PROJECT AND 

PROGRAM

MANAGEMENT

DOE Needs to Revise 

Requirements and 

Guidance for Cost 

Estimating and 

Related Reviews 

Report to the Committee on

Armed Services, U.S. Senate

November 2014

GAO-15-29

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-15-29, a report to the

Committee on Armed Services, U.S. Senate

November 2014

PROJECT AND PROGRAM MANAGEMENT

DOE Needs to Revise Requirements and Guidance for 

Cost Estimating and Related Reviews

Why GAO Did This Study

NNSA is responsible for the nation’s 

nuclear security programs. These 

programs often include the design and 

construction of large projects to meet 

program needs. NNSA has a history of 

struggling to complete these and other 

projects and programs within cost 

estimates.

Senate Report 112-73 mandated that 

GAO report on NNSA’s cost estimating 

practices. This report examines: (1) the 

extent to which DOE and NNSA cost 

estimating requirements and guidance 

for projects and programs reflect best 

practices and (2) the extent to which 

recent NNSA project and program 

reviews identified cost estimating 

weaknesses, and the extent to which 

the weaknesses can be attributed to 

not following best practices. GAO 

reviewed DOE and NNSA cost 

estimating practices and compared 

them to best practices, NNSA project 

and program reviews, and two 

programs selected among the largest 

and most complex NNSA programs. 

GAO also interviewed DOE and NNSA 

officials about requirements and 

guidance for cost estimates. 

What GAO Recommends

GAO recommends that DOE, among 

other things, revise DOE requirements 

and guidance that apply to projects 

and programs to ensure: (1) the 

guidance is referenced in the project 

management order, (2) DOE and 

NNSA and its contractors develop cost 

estimates in accordance with the 12 

best practices, (3) its cost estimating 

guide fully reflects best practices, and 

(4) independent reviews of programs 

are conducted periodically. DOE 

agreed with the report and its 

recommendations. 

What GAO Found

The Department of Energy’s (DOE) and its National Nuclear Security 

Administration’s (NNSA) cost estimating requirements and guidance for projects 

and programs do not fully reflect best practices for developing cost estimates. In 

regard to cost estimating requirements for projects, DOE’s 2010 project 

management order requires 1 of the 12 cost estimating best practices—

conducting an independent cost estimate—for larger projects at certain stages of 

development. In contrast, DOE’s 2011 cost estimating guide describes 

recommended approaches for using 10 of 12 best practices and partially 

contains information about the other 2. Furthermore, because DOE’s cost 

estimating guide was issued in 2011—after DOE’s 2010 project order was 

issued—it is not referenced in the order. As a result, users of the order may not 

be aware of the guide’s availability and may not benefit from its usefulness. In 

addition, although NNSA programs are required to follow DOE’s budget 

formulation order and NNSA’s budget process, both of which require the 

development of cost estimates, neither the order nor the process requires the 

use of best practices in developing the estimates. In February 2014, for example,

GAO found that NNSA’s lifecycle cost estimate for the Plutonium Disposition 

Program did not follow all key steps for developing high-quality cost estimates, in 

part because the agency did not have a requirement to develop a life-cycle cost 

estimate. In the absence of a requirement for using best practices, it is unlikely 

that DOE, NNSA, and their contractors will consistently develop reliable cost 

estimates. 

NNSA’s project and program reviews issued during fiscal year 2009 through 

March 2014 identified cost estimating weaknesses that can be attributed to not 

following best practices. DOE and NNSA require independent project reviews, 

including reviews of cost estimates at certain stages of development and at the 

discretion of project managers. Of the 50 reviews GAO analyzed, 39 identified a 

total of 113 cost estimating weaknesses. GAO determined that 71 of the 113 

weaknesses—or about 63 percent—can be attributed to not following four best 

practices: (1) determining the estimating structure, (2) identifying ground rules 

and assumptions, (3) conducting risk and uncertainty analysis, and (4) 

