Nuclear Waste
Actions Needed to Address Persistent Concerns with Efforts to Close Underground Radioactive Waste Tanks at DOE's Savannah River Site Gao ID: GAO-10-816 September 14, 2010Decades of nuclear materials production at the Department of Energy's (DOE) Savannah River Site in South Carolina have left 37 million gallons of radioactive liquid waste in 49 underground storage tanks. In December 2008, DOE entered into a contract with Savannah River Remediation, LLC (SRR) to close, by 2017, 22 of the highest-risk tanks at a cost of $3.2 billion. GAO was asked to assess: (1) DOE's cost estimates and schedule for closing the tanks at the Savannah River Site, and (2) the primary challenges, if any, to closing the tanks and the steps DOE has taken to address them. GAO visited the Savannah River Site and reviewed tank closure documents, as well as conducted an analysis of the construction schedule of the Salt Waste Processing Facility (SWPF), which is a facility vital to successful tank closure because it will treat a large portion of the waste removed from the tanks.
Emptying, cleaning, and permanently closing the 22 underground liquid radioactive waste tanks at the Savannah River Site is likely to cost significantly more and take longer than estimated in the December 2008 contract between DOE and SRR. Originally estimated to cost $3.2 billion, SRR notified DOE in June 2010 that the total cost to close the 22 tanks had increased by more than $1.4 billion or 44 percent. Much of this increase is because DOE's cost estimate in the September 2007 request for proposals that formed the basis of the December 2008 contract between DOE and SRR was not accurate or comprehensive. For example, DOE underestimated the costs of labor and fringe benefits. DOE also omitted certain other costs related to equipment and services needed to support tank closure activities. Moreover, more than $600 million of this increase is due to increased funding needed to make up for significant losses suffered by Savannah River Site workers' pension plans as a result of the recent economic crisis. Closing the tanks may also take longer than originally estimated because of persistent delays and shortcomings in the construction schedule for SWPF. According to SRR, construction delays that have already occurred will result in between 2 and 7 fewer tanks being closed by 2017 than agreed to in the contract. Furthermore, the SWPF construction schedule does not fully meet GAO-identified best scheduling practices. For example, the schedule had problems with excess float time between activities, indicating that the schedule's activities may not be sequenced logically. DOE is exploring ways to mitigate the effects of construction delays by deploying new technologies to treat radioactive waste. However, additional research and development on these new technologies is still required and, therefore, it will be several years before they are deployed. DOE officials identified three primary challenges to closing the liquid radioactive waste tanks at the Savannah River Site: (1) on-time construction and successful operation of SWPF; (2) increasing the amount and speed at which radioactive waste is processed at the Savannah River Site's Defense Waste Processing Facility, which prepares the waste for permanent disposal by mixing it with molten glass and then pouring it into large metal canisters where it hardens; and (3)successful implementation of an enhanced chemical cleaning process that will remove residual waste from the tanks with minimal creation of additional waste that must be treated. DOE officials identified steps the department is taking to ensure these challenges are met. However, several factors raise concerns about whether DOE will be able to resolve them. For example, the enhanced chemical cleaning process that is a cornerstone of SRR's ability to close tanks on time has never been used in liquid radioactive waste tanks and, according to SRR officials, DOE has not consistently funded additional research and development on the technology. Most experts GAO spoke with were generally confident of DOE's ability to successfully overcome these challenges, although some of them identified additional concerns. For example, some experts suggested that DOE has not engaged in sufficient contingency planning in the event that the department's chosen waste removal, treatment, and tank closure strategies are unsuccessful. GAO is making five recommendations to DOE to, among other things, clarify how cost increases should be requested by a contractor, as well as reviewed and approved by DOE and to ensure the SWPF construction schedule conforms to best practices. Although DOE generally agreed with two of our recommendations, they disagreed on the necessity of additional clarity on how cost increases should be requested by a contractor and that the SWPF construction schedule did not conform to best practices. We continue to believe our recommendations are valid.
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: David C. Trimble Team: Government Accountability Office: Natural Resources and Environment Phone: No phone on recordGAO-10-816, Nuclear Waste: Actions Needed to Address Persistent Concerns with Efforts to Close Underground Radioactive Waste Tanks at DOE's Savannah River Site
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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 2010:
Nuclear Waste:
Actions Needed to Address Persistent Concerns with Efforts to Close
Underground Radioactive Waste Tanks at DOE's Savannah River Site:
GAO-10-816:
GAO Highlights:
Highlights of GAO-10-816, a report to the Subcommittee on Energy and
Water Development, Committee on Appropriations, House of
Representatives.
Why GAO Did This Study:
Decades of nuclear materials production at the Department of Energy‘s
(DOE) Savannah River Site in South Carolina have left 37 million
gallons of radioactive liquid waste in 49 underground storage tanks.
In December 2008, DOE entered into a contract with Savannah River
Remediation, LLC (SRR) to close, by 2017, 22 of the highest-risk tanks
at a cost of $3.2 billion. GAO was asked to assess: (1) DOE‘s cost
estimates and schedule for closing the tanks at the Savannah River
Site, and (2) the primary challenges, if any, to closing the tanks and
the steps DOE has taken to address them. GAO visited the Savannah
River Site and reviewed tank closure documents, as well as conducted
an analysis of the construction schedule of the Salt Waste Processing
Facility (SWPF), which is a facility vital to successful tank closure
because it will treat a large portion of the waste removed from the
tanks.
What GAO Found:
Emptying, cleaning, and permanently closing the 22 underground liquid
radioactive waste tanks at the Savannah River Site is likely to cost
significantly more and take longer than estimated in the December 2008
contract between DOE and SRR. Originally estimated to cost $3.2
billion, SRR notified DOE in June 2010 that the total cost to close
the 22 tanks had increased by more than $1.4 billion or 44 percent.
Much of this increase is because DOE‘s cost estimate in the September
2007 request for proposals that formed the basis of the December 2008
contract between DOE and SRR was not accurate or comprehensive. For
example, DOE underestimated the costs of labor and fringe benefits.
DOE also omitted certain other costs related to equipment and services
needed to support tank closure activities. Moreover, more than $600
million of this increase is due to increased funding needed to make up
for significant losses suffered by Savannah River Site workers‘
pension plans as a result of the recent economic crisis. Closing the
tanks may also take longer than originally estimated because of
persistent delays and shortcomings in the construction schedule for
SWPF. According to SRR, construction delays that have already occurred
will result in between 2 and 7 fewer tanks being closed by 2017 than
agreed to in the contract. Furthermore, the SWPF construction schedule
does not fully meet GAO-identified best scheduling practices. For
example, the schedule had problems with excess float time between
activities, indicating that the schedule‘s activities may not be
sequenced logically. DOE is exploring ways to mitigate the effects of
construction delays by deploying new technologies to treat radioactive
waste. However, additional research and development on these new
technologies is still required and, therefore, it will be several
years before they are deployed.
DOE officials identified three primary challenges to closing the
liquid radioactive waste tanks at the Savannah River Site:
* on-time construction and successful operation of SWPF;
* increasing the amount and speed at which radioactive waste is
processed at the Savannah River Site‘s Defense Waste Processing
Facility, which prepares the waste for permanent disposal by mixing it
with molten glass and then pouring it into large metal canisters where
it hardens; and;
* successful implementation of an enhanced chemical cleaning process
that will remove residual waste from the tanks with minimal creation
of additional waste that must be treated.
DOE officials identified steps the department is taking to ensure
these challenges are met. However, several factors raise concerns
about whether DOE will be able to resolve them. For example, the
enhanced chemical cleaning process that is a cornerstone of SRR‘s
ability to close tanks on time has never been used in liquid
radioactive waste tanks and, according to SRR officials, DOE has not
consistently funded additional research and development on the
technology. Most experts GAO spoke with were generally confident of
DOE‘s ability to successfully overcome these challenges, although some
of them identified additional concerns. For example, some experts
suggested that DOE has not engaged in sufficient contingency planning
in the event that the department‘s chosen waste removal, treatment,
and tank closure strategies are unsuccessful.
What GAO Recommends:
GAO is making five recommendations to DOE to, among other things,
clarify how cost increases should be requested by a contractor, as
well as reviewed and approved by DOE and to ensure the SWPF
construction schedule conforms to best practices. Although DOE
generally agreed with two of our recommendations, they disagreed on
the necessity of additional clarity on how cost increases should be
requested by a contractor and that the SWPF construction schedule did
not conform to best practices. We continue to believe our
recommendations are valid.
View [hyperlink, http://www.gao.gov/products/GAO-10-816] or key
components. For more information, contact David C. Trimble at 202-512-
3841 or trimbled@gao.gov.
[End of section]
Contents:
Letter:
Background:
Based on Current Cost Estimates and Schedule, Closing the Savannah
River Site's Tanks Is Likely to Cost More and Take Longer Than
Originally Estimated:
DOE Has Identified Several Challenges to Successfully Closing the
Savannah River Site's Underground Waste Tanks:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: GAO Assessment of DOE's SWPF Construction Schedule:
Appendix III: Comments from the Department of Energy:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: SWPF Construction Schedule's Progress in Meeting GAO-
Identified Best Practices for Scheduling:
Figure:
Figure 1: Three Types of Waste at the Savannah River Site by Volume
and Level of Radioactivity as of March 30, 2010:
Abbreviations:
ARP/MCU: Actinide Removal Process/Modular Caustic-Side Solvent
Extraction Unit:
DOE: Department of Energy:
DWPF: Defense Waste Processing Facility:
EPA: Environmental Protection Agency:
SRR: Savannah River Remediation, LLC:
SWPF: Salt Waste Processing Facility:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 14, 2010:
The Honorable Peter J. Visclosky:
Chairman:
The Honorable Rodney P. Frelinghuysen:
Ranking Member:
Subcommittee on Energy and Water Development:
Committee on Appropriations:
House of Representatives:
The Department of Energy's (DOE) Savannah River Site, located on
nearly 310 square miles in southwestern South Carolina, was built in
the 1950s to produce nuclear materials such as tritium and plutonium
that were needed to manufacture nuclear weapons. It did so by
dissolving highly radioactive spent nuclear fuel from the site's
nuclear reactors in large, heavily shielded separation facilities
known as canyons. Decades of nuclear weapons production have left a
legacy of radioactive and hazardous waste to be cleaned up at the
Savannah River Site, including 37 million gallons of highly
radioactive liquid waste that is currently stored in 49 underground
storage tanks.[Footnote 1] Many of these tanks have a history of
leakage and 8 are sitting near or below the water table, raising
concerns that radioactive and hazardous waste in the tanks could leak
into the groundwater and endanger worker safety, public health, and
the environment.
