Nuclear Waste
Action Needed to Improve Accountability and Management of DOE's Major Cleanup Projects Gao ID: GAO-08-1081 September 26, 2008The Department of Energy (DOE) spends billions of dollars annually to clean up nuclear wastes at sites that produced nuclear weapons. Cleanup projects decontaminate and demolish buildings, remove and dispose of contaminated soil, treat contaminated groundwater, and stabilize and dispose of solid and liquid radioactive wastes. Ten of these projects meet or nearly meet DOE's definition of major: costs exceeding $1 billion in the near term--usually a 5-year window of the project's total estimated life cycle. GAO was asked to determine the (1) extent to which the cost and schedule for DOE's major cleanup projects have changed and key reasons for changes, and (2) factors that may hinder DOE's ability to effectively manage these projects. GAO met with project directors and reviewed project documents for 10 major cleanup projects: 9 above the near-term $1 billion threshold, and 1 estimated to cost between $900 million and $1 billion over the near term.
Nine of the 10 cleanup projects GAO reviewed had life cycle baseline cost increases, from a low of $139 million for one project to a high of nearly $9 billion for another, and life cycle baseline schedule delays from 2 to 15 years. These changes occurred primarily because the baselines we reviewed included schedule assumptions that were not linked to technical or budget realities, and the scope of work included other assumptions that did not prove true. Specifically, the schedules for 8 of the 10 projects were established in response to DOE's 2002 effort to complete cleanup work, which in some cases moved up project completion dates by 15 years or more. For example, to meet the 2012 accelerated completion date for its solid waste disposition project, DOE's Idaho National Laboratory assumed it would process waste at a rate that was more than 50 percent higher than the rate demonstrated at the time it established the baseline. When the laboratory could not meet that processing rate, DOE revised its baseline, adding 4 years and about $450 million to the project. Also, most of the 10 projects had cost increases and schedule delays because the previous baselines (1) had not fully foreseen the type and extent of cleanup needed, (2) assumed that construction projects needed to carry out the cleanup work would be completed on time, or (3) had not expected substantial additional work scope. DOE has not effectively used management tools--including independent project baseline reviews, performance information systems, guidance, and performance goals--to help oversee major cleanup projects' scope of work, costs, and schedule. For example, DOE's independent reviews meant to provide reasonable assurance that a project's work can be completed within the baseline's stated cost and schedule, have not done so for 4 of 10 projects. For one project, the baseline was significantly modified as little as 7 months after it had been revised and validated by the independent review, while other projects have experienced life cycle cost increases of as much as $9 billion and delays of up to 10 years, within 1 to 2 years after these reviews. In addition, although DOE uses several types of reporting methods for overseeing cleanup projects, these methods do not always provide managers with the information needed to effectively oversee the projects or keep Congress informed on the projects' status. For example, sites' proposals for changes to projects' cost and schedule baselines do not always identify possible root causes, and DOE does not systematically analyze the proposals for common problems across its projects. Therefore, DOE may be missing opportunities to improve management across projects. In addition, guidance for key management and oversight functions are spread across many different types of documents and are unclear and contradictory. As a result, project managers do not consistently implement this guidance, which may lead, for example, to problems in effectively managing risks across projects. Finally, DOE recently changed its goals for "successful" cleanup projects, reducing the amount of work and raising the allowable cost increases against the near-term baseline. DOE has initiated several actions to improve project management, but it is too early to determine whether these efforts will be effective.
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-08-1081, Nuclear Waste: Action Needed to Improve Accountability and Management of DOE's Major Cleanup Projects
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Report to the Subcommittee on Energy and Water Development, Committee
on Appropriations, House of Representatives:
United States Government Accountability Office:
GAO:
September 2008:
Nuclear Waste:
Action Needed to Improve Accountability and Management of DOE's Major
Cleanup Projects:
GAO-08-1081:
GAO Highlights:
Highlights of GAO-08-1081, a report to the Subcommittee on Energy and
Water Development, Committee on Appropriations, House of
Representatives.
Why GAO Did This Study:
The Department of Energy (DOE) spends billions of dollars annually to
clean up nuclear wastes at sites that produced nuclear weapons. Cleanup
projects decontaminate and demolish buildings, remove and dispose of
contaminated soil, treat contaminated groundwater, and stabilize and
dispose of solid and liquid radioactive wastes. Ten of these projects
meet or nearly meet DOE‘s definition of major: costs exceeding $1
billion in the near term”usually a 5-year window of the project‘s total
estimated life cycle.
GAO was asked to determine the (1) extent to which the cost and
schedule for DOE‘s major cleanup projects have changed and key reasons
for changes, and (2) factors that may hinder DOE‘s ability to
effectively manage these projects. GAO met with project directors and
reviewed project documents for 10 major cleanup projects: 9 above the
near-term $1 billion threshold, and 1 estimated to cost between $900
million and $1 billion over the near term.
What GAO Found:
Nine of the 10 cleanup projects GAO reviewed had life cycle baseline
cost increases, from a low of $139 million for one project to a high of
nearly $9 billion for another, and life cycle baseline schedule delays
from 2 to 15 years. These changes occurred primarily because the
baselines we reviewed included schedule assumptions that were not
linked to technical or budget realities, and the scope of work included
other assumptions that did not prove true. Specifically, the schedules
for 8 of the 10 projects were established in response to DOE‘s 2002
effort to complete cleanup work, which in some cases moved up project
completion dates by 15 years or more. For example, to meet the 2012
accelerated completion date for its solid waste disposition project,
DOE‘s Idaho National Laboratory assumed it would process waste at a
rate that was more than 50 percent higher than the rate demonstrated at
the time it established the baseline. When the laboratory could not
meet that processing rate, DOE revised its baseline, adding 4 years and
about $450 million to the project. Also, most of the 10 projects had
cost increases and schedule delays because the previous baselines (1)
had not fully foreseen the type and extent of cleanup needed, (2)
assumed that construction projects needed to carry out the cleanup work
would be completed on time, or (3) had not expected substantial
additional work scope.
DOE has not effectively used management tools”including independent
project baseline reviews, performance information systems, guidance,
and performance goals”to help oversee major cleanup projects‘ scope of
work, costs, and schedule. For example, DOE‘s independent reviews meant
to provide reasonable assurance that a project‘s work can be completed
within the baseline‘s stated cost and schedule, have not done so for 4
of 10 projects. For one project, the baseline was significantly
modified as little as 7 months after it had been revised and validated
by the independent review, while other projects have experienced life
cycle cost increases of as much as $9 billion and delays of up to 10
years, within 1 to 2 years after these reviews. In addition, although
DOE uses several types of reporting methods for overseeing cleanup
projects, these methods do not always provide managers with the
information needed to effectively oversee the projects or keep Congress
informed on the projects‘ status. For example, sites‘ proposals for
changes to projects‘ cost and schedule baselines do not always identify
possible root causes, and DOE does not systematically analyze the
proposals for common problems across its projects. Therefore, DOE may
be missing opportunities to improve management across projects. In
addition, guidance for key management and oversight functions are
spread across many different types of documents and are unclear and
contradictory. As a result, project managers do not consistently
implement this guidance, which may lead, for example, to problems in
effectively managing risks across projects. Finally, DOE recently
changed its goals for ’successful“ cleanup projects, reducing the
amount of work and raising the allowable cost increases against the
near-term baseline. DOE has initiated several actions to improve
project management, but it is too early to determine whether these
efforts will be effective.
What GAO Recommends:
GAO is making a number of recommendations, such as expanding the
content of performance reports provided to DOE senior managers and
information provided to Congress to better reflect current status of
near-term and life cycle baseline cost and schedules and reasons for
significant changes; and strengthening DOE guidance and baseline
reviews, among other things. In commenting on a draft of this report,
DOE agreed with GAO‘s recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1081]. For more
information, contact Gene Aloise at (202) 512-3841 or aloisee@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Major Cleanup Projects Experienced Billions of Dollars in Additional
Costs and Schedule Delays, Primarily because Initial Baselines Were
Overly Optimistic:
DOE Has Not Effectively Used Available Management Tools to Help Control
Major Cleanup Projects' Scope of Work, Costs, and Schedule:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Information on the 10 Department of Energy Major Cleanup
Projects Reviewed:
Appendix III: Current Life Cycle Baselines for 10 DOE Cleanup Projects:
Appendix IV: Comments from the Department of Energy:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Changes in the Estimated Life Cycle Costs for DOE Major
Cleanup Projects:
Table 2: Changes in Estimated Project Schedules for DOE Major Cleanup
Projects:
Table 3: Key Policy Memos for EM Cleanup Projects:
Abbreviations:
Army Corps: Army Corps of Engineers:
DOE: Department of Energy:
EM: Office of Environmental Management:
EVM: earned value management:
OECM: Office of Engineering and Construction Management:
OMB: Office of Management and Budget:
QPR: quarterly project review:
WTP: Waste Treatment Plant:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 26, 2008:
The Honorable Peter J. Visclosky:
Chairman:
The Honorable David L. Hobson:
Ranking Member:
Subcommittee on Energy and Water Development:
Committee on Appropriations:
House of Representatives:
The Department of Energy (DOE) spends billions of dollars annually to
clean up nuclear wastes at sites across the nation that produced
nuclear weapons. Cleanup projects decontaminate and demolish buildings,
remove and dispose of contaminated soil, treat contaminated
groundwater, and stabilize and dispose of solid and liquid radioactive
wastes, among other things. DOE's Office of Environmental Management
(EM) currently oversees more than 80 of these cleanup projects,
primarily at government-owned, contractor-operated sites throughout the
nation. Some of these highly complex projects have completion dates
beyond 2050. Ten of these projects meet or nearly meet DOE's definition
of "major": projects whose costs exceed $1 billion in the near-term--
usually a 5-year window of the project's total estimated life cycle.
[Footnote 1],[Footnote 2] These 10 projects have combined estimated
near-term costs of almost $19 billion and combined life cycle costs
estimated to range between $115 billion and $143 billion, and they
account for almost half of EM's $5.5 billion fiscal year 2009 budget
request.[Footnote 3] These 10 projects are described in detail in
appendix II and include the remediation, decontamination, and
decommissioning, or the stabilization and disposition of:
* solid waste at Idaho National Laboratory, Idaho;
* nuclear facilities at the East Tennessee Technology Park, Oak Ridge
Reservation, Tennessee;
* nuclear materials at the Savannah River Site, South Carolina;
* radioactive liquid tank waste at the Savannah River Site, South
Carolina;
* soil and water at Los Alamos National Laboratory, New Mexico;
* nuclear materials at the Hanford Site, Washington;
* solid waste at the Hanford Site, Washington;
* soil and water at the Hanford Site, Washington;
* nuclear facilities at the River Corridor Closure Project, Hanford
Site, Washington; and:
* radioactive liquid tank waste at the Office of River Protection,
Hanford Site, Washington.[Footnote 4]
DOE established Order 413 in 2000 to provide project management
guidance for construction projects--projects that build large complexes
often housing unique equipment and technologies that process waste or
other radioactive material--and nuclear waste cleanup projects.
[Footnote 5],[Footnote 6] In 2005 and 2007, EM, in conjunction with
DOE's Office of Engineering and Construction Management (OECM), issued
further guidance to better tailor the order's requirements to the
cleanup projects. This guidance lays out protocols directing DOE
project managers to establish a life cycle baseline for cleanup
projects that includes three key parts: (1) prior year actual costs;
(2) a near-term estimate of the scope of the cleanup work (the cleanup
activities needed to achieve project goals), cost, and schedule of the
cleanup activities (the near-term is generally for 5 years, or the
duration of the contract, whichever is longer); and (3) out-year
estimates through project completion for those projects that extend
beyond the near term.[Footnote 7] The near-term and out-year estimates
also identify the amount of contingency monies that could be needed to
cover potential project risks.[Footnote 8]
Major cleanup projects take years to complete, and often involve unique
challenges and a high degree of complexity; therefore, it is critically
important that EM develop and implement a rigorous, disciplined
approach for developing and managing the baselines. Such an approach
includes planning and managing work activities, cost, and schedule to
achieve project goals in a stable, controlled manner over the near term
and the entire life of the project. DOE has taken several steps to
establish such an approach, including the following:
* EM must formally approve changes to the near-term and life cycle
baseline.
* Project managers must provide formal and informal reports to DOE
headquarters staff, including data entries into databases and quarterly
performance reports. These reports contain, among other things, earned
value management (EVM) data--a measure of progress against a cost and
schedule baseline. Widely used in industry, earned value data makes it
possible for managers and others to determine how a project has been
performing and to predict future performance trends. Furthermore, both
the Office of Management and Budget (OMB) and DOE Order 413 require the
use of EVM data, and GAO has developed best practices on how to use the
data.[Footnote 9]
* As stipulated in DOE Order 413, OECM must independently review
project baselines at critical project stages; OECM conducts these
reviews largely with the help of external technical experts.
Specifically, for cleanup projects that cost $100 million or more, OECM
must review a project's proposed baseline to provide reasonable
assurance that the project can be successfully executed. OECM also
examines technical scope, cost, schedule, and avoidance and mitigation
plans for possible cost and schedule overruns, as well as proposed
project management.
Overall, we and others have reported over the past two decades that
project management weaknesses have impaired DOE's major projects. In
1990, we designated DOE's contract management (which includes project
management) as a high-risk area for fraud, waste, abuse, and
mismanagement. In addition, in 1999, the National Academies' National
Research Council developed recommendations to address weaknesses in
DOE's project management. Recently, in 2007, we reported that DOE had
improved its approach to project management but that performance on
DOE's projects had not substantially improved.[Footnote 10] Also in
2007, the National Academy of Public Administration reported
specifically on EM's management of nuclear waste and complimented EM on
its improvements in project management, but also raised questions about
EM's ability to follow through on them. Furthermore, reviews by DOE's
Office of Inspector General, the Department of Defense's Army Corps of
Engineers (Army Corps), and the National Research Council, among
others, have advised DOE on how to better manage its major projects.
In this context, you asked us to determine the (1) extent to which the
cost and schedule for DOE's major cleanup projects have changed and the
key reasons for these changes, and (2) factors that may hinder DOE's
ability to effectively manage these cleanup projects.
To determine the extent to which DOE cleanup projects are experiencing
cost or schedule changes and key reasons contributing to these changes,
we spoke with DOE project directors and reviewed project management
documents for 10 of EM's major cleanup projects--9 projects above the
near-term $1 billion threshold, and 1 estimated to cost between $900
million and $1 billion over the near term. For our analysis, we
examined the life cycle baseline reported as of the most recent
contract awards or major contract modifications--which occurred between
2004 and 2007--and compared these baselines with the updated baselines
at the time of our review (dollar amounts used in calculating cost
increases are in fiscal year constant 2008 dollars). We conducted site
visits and analyzed project documentation, such as project plans,
independent reviews, contractor performance data, plans to avoid or
mitigate project risks, and documents prepared to guide and control
formal changes to the baseline. We also identified factors that may
hinder DOE's ability to effectively manage projects in accordance with
approved life cycle baselines primarily through a review of project
documents and interviews with project officials. Because we and others
have previously expressed concern about the data reliability of a key
DOE project management tracking database--the Project Assessment and
Reporting System--we did not develop conclusions or findings based on
information generated through that system.[Footnote 11] Instead, we
collected information directly from project site offices and
contractors. In addition, we spoke with officials from EM and OECM in
Washington, D.C. We provided an interim briefing to the Subcommittee on
the status of our work on April 3, 2008.