documenting the estimate. Neither DOE nor NNSA, however, requires reviews of 

program cost estimates. Of the three program reviews conducted during fiscal 

years 2009 to 2013, two were of the B61 Life Extension Program, which is to 

extend the operational life of this nuclear weapon. Both reviews identified 

weaknesses in the cost estimates that can be attributed to not following three 

best practices: (1) determining the estimating structure, (2) defining program 

characteristics, and (3) obtaining data. In addition, a February 2014 GAO report 

on NNSA’s program to dispose of weapons-grade plutonium found that NNSA 

did not follow several cost estimating best practices, such as conducting an 

independent cost estimate and as a result, the program cost estimate was not 

reliable. While the program reviews and GAO’s February 2014 report indicate 

weaknesses in a few program cost estimates, the extent of program cost 

estimate weaknesses is largely unknown because neither DOE nor NNSA 

requires reviews of program cost estimates. Without a requirement for 

conducting independent program reviews, NNSA does not have the internal 

control necessary for assessing program performance over time.

View GAO-15-29. For more information, 

contact David Trimble at (202) 512-3841 or 

trimbled@gao.gov.
Page i GAO-15-29 NNSA Cost Estimating Practices

Letter 1

Background 6

DOE and NNSA Cost Estimating Requirements and Guidance 

Generally Do Not Reflect Best Practices for Developing Cost 

Estimates 15

Project Reviews Indicate Cost Estimating Weaknesses and 

Program Reviews Are Not Required and Therefore the Extent 

of Weaknesses Is Largely Unknown 20

Conclusions 23

Recommendations for Executive Action 23

Agency Comments 24

Appendix I Comparison of DOE Cost Guide to GAO’s Best Practices for Cost 

Estimating 27

Appendix II Cost Estimating Weaknesses Identified in All Completed NNSA 

Project Reviews February 2009 - February 2014 and GAO’s Best 

Practices for Cost Estimating 28

Appendix III Comments from the Department of Energy 32

Appendix IV GAO Contact and Staff Acknowledgments 35

Tables

Table 1: DOE and NNSA Critical Decision Review Requirements 

for Projects 10

Table 2: Four Characteristics of a High-Quality Cost Estimate with 

Corresponding Best Practices 14

Figure

Figure 1: NNSA Nuclear Security Enterprise 8

Contents
Page ii GAO-15-29 NNSA Cost Estimating Practices

Abbreviations

CD critical decision

DOE Department of Energy

ICE independent cost estimate

LEP Life Extension Program

M&O management and operating

MOX Mixed Oxide

NNSA National Nuclear Security Administration

OAPM Office of Acquisition and Project Management

PPBE Planning, Programming, Budgeting, and Evaluation

WBS work breakdown structure

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-15-29 DOE and NNSA Cost Estimating Practices

441 G St. N.W.

Washington, DC 20548

November 25, 2014

The Honorable Carl Levin 

Chairman

The Honorable James Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The National Nuclear Security Administration (NNSA)—a 

semiautonomous agency within the Department of Energy (DOE)—is 

responsible for managing the nation’s nuclear security missions. These 

missions include maintaining the safety, security, and effectiveness of the 

U.S. nuclear weapons stockpile and reducing the threat posed by nuclear 

proliferation. To achieve its missions, NNSA manages numerous 

programs such as the Stockpile Life Extension Program and the 

Plutonium Disposition Program.1 These and other programs frequently 

rely on the acquisition of capital assets to meet program needs.2 For 

example, to meet the needs of the Plutonium Disposition Program, NNSA 

is currently managing the construction of two capital asset projects—the 

Mixed Oxide (MOX) Fuel Fabrication Facility and the Waste Solidification 

Building—at DOE’s Savannah River Site in South Carolina.3

 1

DOE defines a program as an organized set of activities directed toward a common 

purpose or goal in support of an assigned mission area, and typically includes labor and 

operations and maintenance costs. The Stockpile Life Extension Program is intended to 

extend, through refurbishment, the operational lives of the weapons in the nuclear 

stockpile. The Plutonium Disposition Program is intended to dispose of 34 tons of surplus, 

weapons-grade plutonium.