In 1993, DOE, the Environmental Protection Agency (EPA), and the South
Carolina Department of Health and Environmental Control entered into
an agreement that, among other things, called for DOE to empty, clean,
and permanently close 22 underground tanks that lack secondary
containment--such as tanks that are not double walled or that do not
have an external liner--by 2022. DOE has committed to removing waste
from the remaining 27 tanks by 2028. Since then, DOE closed 2 tanks in
1997, and finished removing the waste from 2 other tanks in 2009. In
December 2008, DOE awarded an 8-year tank closure contract to Savannah
River Remediation, LLC (SRR).[Footnote 2] Under this contract, SRR
committed to an accelerated schedule of emptying, cleaning, and
closing the 22 tanks without secondary containment by 2017, 5 years
before the date in the agreement between DOE, EPA, and South Carolina
at a cost of $3.2 billion.
In this context, you asked us to assess (1) DOE's current cost
estimates and schedule for closing the liquid radioactive waste tanks
at the Savannah River Site, and (2) the primary challenges, if any, to
closing the liquid radioactive waste tanks and the steps DOE has taken
to address them.
To address these objectives, we reviewed DOE's initial tank closure
cost estimates, the December 2008 contract between DOE and SRR, and
SRR's revised cost estimates. We also used GAO-identified best
practices from across industry and government to review the
construction schedule for a facility that will be used to treat a
majority of the tank waste volume.[Footnote 3] In addition, we
interviewed DOE officials at the Savannah River Site and in
Washington, D.C., as well as officials from SRR, EPA, and South
Carolina. To assess the primary challenges to closing the tanks, we
interviewed DOE officials and asked them to identify such challenges
and steps taken. We also reviewed tank closure plans and risk
management documents, toured Savannah River Site facilities relevant
to tank closure, and received briefings from DOE and SRR officials on
the liquid radioactive waste system to gain an understanding of these
challenges and how DOE planned to address them. In addition, we
interviewed 11 experts and solicited their views on the primary tank
closure challenges. We selected these experts on the basis of their
extensive knowledge of tank closure-related activities. Appendix I
contains additional information on our scope and methodology.
We conducted this performance audit from June 2009 to September 2010
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.
Background:
DOE's December 2008 contract with SRR to empty, clean, and close the
Savannah River Site's underground tanks is a cost plus award fee
contract. Under this type of contract, SRR's costs to conduct cleanup
work are reimbursed by DOE. Such costs include, among other things,
workers' salaries and fringe benefits such as employer-provided health
insurance and defined-benefit pension plans. In addition, to encourage
innovative, efficient, and effective performance, this type of
contract gives SRR the opportunity to earn a monetary incentive known
as an award fee. The amount of award fee SRR is able to earn is
determined by its accomplishment of goals mutually agreed upon by the
contractor and DOE. The contractor's cost, schedule, performance, and
scope commitments for successfully delivering the contract-defined
requirements are specified in a document known as the contract
performance baseline that is developed by the contractor and agreed to
by DOE. Many site activities not related to tank closure--such as
management of spent nuclear fuel and soil and groundwater cleanup--are
conducted under a separate management and operations contract
currently held by Savannah River Nuclear Solutions, LLC.
DOE Order 413.3A establishes a process for managing the department's
major projects--including contractor-run projects that build large
complexes that often house unique equipment and technologies such as
those that process waste or other radioactive material and
environmental cleanup projects. The order covers activities from
identification of need through project completion.[Footnote 4]
Specifically, the order establishes five major milestones--or critical
decision points--that span the life of a project. Order 413.3A
specifies the requirements that must be met, along with the
documentation necessary, to move a project past each milestone. In
addition, the order requires that DOE senior management review the
supporting documentation and approve the project at each milestone.
DOE also provides suggested approaches for meeting the requirements
contained in Order 413.3A through additional guidance.
For years, DOE has had difficulty managing its contractor-run
projects. Despite repeated recommendations from us and others to
improve project management, DOE continues to struggle to keep its
projects within their cost, scope, and schedule estimates. For
example, we reported in September 2008 that 9 of 10 major cleanup
projects managed by DOE's Office of Environmental Management--which
manages cleanup projects such as tank closure at the Savannah River
Site--had experienced cost increases, and that DOE had estimated that
it needed an additional $25 billion to $42 billion more than the
projects' initial cost estimates to complete these projects.[Footnote
5] Because of DOE's history of inadequate management and oversight of
its contractors, we have included contract and project management in
DOE's National Nuclear Security Administration and Office of
Environmental Management on our list of government programs at high
risk for fraud, waste, abuse, and mismanagement since 1990.[Footnote 6]
In response to its continued presence on our high-risk list, DOE
analyzed the root causes of its contract and project management
problems in 2007 and identified several major findings.[Footnote 7]
Specifically, DOE found that the department:
* often does not complete front-end planning to an appropriate level
before establishing project performance baselines;
* does not objectively identify, assess, communicate, and manage risks
through all phases of project planning and execution;
* fails to request and obtain full project funding;
* does not ensure that its project management requirements are
consistently followed; and:
* often awards contracts for projects prior to the development of an
adequate independent government cost estimate.
To address these issues and improve its project and contract
management, DOE has prepared a corrective action plan with various
corrective measures to track its progress.[Footnote 8] Among the
measures being implemented are for DOE to make greater use of third-
party reviews prior to project approval, establish objective and
uniform methods of managing project risks, better align cost estimates
with anticipated budgets, and establish a federal independent
government cost-estimating capability.
Emptying, cleaning, and closing the 22 tanks without secondary
containment involves a number of steps. The radioactive waste
generally comes in a variety of physical forms and layers inside the
tanks, depending on the physical and chemical properties of the waste
components. The waste in the tanks take the following three main forms
which are illustrated in figure 1:
* Sludge. The denser, water-insoluble components of the waste
generally settle to the bottom of the tank to form a thick layer known
as sludge, which has the consistency of peanut butter. Although sludge
is only 8 percent of the total volume of the tank waste at the
Savannah River Site, it has about 49 percent of the tanks' total
radioactivity.
* Saltcake. Above the sludge may be water-soluble components, such as
sodium salts, that crystallize or solidify out of the waste solution
to form a moist sandlike material called saltcake.
* Salt supernate. Above or between the denser layers may be liquids
comprised of water and dissolved salts that are called supernate.
Figure 1: Three Types of Waste at the Savannah River Site by Volume
and Level of Radioactivity as of March 30, 2010:
[Refer to PDF for image: illustration]
Total Volume:
Salt Supernate and Saltcake: 34.3 Mgal (92%);
Sludge: 3.0 Mgal (8%).
Less than 37 million gallons (Mgal).
Total Curies:
Salt Supernate and Saltcake: 183 MCi (51%);
Sludge: 175 MCi (49%).
Less than 358 Million Curies (MCi).
Source: DOE.
[End of figure]
Most of the waste in a tank is removed by using pumps and high-
pressure wash systems. Various methods are then used to immobilize the
waste and prepare it for permanent disposal. In the case of sludge,
the material is immobilized through vitrification--a process that
stabilizes waste by mixing it with molten glass and then pouring it
into large metal canisters where it hardens--at the Savannah River
Site's Defense Waste Processing Facility (DWPF), which has operated
since March 1996. Canisters produced by DWPF are currently stored on
site pending the availability of a geologic repository where they will
be permanently disposed. DOE's original plans were to locate a
permanent geologic repository for these canisters, as well as other
nuclear waste generated across the United States, at Yucca Mountain in
Nevada. The department had submitted a license application for
authorization to construct a repository at Yucca Mountain to the U.S.
Nuclear Regulatory Commission. However, DOE moved to withdraw the
license application in March 2010 and has declared its intention not
to proceed with the Yucca Mountain project. While the U.S. Nuclear
Regulatory Commission's Atomic Safety and Licensing Board denied DOE's
motion to withdraw the application in June 2010, the final permanent
disposal location for vitrified high-level waste at the Savannah River
Site, as well as hundreds of thousands of tons of additional
radioactive waste across the country, remains in question.
In the case of the larger volumes of saltcake and salt supernate
(known collectively as salt waste) that are stored at the Savannah
River Site, glass vitrification of all of this waste without reducing
its volume would produce a very large number of metal canisters that
would need to be permanently disposed. DOE is using several interim
processes to separate higher radioactivity waste from the remainder of
the lower activity waste and, consequently, reduce the number of
canisters requiring disposal that will be generated. One of these
interim processes--the Actinide Removal Process/Modular Caustic-Side
Solvent Extraction Unit (ARP/MCU)--began operations in May 2008 with a
3-year operational expectancy. DOE is also constructing permanent
facilities at the Savannah River Site to separate the higher activity
waste from the remainder of the lower activity waste. A key facility,
the Salt Waste Processing Facility (SWPF), uses the same technology as
ARP/MCU, but on a larger scale. SWPF is currently being constructed by
Parsons Corporation under a separate contract with DOE. Although
estimated to cost more than $1.3 billion, we reported in January 2010
that DOE's cost estimate for SWPF only somewhat or partially met the
four characteristics of high-quality cost estimates--accuracy,
comprehensiveness, credibility, and well documented.[Footnote 9] DOE
expects SWPF to begin separating higher-and lower-radioactivity waste
sometime between fiscal year 2013 and the beginning of fiscal year
2016. Once separated, higher-radioactivity waste will then be mixed
with sludge for vitrification at DWPF. The low-radioactivity waste
that is currently separated out by ARP/MCU and is to be separated out
by SWPF is stabilized by combining it with a grout-like substance at
another Savannah River Site facility called the Saltstone Facility,
where it will be permanently disposed of in a series of on-site vaults.
