first-of-a-kind, nuclear waste treatment plant in the United
States.[Footnote 8] Less than one year after construction began, DOE
was already experiencing problems with construction activities
outpacing design, technology problems that were affecting the critical
path of the construction project, contractor safety control
inadequacies, and outdated facility seismic criteria. Despite these
problems, DOE insisted on continuing its fast-track design-build
approach under its accelerated cleanup plan until early 2005. At that
point, the effect of these and other unresolved issues, contractor
performance problems, and signs of significant cost growth and schedule
delays caused DOE to direct Bechtel to significantly slow construction,
rework the design, and reevaluate safety, seismic, and regulatory
requirements.
The impact of many of these problems could have been lessened if
facility design had been more complete before construction began. Under
nuclear industry guidance, which recommends that facility design be
essentially complete before construction begins, major environmental,
technological, and regulatory issues can be resolved in advance of
construction.[Footnote 9] The benefit of this process is that most
uncertainties are resolved before major capital is at risk, and the
potential for project delay is significantly reduced. On this project,
under the fast track approach, actual schedule delays of more than two
years have occurred, contributing to more than 1,000 workers being laid
off, and work on the two largest waste treatment facilities coming to a
halt.
GAO, the Safety Board, and others have criticized DOE in the past for
using the fast-track approach for large, complex first-of-a-kind
nuclear cleanup facilities. We issued reports in 1993, and again in
1998, that were critical of DOE for using an approach that differs so
significantly from nuclear industry guidelines for constructing complex
nuclear facilities. The Safety Board cautioned in June 2002, and again
in March 2004, that a fast-track, design-build approach could lead to
expensive plant modifications or to the acceptance of increased public
health and safety risks. In June 2004, we recommended that DOE avoid
using a fast-track approach to designing and constructing its complex
nuclear facilities. The department accepted this recommendation, but
apparently believes that it does not apply to this project. At the time
of our 2004 report, the department could not identify a single instance
where it had successfully used the approach to construct a large,
complex nuclear cleanup facility. Despite the fact that DOE has never
been successful with this approach on any complex nuclear cleanup
project, Bechtel reported in its most recent cost and schedule estimate
that a "fast-track engineering, procurement, and construction" approach
is a standard commercial approach for large projects and the best
approach for a schedule-driven project.
DOE's lack of oversight of Bechtel's activities has also been
unfortunate. DOE did not ensure adherence to normal project reporting
requirements and, as a result, status reports provided an overly
optimistic assessment of progress on the project. For example, in
January 2005, DOE's project status report indicated that costs and
scheduled work to date were proceeding as planned. However, Bechtel was
not providing accurate information. The project almost always appeared
to be on schedule because Bechtel adjusted the project baseline
schedule to match actual project results. In addition, DOE headquarters
oversight officials were generally unaware of the full extent of the
problems with the project.
Finally, DOE has not prevented significant safety problems from
occurring on the project. DOE is responsible for ensuring that its
activities follow nuclear safety requirements and generally receives no
outside regulatory oversight of nuclear safety. However, the department
was not fully effective in ensuring that nuclear safety requirements
were being met. Contributing to the problem, DOE's internal safety
oversight had been significantly reduced since 2000. Furthermore, key
responsibilities to ensure quality control of contractors were placed
under the responsibility of the DOE project manager who also had
primary responsibility for meeting project cost and schedule targets.
In late 2003, DOE began recognizing some of the nuclear safety problems
on the project but many of these problems dated back to 2002, or
earlier. Finally, in 2005 and 2006, according to the WTP project
manager, DOE withheld a total of $800,000 in performance fee from
Bechtel for industrial and nuclear safety problems, but problems
continued. In 2006, DOE assessed a civil penalty of $198,000 for a
number of nuclear safety violations. DOE also recently increased the
number of staff assigned to oversee safety activities.
Technical challenges. Constructing the waste treatment plant at the
Hanford site is a massive, highly complex and technically challenging
project. Problems in addressing these technical challenges have
contributed to cost and schedule increases.