NNSA has a 

2

DOE defines a capital asset as land, structures, equipment, and intellectual property, 

which are used by the federal government and have an estimated useful life of 2 years or

more. The acquisition of capital assets typically includes projects involving the design and 

construction of facilities with specialized equipment, such as facilities needed to maintain 

the nuclear weapons stockpile, conduct research and development, or process nuclear 

materials. DOE defines a capital asset project as having defined start and end points with 

an acquisition cost that includes all costs incurred to construct the project for its intended 

purpose, bringing it to a form and location suitable for its intended use, excluding 

operating expenses that are part of routine operations and maintenance functions.

3

The MOX capital asset project is designed to remove impurities from plutonium feedstock 

obtained from nuclear weapon pits, form the plutonium into MOX fuel pellets, and fabricate 

pellets into fuel assemblies for use in commercial nuclear power reactors. The Waste 

Solidification Building is a capital asset project that is designed to process radioactive 

waste from the MOX facility.
Page 2 GAO-15-29 DOE and NNSA Cost Estimating Practices

history of struggling to complete these and other projects within their 

initial cost and schedule estimates. Since 1990, DOE’s management of 

major contracts and projects, including those executed by NNSA, has 

been on our list of areas at high risk for fraud, waste, abuse, and 

mismanagement.4 We have also recently reported that cost estimates for 

several NNSA projects were inaccurate, and significant cost increases 

were likely. For example, in 2014, we reported that the estimated cost of 

the MOX facility had increased from $4.8 billion in April 2007 to $7.7 

billion in 2012.5

To support its missions, NNSA is organized into program offices, which 

include Defense Programs, Defense Nuclear Nonproliferation, and Naval 

Reactors.

In that report, we recommended, among other things, that 

DOE and NNSA conduct an analysis of the root causes of the increase 

and identify and prioritize recommended solutions. NNSA concurred with 

this recommendation and stated that it was planning to conduct such an 

analysis.

6

 4

GAO, High-Risk Series: An Update,

These offices manage a wide variety of programs that can be 

generally placed into one of two categories. The first category includes 

those programs that are ongoing in nature with activities that contribute to 

a broad range of objectives and goals across the nuclear enterprise. 

Programs in this category consist of programs that have defined start and 

end points and a total cost that includes all costs incurred to complete the 

program, like capital asset projects programs of this type include NNSA’s 

GAO-13-283 (Washington, D.C.: February 2013). 

Major contracts and projects are those with values of $750 million or greater. GAO 

designated DOE contract management as a high-risk area in 1990, and, in 2013, GAO 

narrowed the focus of its high-risk designation for DOE to the major contracts and projects 

of DOE’s Office of Environmental Management and NNSA.

5

GAO, Plutonium Disposition Program: DOE Needs to Analyze the Root Causes of Cost 

Increases and Develop Better Cost Estimates, GAO-14-231 (Washington, D.C.: Feb.13, 

2014). DOE’s fiscal year 2015 budget request stated that the MOX facility will be 

significantly more expensive than anticipated, and the request proposes to place the MOX 

facility in cold standby while NNSA evaluates plutonium disposition options.