We conducted this performance audit from March 2007 to September 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. Appendix I contains a
detailed description of our scope and methodology.
Results in Brief:
Nine of the 10 cleanup projects we reviewed have experienced cost
increases and schedule delays in their life cycle baseline, ranging
from $139 million for one project to more than $9 billion for another,
and schedule delays ranging from 2 years to 15 years. These changes
arose primarily because the initial baselines made schedule assumptions
that were not linked to technical or budget realities, and the scope of
work included other assumptions that did not prove true. Specifically:
* Baselines were not linked to technical or funding realities. The
schedules for 8 of the 10 projects we reviewed were established in
response to EM's 2002 effort to accelerate cleanup work, which in some
cases moved up project completion dates by 15 years or more. EM wanted
to complete cleanups earlier to better safeguard public health and the
environment, among other things. However, these dates were not always
tied to technical capabilities or likely funding realities. For
example, to meet the 2012 accelerated completion date for its solid
waste disposition project, DOE's Idaho National Laboratory assumed its
waste treatment plant could process waste at a rate that was more than
50 percent higher than the rate demonstrated at the time EM established
the baseline. When the waste treatment plant did not meet that
processing rate, EM revised its baseline, deferring 4 years of cleanup
work, which added about $450 million to the project. In addition,
before April 2007, according to several EM officials, project managers
were directed to establish cost baselines to meet the accelerated
schedules without considering likely funding for the projects. As a
result, most projects did not receive funding as planned for in the
baselines, hindering their ability to complete the work on time. In
April 2007, EM changed its strategy: It limited its funding for all
sites and directed that future baselines be based on the expected
budget for each site. In part because of this change, some completion
dates were extended by as much as 15 years.
* Baselines' scope of work included optimistic assumptions that did not
prove true. Most of the projects we reviewed also experienced cost
increases and schedule delays because the initial baselines had (1) not
fully anticipated the type and extent of cleanup that would be needed,
(2) assumed that construction projects needed to carry out the cleanup
work would be completed on time, or (3) assumed the scope of work
activities needed to finish the project would not increase. For
example, at a 1940s-era building being demolished at Oak Ridge as part
of the nuclear facility decontamination and decommissioning project,
the contractor found that the building was far more contaminated and
deteriorated than first estimated and had to reinforce the structure in
order to safely remove contaminated equipment before demolishing the
building. Primarily because these activities had not been adequately
anticipated in the baseline, project costs rose by $1.2 billion and
completion was extended by 9 years, to 2017. Similarly, the baselines
for four of the major cleanup projects assumed that a related, major
construction project would be completed on schedule and available for
the cleanup project to use. For example, a 5-year delay in the
completion of Hanford's major construction project--the Waste Treatment
Plant (WTP)--was the most significant factor behind extending the
radioactive liquid tank waste project's schedule by 10 years, and
increasing its life cycle costs by $4.8 billion. The delay in WTP's
startup date resulted in additional years required to store the waste
in the tanks and then to operate the treatment plant.
DOE has not always effectively used management tools--including
independent project baseline reviews, performance information systems,
guidance, and performance goals--to help oversee major cleanup
projects' scope of work, costs, and schedule. Specifically:
* DOE's independent reviews of project baseline estimates, meant to,
among other things, provide reasonable assurance that a project's work
activities can be accomplished within the baseline's stated cost and
schedule, have not done so for 4 of the 10 projects we reviewed. The
baselines for these 4 projects were significantly modified shortly
after review, revision, and validation. For one project, the baseline
was significantly modified as little as 7 months after it had been
revised and validated based on the independent review, while other
projects had experienced additional life cycle cost increases of as
much as $9 billion and delays of up to 10 years, within 1 to 2 years
after the baseline reviews. As a result, the usefulness of the
independent baseline reviews is questionable when significant baseline
changes occur very shortly after the reviews are completed.
* EM managers do not always receive the information needed to
effectively manage major cleanup projects or provide detailed reports
to Congress on the projects' status. First, sites' proposals for
changes to cost and schedule baselines do not consistently identify
reasons for the changes or possible root causes, and EM does not
systematically analyze the proposals for common problems across its
projects. As a result, EM may be missing opportunities to apply lessons
learned across projects. Second, in certain cases, the use of EVM data
did not conform to industry standards or best practices identified by
GAO, in part because the data contained anomalies that skewed analyses
or lacked important information on future staffing needs. Third, EM's
quarterly performance reports neither consistently provide accurate
information about a project's performance against the near-term
baseline, nor do they include information about how current performance
may affect the life cycle baseline. Finally, DOE's reports to Congress
do not include important information that would aid oversight, such as
the extent of and reasons for significant changes to near-term and life
cycle baseline estimates. In contrast, Department of Defense reports to
Congress on acquisitions for major systems provide detailed information
on significant cost and schedule changes and the reasons for those
changes.
* Guidance for key management and oversight functions--such as project
baseline development, risk management, and contingency funding--is not
consolidated, and is contradictory and unclear. Consequently, project
managers do not consistently implement this guidance. For example, DOE
headquarters officials found that project managers are calculating
contingency funding to cover project risks in their baselines in a
variety of ways, leading to uncertainty regarding the total contingency
funds needed to cover all cleanup projects.
* DOE recently changed its goals for the performance of cleanup
projects. Before 2008, a major cleanup project was expected to achieve
100 percent of the scope of work in its life cycle baseline with less
than a 10 percent cost increase in the project's life cycle baseline.
However, according to EM's current cleanup project performance goal,
the projects are successful if they achieve at least 80 percent of the
scope of work in their near-term baselines with less than a 25 percent
cost increase. The new performance goal permits up to 20 percent of the
scope of work to be deferred from the near term to out years, creating
a substantially greater risk that life cycle costs will continue to
increase and that completion dates will be delayed. According to DOE
officials, the agency adjusted performance goals primarily to account
for the greater level of uncertainty inherent in cleanup projects.
However, by lowering expectations for adhering to near-term baselines,
DOE may inadvertently be creating an environment in which large
increases to life cycle costs become not only more common, but accepted
and tolerated.
* Over the past 2 years, EM has begun a series of efforts to better
manage its projects and address long-standing problems. For example,
under its "Best-in-Class" Project Management Initiative, EM senior
managers have expressed a strong commitment to improving project
performance, and under this initiative, EM contracted with the Army
Corps to assess project management, and then identified 18 priority
actions to correct known problems. Although these efforts are ongoing,
EM has yet to combine them into a formal plan, and it is too early to
tell whether these efforts will prove effective.
We are making a number of recommendations to the Secretary of Energy to
improve management of major cleanup projects, including to report more
complete information to senior DOE management and Congress so that they
can be fully informed about project status and make informed decisions
about these projects; consolidate, clarify, and update guidance for
managing cleanup projects; consolidate all planned and ongoing EM
improvements into a comprehensive corrective action plan; and develop
the independent baseline reviews to better assure that project work
scope can be completed within the baselines' stated cost and schedule.
We provided a draft of this report to the Department of Energy for its
review and comment. DOE agreed with our recommendations but provided
some suggested changes to them, and provided specific comments on the
overall report, which we incorporated as appropriate. We discuss DOE's
comments in detail at the end of this letter. DOE also provided some
technical comments, which we incorporated as appropriate. DOE's
comments are provided in appendix IV.
Background:
DOE oversees and implements its major cleanup projects through
agreements with contractors who operate the nuclear weapons research
and production sites and the cleanup projects at those sites. Some of
EM's cleanup projects are located at DOE sites administered by the
National Nuclear Security Administration, a separately organized agency
within DOE.
EM's major cleanup projects involve efforts to clean up sites where
nuclear weapons were produced and production waste stored.[Footnote 12]
EM's cleanup projects handle a wide array of waste types and levels of
radioactivity and hazardous constituents, and can involve multiple
activities to, among other things, retrieve, characterize, treat,
package, store, transport, and dispose of the waste, as well as
disassemble, treat, package, store, transport, and dispose of the
contaminated containers or processing lines/equipment used for weapons
production or for storing or treating the waste. Multiple EM cleanup
projects can occur at a single DOE site responsible for a multitude of
other noncleanup-related activities. The cleanup projects are organized
generally around similar waste types and activities. For example, the
soil and water remediation activities at each site are organized under
one umbrella, as are the nuclear facility decontamination and
decommissioning projects, and the radioactive liquid tank waste
projects, among others. EM generally manages these similar work
activities, grouped into a category known as a Project Baseline
Summary, through numerical designations; for example, all activities
for soil and water remediation are grouped under Project Baseline
Summary 30. (See app. II for additional information on the 10 DOE major
cleanup projects reviewed.)
Funding for and Costs of DOE's Major Cleanup Projects:
Unlike construction projects, which are funded on a line item basis,
cleanup projects receive funding through operating funds designated for
each DOE site. In 2003, EM began applying project management principles
contained in DOE Order 413 to these cleanup projects in order to apply
more discipline and rigor in planning and expending these project
funds, among other things.
A cleanup project can cost several billion dollars and its life cycle
can span several decades. EM divides the life cycle baselines for its
major cleanup projects into three distinct parts--prior year costs,
near term (usually a 5-year period), and out year (through project
completion). Life cycle costs for each project range from a low of
almost $1.7 billion to over $44 billion, and some projects might not be
completed until after 2050.[Footnote 13] (See app. III for detailed
information on the life cycle baseline costs for the 10 projects we
reviewed.)
EM applies different approaches to managing these wastes, depending on
the type and extent of contamination and the state or federal
regulatory guidelines and milestones it needs to comply with. DOE has
agreements with state and federal regulators to clean up sites, and the
agreements lay out a framework for determining the cleanup standards to
be met. Furthermore, because all projects have a certain degree of
uncertainty, such as not fully knowing the condition of buried waste
containers, EM needs to plan for this uncertainty and identify ways to
prevent serious disruption to projects should problems arise. To
address this uncertainty, DOE Order 413 requires project managers to
identify contingency funds that may be needed to cover potential cost
increases stemming from a variety of project risks, including technical
complexities, regulatory issues, and funding shortfalls. Although EM
project managers build contingency funding into their near-term and out-
year estimates, EM management does not generally include funding in its
budget requests to cover contingency for cleanup projects until after
it is actually needed to address a problem; therefore, EM contingency
for cleanup projects has been referred to as "unfunded contingency."
Earned Value Management for Tracking Work Progress:
To be effective, program managers need information on program
deliverables and on the progress made in meeting them. One method that
can help program managers track this progress is EVM data. These data
include, for example, detailed information on budgeted costs and actual
costs for work scheduled and work performed, as well as forecasted
costs at project completion. Among other things, EVM data can be used
to compare (1) budgeted costs to actual costs and (2) the value of work
accomplished during a given period with the value of work scheduled for
that period. By using the value of work completed as a basis for
estimating the cost and time to complete a project, EVM data should
alert program managers to potential problems sooner than expenditures
alone can.
As a key management tool, EVM has evolved from an industrial
engineering concept to a government and industry best practice to
better oversee programs. Both OMB and DOE Order 413 require the use of
EVM. OMB Circular A-11, part 7, requires the use of an integrated EVM
system across an entire program to measure how well the government and
its contractors are meeting a program's approved cost, schedule, and
performance goals. The American National Standards Institute and the
Electronic Industries Alliance have jointly established a national
standard for EVM systems.[Footnote 14] Recognizing the benefits of
having these national standards, OMB states in its 2006 Capital
Programming Guide that major acquisitions that require product
development are to require that contractors use an EVM system that
meets the American National Standards Institute guidelines.[Footnote
15] In addition, DOE Order 413 requires that projects with total
cleanup costs of $50 million or more use an EVM system that complies
with industry standards and is certified by DOE's OECM to comply with
these standards.
GAO also has developed EVM best practices that, when followed, can help
project managers consistently develop and analyze EVM data to gain a
complete and accurate understanding of project status. Among other
things, our guidance on EVM states that (1) EVM data should not have
data errors and anomalies that may skew and distort the EVM analysis,
and (2) information such as staffing levels and the root causes of and
corrective actions for cost and schedule variances should be reported
through the EVM system.
Major Cleanup Projects Experienced Billions of Dollars in Additional
Costs and Schedule Delays, Primarily because Initial Baselines Were
Overly Optimistic:
Nearly all the cleanup projects we reviewed have had cost increases and
schedule delays in the life cycle baseline, as much as $9 billion for
one project, and schedule delays of as much as 15 years for two
projects. These cost increases and schedule delays occurred primarily
because the previous baselines for these projects had schedule
assumptions that were not linked to technical or budget realities, and
other assumptions also proved to be overly optimistic.
Major Cleanup Projects' Costs Have Increased by Billions and Schedules
Have Been Delayed by As Much As 15 Years:
The estimated costs of the 9 of the 10 DOE major cleanup projects we
reviewed have significantly exceeded original estimates, as table 1
shows.
Table 1: Changes in the Estimated Life Cycle Costs for DOE Major
Cleanup Projects (Dollars in billions):
Project: Solid waste stabilization and disposition, Idaho National
Laboratory;
Previous life cycle cost estimate (year of estimate)[A]: $2.851 (2006);
Current life cycle cost estimate range[B]: $3.301 - $3.940;
Life cycle cost increase range[B]: $.450 - $1.089;
Percentage increase range[B,C]: 16% - 38%.
Project: Nuclear facility decontamination and decommissioning, Oak
Ridge Reservation;
Previous life cycle cost estimate (year of estimate)[A]: $1.907 (2004);
Current life cycle cost estimate range[B]: $3.126 - $3.290;
Life cycle cost increase range[B]: $1.219 - $1.383;
Percentage increase range[B,C]: 64 - 73.
Project: Nuclear material stabilization and disposition, Savannah River
Site;
Previous life cycle cost estimate (year of estimate)[A]: $7.487 (2004);
Current life cycle cost estimate range[B]: $10.802 - $11.248;
Life cycle cost increase range[B]: $3.315 - $3.761;
Percentage increase range[B,C]: 44 - 50.
Project: Radioactive liquid tank stabilization and disposition,
Savannah River Site;
Previous life cycle cost estimate (year of estimate)[A]: $11.909
(2004);
Current life cycle cost estimate range[B]: $18.622 - $24.003;
Life cycle cost increase range[B]: $6.714 - $12.094;
Percentage increase range[B,C]: 56 - 102.