A number of technical problems have continued to plague the project,
including:
* changing seismic standards that resulted in substantial re-
engineering of the facility design;
* problems with "pulse jet mixers" needed to keep waste constituents
uniformly mixed while in various tanks in the facilities;
* the potential buildup of flammable hydrogen gas in the waste
treatment plant tanks and pipes; and:
* problems with radioactive and hazardous wastes plugging treatment
plant piping systems during operations.
Bechtel estimated, in December 2005, that collectively these technical
problems could add nearly $1.4 billion to the project's estimated cost.
In 2002, the Safety Board began expressing concerns that the seismic
standards used to design the facilities were not based on the most
current ground motion studies and computer models, and were not based
on geologic conditions present directly under the construction site.
After more than 2 years of analysis and discussion, DOE contracted for
a new seismic analysis that confirmed the Safety Board's concerns that
the seismic criteria were not "sufficiently conservative" for the two
largest treatment facilities--the high-level waste facility and the
pretreatment facility. Revising the seismic criteria caused Bechtel to
recalculate thousands of engineering estimates and to rework thousands
of design drawings to ensure that tanks, piping, cables, and other
equipment in these facilities were adequately anchored. Bechtel
determined that the portions of the building structures already
constructed were sufficiently robust to meet the new seismic
requirements. By December 2005, however, Bechtel estimated that
engineering rework and other changes to tanks and other equipment
resulting from the more conservative seismic requirement would increase
project costs by about $750 million to $900 million and result in a 26
month schedule delay.
In 2003, potential problems with the pulse jet mixers caused project
construction delays. Bechtel initially planned to rely on computer
modeling to confirm that the mixer would successfully keep the tank
waste uniformly mixed. However, because these mixers were designed to
be placed in "black cells" in the pretreatment facility where they
could not be repaired or modified after operations began because of the
high levels of radiation in the cells, mixer failure was considered
high risk. Given this risk, in April 2003, just 9 months before the
design configuration for the mixers was to be completed, Bechtel
decided to conduct laboratory tests of the mixers to ensure that they
would successfully mix the tank waste. Based on laboratory performance
testing, Bechtel found that the mixers did not adequately work.
Consequently, the mixers had to be re-designed. The tanks that were to
house the mixers also had to be redesigned with greater structural
support to accommodate more forceful mixing pumps and other
modifications. DOE spent about two years addressing problems with the
pulse jet mixers. According to DOE's project manager, Bechtel has
completed the testing and design modifications for the mixers. As of
May 2005, this problem had contributed more than $300 million to the
project's cost growth.
In June 2004, we reported on the possibility of hydrogen gas building
up in the plant's tanks, vessels, and piping systems, and noted that
the buildup of flammable gas in excess of safety limits could cause
significant safety and operational problems. Although DOE and Bechtel
have been aware of this problem since 2002, the problem has not been
fully resolved. As of March 2006, Bechtel continued to assess how to
resolve this technical problem but has not identified final solutions.
In April 2005, Bechtel estimated that this problem contributed about
$90 million to the project's cost growth.
In March 2006, an external technology review identified another
technological problem called "line plugging," involving the potential
that solid and liquid radioactive and hazardous wastes could plug waste
treatment facility piping systems during treatment operations.[Footnote
10] Described as the most serious problem the external group
identified, the report emphasized that unless corrected, this flaw
could prevent the plant from operating successfully. The review
concluded that the treatment plant's piping systems could begin
plugging within days to a few weeks of operational start up. The
external review did not estimate the potential cost and schedule impact
of correcting this problem, but concluded that DOE identify and
consider the corrective actions needed to resolve the problem. Bechtel
plans to address these actions in its final cost and schedule estimate
due in late May 2006.
DOE and Bechtel Have Taken Several Steps to Strengthen Management and
Oversight of the Project:
To address underlying causes contributing to cost and schedule growth
on the construction project, DOE and Bechtel have undertaken three main
initiatives: (1) slowing construction to allow time to address
technical and safety problems and to advance design activities further
ahead of construction activities, (2) developing a more credible cost
and schedule baseline, and (3) improving project management and
oversight.