6

NNSA’s other program offices include Emergency Operations, Defense Nuclear Security, 

Counterterrorism and Counterproliferation, Infrastructure and Environment, Management 

and Administration, and the Office of the Administrator.
Page 3 GAO-15-29 DOE and NNSA Cost Estimating Practices

Science Campaign and the Directed Stockpile Work program.7 The 

second category consists of programs that have defined start and end 

points and a total cost that includes all costs incurred to complete the 

program.8 Programs in this category include the B61 Life Extension 

Program (LEP) and the Plutonium Disposition Program. Programs in this 

second category are the programs discussed in this report.9

In April 2008, to assess the underlying causes of its contract and project 

management challenges, DOE conducted a root-cause analysis, which 

involved identifying the most significant issues that were impeding the 

department’s ability to complete projects within their cost, scope, and 

schedule estimates. The analysis identified an inadequate cost estimating 

capability as one of the top five reasons that DOE was unable to 

successfully complete these projects. The analysis also identified DOE’s 

lack of cost estimating policy or standards, personnel without the 

appropriate skills, and databases that lack current or historical information 

as root causes contributing to cost estimating problems. In July 2008, 

DOE published a corrective action plan to address the deficiencies 

identified in the root-cause analysis. The plan included actions to address 

cost estimating issues by establishing “a federal independent government 

cost estimating capability.” In line with these efforts, DOE and NNSA have 

undertaken a number of activities to improve their cost estimating 

practices, including revising DOE’s project management order, issuing a 

supplemental cost estimating guide, and strengthening training courses 

and certification requirements. In February 2011, DOE issued a report 

documenting the actions taken and progress made to implement 

corrective actions. In the report, DOE stated that the actions taken 

 7

The Science Campaign is a program intended to improve the understanding of the 

complex processes that occur during a nuclear explosion by supporting several NNSA 

activities, including annual nuclear stockpile assessments and stockpile life extension 

program efforts. The Directed Stockpile Work program is intended to ensure the reliability

of the nation’s nuclear weapons stockpile, which includes activities such as LEP efforts 

and weapons dismantlement and disposition. Both of these programs are managed by the 

Office of Defense Programs.

8

Ideally, according to DOE, execution of such projects should take no more than 4 years 

from when the start of construction or execution was approved. Programs, however, can 

continue for defined periods of a decade or more.

9

The B61 is one of the nuclear weapons in the stockpile and the goal of the B61 LEP is to 

extend the operational life of this weapon. The B61 LEP is managed by the Office of 

Defense Programs. The Plutonium Disposition Program is a part of the Fissile Materials 

Disposition Program, which is managed by the Office of Defense Nuclear Nonproliferation.
Page 4 GAO-15-29 DOE and NNSA Cost Estimating Practices

effectively mitigated most of the root causes of their most significant 

contract and project management challenges and decreased the inherent 

risks involved with managing large, technically complex projects.

The Senate Report accompanying a proposed bill for the National 

Defense Authorization Act for Fiscal Year 2013 mandated that GAO 

report on NNSA’s cost estimating practices and provide 

recommendations, if appropriate, to help NNSA conform to cost 

estimating best practices for projects and programs.10 This report 

examines: (1) the extent to which DOE and NNSA cost estimating 

requirements and guidance for its projects and programs reflect best 

practices for developing and reviewing cost estimates, and (2) the extent 

to which NNSA project and program reviews identified weaknesses in 

cost estimates, and the extent to which any weaknesses can be attributed 

to not following cost estimating best practices. In May 2013, we testified 

before the U.S. Senate Subcommittee on Strategic Forces, Committee on 

Armed Services, relying on prior work and on preliminary observations 

from our work in this area.11

To examine the extent to which DOE and NNSA cost estimating 

requirements and guidance for its projects and programs reflect best 

practices for developing and reviewing cost estimates, we reviewed DOE 

and NNSA requirements and guidance related to cost estimating for 

projects and programs and compared them with the best practices 

identified in our 2009 Cost Estimating and Assessment Guide.

12

 10S. Rep. No. 112-173, 293-4 (2012). 