Removal and treatment of liquid radioactive waste from the tanks do
not, however, complete the tank closure process. Any residual
radioactive waste that pumping and high-pressure washing cannot remove
from the tank surfaces must be mechanically scrubbed and may also be
treated with chemicals for removal. This cleaning process generates
additional radioactive waste that must also be removed from the tanks
and eventually treated for permanent disposal. Even with chemical
cleaning, it is impossible with current technology to remove 100
percent of the radioactive and hazardous waste from every tank. A
small quantity of waste will remain in the tank. Following the removal
of most of the waste and chemical cleaning, DOE must demonstrate that
the department has cleaned the tank to the maximum extent practicable.
DOE, EPA, and South Carolina must agree upon the concentration of
wastes that are allowed to remain in the tanks and the criteria for
permanently closing them. The current plan calls for DOE to
permanently close the tanks by filling the now-substantially empty
tanks with a cementlike substance to prevent their collapse and the
release of any residual radioactive or hazardous material into the
environment.
Based on Current Cost Estimates and Schedule, Closing the Savannah
River Site's Tanks Is Likely to Cost More and Take Longer Than
Originally Estimated:
Emptying, cleaning, and permanently closing the 22 underground liquid
radioactive waste tanks at the Savannah River Site that lack secondary
containment is likely to cost significantly more and take longer than
estimated in the December 2008 contract between DOE and SRR.
Specifically, SRR notified DOE in June 2009 that the total cost to
close the 22 tanks had increased by slightly more than $1.4 billion
from $3.2 billion as estimated in the December 2008 contract to about
$4.6 billion. In addition, closing the tanks may take longer than
originally estimated because of persistent delays constructing SWPF--a
facility vital to successful tank closure because it will treat a
large portion of the waste removed from the tanks. Our review also
found that the SWPF construction schedule does not meet GAO-identified
best scheduling practices. Although DOE is exploring ways to mitigate
the effects of SWPF construction delays by deploying new technologies
to treat additional quantities of waste, DOE officials told us that
additional research and development on these technologies is still
required and that it would be several years before these new
technologies could be deployed.
SRR Estimates That the Cost to Close 22 Tanks Has Increased 44 Percent:
One day before beginning work under the contract it signed with DOE in
December 2008, SRR reported that the estimated cost to empty, clean,
and permanently close the 22 tanks had increased by slightly more than
$1.4 billion. The estimated cost increase was discovered during a due-
diligence review SRR conducted during the transition period from the
previous contractor managing liquid high-level radioactive waste
operations at the Savannah River Site. The purpose of this review was
to identify, among other things, any physical site conditions that
were different than those portrayed in DOE's September 2007 request
for proposals--which formed the basis of SRR's proposal and the
December 2008 contract--or that could give rise to other liabilities
or noncompliance with the contract. In a June 30, 2009, letter--one
day prior to the end of the contract transition period--SRR reported
to DOE that its review had identified more than 300 differences in
such conditions, 22 of which SRR considered to be material. Material
differences are a change of conditions that will have a significant
impact, positive or negative, on the performance of work in terms of
time or costs, and impacts to the contract milestones, among other
things.
SRR's June 2009 letter stated that these 22 material differences would
result in a contract cost increase from roughly $3.2 billion to about
$4.6 billion--a 44 percent increase. Our review indicates that much of
this increase is because the cost estimate in DOE's 2007 request for
proposals that formed the basis of the December 2008 contract was not
accurate or comprehensive. For example:
* DOE underestimated fringe benefit rates by 27 to 62 percent
depending upon an employee's job classification, and underestimated
labor rates by 5 to 70 percent for certain job classifications. DOE's
cost estimate was based on historical data that underestimated future
costs. As a result, SRR reported that costs would increase by $279
million.
* DOE assumed in the September 2007 request for proposals that certain
costs--including retiree health care and essential site services such
as computer and telecommunications equipment and water service--would
be paid under the Savannah River Site's management and operations
contract rather than the SRR contract. Subsequently, DOE reversed its
decision and instead assigned these costs to the SRR contract.
Although this action resulted in no net increase in costs to the
taxpayer because these costs will be subtracted from the Savannah
River Site's management and operations contract, it resulted in a $270
million increase in the costs associated with the tank closure
contract.
In addition, DOE did not account for the more than $600 million in
pension costs that were needed to make up for significant losses
suffered by the Savannah River Site workers' defined-benefit pension
plans as a result of the economic crisis that began in 2007. DOE
contractors generally provide their employees with pension plans,
health care benefit plans, and other postretirement benefits. DOE
reimburses these contractors for the costs of providing pension and
postretirement benefits to current and former employees and their
beneficiaries. DOE is ultimately responsible for reimbursing its
contractors for the allowable costs of these plans.[Footnote 10] DOE's
September 2007 request for proposals estimated that funding the
defined-benefit pension plans for current and retired Savannah River
Site workers and their beneficiaries covered under the contract would
cost $146 million. However, the economic crisis that began in 2007
caused significant losses to the assets in which the Savannah River
Site workers' pension plans had invested. This, combined with other
factors, caused DOE to face a significant shortfall in the amount of
pension funding originally estimated in the 2007 request for proposals
versus what is now estimated to be required. Despite having 17 months
between the start of the economic crisis and signing the contract with
SRR, DOE did not update the September 2007 pension cost estimate
because, according to DOE officials, the amount of the shortfall was
still fluctuating. In its June 2009 letter to DOE, SRR estimated that
pension costs had increased by more than $600 million, from $146
million to $762 million.
DOE's difficulty producing an accurate and comprehensive cost estimate
to empty, clean, and permanently close the 22 tanks is consistent with
the department's own findings in its April 2008 root cause analysis of
its contract and project management problems. Similarly, we reported
in January 2010 that DOE's inability to produce high-quality cost
estimates limits the department's ability to effectively manage its
projects and provide good estimates to Congress of the amount of money
needed to complete projects and recommended that the department update
its cost estimating guidance to address these concerns.[Footnote 11]
DOE took no action in response to SRR's June 2009 letter reporting the
22 material differences and $1.4 billion cost increase. Lacking a
response from DOE, SRR prepared and, in September 2009, submitted a
contract performance baseline to DOE that included these additional
costs. SRR and DOE officials told us that DOE did not inform SRR of
department guidance that stated that a contractor should not be
allowed to change estimated contract costs by simply including a
higher cost in the contract performance baseline. As a result, SRR
received no information on DOE's assessment of the cost increases
proposed in June 2009 until DOE rejected SRR's September 2009 contract
performance baseline in November 2009. DOE rejected the baseline for
reasons including that the department needed additional cost and
scheduling documentation to validate SRR's cost and schedule estimates.
Since rejecting SRR's contract performance baseline in November 2009,
DOE and SRR officials have discussed SRR's proposed cost increases as
part of revising the contract performance baseline. Despite about 7
months of discussions, the revised contract performance baseline SRR
submitted on June 30, 2010, contained a cost increase of slightly less
than $1.4 billion--only $50 million less than the June 2009 cost
increase. Therefore, the current estimated cost to close the 22
Savannah River Site tanks is about $4.6 billion--a 44 percent increase
from the roughly $3.2 billion in the December 2008 contract.
DOE approved SRR's proposed cost increases and its revised contract
performance baseline in August 2010, more than a year after SRR first
identified proposed cost increases. DOE's primary guidance on contract
performance baseline development contains limited information
detailing the process and time frames by which baselines are to be
reviewed and approved.[Footnote 12] As such, there is no DOE-wide
guidance that establishes milestones for reviewing and approving
contract performance baselines.
Oversight of contractor performance may also be complicated because
DOE has exempted many tank closure activities at the Savannah River
Site--as well as many other ongoing environmental cleanup projects--
from the full requirements of DOE Order 413.3A. In general, Order
413.3A applies to capital asset acquisition projects, including
environmental cleanup projects, having a total cost of $20 million or
more. Accordingly, DOE's contract with SRR originally required that
the project be managed in accordance with Order 413.3A. In addition,
when DOE rejected SRR's initial contract performance baseline, the
department found multiple instances in which SRR had not fully
satisfied project management provisions contained in Order 413.3A.
However, following the completion of the contract with SRR, DOE's
Office of Environmental Management evaluated the scope of its
contracts to determine how much of the activity actually constituted
capital asset acquisition activity. As a result of this evaluation,
DOE determined that some of the activities covered by the contract
with SRR included both capital asset projects and operating
activities. DOE exempted these operating activities from Order 413.3A.
DOE officials explained that Order 413.3A is more focused on managing
the process by which the department constructs new facilities rather
than the process by which it operates existing facilities, such as to
complete environmental cleanup efforts. While DOE issued a contract
modification removing references to Order 413.3A for exempted
activities, the modification does not specify which DOE project
management policies, if any, apply to the exempted SRR activities. We
have previously reported that it is critically important that DOE
develop and implement a rigorous, disciplined approach for managing
projects, because major cleanup projects, such as tank closure
activities at the Savannah River Site, take years to complete, and
often involve unique challenges and a high degree of complexity.
[Footnote 13] Such an approach includes planning and managing work
activities, cost, and schedule to achieve project goals in a stable,
controlled manner.
SWPF Construction Schedule Delays Could Jeopardize DOE's Tank Closure
Schedule:
Because salt waste makes up more than 90 percent of the volume of
liquid radioactive waste at the Savannah River Site, successful
construction of the SWPF is vital to DOE's efforts to empty, clean,
and permanently close the site's underground tanks. However, SWPF has
experienced multiple delays since design of the facility began in
2004. Originally estimated to begin operating in 2009, the facility's
startup date has been repeatedly delayed.[Footnote 14] At the time the
contract between DOE and SRR was signed in December 2008, SWPF was
expected to begin operations in September 2012. However, DOE
subsequently delayed SWPF's expected startup date to May 2013 at the
earliest. DOE also added more than 2 years of contingency time to the
SWPF construction schedule, meaning that SWPF operations may start as
late as October 2015.
If SWPF starts up in May 2013, SRR estimated that 2 fewer tanks could
be closed by the end of the contract in 2017 than originally
estimated. If SWPF does not begin operations until 2015, SRR estimated
a total of 7 fewer tanks would be closed than originally called for in
the contract by the contract's end in 2017, or 15 out of the 22
underground tanks originally agreed to in the contract.