Project: Soil and water remediation, Los Alamos National Laboratory;
Previous life cycle cost estimate (year of estimate)[A]: $1.521 (2006);
Current life cycle cost estimate range[B]: $1.660 - $2.425;
Life cycle cost increase range[B]: $.139 - $.904;
Percentage increase range[B,C]: 9 - 59.
Project: Nuclear material stabilization and disposition, Hanford Site;
Previous life cycle cost estimate (year of estimate)[A]: $2.990 (2006);
Current life cycle cost estimate range[B]: $3.387 - $3.412;
Life cycle cost increase range[B]: $.397 - $.422;
Percentage increase range[B,C]: 13 - 14.
Project: Solid waste stabilization and disposition, Hanford Site;
Previous life cycle cost estimate (year of estimate)[A]: $8.219 (2007);
Current life cycle cost estimate range[B]: $9.596 - $10.639;
Life cycle cost increase range[B]: $1.377 - $2.420;
Percentage increase range[B,C]: 17 - 29.
Project: Soil and water remediation, Hanford Site;
Previous life cycle cost estimate (year of estimate)[A]: $3.902 (2007);
Current life cycle cost estimate range[B]: $5.623 - $5.759;
Life cycle cost increase range[B]: $1.721 - $1.857;
Percentage increase range[B,C]: 44 - 48.
Project: Nuclear facility decontamination and decommissioning, Hanford
Site[D];
Previous life cycle cost estimate (year of estimate)[A]: $4.762 (2006);
Current life cycle cost estimate range[B]: $4.762 - $4.892;
Life cycle cost increase range[B]: 0;
Percentage increase range[B,C]: 0.
Project: Radioactive liquid tank stabilization and disposition, Hanford
Site;
Previous life cycle cost estimate (year of estimate)[A]: $21.647
(2004);
Current life cycle cost estimate range[B]: $31.048 - $39.694;
Life cycle cost increase range[B]: $9.401 - $18.048;
Percentage increase range[B,C]: 43 - 83.
Source: GAO analysis of DOE data.
[A] For purposes of this report, previous cost estimates are the life
cycle cost estimates created at the beginning of the most recent
contract period for operation of the DOE site or the most recent major
contract modification or extension, which in many cases coincided with
the beginning of the project's previous near-term baseline. Current
life cycle cost estimates are based on the most recently approved near-
term baseline, out-year planning estimate ranges, or both.
[B] EM recently began using cost estimate ranges rather than point
estimates. According to EM officials, costs at the lower end of the
ranges were estimated at the 50 percent level of confidence, while
costs at the upper end of the ranges represent the 80 percent level of
confidence. For this report, our analysis of cost change uses the lower
end of the range, which excludes contingency, because contingency
amounts can vary widely between projects and are not typically funded
before they are needed.
[C] We calculated the percentage of cost increase on the basis of
constant 2008 dollars to make them comparable across projects and to
show real increases in cost while excluding increases due to inflation.
[D] As of August 2008, this project has not registered a cost increase.
However, project officials told us that they expect to file a baseline
change proposal increasing the life cycle cost by at least several
hundred million dollars by the end of December 2008.
[End of table]
As the table shows, estimated costs increased from a minimum of $139
million for one project to more than $9 billion for another project.
The smallest dollar and percentage increase--$139 million, or 9
percent--occurred at Los Alamos' soil and water remediation project,
which is focused on cleaning up known or suspected chemical and
radiological contamination in addition to treating soil and groundwater
that was contaminated by this waste. This project, however, is expected
to further increase its life cycle cost estimate. The largest dollar
increase among the 10 major projects--more than $9 billion--was for
Hanford's radioactive liquid tank waste project, which is expected to
remove, treat, and dispose of more than 56 million gallons of high-
level radioactive waste in 177 underground storage tanks. In fact, the
other radioactive liquid tank waste project, at Savannah River,
registered the second largest dollar increase--almost $7 billion.
However, the largest percentage increase--about 64 percent--occurred at
Oak Ridge's nuclear facilities decontamination and decommissioning
project.
Table 2 shows that 8 of the 10 projects we reviewed experienced delays
in scheduled project completion, ranging from 2 years to 15 years.
[Footnote 16]
Table 2: Changes in Estimated Project Schedules for DOE Major Cleanup
Projects:
Project: Solid waste stabilization and disposition, Idaho National
Laboratory;
Previous completion date estimate[A]: 2012;
Current completion date estimate[A]: 2016 - 2020;
Schedule change (years): 4 - 8.
Project: Nuclear facility decontamination and decommissioning, Oak
Ridge Reservation;
Previous completion date estimate[A]: 2008;
Current completion date estimate[A]: 2017;
Schedule change (years): 9.
Project: Nuclear material stabilization and disposition, Savannah River
Site;
Previous completion date estimate[A]: 2015;
Current completion date estimate[A]: 2024 - 2026;
Schedule change (years): 9 - 11.
Project: Radioactive liquid tank stabilization and disposition,
Savannah River Site;
Previous completion date estimate[A]: 2019;
Current completion date estimate[A]: 2032 - 2034;
Schedule change (years): 13 - 15.
Project: Soil and water remediation, Los Alamos National Laboratory[B];
Previous completion date estimate[A]: 2015;
Current completion date estimate[A]: 2015;
Schedule change (years): 0.
Project: Nuclear material stabilization and disposition, Hanford site;
Previous completion date estimate[A]: 2016;
Current completion date estimate[A]: 2018 - 2019;
Schedule change (years): 2 - 3.
Project: Solid waste stabilization and disposition, Hanford site;
Previous completion date estimate[A]: 2035;
Current completion date estimate[A]: 2050 - 2058;
Schedule change (years): 15 - 23.
Project: Soil and water remediation, Hanford site;
Previous completion date estimate[A]: 2035;
Current completion date estimate[A]: 2050 - 2059;
Schedule change (years): 15 - 24.
Project: Nuclear facility decontamination and decommissioning, Hanford
site;
Previous completion date estimate[A]: 2019;
Current completion date estimate[A]: 2019;
Schedule change (years): 0.
Project: Radioactive liquid tank stabilization and disposition, Hanford
site;
Previous completion date estimate[A]: 2032;
Current completion date estimate[A]: 2042 - 2050;
Schedule change (years): 10 - 18.
Source: GAO analysis of DOE data.
[A] For purposes of this report, previous project completion dates
represent the estimates at the beginning of the new contract period for
operation of the DOE site or the major contract modification or
extension, which typically coincided with the beginning of the
projects' current or previous near-term baseline. Current completion
date estimates represent the most recently approved near-term baseline
or out-year planning estimate ranges calculated at the 50 percent
confidence level at the lower end of the range, to the 80 percent level
of confidence at the higher end of the range. EM recently began using
schedule estimate ranges rather than point estimates. For this report,
our analysis of schedule change uses the lower end of the range.
[B] The June 2008 Baseline Change Proposal shows proposed costs
associated with this project at the 80 percent confidence level would
extend through fiscal year 2020.
[End of table]
As table 2 shows, the shortest delay is at Hanford's nuclear material
stabilization and disposition project, while the longest delays--15
years--also are at Hanford: the soil and water remediation and the
solid waste stabilization and disposition projects.
Overly Optimistic Baselines Contributed to Significant Changes in
Projects' Life Cycle:
The changes in schedule and costs occurred primarily for two reasons.
First, initial project baselines were built on accelerated schedules
that were not always linked to technical capabilities or available
budgets, although EM has begun to tie its new baselines to anticipated
funding. Second, the initial baselines included other assumptions that
did not hold true, including conditions on the ground at the sites,
expected completion dates for related construction projects, and
activities that would be included in projects' scopes of work.
Baseline Schedules Were Not Linked to Technical or Funding Realities:
The initial baselines for 8 of the 10 major projects we reviewed
contained schedules that were influenced by an EM-wide effort to
accelerate the office's cleanup work. In 2002, EM management worked
with its sites and regulators to create new, earlier milestones for
completing key cleanup projects and for closing entire sites to reduce
the public health and environmental risks posed by the waste at these
sites. Before this effort, some of the major cleanup projects were not
estimated to complete work until the 2030s and 2040s. Under the
accelerated schedules, four projects' completion dates were moved up by
15 years or more, as was the case for the radioactive liquid tank waste
stabilization and disposition project at the Hanford site; its
completion date was moved from 2048 to 2028. The baselines containing
the accelerated schedules--those generally created between 2003 and
2006--tied their work scope and funding assumptions to the completion
dates and not necessarily to available cleanup technologies. For
example:
* Solid waste stabilization and disposition project at Idaho. To meet
its accelerated completion date of 2012--down from 2018--DOE's Idaho
National Laboratory assumed its Advanced Mixed Waste Treatment Plant
could process nuclear waste at a rate of about 8,500 cubic meters per
year--more than 50 percent faster than the rate of about 5,400 cubic
meters per year demonstrated when DOE established the baseline. At the
time, because the plant had only recently begun operating, project
staff lacked confidence that they could meet the processing rate.
Moreover, the independent team reviewing the baseline reported that the
rate was optimistically high. Nevertheless, DOE proceeded with the
initial baseline, increasing the amount of unfunded contingency in its
baseline and attempting to meet the optimistic rate by providing the
contractor with performance incentives. Still, the processing rate has
fallen short of baseline assumptions--it is currently roughly 6,000
cubic meters per year. To reflect this more realistic rate, DOE
subsequently revised its baseline, adding 4 years to the project
schedule and increasing costs by about $450 million.
* Radioactive liquid tank waste stabilization and disposition project
at Savannah River. This project, in part, combines high-level
radioactive waste stored in tanks at the Savannah River Site with
melted glass and places it in canisters ultimately to be sent to a
federal repository for disposal. DOE directed that the project's
completion date be accelerated, from 2035 in its early planning
documents to 2019 in the initial baseline. In order to make that date,
according to project officials, they included some assumptions in the
initial baseline they knew at the time would be difficult to realize.
Specifically, they assumed that the project's waste processing facility
could produce canisters consisting of up to 49 percent high-level
waste--with the remaining space filled with melted glass--when at the
time it had not been able to produce a canister containing more than 42
percent high-level waste with an existing technology while remaining
within the acceptance criteria for the federal repository. Those
criteria dictate specific characteristics, including durability and
leachability for the glass-waste mixtures in the canisters. DOE has
since adjusted these assumptions--the current waste processing plan
assumes the canisters will contain 34 percent to 38 percent high-level
waste using the existing technology--contributing to the overall cost
increase and schedule delay for this project.
These early baselines also were not tied to expected funding. According
to several senior EM officials, before April 2007, project directors
were instructed to create cost baselines to meet the accelerated
schedules and their regulatory milestones without regard for the likely
funding the projects could expect to receive. Consequently, the funding
assumptions in the projects' baselines were higher than the amount of
funding DOE requested each year. According to a senior EM budget
official, these shortfalls required project managers to continually
adjust cost and schedule baselines as projects moved work activities
into the out years to accommodate the lower funding levels. For
example, according to site officials at Oak Ridge, when DOE did not
request the full amount of funding in the nuclear facility's
decontamination and decommission project's initial baseline, the
project could not complete all the work as planned. Project managers
responded by pushing work activities into the out years, which
contributed, in part, to the project's overall cost increase and
schedule delay. Similarly, as noted in a recent DOE internal audit,
according to Los Alamos officials, funding has not been sufficient to
meet the site's regulatory commitments, and has been a concern since
2003, when the site manager said he was concerned that appropriate
resources had not been identified to conduct the necessary
environmental restoration activities.[Footnote 17]
According to EM managers, they have implemented changes to the way
baselines are created that address these problems. In April 2007, EM
changed its policy for creating project baselines. Instead of tying
baselines to the accelerated schedules and regulatory commitments with
unconstrained funding, EM limited funding for its sites, directing that
all future baselines be based on expected budget numbers generated for
each site.
For three of the projects we reviewed, this change in direction
resulted in deferral of work and schedule delays because the new
funding levels represented significant reductions in what projects were
planning on receiving, and these projects were low on EM's priority
list.[Footnote 18] For example, Hanford's solid waste stabilization and
disposition project's funding was reduced to the point where it will
receive minimal funding for the next 4 years in order to allow full
funding of Hanford's decontamination and decommissioning project at
River Corridor, a higher priority. During this period, to comply with
the funding levels provided, the project will maintain minimum
activities to safeguard materials and will not advance its waste
processing goals. As a result, according to project officials, life
cycle costs for this project increased in some part to reflect a longer
schedule and the additional costs of having to hire and train new
workers in the future to complete a job that already was underway.
Not all sites have implemented these changes, however. EM's direction
to all sites to create their baselines tied to the funding profile
outlined in the June 2007 policy memo has not been applied to two of
the major cleanup projects. The Hanford radioactive liquid tank waste
stabilization and disposition project--the most expensive cleanup
project--and the Los Alamos soil and water remediation project have not
aligned their baselines with the funding targets. The Hanford project's
baseline was validated just before the policy change took place and,
for the period between 2009 and 2030, the baseline contains about $2.6
billion more than the funding targets.[Footnote 19] Similarly, EM
approved the baseline for the Los Alamos project even though it was not
aligned with the funding targets. The baseline identifies a projected
funding shortfall each year through 2012 that peaks at a cumulative
$236 million in 2010. This shortfall does not include an additional
$947 million in unfunded contingency. At the same time EM approved the
baseline, it directed project managers at the site to change the
baseline to bring its costs in line with the targets.
Another likely contributing factor to the cleanup projects' cost
increases and extended schedules is DOE's practice of not including
contingency funding in its annual budget requests for EM's cleanup
projects. Specifically, EM has requested enough funding for its cleanup
projects to ensure a 50 percent likelihood of completing the projects
within the total estimated project costs. However, the requested amount
generally has not included contingency funding, which project managers
may have to use in order to complete a project on time by addressing
risks that materialize during cleanup. For example, in 2007, the
radioactive liquid tank waste project at Hanford had an unexpected
spill of 85 gallons of radioactive material from one of its storage
tanks; this spill required shutting down waste retrieval operations for
11 months in order to clean up the spill. Even though the retrieval
operations represent a small percentage of the overall work scope
ongoing at the project, the accident added at least $8 million to the
retrieval cost for that one tank. Furthermore, in accordance with EM
policy, projects are expected to account for the costs of such
potential risks by increasing the amount of unfunded contingency in
their near-term and life cycle baselines. Because funding for that
contingency is not included in the budget request, however, increasing
the amount of contingency funding in the near-term baseline is largely
a paperwork exercise that has no active impact on preventing or solving
problems or anticipating actions that could offset demonstrated slow
progress.