Slowing construction to address technical problems and advance the
design work:
Because of the scope of the technical problems on the project,
especially the need to apply more conservative seismic standards to the
pretreatment and high-level waste facilities, in December 2004, DOE
directed Bechtel to slow construction on these facilities. This allowed
Bechtel to focus on addressing the technical problems and to advance
plant design further ahead of construction activities. According to the
DOE project manager, as of March 2006, the design for the waste
treatment plant was about 60 percent complete. DOE's project manager
told us that once construction starts again, he expects to have a gap
of about one year between completing the design of specific building
components and beginning construction of those components. Slowing the
construction of project facilities has also allowed DOE and Bechtel to
resolve some of the technical issues that contributed to cost and
schedule growth. For example, according to DOE's WTP project manager,
seismic criteria have been revised and are being incorporated into
facility design. The Corps is reviewing Bechtel's design rework to
ensure that it meets the revised criteria. These criteria are scheduled
to be confirmed by the Corps in early 2007. Similarly, DOE's WTP
project manager said that problems with tank waste mixing pumps have
apparently been resolved and changes are being incorporated into the
revised design. However, issues involving the potential for hydrogen
gas to build up in the waste treatment plant tanks and piping systems
have not yet been resolved, according to DOE's project manager.
Developing a more reliable project baseline:
Bechtel and DOE have taken steps to develop estimates they believe will
better reflect the project's true cost. Bechtel has been conducting a
more detailed review of cost and schedule elements than occurred in
developing previous baselines. In the past, Bechtel relied more on
estimating techniques to develop the baseline because the design was
not sufficiently mature to more accurately estimate material and labor
costs. Bechtel's December 2005 baseline estimate of $10.5 billion was
based on using detailed design drawings and a better understanding of
the actual material and labor costs. According to Bechtel's deputy
project manager, the new estimate better defines risk on the project
and assigns a more realistic contingency value to that risk. Bechtel
also brought in outside experts and conducted two major corporate
reviews of the estimates in April and December 2005. Bechtel is
expected to submit a final revised cost and schedule estimate by the
end of May 2006.
In addition to Bechtel's efforts, DOE has hired two external teams to
review the revised estimates. First, DOE contracted with the Corps of
Engineers to review the reasonableness of various aspects of Bechtel's
estimate. DOE expects the Corps of Engineers to validate such things as
the revised ground motion criteria and other geophysical data, whether
the ground motion criteria has been adequately incorporated into the
plant design, and the reasonableness of material and labor cost
estimates, including the amount of contingency funds needed for the
project. DOE expects the Corps of Engineers to complete its review by
July 2006. Second, DOE directed Bechtel to hire an independent review
team of experts from industry and academia to review the technical,
cost, and schedule aspects of the project. The team's preliminary
report concluded that the project's cost estimate should be increased
to $11.3 billion, plus contractor fee.[Footnote 11]
In our view, while these reviews are a step in the right direction,
given the Department's past history in developing a credible project
baseline, it is too soon to tell whether these reviews will assist DOE
and Bechtel in providing reliable cost and schedule estimates.
Taking other steps to improve management and oversight:
Both Bechtel and DOE have undertaken several other actions to improve
management and oversight of the project. Bechtel's actions include (1)
improving its cost and schedule performance tracking system, (2) making
management and organizational changes, and (3) taking steps to improve
quality and safety on the project. Regarding the cost and schedule
performance tracking system--referred to as an earned value system--DOE
requires that a contractor's system be certified to comply with
industry standards. However, DOE had not certified Bechtel's earned
value system. Bechtel is now working to have its earned value
management system certified by September 2006. In addition, to improve
its management of the project, Bechtel has reorganized to provide
greater control and oversight of facilities engineering work and
greater standardization in purchasing material and supplies. According
to Bechtel's deputy project manager, the new organizational structure,
along with selected personnel changes will strengthen oversight of this
work. Finally, following a March 2006 nuclear safety enforcement action
by DOE, Bechtel is in the process of developing a nuclear safety and
quality culture change initiative. This includes holding meetings to
emphasize quality and safety, implementing new training requirements,
and conducting employee focus groups to promote greater awareness of
safety requirements.