In addition, on-time completion of the SWPF may be in question because
the facility's construction schedule does not fully meet GAO-
identified best scheduling practices. Using industry-standard
scheduling practices, we previously identified nine key practices
necessary for developing a reliable schedule.[Footnote 15] These
practices are (1) capturing key activities, (2) sequencing key
activities, (3) assigning resources to key activities, (4)
establishing the duration of key activities, (5) integrating key
activities horizontally and vertically, (6) establishing the critical
path for key activities, (7) identifying float time--the time that
activities can slip before the delay affects the completion date, (8)
performing a risk analysis of the schedule, and (9) updating the
schedule using logic and durations to determine dates.[Footnote 16] We
initially assessed SWPF's construction schedule in March 2010 and
found that it did not fully adhere to these best practices. We
discussed these findings with DOE and Parsons officials, and DOE made
changes to the schedule. Subsequently, we reassessed the schedule in
May 2010 and found that SWPF project officials had taken steps to
address some of the problems identified in our initial review but that
the schedule still had some shortcomings. Specifically, both of our
assessments found that the schedule had problems with excess float
time between activities. Float that exceeds a year is unrealistic and
should be minimized because excess float times usually indicate that
the schedule's activities are not sequenced logically, which reduces
confidence that the schedule will be able to meet its completion date.
Our March 2010 review found that the schedule had 272 activities with
more than 500 days of float time and that two construction activities
involving fabrication of piping--usually critical in construction
projects--had more than 1,000 days of float time. Our May 2010
assessment found that this problem had become worse, with 433
activities having more than 500 days of float time--an increase of 59
percent. Twenty-two of these activities had more than 1,250 days of
float time. Table 1 summarizes the results of our March and May 2010
schedule assessments and appendix II discusses the best practices and
our assessments in detail.
Table 1: SWPF Construction Schedule's Progress in Meeting GAO-
Identified Best Practices for Scheduling:
Best practice: Capturing all activities;
March 2010: Fully meets;
May 2010: Fully meets.
Best practice: Sequencing activities;
March 2010: Partially meets;
May 2010: Partially meets.
Best practice: Assigning resources to activities;
March 2010: Fully meets;
May 2010: Fully meets.
Best practice: Establishing the duration of activities;
March 2010: Partially meets;
May 2010: Partially meets.
Best practice: Integrating schedule activities horizontally and
vertically;
March 2010: Partially meets;
May 2010: Partially meets.
Best practice: Establishing the critical path for activities;
March 2010: Partially meets;
May 2010: Fully meets.
Best practice: Identifying float between activities;
March 2010: Does not meet;
May 2010: Does not meet.
Best practice: Conducting a schedule risk analysis;
March 2010: Minimally meets;
May 2010: Partially meets.
Best practice: Updating the schedule using logic and durations to
determine dates;
March 2010: Partially meets;
May 2010: Partially meets.
Source: GAO analysis of DOE's SWPF construction schedule as of March
2010 and May 2010.
[End of table]
DOE is exploring ways of mitigating the effects of SWPF delays. For
example, although it was originally planned to operate only until
2011, DOE plans to extend the operations of ARP/MCU--one of the
interim processes DOE is using to treat salt waste prior to SWPF
operation. In addition, DOE is in the early stages of developing new
technologies that will allow it to treat additional quantities of salt
waste beyond what is treated by ARP/MCU and SWPF; however, department
officials told us that these initiatives will likely not be ready for
deployment until 2013. Specifically, DOE is conducting research and
development on two technologies--called rotary microfiltration and
small-column ion exchange--that will treat salt waste directly in the
tank, rather than pumping the waste to a separate facility like
ARP/MCU or SWPF.[Footnote 17] DOE estimates that developing and
deploying these two technologies will cost $130 million. DOE officials
are hopeful that successful deployment of these new technologies will
allow SRR to close all 22 tanks in the December 2008 contract by 2017,
as agreed. Moreover, a DOE official said that these technologies could
allow closure of the remaining 27 tanks that have secondary
containment by 2024--4 years earlier than the 2028 goal committed to
by DOE. However, DOE faces hurdles to accomplishing these goals using
the new technologies. For example, DOE officials told us that,
although these technologies are proven, they have never been used to
treat liquid radioactive waste at the Savannah River Site and that
additional research and development were necessary.
DOE Has Identified Several Challenges to Successfully Closing the
Savannah River Site's Underground Waste Tanks:
DOE officials with whom we spoke identified three primary challenges
to closing the liquid radioactive waste tanks at the Savannah River
Site--on-time construction and successful operation of SWPF,
increasing the amount and speed at which high-level radioactive waste
is vitrified at DWPF, and successfully implementing an enhanced
chemical cleaning process for the underground tanks. Although these
officials also identified steps the department is taking to ensure
these challenges are met, several factors raise concerns about whether
DOE will be able to resolve them. Moreover, although most experts we
spoke with were generally confident of DOE's ability to successfully
overcome these challenges, some of them identified additional concerns
about DOE's ability to successfully close the underground tanks.
DOE Is Taking Steps to Overcome the Primary Challenges That Could
Impede Savannah River Site Tank Closure, but Concerns Remain About Its
Ability to Resolve Them:
According to DOE officials, there are three primary challenges to
successfully closing the liquid radioactive waste tanks at the
Savannah River Site: (1) on-time construction and successful operation
of SWPF; (2) increasing the amount and speed at which high-level
radioactive waste is vitrified at DWPF; and (3) successfully
implementing an enhanced chemical cleaning process for the underground
tanks.
* On-time construction and successful operation of SWPF. As discussed
previously, successful construction of SWPF is vital to DOE's efforts
to empty, clean, and permanently close the site's underground tanks
because salt waste makes up more than 90 percent of the waste in the
tanks. However, in addition to the construction delays that have
already occurred and the potential for additional delays in the
future, which was discussed earlier, concerns have been raised about
SWPF's ability, once constructed, to process waste at a high-enough
rate to meet tank closure goals. Specifically, a review by DOE's
Office of Cost Analysis that was conducted between September and
November 2008 found that ARP/MCU--which is a small-scale version of
SWPF and uses essentially the same technology--had only achieved 50
percent of its designed processing rate after about 5 months of
operation. The review raised concerns that officials responsible for
SWPF may not have planned to fully utilize lessons learned from
ARP/MCU operations in the design for SWPF. Because of this, the review
found that DOE may be missing opportunities to mitigate SWPF
operational risks. However, DOE officials told us that it was not
unusual that ARP/MCU had only achieved 50 percent of its processing
rate after only 5 months of operation. These officials said that,
because the technology represented a first-of-a-kind nuclear
operation, they operated ARP/MCU at a deliberately slow pace during
startup. Operating ARP/MCU more slowly also allowed them to collect
additional information to inform future operations. According to these
officials, ARP/MCU may achieve its optimal processing capacity of 2
million gallons of salt waste per year in fiscal year 2011--3 years
after beginning operations--and that lessons learned from the ARP/MCU
project are being used in SWPF design. DOE officials said that they
hope the more than 2 years of contingency time in the SWPF
construction schedule will give them time to ensure the facility will
operate as planned. In addition, DOE officials told us that they are
working to ensure SWPF is properly integrated with other Savannah
River Site radioactive waste storage and treatment facilities to
reduce the time needed to ramp up to full operational levels once
construction is completed.
* Increasing DWPF throughput. As discussed earlier, DWPF produces
large metal canisters filled with vitrified high-radioactivity sludge
waste that are currently stored at the Savannah River Site pending the
availability of a geologic repository for permanent disposal. To meet
the December 2008 contract's accelerated schedule for emptying,
cleaning, and closing the 22 underground tanks by 2017, SRR must
increase production at DWPF from approximately 215 canisters annually
to about 400 canisters annually--roughly doubling historical
production. In addition, SRR plans to increase the concentration of
radioactive waste in each canister. To achieve these improvements, SRR
plans to install additional equipment and improve the performance of
the melter technology that vitrifies the waste. Although DOE and SRR
officials told us that they have confidence in each of the individual
improvements planned for DWPF, they are less certain whether the
improvements as a group will increase overall DWPF performance. In
addition, DWPF has not, to date, ever achieved the levels of
efficiency and production that DOE and SRR officials have said will be
necessary to achieve tank closure goals. For example, although parts
of the system were designed to produce more than 400 canisters per
year, DWPF has only achieved an average of about 215 canisters per
year throughout its 10 years of operations.
* Enhanced chemical cleaning. SRR is relying on a new chemical
cleaning process to accelerate tank cleaning with minimal creation of
additional waste that must be treated. The current chemical cleaning
process to remove residual waste adds oxalic acid with large volumes
of water to the tanks. The tank contents are then agitated by mixers
that cause the oxalic acid to bind with the waste, and the mixture is
then pumped from the tanks to be prepared for vitrification at DWPF.
However, the existing process produces large amounts of radioactive
water as a byproduct that must be stored in the Savannah River Site
tanks and, eventually, treated. In addition, the oxalate in the acid
can negatively affect the vitrification process at DWPF. According to
SRR, enhanced chemical cleaning is an improvement on the existing
process to remove residual waste because the cleaning solution is
recirculated and does not increase the volume of waste in the tanks.
In addition, enhanced chemical cleaning eliminates oxalates, reducing
the impact on DWPF. DOE and SRR officials told us that enhanced
chemical cleaning is the cornerstone of their ability to close tanks
on schedule and that there will be cascading negative effects on the
entire liquid waste system and the rate at which tanks can be closed
if the process does not work as planned. To address the challenge of
successfully implementing the enhanced chemical cleaning process, DOE
and SRR officials told us that the process will be phased into
operation. However, this new process is, to date, unproven for use in
liquid radioactive waste tanks. In addition, notwithstanding the
importance of enhanced chemical cleaning to successful tank closure,
DOE did not provide sufficient funding to continue research and
development on the process until December 2009, and SRR officials told
us that research efforts have been limited due to this lack of
funding. As a result, deployment of enhanced chemical cleaning has
been delayed from its original January 2011 planned date until
sometime in 2013.
Experts Were Generally Confident in DOE's Ability to Overcome These
Challenges, but Many Expressed Additional Concerns:
Nearly all of the experts with whom we spoke agreed that the three
challenges DOE officials identified to closing the underground tanks
at the Savannah River Site--on-time construction and successful
operation of SWPF, increasing the amount and speed at which high-level
radioactive waste is vitrified at DWPF, and successfully implementing
an enhanced chemical cleaning process--are, in fact, the primary
challenges the department faces. Many of these experts stated that
they were generally confident of DOE's ability to overcome these
challenges. Those who did not express such confidence told us that, in
their view, they lacked sufficient knowledge of the specific
conditions DOE faces at the Savannah River Site to assess whether DOE
was capable of overcoming these challenges.