According to a December 2007 report by the National Academy of Public
Administration, EM's practice of not funding contingency for its
cleanup projects has meant that EM has not had additional funding
available to address emergency problems when they arise and therefore
has either taken money from another project or extended the schedule of
the work into future fiscal years to manage them. Furthermore,
according to EM officials, by providing enough funding for its projects
to ensure that they have a 50 percent chance of meeting their project
cost and schedule baselines, EM recognizes that 5 of the 10 major
projects are likely to miss their cost and schedule goals. In contrast,
DOE funds its construction projects at a level that reflects a greater
probability of success--80 percent--an amount that reflects the
industry standard for such projects. According to senior EM officials,
EM does not fund contingency for its cleanup projects because allotting
enough funds to cover the costs of risks that may not materialize would
constrain the amount of work EM could perform for the money it receives
each year. However, in accordance with a recommendation from the
National Academy of Public Administration, EM is evaluating its
practice of not including contingency funding in its budget requests
for cleanup projects.
Baselines Included Assumptions about the Scope of Work and Technical
Challenges That Did Not Hold True:
For most of the projects we reviewed, EM included assumptions in its
baselines that (1) did not represent the conditions at some of the
major projects, (2) did not sufficiently anticipate delays in the
completion of related construction projects, and (3) the scope of work
activities to be accomplished would not increase. Correcting these
assumptions often led to changes in the scope of work, higher costs,
and extended schedules.
First, for four of the projects we reviewed--Oak Ridge's nuclear
facility decontamination and decommissioning project, Idaho's solid
waste stabilization and disposition project, and Savannah River and
Hanford's radioactive liquid tank waste stabilization and disposition
projects--site conditions were worse than project staff originally
estimated, leading to significant changes to the life cycle baseline.
[Footnote 20] For example, at the Oak Ridge project, because a 1940s-
era building was far more contaminated and deteriorated than first
estimated, DOE changed its cleanup plan and implemented a more
extensive--and therefore more expensive--approach to tearing down the
building. After a worker fell through a weakened floor, the contractor
had to first reinforce the building's structure so that contaminated
equipment could be removed safely. Primarily because project officials
did not accurately anticipate the site conditions or the types of work
activities necessary to safely conduct the work--despite multiple
estimates generated by the contractor, DOE, and the Army Corps--this
project's costs increased by $1.2 billion and significant amounts of
work were delayed, extending the completion date by 9 years, to 2017.
Similarly, the initial baseline for the radioactive liquid tank waste
stabilization and disposition project at Hanford assumed that 99
percent of the waste contained in the 177 storage tanks could be
removed by using only one type of technology to retrieve the tank
waste. However, DOE subsequently determined that almost half of the
tanks contained a hardened layer of waste that could not be removed
with the chosen technology and therefore a second technology was needed
to remove this waste. Correcting the optimistic assumptions--adding the
second technology and re-estimating the costs of retrieving waste from
the tanks based on field experience gained--increased the baseline by
more than $2 billion.
Second, delays in completing related construction projects directly
contributed to schedule delays--and corresponding cost increases--for
four of the cleanup projects we reviewed. Three of these projects are
at the Hanford site in Richland, Washington. The initial baselines for
these projects included assumptions that the major construction project
there--the Waste Treatment Plant (WTP)--would be ready to begin
operations in 2011. In 2006, DOE extended the WTP construction
completion date by 5 years, resulting in schedule extensions for three
cleanup projects.[Footnote 21] The major cleanup project that will run
the WTP--the radioactive liquid tank waste stabilization and
disposition project--had to increase its life cycle cost estimate by
about $4.8 billion and extend its schedule by 10 years in order to
safely maintain the waste storage tanks while the treatment plant is
being built and to operate the plant for additional years, among other
things. Similarly, in response to the WTP delay, the schedules for the
solid waste stabilization and disposition project and the soil and
water remediation project were extended by 15 years--increasing costs
by more than $4 billion combined. These projects cannot complete their
missions until the WTP has finished processing all of the liquid waste
in the storage tanks. According to the currently approved baselines,
the liquid tank waste project will complete its operations in 2042, and
activities under the latter two projects are not expected to be
completed until 2050.[Footnote 22] However, as we recently reported,
DOE has acknowledged that the start of waste treatment operations will
be delayed by at least 8 years (from 2011 to 2019), not 5 years, which
will likely affect further these projects' costs and schedules.
[Footnote 23]
Third, for three of the projects we reviewed, increases in work scope-
-the activities required to complete the project--contributed to cost
increases and schedule delays. For example, a major contributor to the
more than $3 billion cost increase and at least 9-year schedule delay
at the nuclear materials stabilization and disposition project at
Savannah River was DOE's approval of a new initiative in 2006 that
added additional amounts of nuclear materials for the project's
facilities to disposition, including materials from other DOE sites.
Those facilities were originally scheduled to complete their mission in
2007--the new scope extended the mission until 2019.[Footnote 24]
Similarly, Savannah River's other major cleanup project--radioactive
liquid tank waste stabilization and disposition--also had significant
scope added. Under a law passed in 2004,[Footnote 25] DOE determined
that the salt waste in its tanks is not high-level waste and therefore
can be disposed of at the site instead of in a geologic repository. The
law required DOE to consult with the Nuclear Regulatory Commission when
making this determination. According to DOE, this consultation and the
resulting changes to the cleanup process added significant scope to the
project, causing DOE to lengthen the estimated time to close the 49
tanks at the site.
According to EM, most of the cost increases and schedule delays
experienced by the major cleanup projects were the direct result of
unrealized aggressive planning assumptions. EM has since recognized
that project baselines must be based on realistic technical and
regulatory assumptions and be planned on the basis of realistic out
year budget profiles. However, it appears that the practice of
incorporating optimistic assumptions into project baselines has not yet
been eliminated. As we recently reported, some of the underlying
assumptions in the baseline for the Hanford radioactive liquid tank
waste project may be overly optimistic.[Footnote 26] For example, DOE
assumes that the tanks will remain viable throughout what has become a
protracted waste treatment process, with some tanks expected to remain
in service more than 60 years longer than originally anticipated. This
extended operation raises the risk of tank failure and leaks to the
environment. The baseline also assumes that emptying single-shell tanks
will proceed significantly faster than it has to date. Hanford project
management officials have since acknowledged that the ambitious
retrieval schedule might not be achievable and are adjusting their
planning estimates.
DOE Has Not Effectively Used Available Management Tools to Help Control
Major Cleanup Projects' Scope of Work, Costs, and Schedule:
While DOE has several mechanisms in place to help manage cleanup
projects, including independent reviews, performance information
systems, guidance, and performance goals, it has not always used them
to effectively manage major cleanup projects' scopes, costs, and
schedules.
DOE's Baseline Reviews Highlight Problems but Have Not Succeeded in
Ensuring Work Can Be Accomplished within Stated Cost and Schedule:
OECM's independent reviews of the baselines, meant, among other things,
to provide reasonable assurance that the project's work activities can
be accomplished within the stated cost and schedule, have not done so
for four of the projects we reviewed. Instead, these baselines were
significantly modified shortly after approval. As a result, the
usefulness of the independent baseline reviews is questionable when
significant baseline changes occur very shortly after the reviews are
completed, as the following discussion illustrates.
The advanced mixed waste treatment project under Idaho's solid waste
stabilization and disposition project. OECM's 2006 independent review
accurately noted that the project baseline submitted for validation for
the treatment plant included an unrealistic rate for processing waste-
-more than 50 percent faster than the rate demonstrated at the time the
baseline was established. In response, project officials proposed
correcting the problem primarily by increasing the amount of unfunded
contingency in the baseline, a move that reflected common practice
within EM, and OECM officials approved this action and validated the
baseline. As the panel predicted, the project's actual processing rate
after its baseline was validated was slower than expected. Within 7
months of OECM's validation of the near-term baseline, project
officials proposed modifying it. DOE had to defer the activities that
the contractor was not able to accomplish in the near term, extending
the project life cycle by about 4 years and increasing costs by about
$450 million. We believe that DOE's approval of increasing unfunded
contingency as a corrective action for an unrealistic processing rate
was ineffective.[Footnote 27] Although DOE also attempted to increase
the processing rates through contractor performance incentives, we
believe DOE should have revised the baseline using a more realistic
processing rate to calculate baseline cost and schedule before
validating it.
Oak Ridge's nuclear facility decontamination and decommissioning
project. Significant cost increases began 2 years before OECM's
independent validation of the project in 2006, and have continued to
increase. Specifically, life cycle costs for the project were estimated
at $1.8 billion in 2004--the beginning of the project's previous near-
term baseline--with expected project completion by fiscal year 2008. By
August 2006, when OECM completed its review of the baseline and issued
its validation recommendation, life cycle costs for the project had
grown to about $2.2 billion and project completion was extended by
about 1 year. However, roughly 1 year after OECM validated the
baseline, EM revised it again, adding about $800 million in costs and
delaying project completion by an additional 8 years. EM justified the
change because, among other things, it wanted to adjust the baseline to
conform to new funding targets as directed by DOE in June 2007 and to
account for other changes it needed to make in its approach to
decontaminating the building.
Los Alamos soil and water remediation project. In March 2008, EM
approved an independent review of this project and the associated
baseline although it expected that the baseline would change. According
to the EM memorandum approving the baseline, changes in EM's priorities
and funding plans were likely to necessitate changes to the Los Alamos
project's baseline, and the project was directed to submit a baseline
change that would align the baseline with funding targets. OECM
officials also acknowledged that their independent review of the
baseline was based on assumptions that would likely not prove to be
true. Specifically, OECM's review assumed that the project would
receive the full funding needed even though DOE's funding targets at
the time were below the funding levels needed to comply with the state
cleanup agreement. As a result, project officials expect that the
estimated life cycle costs of nearly $1.7 billion will increase
substantially during 2008 but could not tell us the extent of the cost
and schedule change until they receive DOE's new funding commitments
for the project.
Hanford's radioactive liquid tank waste stabilization and disposition
project. The most significant cost increase--more than $9 billion--
occurred about 2 years after DOE's initial independent review and
approval of this project. The project's baseline was first approved in
2004, with life cycle costs expected to be about $22 billion and
completion scheduled for 2032. However, in 2006, life cycle costs
increased to about $31 billion--not including an additional $8.6
billion in unfunded contingency--and the completion date was extended
by 10 years, to 2042. Project officials expect the baseline will
require another update and independent review in 2009 to reflect
anticipated changes as a result of the project's new contractor and
because of changes resulting from ongoing negotiations with state
regulators over regulatory agreement milestones.
In addition to changes to the baselines soon after the independent
reviews, DOE has recently relaxed standards used for conducting these
reviews. In 2003, DOE issued standard operating procedures for
conducting independent reviews--primarily of construction projects.
These procedures stated that baselines should be considered, once
approved, as set in concrete. The EM-OECM 2005 protocol--and its 2007
update--for cleanup projects replaced the standard operating procedures
and directed OECM to validate only the near-term baseline for cleanup
projects while reviewing the life cycle estimate "for reasonableness."
In this way, EM and OECM sought to acknowledge what they believe are
the greater uncertainties present in the out-years of a cleanup project
compared with a typical construction project. However, within a year of
the 2007 protocol, OECM had changed its approach for EM cleanup
projects from validating baselines to "certifying" them, which is a
more limited statement of assurance than validation. Specifically,
according to OECM officials, certification means that the near-term
baselines are reasonable if near-term baseline costs are funded as
outlined in the baseline and contingency funds are provided as needed.
The change is intended to reflect OECM's belief that, because funding
for cleanup projects is more uncertain than for construction projects,
the same confidence level cannot, nor should, be applied to reviews of
EM cleanup project baselines as it is applied to construction projects.
Since EM headquarters does not consistently provide contingency funds
for its cleanup projects, and half of the major projects have
significant contingencies in their near-term baselines, the most likely
result for projects experiencing problems is to extend schedules and
increase life cycle costs. In commenting on a draft of this report,
OECM stated it intends to go back to validating near-term baselines for
cleanup projects, assuming, in part, that funding becomes more stable
and EM gains greater experience managing near-term baselines.
DOE Lacks Reliable and Consistent Performance Information:
DOE managers depend on data about the performance of EM's major cleanup
projects to make informed decisions about how best to handle unexpected
events and manage shifting priorities. DOE site and headquarters staff
generate a number of regular reports to update senior managers on the
status of these projects, both to justify making significant changes to
project baselines and to request funding from Congress. Although these
reports provide valuable information to managers on the progress of
work at cleanup sites around the country, they do not consistently
provide the key information needed to make fully informed management
decisions about EM's major cleanup projects. Specifically, (1)
proposals for baseline changes do not consistently identify reasons for
proposed changes or possible root causes that contributed to problems,
(2) use of EVM data does not consistently conform to industry standards
or GAO's best practices, (3) quarterly reports do not always describe
the impact of contractor performance on near-term or life cycle costs
and schedules, and (4) reports to Congress on the status of and changes
to major cleanup projects are limited to a small snapshot in time and
do not provide information necessary for effective oversight.
EM Baseline Change Reports Do Not Consistently Include Needed
Information:
When a project reaches a point at which it is likely to miss the goals
in its baseline, project managers are required to propose changes to
the project's cost, schedule, or scope baseline, a process that is akin
to hitting the reset button. EM project managers request such a change
by, among other things, documenting certain information in a Baseline
Change Proposal report, including current approved costs and new
proposed costs, proposed project start and end dates, and a
justification for the changes. For the key change proposals we reviewed
for the major cleanup projects, the information provided describing the
changes and their impacts varied widely, with some projects providing
little to no explanatory information about what led to the change and
others explaining the causes of the changes in detail. For example, a
change proposal for Hanford's nuclear material stabilization and
disposition project simply described the project's scope of work and
did not provide any explanation for why the project's schedule was
being delayed by 3 years, while a proposal from Savannah River's
radioactive liquid tank waste stabilization and disposition project
included information on the causes for its cost and schedule changes,
as well as the specific cost and schedule impacts of each cause.
However, the change proposals we reviewed generally did not address the
root causes that resulted in the changes to the baseline. For example,
the Savannah River change proposal explained that almost $500 million
of the total proposed cost increase was due to revising the strategy
for finishing the project. However, the proposal did not explain why
this strategy needed revision. In investigating the reason for this
proposed revision, we determined that a robust strategy for finishing
the project was not included in the original baseline because the
project was directed to meet a completion date of 2025 and could not do
so if it included the thorough closure strategy. Without including this
kind of information in the proposals, it would be difficult for EM
managers to effectively identify the true causes of the baseline
changes, take steps to address them, and transfer any lessons learned
to other projects.
In addition, EM does not centrally gather and systematically analyze
the narrative information in the baseline change proposals. We
recognize that such information is not easily analyzed to identify
common causes across projects. However, without such analysis, EM
senior managers are potentially hindered in addressing problems
collectively. One EM project management official agreed that having the
ability to analyze the information in the change proposals across
projects would be beneficial, but that his office had not yet made it a
priority to collect this information because it was still addressing
reliability issues with the data in the change proposals.