DOE has also taken steps to strengthen its management and oversight. To
address organizational and staffing oversight issues, DOE formed a
special headquarters task force, in late 2005, to study various aspects
of the Hanford project and to advise the Secretary and the DOE project
manager as the project goes forward. In addition, the Assistant
Secretary for Environmental Management directed the DOE site manager to
hire at least eight additional contracting staff to help administer the
project, including a director of procurement, a procurement attorney,
two senior contracting officers, two senior contract specialists, and
two contract specialists. DOE expects to fill these positions by spring
2006. DOE also established a new headquarters office--the Office of
Project Recovery--to focus greater attention on projects, such as the
waste treatment plant project, that have performance problems. This
office, which reports directly to the Assistant Secretary for
Environmental Management, is intended to work with field officials to
help get projects in trouble back on track.
To address project management and reporting concerns, DOE is improving
the use of its earned value information--data DOE uses to monitor cost
and schedule performance on its projects. DOE is also requiring Bechtel
to comply with DOE's project management requirements, as defined in DOE
Order 413.3. In our June 2004 report on the Hanford waste treatment
project,[Footnote 12] we found that DOE awarded the original contract
in December 2000, without putting in place these key project management
requirements. We noted that this approach added significantly to
project risk. Additionally, the Assistant Secretary for Environmental
Management directed DOE's Office of Engineering and Construction
Management to provide more frequent assessments of the waste treatment
project and, if necessary, initiate more external reviews of the
project.
To address continuing problems in nuclear safety and quality, DOE
recently initiated an enforcement action, including a civil penalty of
$198,000, against Bechtel for the continuing recurrence of quality and
safety violations. In its March 16, 2006 Preliminary Notice of
Violation letter, DOE listed several areas where Bechtel had violated
nuclear safety requirements, including non-adherence to procedures,
inadequate training for staff, and emphasizing meeting cost and
schedule requirements over quality and safety. In its March 16 letter,
DOE noted that past actions by Bechtel to correct these long-standing
problems had not been effective. DOE plans to meet with Bechtel in June
2006 to discuss the contractor's progress in improving nuclear safety
on the project and determine what additional steps will be necessary to
ensure safety and quality on the project.
Observations About Selected Issues DOE Will Need to Address in Going
Forward on the Project:
Despite the actions taken by DOE and Bechtel to address technical,
safety, and other management problems on the project, we have
continuing concerns about the current strategy for going forward. Our
main concerns include:
* the continued use of a fast-track, design-build approach to the
remaining work on the construction project,
* the reliability of the project baseline and whether it will fully
account for remaining uncertainties, and:
* the adequacy of project incentives and management controls for
ensuring effective project management and oversight.
The use of a fast-track, design-build approach to the project:
It is unclear whether DOE plans to go forward with the fast-track
approach and allow Bechtel to work concurrently on technology, design,
and construction activities. Although design and construction
activities will be less "close-coupled" than before, the work schedule
will still not fully comply with nuclear industry guidelines to
complete at least 90 percent of the design before constructing the
facilities. DOE is continuing with this fast-track, design-build
approach to try and stay as close as possible to milestone dates agreed
to in the Tri-Party Agreement, and because DOE believes that doing so
will help to control costs on the project. However, the myriad of
technical, safety, and management problems that have already occurred
on the project make it clear that a more systematic approach to the
project is needed. Indeed, many of those problems have not yet been
fully resolved. Continuing with a fast-track, design-build approach
under these conditions increases the risk that the completed facilities
may require major rework to operate safely and effectively, which could
further increase costs. In our view, proceeding with a project
construction plan more closely aligned with nuclear industry guidelines
for complex nuclear facilities will provide the best chance of
successfully completing the project and controlling the final cost and
completion date.
The reliability of the revised project estimates:
None of the estimates Bechtel has developed so far have been reliable.