More than half of the experts we spoke with expressed additional
concerns. For example, some of the experts we interviewed told us that
they believed that DOE may not be sufficiently considering alternative
tank cleaning or waste processing technologies. Three experts
expressed concern that DOE was disproportionately relying on enhanced
chemical cleaning technologies when, in their view, additional
mechanical cleaning technologies may be necessary as well. In
addition, one expert recalled a previous situation where DOE relied
too heavily on one waste processing technology--called In-Tank
Precipitation--to treat waste in the underground tanks. As we reported
in 1999, DOE determined the technology would not work as planned after
nearly a decade of delays and spending nearly $500 million.[Footnote
18] Other experts expressed concern that DOE does not have adequate
knowledge of the specific characteristics and chemistry of the waste
in the tanks. According to these experts, having complete knowledge of
the exact characteristics of the waste is important to successfully
processing it.
In response, DOE officials told us they believe the department is
sufficiently considering alternative waste processing technologies, as
evidenced by their continued research and development on the rotary
microfiltration and small-column ion exchange technologies discussed
earlier. In addition, regarding their knowledge of the characteristics
of the waste in the tanks, DOE officials told us that it is always
possible that there are unknown chemicals in the tanks. However,
because of the extensive historic and current sampling of the waste in
the tanks, DOE officials expressed confidence in their knowledge of
the characteristics and chemistry of the tank waste.
Conclusions:
The potential for significant cost increases and the possibility of
accomplishing one-third fewer tank closures by 2017 than agreed to
under the December 2008 contract between DOE and SRR raises concerns
about the department's ability to successfully close the 22
underground liquid radioactive waste tanks that lack secondary
containment at the Savannah River Site within DOE's cost and schedule
goals. This concern is based in part on DOE's inability to produce
high-quality cost estimates, an issue we have addressed since 2007 in
several reports that contained numerous recommendations. In addition,
DOE's difficulties planning for and mitigating risks in the Savannah
River Site's tank closure project appear to be a continuation of the
department's history of difficulties in contract and project
management, as well as the findings of its own root cause analysis of
this issue. DOE took nearly 6 months to respond to SRR's initial
report of a $1.4 billion cost increase in June 2009, and SRR had been
operating at the Savannah River Site for more than a year by the time
the cost estimates were finalized and a contract performance baseline
was approved in August 2010.
We recognize that much of the potential cost increase is the result of
pension plan losses due to economic conditions beyond DOE's control,
and that the department is obligated to pay those benefits under the
terms of its contracts. However, DOE lacked adequate guidance to
ensure that the contract signed in December 2008--nearly a year and a
half after the onset of the economic conditions that led to those
losses--accurately reflected increased pension funding requirements.
The department also lacked adequate guidance to ensure that the
contract included known costs such as labor, fringe benefits, retiree
health care, and essential site services costs incurred under the tank
closure contract, rather than other contracts DOE manages at the
Savannah River Site. In addition, DOE failed to inform SRR about
existing guidance regarding how a contractor can request contract cost
increases. Moreover, the exemption of the tank closure project from
the requirements of DOE Order 413.3A means that the specific policies
and procedures DOE will use to oversee the implementation of the tank
closure contract and other Office of Environmental Management
operations activities are also uncertain. Without certainty as to the
policies and procedures that apply, there is no clear approach for
management oversight of tank closure at the Savannah River Site, as
well as other DOE operations activities.
The challenges DOE faces to successfully remove highly radioactive
liquid waste from the Savannah River Site's underground tanks and to
then treat the waste and permanently close those tanks are daunting,
but experts we spoke with generally agreed that DOE is potentially up
to the challenge. However, we share the experts' concerns that DOE has
not engaged in sufficient planning in the event that the department's
chosen waste removal, treatment, and tank closure strategies are
unsuccessful. For example, on-time completion of SWPF and its
successful operation are vital to DOE's tank closure plans. Although
DOE has made some improvements to the SWPF construction schedule,
several shortcomings remain that need to be corrected for it to comply
with GAO-identified best practices and DOE's schedule development
guidance. Furthermore, it is important to note that construction
delays have already occurred and SRR already estimates that between 2
and 7 fewer tanks than originally planned will be closed by 2017. DOE
is in the early stages of planning technologies to mitigate these
delays, but it will be several years before these technologies are
ready. As a result, we are uncertain whether DOE and SRR will be able
to overcome SWPF construction delays soon enough to achieve the
contract tank closure goals.
Recommendations for Executive Action:
In light of continuing uncertainty about the costs and schedule to
close underground tanks at the Savannah River Site, we recommend that
the Secretary of Energy take the following five actions:
* Revise department contract management guidance to ensure it includes
provisions that detail how contract cost increases should be requested
by a contractor and the specific process DOE should undertake to
review and approve the increases, along with a timetable for such a
review to take place.
* Revise department contract management guidance to ensure it includes
a detailed process by which contract performance baselines are to be
reviewed and approved, including appropriate milestones to help ensure
that review and approval occur in a timely manner.
* In the absence of the requirements of Order 413.3A, specify policies
and procedures that DOE will use to oversee Office of Environmental
Management activities that have been exempted from Order 413.3A,
including Savannah River Site tank closure activities.
* Develop guidance for DOE contracting officers to ensure that known
costs incurred by contractors, such as retiree health care and
essential site services, are assigned to the proper contract for sites
whose operations are divided into multiple contracts.
* Direct the contractor for the construction of SWPF to revise its
construction schedule to ensure conformance with DOE's schedule
development guidance and scheduling best practices found in GAO's Cost
Estimating and Assessment Guide: Best Practices for Developing and
Managing Capital Program Costs.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOE for its review and comment.
In its written comments, DOE agreed with our recommendation that
specific policies and procedures are needed to oversee Office of
Environmental Management activities that have been exempted from Order
413.3A. DOE partially agreed with our recommendation that department
guidance should be revised to ensure it includes a detailed process by
which contract performance baselines are to be reviewed and approved,
including milestones to help ensure that review and approval occur in
a timely manner. However, DOE disagreed with our recommendation to
revise DOE contract management guidance to ensure it includes
provisions that detail how contract cost increases should be requested
by a contractor. In addition, the department disagreed with our
recommendation to develop guidance for contracting officers to ensure
that known costs incurred by contractors are assigned to the proper
contract. Finally, DOE disagreed with our recommendation that the
department direct the contractor for the construction of SWPF to
revise its construction schedule to ensure conformance with scheduling
best practices.
Overall, DOE commented that it had significant concerns with the
manner in which we framed our discussion and presented our findings.
Specifically, DOE stated that our focus on cost and schedule increases
associated with the tank closure contract did not take into
consideration the cost and schedule improvements the contract
represents over the department's prior tank closure strategy. We
disagree. Our draft report noted that the December 2008 contract
represented an accelerated schedule of emptying, cleaning, and closing
the 22 tanks without secondary containment 5 years sooner than the
date in the agreement between DOE, EPA, and South Carolina.
Nevertheless, the contract performance baseline that was approved in
August 2010 contained a 44 percent increase greater than the cost in
the contract. In addition, as our draft report noted, between 2 and 7
fewer tanks may be closed by 2017 than originally called for in the
contract. In our view, it is not unreasonable to expect contracts
entered into by DOE, or indeed any federal agency, to accurately
reflect the costs and schedule to accomplish the goals outlined in the
contract. In this case, however, DOE's contractor identified a $1.4
billion cost increase before performing any work under the contract,
DOE ultimately approved a contract performance baseline that contained
a $1.4 billion cost increase, and the department took more than a year
to approve the baseline once the contractor began work. Even though
more than $600 million of this cost increase is due to pension cost
increases caused by economic conditions outside of DOE's control, we
believe DOE's failure to ensure the December 2008 contract accurately
reflected increased costs and DOE's delays approving a contract
performance baseline are examples of continued contract mismanagement
by the department.
DOE agreed with our recommendation that specific policies and
procedures are needed for operating activities, including Savannah
River Site tank closure activities. DOE commented that a framework for
managing and reporting progress for operating activities has been
established, and DOE's sites have been directed that the project
management principles contained in DOE Order 413.3A will still apply
in a tailored manner. In addition, DOE partially agreed with our
recommendation that department guidance should be revised to ensure it
includes a detailed process by which contract performance baselines
are to be reviewed and approved and include milestones to help ensure
that review and approval occur in a timely manner. Specifically, DOE
stated that while the department agrees that a timeline is needed to
add discipline and rigor to the process for review and approval of
contract performance baselines, it already has a rigorous and detailed
process established under DOE Order 413.3A. However, as our draft
report noted, DOE has exempted many tank closure activities at the
Savannah River Site from the full requirements of DOE Order 413.3A.
DOE stated that it will expedite the issuance of guidance for contract
performance baseline review for operating activities exempted from DOE
Order 413.3A.
With regard to our recommendation that DOE revise its contract
management guidance to ensure it includes provisions that detail how
contract cost increases should be requested by contractors and the
specific process DOE should undertake to review and approve the
increases, DOE commented that such guidance would be inappropriate to
include in departmental policy and redundant to contract clauses
required by Federal Acquisition Regulations. While we acknowledge that
the contract incorporates certain Federal Acquisition Regulations-
mandated contract clauses on this subject, we continue to believe
departmental contract management guidance should be revised to ensure
it includes provisions that detail how contract cost increases should
be requested by a contractor. For example, the contract clause titled
"Notification of Changes," which was incorporated by reference into
the contract, says that changes must be requested in writing, but does
not specify procedures for submitting the written request. As we noted
in the report, the department already has guidance that states that a
contractor should not be allowed to change estimated contract costs by
simply including a higher cost in the contract performance baseline,
but the guidance was not followed by either SRR or DOE. In addition,
the guidance mentioned by DOE in its comments that established a 180-
day contract administrative lead time requirement for resolving
contract change requests does not provide information as to how
contractors are to submit changes in order to trigger the 180-day
review period. Moreover, DOE noted that SRR required additional
contract clarification guidance to comply with the contract provisions
at issue. Furthermore, SRR officials told us that there was a
miscommunication between DOE and SRR regarding the process to request
a contract cost increase. As a result, we continue to believe more
clarity in DOE guidance is necessary.