EM has made some effort to identify root causes of its project
management problems. It recently participated in a DOE-wide effort to
identify root causes of project and contract management problems in
response to GAO's inclusion of DOE's contract management on its high-
risk list.[Footnote 28] However, DOE's analysis was focused more on
construction projects than EM cleanup projects. The report notes that
the emphasis of the effort was on the capital line item--construction-
-projects, but that several of the issues identified also are
applicable to other projects, including EM cleanup projects.[Footnote
29] According to one project participant from OECM, the participants
discussed how some of the issues raised related to cleanup projects but
they did not examine those projects as extensively as the construction
projects. In commenting on a draft of this report, DOE explained that
its analysis was based more on data from construction projects than EM
cleanup projects because more data exist documenting DOE's past project
management deficiencies for construction projects since those projects
have a longer history of a structured, disciplined management process.
Use of Earned Value Data Does Not Always Conform to Industry Standards
or GAO-Identified Best Practices:
At three of the major cleanup projects--nuclear facilities cleanup at
the Hanford Site's river corridor cleanup project, solid waste
stabilization and disposition at Idaho National Laboratory, and soil
and water remediation at Los Alamos National Laboratory--we found
several instances in which the use of EVM data did not conform to
industry standards or our best practices.[Footnote 30] As a result, EM
and site project managers using the data may be less able to make
informed decisions to effectively manage these projects.
Data anomalies. For all three projects, the EVM systems we assessed
contained data errors or anomalies that could potentially distort the
analysis of EVM data. Anomalies included, for example, reporting
negative actual costs or reporting costs that are not tied to work
scheduled or performed. The Los Alamos EVM data contained both types of
these anomalies, which may have distorted the results of data analyses
by as much as $34 million, preventing managers from understanding the
true status of project performance. According to project officials, the
anomalies occurred primarily because Los Alamos had initially assigned
costs to a general account, and waited up to several months before
assigning these costs to the correct specific work activities. In
another case, in a significant number of instances the contractor at
Hanford's river corridor closure project reported costs incurred for
work activities performed that had not been scheduled to start until
future years, skewing the reported performance results.[Footnote 31]
The contractor explained that these data anomalies occurred because it
had performed work sooner than originally expected--and therefore the
work was not incorporated into the project's EVM planned schedule in
the periods for which it was actually performed. Project officials at
the site stated that they believe the EVM information, as reported,
correctly represents the project's status. As such, the summary-level
EVM data seem to depict a favorable schedule performance in April 2008;
however, our independent analysis of this data shows that when we
removed the value of the work that was started and completed ahead of
schedule, the remainder of the originally scheduled work was actually
behind schedule in April 2008, and trends indicated that the variance
was worsening.
Data on the availability of staff to perform future work was not always
developed. For one of the projects we reviewed, the EVM system lacked
important information on staffing, contrary to GAO-identified best
practices. DOE officials at Los Alamos' soil and water remediation
project told us they plan to begin asking for staffing information from
the contractor, and contractor officials stated they are setting up a
staffing report within their EVM system. Without this information,
project managers lack important information necessary for ensuring that
they have, or will have, an adequate number and type of staff to
perform the upcoming scheduled work.
Reliability of earned value systems is questionable. OECM has certified
that the earned value system used to report performance for only one of
the three systems we assessed meets the required industry standards.
[Footnote 32] The EVM system used by the contractor operating the
advanced mixed waste treatment project--a significant portion of the
solid waste stabilization and disposition project at the Idaho National
Laboratory--has not been reviewed by OECM to determine whether it is
compliant with industry standards, and contractor officials stated they
believed their system does not meet the standards. In addition, OECM
was in the process of reviewing the system used by the contractor
responsible for the soil and water remediation project at Los Alamos
National Laboratory at the time of our review. As a result, these
projects lack the necessary assurances that the EVM data were free of
errors and anomalies that could skew and distort the EVM analyses.
Once a system is certified as meeting the standards, regular
surveillance is needed in order to ensure its continued compliance.
Surveillance allows managers to focus on how well a contractor is using
its EVM system to manage cost, schedule, and technical performance, and
is important because it monitors problems with performance and the EVM
data. If these kinds of problems go undetected, EVM data may be
distorted and not meaningful for decision making. OECM's surveillance
program is under development: it recently hired one staff person to
lead its surveillance efforts, and is developing a guide to better
define its surveillance protocol. DOE also requires its sites to
perform surveillance of EVM monthly contractor performance data, which
includes developing EVM surveillance plans and conducting random EVM
surveillance.
Furthermore, EM managers do not appear to consistently gather or
analyze EVM data to maximize the data's benefits for project
management. GAO best practices recommend that EVM system reports
include thorough narrative explanations of any root causes of, or
proposed corrective actions, for reported cost and schedule variances
shown in the data. For the soil and water remediation project at Los
Alamos, for example, EM did not require that this information be
reported by its contractor. As a result, EM project managers at Los
Alamos have not always received the information necessary for ensuring
that effective corrective actions are implemented to prevent additional
changes to the cost and schedule baselines. According to contractor
officials, they reported information on root causes and corrective
actions to EM routinely before fiscal year 2008, but DOE asked them to
stop providing it. According to the project director for the soil and
water remediation project at Los Alamos, the Los Alamos Site Office
Assistant Manager had directed the contractor to not provide the
variance reports as part of its project status reviews because the
contractor's explanation of these variance reports during scheduled
meetings was taking several hours to review and wanted instead to use
the available time to focus more on risk management and other project
issues. However, according to this site official, the site office's
direction was not intended to discontinue all variance analysis
reporting. Although the contractor discontinued including the variance
analyses reports in its project status reviews, the project director
stated that DOE continues to obtain information from the contractor by
other means, such as cost performance reports and weekly contractor
meetings at which DOE and the contractor discuss the root causes of
variances that resulted in risks to meeting milestone compliance
agreements. However, contractor cost performance reports we reviewed
did not provide any narrative information on causes or corrective
actions. Furthermore, the weekly contractor meetings discuss only
certain root causes of the variances that resulted in risks to
milestone compliance agreements and therefore are neither comprehensive
nor documented. Because verbal information can easily be forgotten,
lost, or misinterpreted, among other things, we believe that a written
report would be a best practice.
In addition, EM projects report their EVM data to headquarters managers
at the project summary level, which can mask problems occurring in the
project that more detailed reporting could reveal. At Idaho, in early
2008, EVM data showed the solid waste stabilization and disposition
project was performing ahead of schedule and under cost, although major
problems had occurred at the advanced mixed waste treatment project--
the primary subproject. Without EVM reports that contain more specific
detail, project managers at headquarters may not recognize that a
problem is occurring until it becomes large enough to recognize at the
summary project level of reporting. In addition, greater detailed
information provided to managers earlier in the project potentially
could allow for early intervention.
Beyond more detailed reports, some project managers in the field and at
headquarters have not always systematically reviewed or independently
analyzed the EVM data they received, which also would help improve
their understanding, as well as mitigate potential problems occurring
within a project. At one site we visited, the DOE official receiving
the data said he did not analyze the information before entering it
into the EM headquarters database. In turn, headquarters EM project
managers told us they also do not analyze the EVM data the projects
report. One oversight official indicated he would prefer to analyze the
information he receives from the projects but he did not have the time
required to do so. A senior EM project management official told us that
he recognizes this deficiency and is working to address it: EM intends
to pilot a new software package that will allow managers to analyze EVM
data. According to EM, the software will enable EM managers to drill
down into the EVM data received from the contractors, thus improving
their oversight capabilities. In addition, according to EM project
management officials, EM has insufficient federal staff to conduct
oversight, which is being addressed as part of an ongoing effort to
improve project management. In commenting on a draft of this report, EM
stated it also intends to provide additional EVM training for its
analysts.
Quarterly Reports Do Not Present a Comprehensive Picture of Performance
against Near-Term or Life Cycle Commitments:
In accordance with Order 413, EM senior managers, including the
Assistant Secretary, receive quarterly updates on the status of the
major cleanup projects. Two key reports are the quarterly project
reviews (QPR), generated by EM project managers, and a quarterly
project status report created by OECM. These reports contain contractor
performance data and information about new or ongoing issues that need
addressing at the sites, but do not always describe how contractor
performance affects performance against the near-term or life cycle
baselines. Without this information, managers cannot develop a
comprehensive assessment of progress against agreed-upon goals.
The QPRs and OECM quarterly reports we reviewed largely use EVM data to
assess project performance, but these data only reflect performance
against the current contract period. Current contract period start and
end dates do not line up with the start and end dates of the near-term
baselines for any of the major cleanup projects we reviewed, and
contract goals have not always been tied to what would be necessary to
meet near-term baseline goals.[Footnote 33] For example, we found the
EVM data for Idaho's solid waste stabilization and disposition project-
-including the advanced mixed waste treatment subproject--that was
reported in the QPRs and OECM quarterly reports from early 2008 did not
line up with the near-term baseline because the advanced mixed waste
treatment project's contract period was not the same as the near-term
baseline period, which ends in 2012. EVM data for this project are
reported as a combination of work done by two contractors: disposal of
low-level and mixed-low-level waste, among other things, by the major
site contractor, whose contract runs through 2012, and the advanced
mixed waste treatment project operations contractor, who, in early
2008, was operating under a contract extension that expired in April
2008, 4 years shy of the end of the near-term baseline. In addition,
according to project officials, the goal of processing 15,500 cubic
meters of waste contained in that contract extension was not based on
what was necessary to meet the near-term baseline goal of processing
65,000 cubic meters of waste by 2012, which was DOE's commitment at the
time of the extension. Since the advanced mixed waste treatment
project's activities make up about 75 percent of the cost baseline for
the overall project, EVM data for this project as reported in the QPRs
and OECM quarterly reports were not an accurate indicator of how the
project was performing against the approved near-term baseline. DOE has
further extended the advanced mixed waste treatment project contract
through September 2009, and project officials explained the current
extension is better linked to the current baseline, meaning EVM data
reported should represent a better indication of performance against
that baseline.
In addition, although the QPRs we reviewed include data on current life
cycle cost and schedule estimates, they do not always include
information about changes to the schedule or scope, nor do they
explicitly mention when a change to the baseline has been proposed.
Instead, the QPRs generally present information on life cycle cost
increases and provide comparisons to original baselines. QPRs also
contain a schedule for each project detailing key milestones and
expected end dates. However, when a change to a project completion date
is made, the schedule shown in the QPR in most cases does not preserve
the original completion date as a point of comparison. Similarly, there
does not appear to be any mechanism in the QPR to present a change in a
project's scope of work, for example, a move of some work activities
from the near term into the out years. As a result, the reports tell
only that life cycle costs have increased, but corresponding changes to
schedule and scope are not apparent. Furthermore, there is no clear
place in a QPR for a project manager to mention that a baseline change
proposal has been submitted to headquarters if the results of that
proposal are not yet presented in the life cycle cost or schedule
information in the report. Including mentions of pending change
proposals may help ensure senior managers clearly understand the true
state of a project's performance.
A key performance indicator used in OECM's quarterly reports also may
create the impression that a project is performing well overall when it
is in fact encountering problems. As directed in the 2007 protocol for
cleanup projects, OECM uses a traffic light indicator--red-yellow-
green--as an at-a-glance way to highlight developing problems for DOE
managers. This indicator is intended to represent expected performance
against the approved near-term baseline and is based largely on EVM
data. However, since projects encountering problems tend to manage
those problems by moving work scope into the out years, the effects of
problems occurring today show up as increases to out-year cost and
schedule estimates and not as increases or delays in a near-term
baseline.[Footnote 34] Therefore, a project rated "green" by OECM may
simultaneously be experiencing increases in overall life cycle costs
and delays in project completion. OECM officials agreed that it would
be beneficial to present projected impacts of current performance on
life cycle estimates wherever practical in its reports.
EM Does Not Report Information about Significant Changes to Near-Term
and Life Cycle Baselines to Congress:
DOE's reports to Congress do not include key information that would aid
oversight efforts, including the extent of and reasons for significant
changes to near-term and life cycle baseline estimates, and the status
of estimated life cycle costs. DOE's annual budget request to Congress
for fiscal year 2009 for EM included funding requests for each site and
each project, as well as the funding appropriated in fiscal years 2007
and 2008. The budget request also contains, among other things,
descriptive information about the sites and projects, including EM's
major cleanup projects, and about cleanup goals, regulatory frameworks,
and key uncertainties. However, the request did not provide any project-
specific life cycle costs or completion dates.[Footnote 35] In the
previous three budget requests, EM had provided life cycle costs and
planned completion dates for each project. Without this information,
Congress cannot know what progress each project has made and the extent
of work still needed, cannot understand how the project may be changing
and has changed over time, and cannot know whether the project
experienced problems since the previous budget request and the reasons
for these problems. The absence of this information makes it more
challenging to effectively oversee the department and its major cleanup
projects.
DOE has not been directed to provide such information about its major
cleanup projects to Congress. In contrast, Congress has required the
Department of Defense to report annually on its major defense
acquisition programs--those costing $2 billion or more and typically
consisting of a weapons system, such as Navy ships or fighter planes--
or report quarterly when programs are experiencing significant cost
increases or schedule delays.[Footnote 36] Congress established the
reporting requirement to improve oversight of these defense programs by
providing visibility and accountability for any growth in cost that may
occur. Known as Selected Acquisition Reports, each annual report
includes information on full life cycle program costs, unit costs--the
cost per plane or ship--and the history of those costs. A quarterly
report also includes reasons for any change in unit cost or program
schedule since the previous report, information about major contracts
under the program and reasons for any cost or schedule variances, and
program highlights. In addition, the Department of Defense includes
development and procurement schedules, with estimated costs through
program completion, in its annual budget justification submissions to
Congress.
DOE Guidance for Management and Oversight Functions Is Unclear and Not
Implemented Uniformly across Sites:
EM's key policies for managing its cleanup projects--including
developing project baselines, managing risk, and planning for
contingency funding--are not consolidated but spread across various
guidance documents and memos and provide contradictory and confusing
information. Although Order 413 serves as the overarching policy
document for project management, according to EM, the order contains
requirements that are unnecessary or expensive and awkward to implement
for cleanup projects. EM thus has issued numerous memos outlining the
way in which its project managers should implement the order. See table
3 for a list of key memos we identified that contribute to project
management guidance and policy for EM cleanup projects.
Table 3: Key Policy Memos for EM Cleanup Projects:
Date: February 3, 2005;
Title: EM Contingency Policy;
Source: EM;
Guidance provided: Policy on funding contingency and preferred method
for establishing contingency.
Date: June 23, 2005;
Title: Project Management for the Acquisition of Capital Assets--DOE
Manual 413.3-1;
Source: DOE Office of Management, Budget and Evaluation;
Guidance provided: Requirements and guidance on implementing Order 413.
Date: July 10, 2006;
Title: Policies for EM Operating Project Performance Baselines,
Contingency and Federal Risk Management Plans, and Configuration
Control[A];
Source: EM;
Guidance provided: Additional clarification and guidance on process and
requirements to identify, develop, control, and validate EM baselines.