Estimates of material and labor costs have been inadequate and Bechtel
has not included sufficient contingencies in the project baseline to
account for the high risk, technical complexities, and managerial
challenges it has faced. As DOE's project management guidance states,
the key is to develop a project baseline estimate that is fully
achievable. Re-baselining the project is a time-consuming and costly
effort. Bechtel's December 2005 baseline proposal is contained in a
roughly 44,000 page document that according to Bechtel's deputy project
manager required the efforts of about 200 staff over a 6-month period
and cost about $10 million to develop. Furthermore, outside reviews and
baseline validations have cost DOE an additional $20 million since
2003.
Bechtel has indicated that the project's revised cost and schedule
estimates will be comprehensive enough to account for known
uncertainties, such as what it might take to address the problem of
hydrogen gas building up in facility pipes as well as any less
predictable unknowns that might occur, such as a shortage of a key
commodity. While we are encouraged that Bechtel is taking a more
systematic approach to developing the project estimates, we have some
remaining concerns. In particular, the project estimate must not only
account for constructing the facilities but also commissioning---when
DOE and Bechtel will demonstrate that the facilities are safe and ready
to operate. In the past, to try and achieve milestone dates agreed to
for beginning facility operations, DOE and Bechtel reduced the amount
of time in the baseline schedule allocated to facility commissioning
and testing activities from about 58 months to 42 months. In our June
2004 report, we expressed a concern that shortening the commissioning
schedule may affect the reliability of the completed facilities. We
also contacted former DOE and contractor officials and industry
technology development managers who told us that the commissioning
approach in the 2003 baseline could result in significant problems
being overlooked.
Under Bechtel's most recent proposal, the timeframe for commissioning
and testing activities has been increased to about 46 months, including
about 21 months of component testing before commissioning with
simulated and actual waste begins. However, Bechtel does not yet have a
detailed plan for the commissioning activities that demonstrates a 46
month period is adequate. Furthermore, one independent review has
concluded that the commissioning phase will be the most difficult
aspect of the entire construction project.[Footnote 13] Given the
nuclear safety problems Bechtel has encountered so far on the project,
and the complexity and size of the waste treatment plant, the
commissioning phase portion of the schedule will need to be long enough
to allow full testing of the facilities and sufficient time to identify
and address any remaining problems before operations begin.
The adequacy of project management and oversight:
One of the remaining management uncertainties is how DOE will modify
contract incentives once the new baseline is finalized. Due to cost
increases and schedule delays that have occurred, the incentive fees in
the current contract are no longer meaningful. Those incentives
included more than $300 million for meeting cost and schedule goals or
construction milestones, and about $111 million for building a plant
that operates effectively. This greater focus on cost and schedule
milestones may help explain why DOE has found a less than adequate
concern for nuclear safety on the project. Another issue, however, is
that modifying the contract to provide new incentives could be viewed
as rewarding Bechtel's past performance. Overall, it remains to be seen
whether DOE can finally put in place a combination of performance
incentives and management controls that will support the successful
treatment of the Hanford tank wastes over the next few decades.
Conclusions:
By just about any measure, the Hanford waste treatment project is in
disarray, as evidenced by ever-increasing cost estimates, construction
delays, and more recently, safety concerns. In our view, what is
happening is uncharacteristic of a well-planned and well-managed
construction project. Project costs are increasing rapidly and we do
not know what the facilities will ultimately cost or when they will be
operational. Of great concern to us is the fact that many nuclear
safety and other technical problems have occurred on the project. We
believe that it is imperative that Bechtel and DOE discover any and all
safety problems and immediately address them. In going forward, it is
unclear whether DOE plans to continue using a fast-track approach that
we have found is inappropriate for this unique, complex nuclear
facility. We believe that DOE needs to follow nuclear industry
construction guidelines and take a more conservative approach to design
and construction activities that avoids carrying out these activities
concurrently. Furthermore, the revised baseline must be robust enough
to adequately address remaining uncertainties and allow sufficient time
for testing the facilities during the commissioning phase. Unless the
revised baseline fully reflects all remaining uncertainties, especially
problems that may occur during facility commissioning, DOE will be
unable to ensure that no further re-baselining of the project will be
necessary. Furthermore, it is unclear how DOE will modify contract
incentives or carry out its revised plan for overseeing the project. We
believe that DOE needs to develop contract incentives that better
balance cost and schedule incentives and incentives to ensure that the
facilities operate safely and effectively as well as improve the
department's management and oversight of contractor activities. In our
view, if DOE takes these actions the project will have a better chance
of being successfully completed.