DOE did not agree with our recommendation to develop guidance for
contracting officers to ensure that known costs incurred by
contractors are assigned to the proper contract. The department noted
that the majority of the cost increases we identified in the report
are associated with fluctuating indirect costs mainly due to economic
conditions beyond either the department's or the contractor's control,
and that these cost fluctuations are not related to project
performance. As our draft report noted, we agree that a significant
amount of the cost increase--more than $600 million in pension costs--
is due to economic conditions beyond DOE's control. Nevertheless, DOE
had nearly a year and a half after the onset of the economic
conditions to ensure that the contract accurately reflected increased
pension costs. We have also modified our draft report to acknowledge
that the $270 million contract cost increase associated with retiree
health care and essential site services does not represent an
increased cost to the taxpayer because these costs would be eliminated
from the management and operations contract at the Savannah River
Site. However, this $270 million still represents an unplanned
increase in the costs associated with the tank closure contract. As
discussed previously, we believe contracts entered into by DOE should
accurately reflect the costs to accomplish the goals outlined in the
contract. Therefore, we maintain that guidance to ensure appropriate
allocation of costs between contracts at sites whose operations are
divided into multiple contracts is necessary.
Regarding our recommendation that DOE should direct the contractor for
the construction of SWPF to revise its construction schedule to ensure
conformance with scheduling best practices, the department commented
that the contractor has developed and maintains a schedule that
exhibits best practices included in industry standards such as GAO's
Cost Estimating and Assessment Guide. We disagree. As we noted in our
draft report, based upon our analysis of the SWPF construction
schedule in both March and May 2010, DOE has made some improvements to
the SWPF schedule, but shortcomings remain. In particular, both of our
assessments found that the schedule had problems with excess float
time, which indicates that the schedule's activities are not sequenced
logically. DOE believes that having long float times is appropriate
for the schedule's current level of maturity. We disagree. In our
view, including in the schedule activities that could slip by up to 3
years and not impact the project's overall end date is not realistic
and does not meet scheduling best practices. However, we are
encouraged that DOE and the contractor will continuously assess the
schedule against best practices to ensure that float time is
appropriately managed.
DOE also provided technical comments that we incorporated in the
report as appropriate. DOE's written comments are presented in
appendix III.
We are sending copies of this report to the appropriate congressional
committees; the Secretary of Energy; the Director, Office of
Management and Budget; and other interested parties. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix IV.
Signed by:
David C. Trimble:
Acting Director, Natural Resources and Environment:
[End of section]
Appendix I: Scope and Methodology:
To determine the current costs and schedule for closing the tanks at
the Savannah River Site and the extent to which the Department of
Energy (DOE) established these using best practices, we analyzed cost
and schedule documents such as DOE's June 2007 tank closure cost
estimate, the December 2008 tank closure contract between DOE and
Savannah River Remediation, LLC (SRR), SRR's contract performance
baseline, and tank closure cost increase proposals. To determine the
extent to which DOE established tank closure costs using best
practices, we compared both the process by which DOE developed these
documents, as well as evidence collected through interviews with DOE--
at the Savannah River Site and in Washington, D.C.--and SRR officials,
to GAO-identified best practices for cost estimating.[Footnote 19] We
also analyzed DOE's contract management plan and interviewed DOE
officials responsible for administering the tank closure contract to
determine the process the department is employing to review and
approve SRR's proposed cost increases, and compared this process to
the steps contained in DOE guidance on how proposed contract cost
increases should be prepared, reviewed, and approved.
To determine the extent to which DOE established the tank closure
schedule using best practices, we reviewed the construction schedule
for the Salt Waste Processing Facility (SWPF), a facility that will be
used to treat a majority of the tank waste. Specifically, with the
assistance of scheduling experts, we evaluated the reliability of the
SWPF construction schedule to determine the extent to which it
captures key activities, is correctly sequenced, establishes the
duration of key activities, is integrated, and has an established
reliable critical path, among other things. We conducted an initial
assessment in March 2010 and shared the results of this assessment
with DOE and contractor officials. We based our assessment on GAO-
identified best practices associated with effective schedule
estimating,[Footnote 20] many of which are also identified by DOE in
its guidance on establishing performance baselines.[Footnote 21] We
then interviewed DOE and contractor officials to obtain information on
how the SWPF construction schedule is developed and maintained. We
then conducted a second assessment in May 2010 to evaluate the extent
to which the schedule improved in its adherence to GAO-identified best
scheduling practices.
To determine the primary challenges DOE faces to close the Savannah
River Site's liquid radioactive waste tanks and the steps the
department has taken to address them, we interviewed DOE officials and
asked them to identify the primary challenges the department faces and
the steps DOE has taken to address them. We also reviewed past and
current tank closure plans and risk management documents, toured
Savannah River Site facilities relevant to tank closure, and attended
DOE and SRR briefings on components of the Savannah River Site's
liquid radioactive waste system and the proposed modifications to the
system to gain an understanding of these challenges and how DOE
planned to address them. To corroborate that DOE had identified the
primary challenges to tank closure, we interviewed 11 experts--all of
whom have extensive knowledge of tank closure-related activities--and
solicited their views on the primary tank closure challenges. We
identified these experts in consultation with various sources
including the National Academy of Sciences and the South Carolina
Governor's Nuclear Advisory Council, and using GAO's prior work on
tank closure activities at DOE's Hanford Site in Washington State.
[Footnote 22] We then contacted these individuals and asked for
additional referrals. We continued this iterative process until
additional interviews did not lead us to any new names or we
determined that the qualified experts in this field had been
exhausted. We then asked these individuals questions to determine the
nature and extent of their expertise, and to ensure that they were not
currently or recently employed by DOE or SRR. The final list of
experts included primarily university professors and consultants. We
developed a semistructured interview guide, containing both closed-and
open-ended questions, to solicit responses about the primary
challenges DOE identified to close the Savannah River Site's tanks and
the steps DOE proposed to address the identified challenges. Using the
guide, we interviewed each expert by telephone. Because some of the
questions were open-ended, and experts were knowledgeable about
varied--but not all--aspects of the issues covered, we did not attempt
to quantify their responses to these questions for reporting purposes.
In addition, we interviewed multiple entities that are stakeholders in
the tank closure process, including the U.S. Nuclear Regulatory
Commission, the Environmental Protection Agency, the Defense Nuclear
Facilities Safety Board, and the South Carolina Department of Health
and Environmental Control, to obtain their views on the challenges DOE
faces to close the Savannah River Site's tanks and the steps the
department is taking to address these challenges.
We conducted this performance audit from June 2009 to September 2010
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: GAO Assessment of DOE's SWPF Construction Schedule:
Practice: Capturing all activities;
Explanation: The schedule should reflect all activities as defined in
the program's work breakdown structure, including activities to be
performed by both the government and its contractors;
GAO's March 2010 assessment: Practice fully met: The schedule lists
activities in a careful and complete manner using consistent language.
Also, the schedule contains a wide scope of activities, such as
activities related to design, procurement, fabrication, and
installation. The schedule is comprised of 9,177 activities;
GAO's May 2010 assessment: Practice fully met: No change from previous
assessment. See "GAO's March 2010 assessment" column for details. The
schedule now has 11,291 activities, an increase of 23 percent.
Practice: Sequencing all activities;
Explanation: The schedule should be planned so that it can meet
critical program dates. To meet this objective, activities need to be
logically sequenced in the order in which they are to be carried out.
In particular, activities that must finish prior to the start of other
activities (i.e., predecessor activities), as well as activities that
cannot begin until other activities are completed (i.e., successor
activities), should be identified. By doing so, interdependencies
among activities that collectively lead to the accomplishment of
events or milestones can be established and used as a basis for
guiding work and measuring progress. The schedule should avoid logic
overrides and artificial constraint dates that are chosen to create a
certain result;
GAO's March 2010 assessment: Practice partially met: The dates of
milestones and activities are mostly determined by the durations and
predecessor-successor logic. However, we identified multiple problems
with the schedule's logic, use of constraints, and use of lags that
keep the schedule from meeting this best practice; The schedule
contains multiple instances of incomplete logic, also called open
ends, in which predecessor and successor activities are not properly
linked. For example, we found 450 instances of incomplete logic of
which 409 were instances where activities were not linked to
predecessor activities; this fact leads to reduced confidence in the
schedule's ability to meet its completion date; In addition, the
schedule makes excessive use of constraints, which are used instead of
logically-linked predecessor activities to start activities. We
identified 831 activities that are constrained to start as late as
possible--meaning that even if the activity's duration takes one day
longer than estimated, its successor activity will be delayed.
According to best scheduling practices, the schedule should use logic
and durations to reflect realistic start and completion dates for
project activities; The schedule also makes extensive use of lags,
which are the duration between activities that delay successor
activities. Lags should be used to represent fixed, physical gaps
between activities such as the time needed for concrete to cure. The
lags used in the schedule are both too many in number and too long in
duration to represent the physical gaps. Specifically, we found 60
instances where the lag was more than 100 days in duration;
GAO's May 2010 assessment: Practice partially met: The schedule still
has a number of instances with incomplete logic and constraints; The
schedule now contains more instances of incomplete logic than the one
we assessed in March. Specifically, there are now 539 instances of
incomplete logic, which is an increase of almost 20 percent; The
schedule's use of constraints has been reduced, but not eliminated.
Specifically, we found that the number of constrained tasks decreased
from more than 800 to 158; The schedule now contains 101 activities
with lags more than 100 days. This is an increase of 68 percent.
Practice: Assigning resources to all activities;
Explanation: The schedule should reflect what resources (e.g., labor,
material, and overhead) are needed to do the work, whether all
required resources will be available when needed, and whether any
funding or time constraints exist;
GAO's March 2010 assessment: Practice fully met: The schedule contains
multiple resources and their application to various activities was
carefully done. The schedule contains the project's total cost;
GAO's May 2010 assessment: Practice fully met: No change from previous
assessment. See "GAO's March 2010 assessment" column for details.