Date: July 28, 2006;
Title: Program and Project Management for the Acquisition of Capital
Assets--DOE Order 413.3A;
Source: DOE;
Guidance provided: Project management guidance on acquisition of
capital assets and environmental restoration projects.
Date: March 2, 2007;
Title: Risk Management Policy;
Source: EM;
Guidance provided: Statement of EM risk management policy.
Date: April 24, 2007;
Title: Protocol for EM Cleanup Project Performance Baselines and
Conducting the External Independent Review or the EM Independent
Project Review;
Source: EM and OECM;
Guidance provided: Governs review and validation of cleanup projects.
Date: June 25, 2007;
Title: Guidance for Implementing Baseline Changes to Reflect Funding
Targets for Fiscal Year 2008 through the Out-Years;
Source: EM;
Guidance provided: Directed sites to develop baselines tied to specific
funding targets provided.
Date: February 13, 2008;
Title: Configuration Control Process for Project Baselines;
Source: EM;
Guidance provided: Update on EM effort to put baseline under
configuration control.
Source: GAO's analysis of DOE information.
[A] Configuration control refers to efforts to manage and track any
changes to work activities, costs, and schedules.
[End of table]
As the table shows, rather than having a consolidated source for
guidance, EM project managers must consult multiple sources to
determine how to correctly create a baseline or calculate contingency
funding for a project. Furthermore, some of EM's guidance includes
vague language and various exceptions to rules, which are likely to
contribute to a project manager's difficulty in determining how to
implement EM policy. For example, according to the April 2007 protocol
for cleanup projects, once a contract is awarded and a detailed near-
term baseline is developed, a follow-up independent review will be
required if the baseline (1) exceeds the previously validated near-term
baseline costs by 15 percent or more, (2) increases the schedule by a
year, or (3) modifies scope significantly. The first two conditions for
requiring a follow-up review are tied to fairly precise numbers--15
percent and 1 year--although there could be some question as to whether
these numbers are to be applied to the original or reset baseline
calculations, especially for projects that have been extended multiple
times. However, the protocol provides no parameters for determining
when the third condition, a "significant" scope modification, has
occurred.
In addition, agency officials were not able to provide us with formal
documentation of a significant shift in policy. As explained earlier,
OECM recently shifted from validation to certification of the cleanup
projects' near-term baselines. In response to our request for
documentation of the switch to certification, OECM provided us with an
e-mail from an OECM official to a DOE Inspector General auditor that
defined certification and explained the reasons for the change.
According to this e-mail, the change was made to acknowledge OECM's
belief that EM cleanup projects should not be reviewed under the same
standard as construction projects. The OECM official also directed us
to DOE's fiscal year 2009 budget request for an explanation of the new
approach. While the budget request includes a description of baseline
certification, it neither mentions that the certification is a
departure from the previous policy, nor does the request serve as an
adequate means of communicating a significant policy change.
Furthermore, different guidance documents appear to be in conflict with
one another. Specifically, EM's 2006 memo outlining its policy on
contingency funding explained that DOE's risks associated with
implementing a project are covered through contingency that is part of
the "unfunded" portion of the baseline; that is, its funding is not
requested or budgeted in advance of when it may be needed. However, a
2008 EM memo primarily concerned with explaining a new process for
entering baseline changes into a database contains a description of the
elements of a near-term baseline that includes a line for "other funded
contingency," which has been interpreted by some EM officials as
including DOE contingency. If, according to the 2008 memo, some DOE
contingency should be funded--requested in advance--that memo directly
contradicts the guidance provided in the 2006 memo. However, although
the 2008 memo states it is updating the baseline change process, it
does not specifically state that it replaces any part of the 2006 memo.
In part because of this confusion, project managers at cleanup sites
have been implementing EM's contingency policy differently. According
to EM officials, recent independent reviews have alerted senior EM
officials to this inconsistent implementation of the policy guidance.
The review teams found that the project managers were using a variety
of methodologies to calculate the contingency for their projects. As a
result, according to one EM official with expertise in contingency,
managers were likely underestimating the amount of contingency needed
for their projects. To address this problem, EM senior managers
directed the creation of a contingency implementation guide to provide
a definitive interpretation of existing EM policy on contingency, and
this guide is expected to be issued in September 2008.
Furthermore, at least one of DOE's policies--on independent reviews of
cost estimates--is not being implemented at all. According to Order 413
and the April 2007 protocol, an independent cost estimate--a top-to-
bottom, independent estimate that serves to cross-check a cost estimate
developed by project officials--should be developed as part of the OECM
review process for major projects when "complexity, risk, cost, or
other factors create a significant cost exposure for the Department."
We believe that a review of a major cleanup project, given its level of
expected spending over the near term, would meet the criteria for
requiring an independent cost estimate. According to an OECM official,
OECM has not performed an independent cost estimate for any of EM's
major cleanup projects, primarily because OECM lacks the resources
required to perform this type of rigorous estimate for the projects.
Instead, OECM has taken a less rigorous and less expensive approach in
its reviews--examining cost estimates generated by the projects but not
producing a separate estimate for comparison.
According to DOE officials, it is addressing some of these guidance
issues. By the end of September 2008, officials told us, DOE plans to
replace its manual directing implementation of Order 413 with a series
of 16 guides. The guides are expected to cover a range of project
management issues, including risk management and contingency funding,
with one guide providing direction on the management of EM cleanup
projects. In addition to the guides, as part of an EM-wide effort to
improve project performance, EM has issued 18 recommended priority
actions that contain additional EM-specific requirements for cleanup
projects. It is unclear whether the guides and priority actions are
expected to supplant all other guidance, or whether they will
adequately address the challenge project managers face in determining
the most up-to-date, comprehensive guidance to be followed.
DOE Recently Changed Expectations for Cleanup Projects' Performance:
According to EM senior managers, EM cleanup projects are significantly
different from DOE's construction projects in a number of ways. That
is, it is harder in many instances to clearly define up-front
requirements for cleanup projects, and there are more unknowns,
especially since some of these projects are the first of their kind,
with undefined scopes of work and significant risks scheduled many
years into the future. Because of these differences and because it has
said changing budget priorities may affect funding over time, DOE
recently changed its performance goal--the amount of work to be
accomplished and the cost margin for accomplishing that work--for EM
cleanup projects to reflect a much larger margin of error than the
performance goal set for construction projects.
Before 2008, a major cleanup project was measured against the same goal
as a construction project: achieve at least 100 percent of the scope of
work in its baseline with less than a 10 percent cost increase over the
life of the project.[Footnote 37] However, EM's current cleanup project
performance goal applies only to the near-term baseline, and the
projects now are considered to be successful if they achieve at least
80 percent of the scope of work in their near-term baselines with less
than a 25 percent cost increase. The new performance goal permits up to
20 percent of the scope of work to be deferred from the near term to
out years, which creates a substantially greater risk that life cycle
costs will continue to increase and that completion dates will be
delayed. As a result, for example, under this goal the four major
projects each expected to cost more than $2 billion in the near term
could increase their costs by $500 million each over that period and be
considered successful. Furthermore, because a directed change--defined
as a change caused by DOE policy, or regulatory or statutory actions--
already exempts projects from meeting the performance goals, creating a
less stringent goal for EM cleanup projects further waters down the
impact of having a performance goal in the first place. By lowering
expectations for adhering to near-term baselines, DOE inadvertently may
be creating an environment in which large increases to project costs
become not only more common, but accepted and tolerated.
DOE Is Undertaking Efforts to Implement Project Management
Improvements:
EM is undertaking a number of efforts to improve its project
performance and address long-standing problems. One such effort is EM's
"Best-in-Class" Project Management Initiative through which EM
leadership has committed to improving project performance. Under the
initiative, EM contracted with the Army Corps to assess the current
status of project management at EM headquarters and its offices. Using
the Army Corps' analysis, EM identified a set of challenges it faced in
executing its mission, which resulted in the creation of the 18
priority actions for it to undertake to address the challenges and
implement its initiative. Those priority actions include, among others,
completing DOE's project management guide, which is expected to bring
all project management guidance documents under one umbrella document;
establishing standard reporting formats for project updates produced by
project managers, including QPRs; implementing new project management
software packages, including those for EVM analysis; and better
integrating its project and contract management activities. EM has
developed a set of implementing steps and a summary of expected
benefits for each priority action. According to EM, 10 of the priority
actions are being implemented in fiscal year 2008, and 5 of those are
scheduled to be completed by the end of that fiscal year. It appears
that execution of the priority actions would create new tools and
potentially enhance existing ones in EM's effort to improve its cleanup
projects' performance. According to EM, full implementation of the
priority actions will address many EM project management problems and
deficiencies. However, since the actions are still being implemented,
it is too soon to determine their effectiveness.
In addition, EM officials acknowledged that the actions they are
implementing to improve the management of EM's overall cleanup efforts,
including their Best-in-Class initiative and actions being taken in
response to the 2007 National Academy of Public Administration report
have not been formally documented into a specific, corrective action
plan that includes performance metrics and completion milestones. These
officials agreed that such a comprehensive plan would demonstrate a
more integrated and transparent commitment to improving the management
of EM's cleanup projects.
Conclusions:
Cleaning up the nuclear weapons complex is a technically challenging
and risky business. Even as DOE works to gain control of and better
manage its major nuclear waste cleanup projects, cost increases and
project delays continue to mount. Specifically, life cycle costs for
EM's major cleanup projects have increased by cumulative $25 billion
over the past few years and schedules have been extended by a combined
total of more than 75 years, primarily because DOE had to adjust the
optimistic baselines it created to accommodate the realities it has
encountered at its cleanup projects.
Given the cost and complexity of the major nuclear cleanup projects, it
is critically important that DOE fully use the tools it has developed-
-independent reviews, performance information systems, guidance, and
performance goals--to better ensure that projects stay within
established parameters for scope of work, costs, and schedule.
Independent baseline reviews to ensure that the work promised can be
completed on time and for the estimated cost appear to be a useful
planning tool, but the significant changes that have occurred within
years or even months of the baseline reviews and validations indicate
that implementation of these reviews has fallen short. Furthermore,
EM's site proposals for changes to cost and schedule baselines,
quarterly performance reports, earned value data analysis and reports,
and reports to Congress do not consistently provide accurate and
comprehensive information on the status of projects, which undermines
managers' and Congress's ability to effectively oversee projects and
make timely decisions, such as targeting resources to particular
projects or renegotiating cleanup milestones and other contract
conditions. These problems are compounded by the lack of comprehensive
and clear guidance for DOE project managers so that they consistently
implement DOE management policies across the projects and EM's recently
relaxed performance goals establishing the acceptable baseline change
parameters for major cleanup projects. Although DOE has identified a
number of improvements it intends to make to its project management
approach, it is still in the early stages of implementing these
improvements, making it too soon to assess the effort's full effect,
and it has not yet formally documented all the improvements in a
comprehensive corrective action plan.
Recommendations for Executive Action:
So that DOE can better manage its major cleanup projects and more fully
inform Congress on the status of these projects, we recommend that the
Secretary of Energy direct the Assistant Secretary for Environmental
Management to take the following five actions:
* Include in its budget request to Congress life cycle baseline cost
estimate information for each cleanup project, including prior year
costs, estimated near-term costs, and estimated out-year costs.
* Develop an approach to regularly inform Congress of progress and
significant changes in order to improve EM's accountability for
managing the near-term baseline and tracking life cycle costs. Similar
to the Department of Defense's Selected Acquisition Reports, which
include annual information on full life cycle program costs, among
other things, EM's report, at a minimum should compare estimated near-
term and life cycle scope, cost, and schedules with the original and
subsequently updated baselines, and provide a summary analysis of root
causes for any significant baseline changes.
* Expand the content of EM performance reports to describe the
implications of current performance for the project's overall life
cycle baseline, including the near-term baseline cost and out-year cost
estimate, using, when appropriate, valid earned value data that conform
to industry standards and GAO-identified best practices.
* Consolidate, clarify, and update its guidance for managing cleanup
projects to reflect (1) current policy regarding independent baseline
reviews and (2) the results of DOE's determination of the appropriate
means for calculating and budgeting for contingency so that project
managers can consistently apply it across nuclear waste cleanup sites.
* Consolidate all planned and ongoing program improvements, including
those stemming from the Secretary's contract and project management
root cause analysis corrective action plan, the Best-in-Class
initiative, and the 2007 National Academy of Public Administration
report, into a comprehensive corrective action plan that includes
performance metrics and completion milestones.
Because independent baseline reviews have not always provided
reasonable assurance of the stability of projects' near-term baselines
or the reasonableness of the life cycle baselines, we recommend that
the Secretary of Energy direct the Director of the Office of Management
to take the following action:
* Assess the Office of Engineering and Construction Management's
current approach and process for conducting baseline reviews of EM
cleanup projects to identify and implement improvements that will
better provide reasonable assurance that project work scope can be
completed within the baselines' stated cost and schedule. Consider
including in the assessment process an analysis of past lessons learned
and reasons for baseline changes, and an assessment of project
affordability when conducting baseline reviews.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOE for its review and comment.
DOE agreed with our recommendations but provided some suggested changes
to them, which we incorporated as appropriate.
In addition, DOE provided some specific comments on our draft report.
First, DOE stated that the report should provide a more balanced and
accurate portrayal of EM's cleanup projects by including descriptions
of ongoing initiatives, a number of which EM launched in recognition of
the need for improvement, as well as providing better context of the
challenges and constraints the department's cleanup program faces. The
draft report included a brief description of EM's ongoing initiatives,
including its Best-in-Class effort, and acknowledged many of the key
challenges DOE faces while illustrating the factors contributing to
changes in scope, cost, and schedule for its cleanup projects. We also
acknowledged DOE's ongoing initiatives and progress in a 2007 report on
project management.[Footnote 38] In addition, DOE cited its successes
in the cleanup of Rocky Flats and Fernald as evidence of its project
management accomplishments. We commend DOE on its past performance in
successfully cleaning up these sites, which has resulted in some
lessons learned that DOE can apply to other cleanup efforts, as we
reported in 2006.[Footnote 39] Nevertheless, we found in this review
that DOE has not always effectively used its management tools to help
oversee the scopes of work, costs, and schedules for its present major
cleanup projects.
Second, DOE stated that our draft report appears to confuse the term
"baseline." It noted that there is only one project baseline--the near-
term baseline approved by EM senior management--for which DOE should be
held accountable. Our use of the term "baseline" in this report
conforms to EM's guidance documents indicating a project's "lifecycle
baseline" is composed of its prior year, near-term, and out-year costs.
In addition, we disagree with DOE's assertion that it should be held
accountable only for a project's near-term baseline. As we state in
this report, since projects encountering problems have tended to manage
those problems by moving work scope into the out years, the effects of
problems occurring today show up as increases to out-year cost and
schedule estimates and not as increases or delays in a near-term
baseline. Therefore, if DOE's performance is measured solely on the
basis of the near-term baseline, potentially significant cost and
schedule increases would not be accounted for or transparent.