Recommendations:
We recommend that the Secretary of Energy take the following three
actions:
1. Discontinue using a fast-track, design-build approach to completing
the project and consider the feasibility of completing at least 90
percent of the facility design or facility component design before
restarting construction, and ensure that the project's major technical
and safety problems have been addressed before restarting construction.
2. Develop a revised project baseline that fully reflects the remaining
uncertainties, including potential problems that may be encountered
during the commissioning phase, before presenting it as a reliable
estimate of the project's cost and schedule.
3. Establish improved management controls, including revising contract
incentives and strengthening accountability for performing oversight
activities.
Thank you, Mr. Chairman and Members of the Subcommittee. That concludes
my testimony. I would be pleased to respond to any questions that you
may have.
Contacts and Acknowledgments:
For further information on this testimony, please contact Mr. Gene
Aloise at (202) 512-3841. Individuals making key contributions to this
testimony included Chris Abraham, John Delicath, Nancy Kintner-Meyer,
Jeff Larson, Tom Perry, and Bill Swick.
[End of section]
Appendix I: Additional Information on Hanford's Tank Wastes:
DOE has a vast complex of sites across the nation dedicated to the
nuclear weapons program, but the high-level waste stemming from
reprocessing spent nuclear fuel to produce weapons material such as
plutonium and uranium has been limited mainly to three sites--the
Savannah River site, South Carolina; the Idaho National Laboratory near
Idaho Falls, Idaho; and the Hanford site near Richland,
Washington.[Footnote 14] The underground storage tanks that store the
high-level waste at the Hanford site consist of 149 single shell steel
tanks and 28 double shell tanks encased in concrete. Most of these
tanks have already exceeded their design life. DOE has concluded, based
on tank monitoring data and other techniques used to detect
contamination in soil under the tanks, that 67 of the single shell
tanks have leaked about 1 million gallons of high-level waste into the
soil. DOE does not believe that the double shell tanks have leaked any
waste.
The waste in these tanks contains radioactive components that emit
dangerously intense radiation. Because of the intense radiation emitted
from high-level waste, the waste must be isolated and handled remotely
behind heavy shielding such as a layer of concrete in order to protect
humans and the environment. In addition to intense radioactivity, some
radioactive components are highly mobile in the environment and can
quickly migrate to contaminate the soil and groundwater if not
immobilized. In addition to radioactive components, DOE's high-level
waste also generally contains hazardous components added during the
process of dissolving used nuclear fuel to remove plutonium and other
nuclear materials or to stabilize the waste for storage. These
hazardous components include solvents, acids, caustic sodas, and toxic
heavy metals such as chromium and lead. Radioactive waste components,
when combined with hazardous components, are referred to as "mixed
wastes."
High-level waste generally exists in a variety of physical forms and
layers inside the underground tanks, depending on the physical and
chemical properties of the waste components. The waste in the tanks
takes three main forms:
* Sludge: The denser, water insoluble components generally settle to
the bottom of the tank to form a thick layer known as sludge, which has
the consistency of peanut butter.
* Saltcake: Above the sludge may be water-soluble components such as
sodium salts that crystallize or solidify out of the waste solution to
form a moist sand-like material called saltcake.
* Liquid: Above or between the denser layers may be liquids comprised
of water and dissolved salts called supernate.
The treatment and disposal of high-level waste produced at DOE
facilities is governed by a number of federal laws, including laws that
define the roles of DOE and the Nuclear Regulatory Commission (NRC) in
waste management. The Atomic Energy Act of 1954 (AEA) and the Energy
Reorganization Act of 1974 established responsibility for the
regulatory control of radioactive materials including DOE's high-level
wastes. Under amendments the Federal Facility Compliance Act of 1992
made to the Resource Conservation and Recovery Act of 1976 (RCRA), DOE
generally must develop waste treatment plans for its sites that contain
mixed wastes.[Footnote 15] These plans are approved by states,
including the state of Washington, that EPA has authorized to
administer RCRA or by EPA in those states that have not been so
authorized.