Practice: Establishing the duration of all activities;
Explanation: The schedule should realistically reflect how long each
activity will take to execute. In determining the duration of each
activity, the same rationale, historical data, and assumptions used
for cost estimating should be used. Durations should be as short as
possible and have specific start and end dates. In particular,
durations of longer than 200 days should be minimized;
GAO's March 2010 assessment: Practice partially met: The schedule
contains a significant number of activities with long durations,
especially when the durations are compared to the remaining duration
of the entire project. We found 627 activities whose duration is
greater than 5 percent of the schedule's total remaining duration. Any
activities with durations of greater than 5 percent of the schedule's
total remaining duration should be examined closely to see if it is
possible to schedule the activities in smaller increments to improve
the management of those activities;
GAO's May 2010 assessment: Practice partially met: The schedule
continues to contain many items with long durations that appear as if
they could be shortened. We identified 827 activities whose duration
is greater than 5 percent of the schedule's total remaining duration.
This is an increase of 32 percent, a greater increase than the overall
number of activities increased.
Practice: Integrating activities horizontally and vertically;
Explanation: The schedule should be horizontally integrated, meaning
that it should link the products and outcomes associated with other
sequenced activities. These links are commonly referred to as handoffs
and serve to verify that activities are arranged in the right order to
achieve aggregated products or outcomes. The schedule should also be
vertically integrated, meaning that traceability exists among varying
levels of activities and supporting tasks and subtasks. Such mapping
or alignment among levels enables different groups to work to the same
master schedule;
GAO's March 2010 assessment: Practice partially met: The schedule is
partially horizontally integrated. This is the result of the problems
identified in the "sequencing all activities" practice related to
incomplete logic, as well as the use of constraints and lags; The
schedule is vertically integrated as it includes filters that allow
summary or milestone schedules to be developed from the master
schedule;
GAO's May 2010 assessment: Practice partially met: The schedule is
partially horizontally integrated due to the continued instances of
incomplete logic and the use of constraints;
The schedule continues to be vertically integrated.
Practice: Establishing the critical path for all activities;
Explanation: Using scheduling software, the critical path--the longest
duration path through the sequenced list of key activities--should be
identified. The establishment of a program's critical path is
necessary for examining the effects of any activity slipping along
this path. Potential problems that might occur along or near the
critical path should also be identified and reflected in the
scheduling of the time for high-risk activities;
GAO's March 2010 assessment: Practice partially met: The schedule
contains a distinct critical path, but we identified problems with it.
Specifically, the critical path's initial activity has an excessively
long duration, which makes it difficult to accurately measure the
progress being made to complete the activity. Further, there is one
instance of incomplete logic on the critical path;
GAO's May 2010 assessment: Practice fully met: The schedule contains a
distinct critical path, and it is different from the one presented in
March 2010. We identified no problems with the revised critical path.
Practice: Identifying the "float time" between activities;
Explanation: The schedule should identify float time--the time that a
predecessor activity can slip before the delay affects successor
activities--so that schedule flexibility can be determined. As a
general rule, activities along the critical path typically have the
least amount of float time. Total float time is the amount of time
flexibility an activity has that will not delay the project's
completion (if everything else goes according to plan). Total float
that exceeds a year is unrealistic and should be minimized;
GAO's March 2010 assessment: Practice not met: The schedule contains
an excessive amount of activities with too much float, which indicates
that activities are not linked using logic. Specifically, the schedule
contains 272 activities with more than 500 days of float and two
construction activities involving fabrication of piping--usually
critical in construction projects--that had more than 1,000 days of
float time and neither activity was linked to a successor activity;
GAO's May 2010 assessment: Practice not met: The schedule continues to
have several activities with excessive amounts of float. We identified
more than 433 activities with more than 500 days of float. This is an
increase of 59 percent, a greater increase than can be explained by
the overall increase in activities. There are 22 activities with more
than 1,250 days of float. As such, the department is unable to
realistically determine how much an activity can slip before it
impacts the end date. In this case, those activities could slip by up
to 3 years and not impact the overall end date.
Practice: Performing a schedule risk analysis;
Explanation: A schedule risk analysis should be performed using
statistical techniques to predict the level of confidence in meeting a
program's completion date. This analysis focuses not only on critical
path activities, but also on activities near the critical path, since
they can potentially affect program status;
GAO's March 2010 assessment: Practice minimally met: The schedule
contains reserve time--a buffer for the schedule baseline--but there
is no evidence that this reserve time was based on a risk analysis
using data about project schedule risk or statistical techniques, as
required by best practices;
GAO's May 2010 assessment: Practice partially met: Reserve time was
established largely using empirical methods, but the methods lacked
the use of a rigorous statistical technique required by best practices;
DOE and contractor officials presented evidence that they conducted a
schedule risk analysis based on data about the project schedule risk,
specifically a risk management plan. However, DOE used a less rigorous
statistical technique than the one specified in best practices.
Specifically, DOE's statistical technique does not fully account for
potential changes to the order in which activities are sequenced.
Given that our May 2010 assessment found continued problems with how
activities are sequenced--the schedule remained only partially
compliant with this best practice--the potential for changes to the
order in which activities occur is possible. It is unclear if DOE's
current schedule risk analysis would remain valid should these
potential changes materialize.
Practice: Updating the schedule using logic and durations to determine
dates;
Explanation: The schedule should be continually monitored to determine
when forecasted completion dates differ from the planned dates, which
can be used to determine whether schedule variances will affect
downstream work. Individuals trained in critical path method
scheduling should be responsible for ensuring that the schedule is
properly updated. Maintaining the integrity of the schedule logic is
not only necessary to reflect true status, but is also required before
conducting a schedule risk analysis;
GAO's March 2010 assessment: Practice partially met: The techniques
used to measure progress on the schedule, such as containing current
budget information, is consistent with standard scheduling best
practices, but the multiple instances of incomplete logic mean the
schedule partially meets best practices. A schedule must have all its
activities logically sequenced in the order that they are to be
carried out to provide reasonable and accurate forecasts;
GAO's May 2010 assessment: Practice partially met: Discussions with
DOE's scheduler indicated that the schedule is updated monthly, in
accordance with best practices, but continued instances of incomplete
logic call into question the schedule's overall accuracy.
Source: GAO assessment of DOE's SWPF schedule based on GAO-identified
best scheduling practices.
Notes: The ratings we used in this analysis are as follows: Based on
the documentation provided, "fully" means that the project fully
satisfied the practice; "mostly" means that the project satisfied the
practice to a large extent; "partially" means that the project
satisfied the practice in part; "minimally" means that the project
satisfied the practice to a minimal extent; and "not" means that the
project did not satisfy the practice.
During our initial assessment of the SWPF construction schedule in
March 2010, we inadvertently incorporated activities unrelated to SWPF
into the assessment, which produced inaccurate statistics. To correct
this, we obtained a new copy of the SWPF schedule and DOE officials
agreed that the general conclusions of our March 2010 assessment are
still considered valid.
[End of table]
[End of section]
Appendix III: Comments from the Department of Energy:
Department of Energy:
Washington, DC 20585:
August 20, 2010:
Mr. David C. Trimble:
Acting Director of Natural Resources and Environment:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Trimble:
The Department of Energy (DOE) appreciates the opportunity to review
and comment on the Government Accountability Office (GAO) Draft
Report, "Nuclear Waste ” Actions Needed to Address Persistent Concerns
with Efforts to Close Underground Radioactive Waste Tanks at DOE's
Savannah River Site," GA0-10-816. We acknowledge that GAO invested the
time and resources to gain a better understanding of the status of the
Liquid Waste Program and tank closure activities at the Savannah River
Site (SRS) and the actions taken and planned by the Department to
successfully execute SRS's tank waste strategy.
While the Department agrees or partially agrees with two of the five
recommendations, it disagrees with the remaining three
recommendations. The Department also has significant concerns with the
manner in which GAO has framed its overall discussion and presentation
of its findings. Specifically, GAO focused exclusively on cost and
schedule increases associated with the contract award value without
taking into consideration overall life-cycle management of the tank
waste program. At no time did the Department change its approved
Federal Baseline; the contract cost adjustments identified as
increases do not exceed the cost profile in the Federal Baseline.
Moreover, the new contracting strategy has resulted in substantial
acceleration in mission execution.
The Department's Acquisition Strategy at SRS is based on the need to
separate management and operating type activities focusing on ongoing
operations and lower risk cleanup, such as soil and groundwater and
solid waste disposition from the highest risk and most costly work
related to site tank waste disposition. This approach allows a new
contractor to focus exclusively on optimizing tank operations to
accelerate retrieval and closure of tanks The Department determined
that this work would best be executed under a stronger Federal
Acquisition Regulation (FAR) Part 15 contract vehicle with incentives
for better management of performance within cost and schedule.
The contract awardee, Savannah River Remediation LLC (SRR), proposed
to close 22 old-style tanks within the 8-year contract performance
period. The contract award price was impacted by contract adjustments
necessary to accurately reflect increases for indirect costs, such as
pensions, that resulted in two fewer tanks being projected to be
closed. Nowhere in the report does GAO acknowledge the substantial
improvement of the SRR contract over the Department's Federal Baseline
which reflects closure of only 12 tanks over the same time period.
Therefore, the Department is making good on its commitment, through
the successful implementation of its Acquisition Strategy, to
accelerate the Liquid Waste Program over the approved Federal Baseline
by as much as two-thirds.
Further, GAO acknowledges that we are exploring additional ways to
mitigate any schedule delays by introduction of new technologies. The
Department has initiated contract modifications to implement these
mitigating technologies, including rotary microfiltration, small
column ion exchange, and accelerating treatment of Tank 48 waste with
steam reforming. The Department expects SRR's contract cost proposal
in September 2010 and plans to definitize this contract action in the
Fall 2010. Implementation of these technologies will further
accelerate tank retrievals to regain the full 22 tank closures
proposed by SRR and result in life-cycle savings of over $3 billion by
completing the tank waste disposition mission six years earlier than
currently planned. An updated Federal Baseline is being prepared for
approval in September 2010 to reflect these savings.
Finally, the Department does not agree with GAO's critique of the
schedule for the Salt Waste Processing Facility Project (SWPF). The
Department believes that the contractor for SWPF now has developed and
is maintaining a schedule that exhibits best practices included in
industry standards such as the Project Management Institute's Project
Management Body of Knowledge Guide. In addition, the recent SWPF
contract modification signed by DOE and Parsons on August 14, 2010,
places greater incentives on schedule acceleration and increased
processing capacity. These improved SWPF contract incentives in
combination with implementation of the tank waste treatment
technologies described above will mitigate any schedule delays and
ensure a more efficient execution of the tank waste cleanup.