This 

guide is a compilation of cost estimating best practices drawn from across 

industry and government. We also interviewed DOE and NNSA officials at 

headquarters and NNSA project and program managers and their 

contractors at NNSA’s Los Alamos and Sandia National Laboratories in 

New Mexico to discuss the requirements and guidance they follow in 

preparing, documenting, and reviewing project and program cost 

estimates. These NNSA sites were chosen because both sites have 

recently completed or have ongoing projects and are involved in the 

11GAO, Department of Energy: Observations on Project and Program Cost Estimating in 

NNSA and the Office of Environmental Management, GAO-13-510T (Washington, D.C.: 

May 8, 2013).

12GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).
Page 5 GAO-15-29 DOE and NNSA Cost Estimating Practices

execution of several NNSA programs. We focused on projects and 

programs managed by NNSA’s Offices of Defense Programs and 

Defense Nuclear Nonproliferation because they manage a diverse array 

of programs and manage NNSA’s largest ongoing capital asset projects—

these two offices account for approximately 85 percent of NNSA’s fiscal 

year 2015 budget request. We also analyzed NNSA program-specific 

cost-estimating policies and guidance for the B61 LEP. We focused on 

the B61 LEP and the Plutonium Disposition Program because they 

represent two of the largest and most complex NNSA programs and have 

defined start and end points and a total cost that includes all costs 

incurred to complete the program.

To determine the extent to which recent NNSA project and program 

reviews identified any weaknesses associated with the cost estimates for 

projects and programs and whether any of these weaknesses can be 

attributed to not following cost estimating best practices, we obtained 

project and program reviews completed from February 2009 through 

February 28, 2014. We limited our assessment to those reviews 

conducted since February 2009 to coincide with NNSA’s issuance of a 

requirement in February 2009 to conduct independent cost estimates 

(ICE) or independent reviews for certain projects.13 The reviews included 

independent cost assessments, independent project reviews, peer 

reviews, and external independent reviews conducted primarily by DOE’s 

Office of Acquisition and Project Management (OAPM), NNSA’s Office of 

Acquisition and Project Management, and U.S. Army Corps of Engineers, 

and other subject matter experts including former federal contractors.14

 13An ICE is generated by an entity that has no stake in approval of the project but uses 

the same detailed technical information as the project estimate. Having an independent 

entity conduct an ICE and compare it to a project team’s estimate provides an unbiased 

test of whether a project team’s cost estimate is reasonable. As our cost estimating guide 

points out, the most rigorous independent review is an ICE. In contrast, an independent 

cost review addresses a project cost estimate’s high-value, high-risk, and high-interest 

aspects without evaluating the remainder of the estimate. According to our cost guide, 

conducting an ICE is a cost estimating best practice, while an independent cost review is 

not. 

We obtained and assessed a total of 50 reviews of 21 projects and the 

results from two program reviews. We analyzed these reviews to 

determine whether they included any references to weaknesses in the 

cost estimates associated with these projects and programs, and we 

14These reviews are independent in the sense that they are conducted by offices other 

than the office that manages a particular program.
Page 6 GAO-15-29 DOE and NNSA Cost Estimating Practices

determined whether the weaknesses could be attributed to not following 

specific cost estimating best practices. When a weakness was noted, we 

determined whether the weakness fit into any of the 12 best practices as 

described in the Cost Estimating and Assessment Guide. As a measure 

to collect reliable data, two GAO analysts reviewed each report 

independently and compared their responses.

We conducted this performance audit from November 2012 to November

2014, 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.

This section describes: (1) NNSA organization and management, (2) 

DOE and NNSA cost estimating requirements and guidance for projects, 

(3) DOE and NNSA cost estimating requirements and guidance for 

programs, (4) our 2009 cost estimating best practices, and (5) federal 

standards for internal controls.

To fund NNSA’s projects and programs, the President requested 

approximately $11.7 billion for NNSA in the fiscal year 2015 budget 

submission to Congress, the majority of which is intended to fund 

program operations. Work activities on both projects and programs are 

largely carried out by management and operating (M&O) contractors at 

NNSA’s eight government-owned, contractor-operated sites—collectively 

referred to as the nuclear security enterprise. Among other things, these 

contractors operate and maintain the government-owned facilities and 

infrastructure deemed necessary to support the nuclear security 

enterprise and to support the capabilities to conduct scientific, technical, 

engineering, and production activities.