[End of section]
Appendix II: Scope and Methodology:
To determine how costs and schedule for DOE's waste treatment plant
located at the Hanford site near Richland, Washington have changed, and
the primary causes for those changes since the contract was awarded in
2000, we reviewed previous GAO reports on the project from 1993 to
2005. In addition we reviewed several internal and external reports
addressing cost, schedule, technology, and other issues on the project,
including two studies by the Army Corps of Engineers, and a study
conducted for DOE by LMI Government Consulting--a private engineering
consulting firm. We also reviewed both the April and December 2005
Estimates at Completion prepared by Bechtel and two March 2006 reports
prepared by external review teams to assess the impact of a variety of
technical issues on the project and Bechtel's estimated cost estimate
for completing the project. Both of these reports were prepared under
the direction of the department's Office of Environmental Management.
While we did not independently verify the accuracy of the data
presented in these reports, based on our review of much of the
supporting documentation cited in the reports, we determined the data
to be of sufficient reliability use in our report. To assist in
evaluating these reports and other technical issues on the project, we
obtained assistance from our technical consultant, Dr. George Hinman,
who has a Ph. D. in physics and serves as Professor Emeritus at
Washington State University. Dr. Hinman has extensive nuclear energy
experience in industry, government, and academia.
We also discussed the problems and underlying causes of cost and
schedule growth with DOE and contractor officials at the site as well
as DOE officials in its Office of Environmental Management, Office of
Engineering and Construction Management, and Office of Budget. We
discussed the project's cost and schedule changes with outside experts,
including officials from the Defense Nuclear Facilities Safety Board.
To document the primary causes for changes in the cost and schedule
estimates, we relied on these documents as well as interviews with key
project and program officials. We quantified the cost impact of each of
the main causes for cost growth and schedule increases from information
provided in Bechtel's April 2005 estimate and the Corps of Engineers'
May 2005 report. These estimates were based on an estimated contract
price of $9.3 billion. However, even though Bechtel updated its cost
and schedule estimates to reflect a potential contract price of nearly
$11 billion as of December 2005, it does not plan to finalize its
estimate until late May 2006. As a result, we were not able to quantify
the impact of each of the main causes we cited for cost and schedule
changes to reflect the most recent cost estimate.
To determine the steps DOE and Bechtel are taking to improve management
and oversight of the project, we reviewed several documents, including
a letter by the Assistant Secretary for Environmental Management
directing that a number of management improvements be made. We reviewed
DOE policy and procedure documents, and discussed DOE's strategy to
manage the project with DOE headquarters officials in its Office of
Environmental Management. We also discussed management improvement
initiatives with senior Bechtel officials. In reviewing the role of
fast track on the project, we obtained information from the nuclear
industry to update current guidance on designing, licensing, and
building nuclear facilities that may be equivalent in size, scope, and
complexity to the Hanford waste treatment plant.
To develop information on nuclear safety issues at the waste treatment
plant and DOE's enforcement action, we obtained numerous documents from
DOE and Bechtel describing safety problems that had been identified
over the years, analyses of the causes, and proposed actions to correct
the problems. We discussed nuclear safety issues with DOE's Director of
Environmental Safety and Quality at Hanford as well as Bechtel's
Quality Assurance Manager and Price-Anderson Amendments Act
Coordinator. To understand the significance of safety violations raised
in DOE's March 17, 2006 enforcement action, we discussed the Proposed
Notice of Violation with the Director of the Office of Enforcement in
DOE's Office of Environmental Safety and Health. We also discussed
safety concerns with officials from the Defense Nuclear Facilities
Safety Board and with state regulators.
FOOTNOTES
[1] The waste treatment plant consists of a pretreatment facility that
separates waste into high-level and low-activity waste, two facilities
to treat separated portions of the waste, one analytical laboratory,
and a variety of supporting facilities.