DOE's responses to the recommendations are presented below.
Revise Department contract management guidance to ensure it includes:
Provisions that detail how contract cost increases should be requested
by a contractor and the specific process DOE should undertake to
review and approve the increases, along with a timetable for such
review to take place.
Such guidance for contractor use would be inappropriate to include in
Departmental policy and redundant to the FAR-prescribed contract
clauses which already impose such procedures on a contractor by
placing them in their contract. The inclusion of several key
provisions that give specific instructions to both the contractor and
the contracting officer regarding the treatment of proposed increases
to contract cost estimates was accomplished at the onset of this
acquisition.
In 2008, the Office of Environmental Management (EM) issued guidance
that established a 180-day contract administrative lead time
requirement for resolving contract change requests once they are
formally and properly submitted by the contractor in accordance with
the terms and conditions of the contract. In SRR's case, following
additional DOE contract clarification guidance, the contractor
complied with the contract requirements (changes clause) on February 5
and 9, 2010, the contracting officer took prompt action to modify the
contract to accommodate the increased in scope cost estimates within
the 180-day timeframe established by EM policy for definitizing
contract changes.
Although we disagree that guidance for the contractor related to
contract cost changes should appear in Departmental guidance, EM will
make a recommendation to the Secretary of Energy that time tables for
resolving contract changes that EM has established in its programmatic
contract guidance would be prudent for implementation DOE-wide.
A detailed process by which contract performance baselines are to be
reviewed and approved, including appropriate milestones to help ensure
that the review and approval process occurs in a timely manner.
DOE partially agrees with this recommendation. DOE already has a
rigorous and detailed process established under DOE Order 413.3A,
entitled Program and Project Management for the Acquisition of Capital
Assets, for review and approval of baselines. Whether it is a contract
baseline or a project baseline there is essentially no difference in the
documentation needed or the review and approval process. The only
element that the contract baseline does not include is the risk based
analysis supporting DOE Contingency, and further, this element of DOE
Contingency applies only to capital asset projects. The timelines for
review and approval of the performance baseline for capital asset
projects are governed by readiness of the project's design stage and
budgeting process.
For contracts related to Operating Activities the principles of DOE 0
413.3A apply. In light of EM's recent split of Capital Projects and
Operating Activities to enhance schedule and cost performance, we
agree with GAO that a timeline is needed to add discipline and rigor
to the process for review and approval of contract performance
baselines for Operations Activities. As an improvement action we will
expedite the issuance of guidance for contract performance baseline
review and approval time table for operating activities.
In the absence of the requirements of Order 413.3A, specify policies
and procedures that DOE will use to oversee Office of Environmental
Management activities that have been exempted from Order 413.3A,
including Savannah River Site tank closure activities.
DOE agrees that specific policies and procedures are needed for
operating activities including SRS tank closure activities. To date, a
framework for managing and reporting progress for the operating
activities and programs has been established and the sites have been
directed that the project management principles contained in DOE Order
413.3A will still apply in a tailored manner Although Critical
Decisions are no longer required, EM expects the sites to maintain
control of the operating activities, utilize site-level processes and
procedures that are currently in place, manage operations work scope
effectively and efficiently, and meet contract, funding and
performance requirements. EM is currently in the process of preparing
a Standard Operating Policy and Procedure for Managing and Reporting
of Operating Activities.
Develop guidance for DOE contracting officers to ensure that known
costs, such as retiree health care and essential site services
incurred by contractors are assigned to the proper contract for sites
whose operations are divided into multiple contracts.
On the matter of the contract cost adjustments identified as cost
increases, the majority of the cost increases identified by GAO are
associated with fluctuating indirect costs mainly due to economic
conditions beyond either the Departments or the contractor's control.
These cost fluctuations are not related to mission or project
performance, but rather associated with allocation of indirect costs
such as pensions and other infrastructure costs. DOE has an adequate
process to allocate these indirect costs at the time they are incurred
and does not need to develop guidance for its contracting officers.
Over the past four years due to significant fluctuations in pension
investment returns, we have twice reprogrammed tens of millions of
dollars in order to fund pension shortfalls. Last year, without the
significant infusion of Recovery Act funding, we would have had
significant mission impacts in order to a meet a pension shortfall of
hundreds of millions of dollars.
In fact, during the solicitation phase of this acquisition, all
offerors were instructed to include government-provided cost estimates
for the defined benefit pension program for evaluation purposes with
the full intention of updating the estimates of these non-fee bearing
costs following contract award. Such costs were understood to be
subject to fluctuation and not within the control of the bidders and,
as such, were immaterial to the proposal review. As of August 6, 2010,
the contract performance baseline was approved reflecting the latest
indirect project costs to the award.
Direct the contractor for the construction of SWPF to revise its
construction schedule to ensure conformance with DOE's schedule
development guidance and scheduling best practices found in GAO's
"Cost Estimating and Assessment Guide: Best Practices for Developing
and Managing Capital Program Costs".
The Department believes that the contractor for SWPF has developed and
maintains a schedule that exhibits best practices included in industry
standards such as the Project Management Institute's Project
Management Body of Knowledge Guide and GAO's Cost Estimating and
Assessment Guide. DOE and the contractor will continuously assess the
schedule against these best practices to ensure that activity duration
estimating practices such as constraints and Critical Path Analysis
results such as float are appropriately managed.
GAO's review identified long float activities and constraints
negatively impacting the project schedule. The Department believes
that these working-schedules are appropriate for this planning
maturity and that the overall schedule will be tightened later as more
precise schedule durations are determined. The Department and the
contractor will continuously assess the schedule against best
practices and GAO's Cost Estimating and Assessment Guide to ensure
that activity duration estimating practices, critical path activities
and float are appropriately managed.
Again, thank you for your assistance as we continue to strengthen our
Liquid Waste program at SRS. We have gained substantial experience
over the past decade in the cleanup of tank waste. In addition, over
the past several years the Department has continuously improved
contract and project management performance to better address the
inherent uncertainties of our high risk cleanup program.
We welcome direct dialogue with you on these issues prior to
finalizing your report. Should you have questions on the status of the
evaluation, please contact me at (202) 5867709 or Mr. Mark Gilbertson
at (202) 586-0755.
Sincerely,
Signed by:
Ines R. Triay:
Assistant Secretary for Environmental Management:
Enclosure:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
David C. Trimble, (202) 512-3841, or trimbled@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Ryan T. Coles, Assistant
Director; Patrick Bernard; Robert Campbell; Antoinette Capaccio;
Kathryn Edelman; Jennifer Echard; Tim Persons; John Smale Jr; and
Michelle K. Treistman made key contributions to this report.
[End of section]
Footnotes:
[1] There are a total of 51 tanks at the Savannah River Site, 2 of
which have already been emptied and closed.
[2] The contract period of performance consists of a 3-month
transition period, a 6-year base term, and a 2-year option period.
[3] These practices are found in GAO, GAO Cost Estimating and
Assessment Guide: Best Practices for Developing and Managing Capital
Program Costs, [hyperlink, http://www.gao.gov/products/GAO-09-3SP]
(Washington, D.C.: Mar. 2, 2009).
[4] DOE Order 413.3A was approved in 2006, and changed in 2008. This
order canceled DOE Order 413.3, which was issued in 2000.
[5] GAO, Nuclear Waste: Action Needed to Improve Accountability and
Management of DOE's Major Cleanup Projects, [hyperlink,
http://www.gao.gov/products/GAO-08-1081] (Washington, D.C.: Sept. 26,
2008).
[6] GAO, High Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009).
[7] DOE, Root Cause Analysis: Contract and Project Management
(Washington, D.C., April 2008).
[8] DOE, Root Cause Analysis Contract and Project Management
Corrective Action Plan (Washington, D.C., 2008).
[9] GAO, Department of Energy: Actions Needed to Develop High-Quality
Cost Estimates for Construction and Environmental Cleanup Projects,
[hyperlink, http://www.gao.gov/products/GAO-10-199] (Washington, D.C.:
Jan. 14, 2010).
[10] GAO, Department of Energy: Information on Its Management of Costs
and Liabilities for Contractors' Pension and Postretirement Benefit
Plans, [hyperlink, http://www.gao.gov/products/GAO-08-642R]
(Washington, D.C.: June 19, 2008).
[11] [hyperlink, http://www.gao.gov/products/GAO-10-199].
[12] DOE, Performance Baseline Guide, DOE G 413.3-5 (Washington, D.C.,
Sept. 12, 2008).
[13] [hyperlink, http://www.gao.gov/products/GAO-08-1081].
[14] As we reported in 2008, the delays are the result of, among other
things, additional design that was necessary to meet recommendations
from the Defense Nuclear Facilities Safety Board that facilities'
designs be robust enough to withstand certain seismic events. The
Defense Nuclear Facilities Safety Board was created by Congress in
1988 to provide independent safety oversight at defense nuclear
facilities. See 42 U.S.C. §§2286-2286i (2006), and 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/products/GAO-08-840] (Washington, D.C.:
July 25, 2008).
[15] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[16] DOE's guidance on establishing performance baselines includes
many of these best practices.
[17] Rotary microfiltration, which isolates and removes sludge waste,
and small-column ion exchange, which isolates and removes high
radioactivity salt waste, will yield a low-volume, high-radioactivity
salt waste stream for vitrification at DWPF and a high-volume, low-
radioactivity salt waste stream suitable for disposal at the Savannah
River Site's Saltstone Facility.
[18] GAO, Nuclear Waste: Process to Remove Radioactive Waste From
Savannah River Tanks Fails to Work, [hyperlink,
http://www.gao.gov/products/GAO/RCED-99-69] (Washington, D.C.: Apr.
30, 1999).
[19] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2,
2009).
[20] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[21] DOE, Performance Baseline Guide, DOE G 413.3-5 (Washington, D.C.,
2008).
[22] GAO, Nuclear Waste: Uncertainties and Questions about Costs and
Risks Persist with DOE's Tank Waste Cleanup Strategy at Hanford,
[hyperlink, http://www.gao.gov/products/GAO-09-913] (Washington, D.C.:
Sept. 30, 2009).
[End of section]
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