As shown in figure 1, the nuclear security enterprise sites include national 

research and development laboratories, as well as production plants. 

Specifically, NNSA manages three national nuclear weapons design 

laboratories—Lawrence Livermore National Laboratory in California, Los 

Alamos National Laboratory in New Mexico, and Sandia National 

Laboratories in New Mexico and California. It also manages four nuclear 

weapons production plants—the Pantex Plant in Texas, the Y-12 National 

Security Complex in Tennessee, the Kansas City Plant in Missouri, and 

Background

NNSA Organization

and Management
Page 7 GAO-15-29 DOE and NNSA Cost Estimating Practices

Tritium Operations at DOE’s Savannah River Site in South Carolina. 

NNSA also manages the Nevada National Security Site, formerly known 

as the Nevada Test Site. Various headquarters organizations within 

NNSA develop policies and NNSA site offices, collocated with NNSA’s 

sites, conduct day-to-day oversight of the M&O contractors, and evaluate 

the M&O contractors’ performance in carrying out the sites’ missions.15

 15See GAO, National Nuclear Security Administration: Observations on NNSA’s 

Management and Oversight of the Nuclear Security Enterprise, GAO-12-473T

(Washington, D.C.: Feb. 16, 2012).
Page 8 GAO-15-29 DOE and NNSA Cost Estimating Practices

Figure 1: NNSA Nuclear Security Enterprise

The Secretary of Energy is authorized under the National Nuclear 

Security Administration Act to establish policy and provide direction to 

NNSA.16

 16Pub. L. No. 106-65, § 3203, 113 Stat. 512, 954 (1999); codified at 42 U.S.C. §7144 

(2012).

The NNSA Administrator, however, is also vested with the 

authority to establish NNSA-specific policies, unless disapproved by the 
Page 9 GAO-15-29 DOE and NNSA Cost Estimating Practices

Secretary of Energy. NNSA does this through the issuance of Policy 

Letters.17 According to NNSA officials responsible for project 

management, DOE directives and orders and NNSA Policy Letters, 

including business operating procedures, collectively establish 

requirements for the development of NNSA project and program cost 

estimates, and we refer to them as such throughout this document.

NNSA is required to manage its projects, including the development of 

cost estimates, in accordance with DOE Order 413.3B.18 The purpose of 

the order is to provide program and project management direction for the 

acquisition of capital assets, and it includes requirements for developing 

project cost estimates. The order also provides management direction for 

NNSA and other DOE offices with the goal of delivering projects within 

the original performance baseline that are fully capable of meeting 

mission performance and other requirements such as environmental, 

safety, and health standards.19

• CD-0: Approve mission need.

The order defines five major milestones—

or critical decision points—that span the life of a project. These critical 

decision (CD) points are:

• CD-1: Approve alternative selection and cost range.

• CD-2: Approve project performance baseline.

• CD-3: Approve start of construction.

• CD-4: Approve start of operations or project completion.

The order specifies requirements that must be met, along with the 

documentation necessary, to move a project past each CD point. In 

addition, the order requires senior management to review the supporting 

documentation and decide whether to approve the project at each CD.

 17NNSA, Policy Letters: NNSA Policies, Supplemental Directives, and Business Operating 

Procedures, NA SD 251.1 (Washington, D.C.: July 5, 2011).

18DOE Order 413.3B, Program and Project Management for the Acquisition of Capital 

Assets, (November 2010). DOE’s project management order applies to programs only in 

conjunction with a program’s acquisition of capital assets. 

19A project’s performance baseline consists of three interrelated targets—scope, cost, and 

completion date. A project’s scope defines its technical goals and includes targets for 

specific technical requirements that the project is to deliver at completion.