[2] U.S. General Accounting Office, Nuclear Waste: Challenges to
Achieving Potential Savings in DOE's High-Level Waste Cleanup Program,
GAO-03-593 (Washington, D.C.: June 17, 2003); U.S. General Accounting
Office, Nuclear Waste: Absence of Key Management Reforms on Hanford's
Cleanup Project Adds to Challenges of Achieving Cost and Schedule
Goals, GAO-04-611 (Washington, D.C.: June 9, 2004); and U.S. Government
Accountability Office, Nuclear Waste: Better Performance Reporting
Needed to Assess DOE's Ability to Achieve the Goals of the Accelerated
Cleanup Program, GAO-05-764 (Washington, D.C.: July 29, 2005).
[3] CH2M Hill Group is a limited liability corporation of the CH2MHill
Company.
[4] DOE currently is evaluating the suitability of Yucca Mountain in
Nevada as the site of the repository for the high-level waste
canisters.
[5] "Comprehensive Review of the Hanford Waste Treatment Plant Estimate
at Completion--Preliminary Draft," Assessment Conducted by an
Independent Team of External Experts, at the direction of the U.S.
Department of Energy, Office of Environmental Management (Washington,
D.C.: Mar. 20, 2006).
[6] Between 2000 and 2003, cost increases estimated at $1.2 billion
occurred because of engineering problems, estimating errors, and
contingency funding increases. Cost increases occurring between 2003
and May 2005, based on Bechtel's April 2005 estimate and the Corps of
Engineers' May 2005 review of Bechtel's estimate, show that Bechtel
underestimated costs by an additional $845 million, ongoing technical
problems added an additional $1.15 billion to costs, and an additional
$1.45 billion was added to the project's estimated contingency. These
estimates were based on a revised contract price of $9.3 billion. These
analyses have not yet been updated to document the current cost
increases based on the latest estimated contract price estimate of
nearly $11 billion. DOE expects Bechtel to complete its current cost
and schedule estimate in late May 2006.
[7] No estimate is available for how problems in meeting nuclear safety
requirements specifically affected project cost estimates.
[8] The Corps of Engineers reported in May 2004 that DOE did not
properly account for cost increases that should have been expected from
the overall complexity of nearly every aspect of the project--including
the variety of tank wastes; the required technology integration; the
design, construction, and commissioning of the plant; and the
regulatory climate. See U.S. Army Corps of Engineers, Independent Cost
and Schedule Baseline Review Summary Report, (Walla Walla, Washington,
May 28, 2004).
[9] 10 CFR 52.47(b)(1) for certification of a nuclear power plant
design, calls for facility design to be "essentially complete" to
resolve safety issues before starting construction. According to the
director of new plant deployment at the Nuclear Energy Institute, for a
first-of-a-kind plant, the commercial nuclear power industry's goal is
to achieve 90 percent completion of final detailed design before
construction begins. In addition, DOE's own Order 413.3 states that
facility design should be "essentially complete" and all environmental
and safety criteria met when the project is ready to begin
construction.
[10] Comprehensive Review of the Hanford Waste Treatment Plant
Flowsheet and Throughput--Prepublication," Assessment conducted by an
Independent Team of External Experts, at the direction of the U.S.
Department of Energy, Office of Environmental Management (Washington,
D.C.: Mar. 17, 2006).
[11] "Comprehensive Review of the Hanford Waste Treatment Plant
Estimate at Completion--Preliminary Draft," Assessment Conducted by an
Independent Team of External Experts, at the direction of the U.S.
Department of Energy, Office of Environmental Management (Washington,
D.C.: Mar. 20, 2006).
[12] U.S. General Accounting Office, Nuclear Waste: Absence of Key
Management Reforms on Hanford's Cleanup Project Adds to Challenges of
Achieving Cost and Schedule Goals, GAO-04-611 (Washington, D.C.: June
9, 2004).
[13] LMI Government Consulting, Hanford Waste Treatment and
Immobilization Plant Project: After-Action Fact Finding Review, January
2006.
[14] DOE also agreed to clean up high-level waste at another site--the
West Valley Demonstration Project at West Valley, New York--where the
state sponsored reprocessing of both commercial and DOE spent nuclear
fuel. DOE completed treatment and preparation of this waste for
disposal in September 2002.
[15] 42 U.S.C. 6939c(b).