Third, DOE stated that one of our recommendations--to consolidate,
clarify, and update its guidance for managing cleanup projects to
reflect the results of DOE's determination of the appropriate means for
calculating and budgeting for project contingency--could be more
specific, and it outlined three contingency options. These options
include (1) increasing the amount of contingency funding for cleanup
projects to an 80 percent confidence level, the level budgeted for
construction projects; (2) creating a general contingency fund
available for project managers at DOE headquarters to dispense as
needed to manage project risks; and (3) continuing with the current
approach of not including contingency funding for cleanup projects in
its budget requests--funding cleanup projects at the 50 percent
confidence level--and changing its recently established performance
goal. We recognize that managing project contingency is an important
issue, and in fact note in our report that DOE's current approach is a
likely contributing factor to cost increases and schedule delays for
EM's major cleanup projects. While we did not specifically assess these
three options in our report, DOE should continue to study the lessons
learned from managing and budgeting contingency and select the option
that would provide contingency funds in an expedient manner to better
mitigate the impacts of cleanup project changes while minimizing the
amount of unused contingency funding left over at the end of the fiscal
year.
Finally, as part of the explanation of its third option for funding
project contingency, DOE stated that GAO has agreed to its recently
established performance goal--to accomplish at least 80 percent of the
scope of work in the near-term baselines with less than a 25 percent
cost increase. GAO has not agreed to this goal. As we state in this
report, we are concerned with DOE's new goal given that it is lower
than the previous goal for cleanup projects and that DOE may
inadvertently be creating an environment in which large increases to
project costs become not only more common, but accepted and tolerated.
DOE also provided detailed technical comments, which we have
incorporated into our report as appropriate. DOE's comments are
reproduced in appendix IV.
We are sending copies of the report to interested congressional
committees, the Secretary of Energy, and the Director of the Office of
Management and Budget. 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 [hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-3841 or aloisee@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Other staff contributing to the report
are listed in appendix V.
Signed by:
Gene Aloise:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Scope and Methodology:
To determine the extent to which the cost, schedule, and scope baseline
estimates for the Department of Energy (DOE) Office of Environmental
Management's (EM) cleanup projects have changed and the key reasons for
these changes, we identified 10 major cleanup projects at 5 DOE sites.
We first identified 9 major cleanup projects with current near-term
cost estimates (usually a 5-year period) above $1 billion, the DOE
threshold for major cleanup projects. In addition, to include those
projects that could potentially become major projects because of cost
growth, we reduced the threshold to $900 million and identified another
project, the Richland nuclear material stabilization and disposition
project, which is estimated to cost between $900 million and $1 billion
over the near term. We focused on these 10 major cleanup projects
because of their significant cost--combined estimated near-term costs
of about $19 billion and combined life cycle costs estimated at more
than $100 billion--and because they account for almost half of EM's
$5.5 billion fiscal year 2009 budget request. (See app. II for
information on these projects.)
To identify the factors that may hinder DOE's ability to effectively
manage these cleanup projects, we spoke with DOE project directors and
contractor officials and reviewed project management documents for the
10 major cleanup projects we had identified. We conducted site visits
to Idaho National Laboratory, Los Alamos National Laboratory, Oak Ridge
Reservation, Savannah River, and Hanford, and analyzed project
documentation--contracts, policy directives and memoranda, project
management plans, DOE's Office of Inspector General reports,
independent reviews, project execution plans, risk management plans,
quarterly project reviews, monthly project status reports, earned value
management (EVM) surveillance plans, and project control documents
prepared to guide and control formal changes to the baselines. For our
analysis of projects' scope, cost, and schedule data, we examined the
initial baselines reported as of the most recent contract award or
major contract modification (which occurred between 2004 and 2007) and
compared these baselines with the updated baselines at the time of our
review. Initial cost baselines are the estimated life cycle costs at
the beginning of the new contract period for operation of the DOE site
or associated projects or the major contract modification or extension,
which typically coincided with the beginning of the projects' current
or previous near-term baseline. We also calculated the percentages of
cost increases on the basis of constant 2008 dollars to make them
comparable across projects and to show real increases in cost while
excluding increases due to inflation. In addition, because EM now is
reporting its life cycle cost and schedule estimates as ranges, we
included these ranges in the report. However, because the upper ends of
these ranges include unfunded contingency and EM does not include
funding in its budget requests for this contingency, we report cost
increases and schedule delays based on the lower ends of the ranges.
We also analyzed contractor performance data to determine whether DOE
major cleanup projects are consistently developing and analyzing
accurate earned value data according to industry standards and best
practices. We gathered and analyzed data produced by the EVM system
used for one project at each of the following sites: Idaho National
Laboratory, Los Alamos National Laboratory, and Hanford.[Footnote 40]
Often, EVM systems differ depending on how the contractor chooses to
implement the EVM approach. Because of these differences, we gathered
and analyzed information on each EVM system on a case-by-case basis,
according to the structure, reporting format, content, and level of
detail, among other things, unique to each EVM system. We also
considered the best practices developed by GAO for estimating and
managing project costs to analyze the contractor EVM data.[Footnote 41]
In addition, we spoke with DOE officials from EM and the Office of
Engineering and Construction Management in Washington, D.C., and with
representatives from LMI Government Consulting, which conducts external
independent reviews of the projects for DOE, to obtain their
perspective on how these projects are managed.
Because we and others previously have expressed concern about the data
reliability of a key DOE project management tracking database--the
Project Assessment and Reporting System--we did not develop conclusions
or findings based on information generated through that system.
[Footnote 42] Instead, we collected information directly from project
site offices and the contractors.
We provided an interim briefing to the Subcommittee on Energy and Water
Development, House Committee on Appropriations, on the status of our
work on April 3, 2008.
We conducted this performance audit from March 2007 to September 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Information on the 10 Department of Energy Major Cleanup
Projects Reviewed:
Project: Solid Waste Stabilization and Disposition, Idaho National
Laboratory, Idaho (PBS 13);
Project purpose and objective: This project will characterize, treat,
and ship approximately 64,000 cubic meters of transuranic waste that
will ultimately be stored in the Waste Isolation Pilot Plant in New
Mexico. Transuranic waste is radioactive waste containing more than 100
nanocuries of alpha-emitting transuranic isotopes per gram of waste
with half-lives greater than 20 years, except for high-level
radioactive waste. The transuranic waste that must be handled remotely
through protective shielding, because it emits penetrating radiation,
will be treated at the Radioactive Waste Management Complex. The
project also will treat and dispose of a mixed low-level waste backlog
and handle on-site low-level waste for disposal at the complex.
Project: Nuclear Facility Decontamination and Decommissioning, Oak
Ridge Reservation Tennessee (PBS 40);
Project purpose and objective: The project will decontaminate and
decommission approximately 500 facilities and remediate 160 sites in
the East Tennessee Technology Park. This project includes the park's
two major buildings--the K-25 and K-27 gaseous process buildings--and
requires the contractor to remove processing equipment and excess
materials stored in the buildings, demolish building structures, and
dispose of all associated wastes.
Project: Nuclear Material Stabilization and Disposition, Savannah River
Site, South Carolina (PBS 11);
Project purpose and objective: The project will stabilize and dispose
of enriched uranium materials and current and projected inventories of
aluminum-clad spent nuclear fuel in H-Area facilities. It also will
stabilize and dispose of highly enriched uranium solutions,
miscellaneous fuels, plutonium residues, enriched uranium residues, and
other materials DOE identifies that remain from the production of
nuclear weapons. The project also will deactivate F-Area and H-Area
facilities; and dispose of special nuclear materials in the K-Area
Complex.
Project: Radioactive Liquid Tank Waste Stabilization and Disposition,
Savannah River Site, South Carolina (PBS 14C);
Project purpose and objective: The project will remove, treat, and
dispose of 49 underground storage tanks holding a total of 37 million
gallons of highly contaminated legacy waste This effort includes
pretreating radioactive waste such as sludge and salt waste, vitrifying
sludge and high-level waste at the Savannah River Site's Defense Waste
Processing Facility, and treating and disposing of low-level saltstone
waste.
Project: Soil and Water Remediation, Los Alamos National Laboratory,
New Mexico; (PBS 30);
Project purpose and objective: The project will identify, investigate,
and remediate, when necessary, areas with known or suspected chemical
and radiological contamination attributable to past Laboratory
operations. It will investigate and clean up (as needed) approximately
860 solid waste management units and areas of concern remaining from
the original 2,129 sites spread over approximately 39 square miles. The
protection of surface water and groundwater resources that may be
impacted by these management units and past Laboratory operations also
are within the scope of this project.
Project: Nuclear Material Stabilization and Disposition, Hanford,
Washington (PBS 11);
Project purpose and objective: The project will stabilize, package, and
ship (to the Savannah River Site) nuclear materials and fuels used for
the production of plutonium nitrates, oxides, and metal from 1950
through 1989 and now stored primarily in vaults in several facilities.
The project will then clean and demolish the facilities.
Project: Solid Waste Stabilization and Disposition, Hanford, Washington
(PBS 13C);
Project purpose and objective: The project will treat and store spent
nuclear fuel, transuranic waste, mixed low-level waste, and low-level
waste generated at the Hanford site and other DOE and Department of
Defense facilities. It eventually will transfer and ship spent nuclear
fuel elements and 1,936 cesium and strontium capsules to the proposed
geologic repository in Nevada. The project also will operate, among
other things, the (1) Waste Receiving and Processing Facility to
process transuranic waste and low-level waste and (2) Central Waste
Complex to store low-level and mixed-low-level waste and transuranic
waste pending final disposition.
Project: Soil and Water Remediation, Hanford, Washington (PBS 30);
Project purpose and objective: The project will remediate contaminated
groundwater. This effort involves characterizing the movement of
radionuclides and chemicals (carbon tetrachloride, chromium, technetium-
99, strontium, and uranium plumes); assessing the soil and groundwater
characterization results; groundwater and risk assessment modeling; and
operation of groundwater remediation systems among other related
actions.
Project: Nuclear Facility Decontamination and Decommissioning at River
Corridor Closure Project, Hanford, Washington (PBS 41);
Project purpose and objective: Also known as the River Corridor Closure
Project, this project will remediate 761 contaminated waste sites at
the Hanford site near Richland, Washington, and decontaminate,
decommission and demolish 379 surplus facilities that are adjacent to
the Columbia River. This project also will dispose of material in the
Environmental Restoration Disposal Facility.
Project: Radioactive Liquid Tank Waste Stabilization and Disposition,
Office of River Protection, Hanford, Washington (PBS 14);
Project purpose and objective: The project will retrieve, stabilize,
treat, and dispose of 53 million gallons of radioactive mixed waste
stored in 177 underground tanks at the Hanford site. The project also
involves testing and implementing supplemental waste treatment methods;
operating the Waste Treatment Plant; providing interim storage of
immobilized waste planned for disposal in an offsite repository;
receiving and disposing of immobilized low-activity waste on-site in
near-surface disposal facilities; and closing tanks and tank farm
facilities.
Source: DOE and EM information.
[End of table]
[End of section]
Appendix III: Current Life Cycle Baselines for 10 DOE Cleanup Projects:
Dollars in millions (current year dollars):
Project: Solid waste stabilization and disposition, Idaho National
Laboratory, Idaho;
Prior years' costs: $1,398;
Near term[A]: Cost: $1,304;
Near term[A]: Years: 2006 - 2012;
Out years[B]: Cost: $530 - $900;
Out years[B]: Completion date: 2016 - 2020;
Total life cycle cost range: $3,231 - $3,954.
Project: Nuclear facility decontamination and decommissioning, Oak
Ridge Reservation, Tennessee;
Prior years' costs: $1,546;
Near term[A]: Cost: $1,518;
Near term[A]: Years: 2008 - 2017;
Out years[B]: Cost: NA;
Out years[B]: Completion date: NA;
Total life cycle cost range: $3,064 - $3,244.
Project: Nuclear material stabilization and disposition, Savannah River
Site, South Carolina;
Prior years' costs: $3,631;
Near term[A]: Cost: $2,468;
Near term[A]: Years: 2008 - 2014;
Out years[B]: Cost: $3,728 - $4,358;
Out years[B]: Completion date: 2024 - 2025;
Total life cycle cost range: $9,827 - $10,457.
Project: Radioactive liquid tank waste stabilization and disposition,
Savannah River Site, South Carolina;
Prior years' costs: $4,746;
Near term[A]: Cost: $4,394;
Near term[A]: Years: 2008 - 2014;
Out years[B]: Cost: $11,856 - $20,347;
Out years[B]: Completion date: 2032 - 2034;
Total life cycle cost range: $20,996 - $29,488.
Project: Soil and water remediation, Los Alamos National Laboratory,
New Mexico;
Prior years' costs: $579;
Near term[A]: Cost: $1,051;
Near term[A]: Years: 2007 - 2015;
Out years[B]: Cost: NA;
Out years[B]: Completion date: NA;
Total life cycle cost range: $1,630 - $2,489.
Project: Nuclear material stabilization and disposition, Hanford site,
Washington;
Prior years' costs: $1281;
Near term[A]: Cost: $1,143;
Near term[A]: Years: 2008 - 2013;
Out years[B]: Cost: $1,030 - $1,060;
Out years[B]: Completion date: 2018 - 2019;
Total life cycle cost range: $3,453 - $3,490.
Project: Solid waste stabilization and disposition, Hanford site,
Washington;
Prior years' costs: $1,163;
Near term[A]: Cost: $918;
Near term[A]: Years: 2008 - 2013;
Out years[B]: Cost: $11,200 - $12,500;
Out years[B]: Completion date: 2050 - 2058;
Total life cycle cost range: $13,281 - $14,594.
Project: Soil and water remediation, Hanford site, Washington;
Prior years' costs: $532;
Near term[A]: Cost: $1.128;
Near term[A]: Years: 2008 - 2013;
Out years[B]: Cost: $6,400 - $6,600;
Out years[B]: Completion date: 2050 - 2059;
Total life cycle cost range: $8,059 - $8,276.
Project: Nuclear facility decontamination and decommissioning at River
Corridor, Hanford site, Washington;
Prior years' costs: $1,000;
Near term[A]: Cost: $3,751;
Near term[A]: Years: 2005 - 2019;
Out years[B]: Cost: NA;
Out years[B]: Completion date: NA;
Total life cycle cost range: $4,751 - $4,910.
Project: Radioactive liquid tank waste stabilization and disposition,
Hanford site, Washington;
Prior years' costs: $3,474;
Near term[A]: Cost: $2,330;
Near term[A]: Years: 2007 - 2012;
Out years[B]: Cost: $38,414 - 5$6,227;
Out years[B]: Completion date: 2042 - 2050;
Total life cycle cost range: $44,218 - $62,155.
Source: Office of Environmental Management.
[A] Near-term costs represent DOE's estimated costs based on a 50
percent level of confidence, defined as the amount of funding needed to
provide a 50 percent likelihood that the project will be completed
successfully.
[B] Out-year values represent DOE's estimated cost and schedule ranges-
-the cost range covers the full out-year period, while the schedule
range represents the time during which the project is estimated to be
completed. Costs and schedules at the lower end of the ranges were
estimated at the 50 percent level of confidence, while costs and
schedules at the upper end of the ranges represent the 80 percent level
of confidence.
[End of table]
[End of section]
Appendix IV Comments from the Department of Energy:
Department of Energy:
Washington, DC 20585:
September 19, 2008:
Mr. Gene Aloise:
Director of Natural Resources and Environmental:
U.S. Government Accountability Office:
441 G Street NW:
Washington, D.C. 20548:
Dear Mr. Aloise:
Thank you for the opportunity to review the draft report on
accountability and management of the Department's major cleanup
projects managed by the Department of Energy's Office of Environmental
Management (EM). We are in agreement with the recommendations you have
provided, with some suggested changes, and look forward to reporting in
the future on the progress being made. Detailed comments to the draft
report are enclosed. Major comments are summarized below.
We believe the report should provide a more balanced and accurate
portrayal of EM's cleanup projects by including descriptions of ongoing
initiatives and actions, a number of which were launched by EM in
recognition of the need for improvement. Additionally, the report
should provide better context of the incredible challenges and
constraints the Department's cleanup program faces and the difficulties
associated with accurate predictions of project cost and schedule for
the EM cleanup projects.
For instance, the Government Accountability Office's (GAO) conclusion
in 2001 (GAO-01-284, Nuclear Cleanup: Progress Made at Rocky Flats, but
Closure by 2006 Is Unlikely, and Costs May Increase) states that
"Kaiser-Hill and DOE are unlikely to meet the December 2006 target
closure date" for Rocky Flats and yet this closure date was indeed met
by DOE and the Rocky Flats cleanup contractor Kaiser-Hill. As
recommended by the GAO in 2006 (GAO-06-352, Nuclear Cleanup of Rocky
Flats: DOE Can Use Lessons Learned to Improve Oversight of Other Sites'
Cleanup Activities), EM used the lessons learned from Rocky Flats for
other cleanup efforts across the complex to accomplish extremely
successful cleanups. We won the Project Management Institute award for
our prowess in project management in 2006 and 2007 for the Rocky Flats
and Fernald cleanup projects, respectively.
There appears to be some confusion over the term "baseline". There is
only one project baseline, the near-term baseline that has Critical
Decision-2 approval by the Acquisition Executive, for which DOE should
be held accountable. The Decision-1 type range) which is expected to
change, often by significant amounts. For this very reason, DOE no
longer expresses lifecycle information on cleanup projects as a point
estimate.
Finally, the issue of how we fund and manage project contingency is
critical to our long-term success and our ability to mitigate impacts
of these changes. We recognize full well that we cannot continue to
extend schedules and increase costs every time risks that have been
identified and anticipated in advance occur. Your fourth
recommendation, with regard to contingency, could be more specific.
There are three primary or bounding contingency options as we see it,
discussed further in the attachment:
1. Fund operating cleanup project contingency at 80% confidence level
instead of the current 50%.
If provided over and above current target levels, approximately $500
million (M) to $700M additional funding annually would be required.
However, if risks did not materialize during the budget year, there
would be higher uncosted year-end carryover. However, to plan for this
level of contingency without additional funding would require deferral
of lower priority project scope. To compensate, EM would need to
renegotiate compliance milestones or possibly subject the federal
government to fines, penalties, and lawsuits; renegotiate and possibly
terminate contracts, thus affecting employment; and reprioritize its
projects.
2. Request appropriation of a smaller general contingency fund. The
fund (perhaps $100M to $200M annually) would be held, managed, and
distributed by the Assistant Secretary for Environmental Management.
This option would allow more flexibility and expediency in applying
funds where they are needed as risks are realized, and would allow for
multi-year business case decision-making. However, controls would need
to be put in place on EM's allocation authority during execution so as
not to usurp Congressional authority in appropriations.
3. Continue the current approach of funding 50% confidence levels and
changing the corporate metric for the EM cleanup projects agreed to by
DOE, the Office of Management and Budget (OMB), and GAO.
This approach budgets for contingency at a 50% confidence level for
cleanup projects. When risks not covered at this level materialize,
work scope is shifted to the outyears when funds can be requested in
light of overall program priorities. A 50% confidence level across the
EM portfolio connotes that based on statistical analysis half the
projects would be expected to be completed within the cost and schedule
and half would not. Thus, this current approach appears to be
inconsistent with achieving success in the corporate metric that DOE
has agreed to with GAO and OMB for cleanup projects (established
through DOE's Root Cause Analysis Corrective Action Plan, July 18,
2008). The metric requires that 90% of the projects in EM's portfolio
at the end of the approved near-term baseline period have 80% of the
scope completed within 25% of the original cost.
Any GAO recommendations regarding new strategies are welcomed, given
the regulatory-driven nature and complexity of this work, the
sensitivity of life-cycle costs to relatively small slippages in scope
(due to large "hotel" costs), and the need to deliver on commitments
made to our regulators, the Congress, and other stakeholders.
Again, thank you for your assistance as we seek to improve our
management of cleanup projects. We welcome direct dialogue with you on
these issues prior to finalizing your report. We would also appreciate
you including the attached comments in the final report. If you have
any questions with regard to these comments, please contact me on
(202)586-7709, Jack Surash on (202) 586-6382, or Paul Bosco on (202)
586-3524.
Sincerely,
Signed by:
James A. Rispoli:
Assistant Secretary for Environmental Management:
Enclosure:
cc: I. Triay, EM-2:
J. Owendoff, EM-3:
J. E. Surash, EM-50:
M. Sykes, EM-30:
I. Kolb, MA-1:
P. Bosco, MA-50:
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Gene Aloise, (202) 512-3841 or aloisee@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Rudy Chatlos, Jennifer
Echard, James Espinoza, Daniel Feehan (Assistant Director), Mike Gallo,
Diane Lund, Mehrzad Nadji, Omari Norman, Brian Octeau, Christopher
Pacheco, Leslie Pollock, Karen Richey, and Carol Herrnstadt Shulman
made key contributions to this report.
[End of section]
Footnotes:
[1] For this review, we lowered the threshold to $900 million out of
concern that some projects not now considered major would become major
because of increases in costs, which resulted in the addition of one
project to our review (the solid waste stabilization and disposition
project at the Hanford Site, near Richland, Washington).
[2] We did not review one major project still in the early stages of
development (the nuclear facility decontamination and decommissioning
project in Portsmouth, Ohio).
[3] DOE defines life cycle costs as the sum total cost of the direct,
indirect, and other related costs incurred or estimated to be incurred
in the design, development, production, operation, maintenance,
support, and final disposition of a major system over its anticipated
useful life span.
[4] Hanford's radioactive liquid tank waste stabilization and
disposition project is administered by the Office of River Protection,
while the other four major cleanup projects at Hanford are administered
by DOE's Richland office.
[5] Order 413.3 was issued in 2000 and amended in 2006, and is now
referred to as 413.3A. For this report, we use DOE Order 413 to refer
to the order in effect, unless otherwise specified.
[6] We have reported on DOE's management of these construction
projects. See GAO, Department of Energy: Major Construction Projects
Need a Consistent Approach for Assessing Technology Readiness to Help
Avoid Cost Increases and Delays, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-336] (Washington, D.C.: Mar. 27, 2007).
[7] In previous years, DOE presented out-year estimates as a single
point estimate based on the most probable cost and schedule of its
projects. In 2007, DOE developed out-year estimates with cost and
schedule ranges to account for the uncertainty associated with long-
term projects. The low end of the range is based on the amount of
funding needed with a 50 percent level of confidence that the project
will be successfully completed, while the high end of the range is
based on an 80 percent level of confidence. As discussed elsewhere in
this report, DOE does not fund its contingency accounts for these
projects.
[8] Contingency funds are funds that may be needed to cover potential
cost increases stemming from a variety of project risks, including
technical complexities, regulatory issues, and funding shortfalls.
[9] GAO, Cost Assessment Guide: Best Practices for Estimating and
Managing Program Costs, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-1134SP] (Washington D.C.: July 2007).
[10] GAO, Department of Energy: Consistent Application of Requirements
Needed to Improve Project Management, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-518] (Washington, D.C.: May
11, 2007).
[11] See, for example, GAO, Department of Energy: Further Actions Are
Needed to Strengthen Contract Management for Major Projects,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-123] (Mar. 18,
2005); and Civil Engineering Research Foundation, Independent Research
Assessment of Project Management Factors Affecting Department of Energy
Project Success (Washington, D.C., July 12, 2004).
[12] DOE defines a project as a unique effort that supports a program
mission and that has defined points for starting and ending; is
undertaken to create a product, facility, or system; and contains
interdependent activities planned to meet a common objective or
mission.
[13] In current year dollars, and excluding EM contingency funding.
[14] See, for example, ANSI/EIA 748 32 Industry Guidelines (American
National Standards Institute/Electronic Industries Alliance Standard,
Earned Value Management Systems, ANSI/EIA-748-A-1998 (R2002), approved
May 19, 1998, revised January 2002).
[15] See OMB, Capital Programming Guide, II.2.4, Establishing an Earned
Value Management System. The OMB requirements also are reflected in the
Federal Acquisition Regulation at 48 C.F.R. subpart 34.2.
[16] EM recently began using schedule estimate ranges rather than point
estimates. According to EM officials, scheduled completion dates at the
lower end of the ranges were estimated at the 50 percent level of
confidence, while dates at the upper end of the ranges represent the 80
percent level of confidence. For this report, our analysis of schedule
change uses the lower end of the range.
[17] U.S. Department of Energy, Office of Inspector General, Office of
Audit Services, Audit Report: The Department's Progress in Meeting Los
Alamos National Laboratory Consent Order Milestones, DOE/IG-0793, April
2008.
[18] EM's priority list is based on maximizing risk reduction. As such,
it has ranked its activities in priority order, from highest to lowest,
from stabilizing radioactive tank waste in preparation for treatment
down to decontaminating and decommissioning excess facilities.
[19] Figures in this paragraph are in current year dollars.
[20] According to project officials, site conditions also were worse
than estimated at Hanford's nuclear facilities decontamination and
decommissioning project at River Corridor, although a baseline change
proposal for the cost increase for this project had not been filed with
EM headquarters at time of our review.
[21] In 2006 we reported on the primary causes of the cost and schedule
increases at the WTP, some of which echo the issues we found relative
to the major cleanup projects: shortcomings in the contractor's
performance, DOE management and oversight problems, and technical
challenges that were more difficult to address than anticipated. GAO,
Hanford Waste Treatment Plant: Contractor and DOE Management Problems
Have Lead to Higher Costs, Construction Delays, and Safety Concerns,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-602T] (Washington,
D.C.: Apr. 6, 2006).
[22] These dates are based on a 50 percent confidence level. With 80
percent confidence, the liquid tank waste is estimated to extend until
2050, the solid waste project is estimated to complete in 2058, and the
soil and water project is estimated to extend until 2059.
[23] GAO, Nuclear Waste: DOE Lacks Critical Information Needed to
Assess its Tank Management Strategy at Hanford, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-793] (Washington, D.C.: June
30, 2008.)
[24] As we recently reported, DOE may identify additional nuclear
materials to process through these facilities, which could delay the
planned 2019 shutdown and increase operational costs. GAO, Nuclear
Material: DOE Needs to Take Action to Reduce Risks Before Processing
Additional Nuclear Material at the Savannah River Site's H-Canyon,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-840] (Washington,
D.C.: July 25, 2008).
[25] Ronald Reagan National Defense Authorization Act for Fiscal Year
2005, Pub. L. No. 108-375 § 3116. This law resolved a lawsuit in which
an environmental group alleged that DOE lacked authority to determine
that particular wastes were not high-level waste.
[26] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-793].
[27] DOE included $180 million (representing an additional 18 months of
work) in its unfunded contingency for this project , which would have
covered only part of the $450 million cost increase or the 4-year
schedule delay experienced by the project.
[28] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-310] (Washington, D.C.:
January 2007).
[29] DOE, Root Cause Analysis: Contract and Project Management
(Washington, D.C., April 2008).
[30] We conducted limited assessments of EVM data reliability,
compliance with industry standards or our best practices, and other
analyses at three of the five EM sites we visited, including data from
the Hanford site's river corridor cleanup project, Washington; Idaho
National Laboratory's advanced mixed waste treatment plant subproject
(within the solid waste stabilization and disposition project), Idaho;
and Los Alamos National Laboratory's soil and water remediation
project, New Mexico.
[31] Specifically, we found elements where the contractor reported
budgeted and actual costs of work performed without a corresponding
work schedule.
[32] OECM has certified that all of the EVM systems used by the
contractors working on the 10 major cleanup projects are in compliance
with the American National Standards Institute/Electronic Industries
Alliance standard except that of the Advanced Mixed Waste Treatment
Project contractor at Idaho and the major project at the Los Alamos
National Laboratory.
[33] Contract start and end dates for the major cleanup projects do not
match near-term baseline start and end dates. Furthermore, EVM data at
Los Alamos is reported only against the current fiscal year, not
against the full contract period or the near-term baseline.
[34] In commenting on a draft of this report, EM indicated that scope
deferrals or changes to the near-term baseline must now be formally
approved by EM management.
[35] DOE's fiscal year 2009 request for EM includes ranges of life
cycle costs and completion dates at the site level.
[36] Major defense acquisition programs are those identified by the
Department of Defense that require eventual total research,
development, test, and evaluation expenditures of more than $365
million or $2.19 billion for procurement in fiscal year 2000 constant
dollars.
[37] As previously reported in GAO-07-518, in 2004 DOE began reporting
performance information for EM cleanup projects against the same goal
as the line-item construction projects. In late 2005, however, DOE
switched to reporting performance only for those projects with
validated cost and schedule baselines.
[38] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-518].
[39] GAO, Nuclear Cleanup of Rocky Flats: DOE Can Use Lessons Learned
to Improve Oversight of Other Sites' Cleanup Activities, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-06-352] (Washington, D.C.: July
10, 2006).
[40] We did not analyze the EVM data for the Oak Ridge or Savannah
River projects.
[41] GAO, Cost Assessment Guide: Best Practices for Estimating and
Managing Program Costs, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-1134SP] (Washington D.C.: July 2007).
[42] GAO, Department of Energy: Further Actions Are Needed to
Strengthen Contract Management of Major Projects, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-123] (Washington, D.C: Mar.
18, 2005); and Civil Engineering Research Foundation, Independent
Research Assessment of Project Management Factors Affecting Department
of Energy Project Success (Washington, D.C.: July 12, 2004).
[End of section]
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