DOE and NNSA Cost 

Estimating Requirements 

and Guidance for Projects
Page 10 GAO-15-29 DOE and NNSA Cost Estimating Practices

DOE also provides suggested approaches for meeting the requirements 

contained in Order 413.3B through a series of guides, such as guides for 

project reviews and risk management.

The order includes several cost estimating requirements for projects. 

Specifically, the order requires:

• a cost estimate be provided at each CD point;

• the degree of rigor and detail for a cost estimate be carefully defined, 

depending on the degree of confidence in project scale and scope 

that is reasonable to expect at that stage;

• a cost estimate range for CD-0 and 1 explicitly noting any relevant 

caveats concerning uncertainties; and

• a program sponsor never be the sole cost estimator at any critical 

decision given the inherent conflict of interest, and a second cost 

estimator should come from outside of the line manager’s chain of 

command to avoid conflict of interest.

The order also establishes requirements for the review of cost estimates 

for certain projects at CD-0 through CD-3, depending on the estimated 

cost of the project. Table 1 shows these requirements and an NNSA 

requirement for review.

Table 1: DOE and NNSA Critical Decision Review Requirements for Projects 

Critical 

decision 

(CD) Action required

Source of 

requirement

Office 

responsiblea

CD-0 Independent cost 

review

DOE Order 413.3B Office of 

Acquisition and 

Project 

Management 

(OAPM)

Required for projects with a total estimated cost of $750 

million or greater, or for projects as designated by the 

DOE (or NNSA) acquisition executive responsible for the 

project.

CD-1 Independent cost 

estimate OR 

independent cost 

review

DOE Order 413.3B OAPM Required for projects with a total estimated costs of $100 

million or greater or as OAPM deems appropriate.

CD-2 Independent cost 

estimate

DOE Order 413.3B OAPM Required for projects with a total estimated costs of $100 

million or greater.
Page 11 GAO-15-29 DOE and NNSA Cost Estimating Practices

Critical 

decision 

(CD) Action required

Source of 

requirement

Office 

responsiblea

CD-2 Independent cost 

review OR 

independent cost 

estimate

National Nuclear 

Security 

Administration 

(NNSA) Business 

Operating Procedure 

06.03

NNSA Office of 

Acquisition and 

Project 

Management 

Independent cost estimate or independent cost review 

required for projects with a total estimated cost greater 

than $20 million and less than $100 million.b

CD-3 Independent cost 

estimate

DOE Order 413.3B OAPM Required for projects with a total estimated cost greater 

than or equal to $100 million if warranted by risk and 

performance indicators, or as designated by the DOE (or 

NNSA) acquisition executive responsible for the project.

Source: GAO | GAO-15-29

c

a

Order 413.3B currently refers to the Office of Engineering and Construction Management as the 

office responsible for conducting these independent reviews. OECM was replaced as part of DOE’s 

reorganization in June 2012 by OAPM.

b

NNSA Business Operating Procedure 06.03, Independent Cost Estimating Procedure, February 27, 

2014. According to the procedure, the decision of whether to conduct an ICE or an independent cost 

review is determined by NNSA’s Director of Enterprise Project Management, which is in NNSA’s

Office of Acquisition and Project Management, in consultation with the NNSA acquisition executive 

responsible for the project.

c

In addition to the ICE requirements in Order 413.3B for CD-3, the Consolidated Appropriations Act, 

2012, prohibited expenditure of fiscal year 2012 funds to approve CD-2 or CD-3 for construction 

projects with a total estimated cost of $100 million or greater prior to the development of an ICE. DOE 

officials treat this as an ongoing requirement.

As a supplement to Order 413.3B, DOE provides guidance for the 

development of cost estimates in its Cost Estimating Guide, which was 

issued in May 2011.20 According to the guide, its purpose is to provide 

uniform guidance and best practices that describe recommended 

methods and procedures that projects and programs could use for 

preparing cost estimates. The guide states that it is based on accepted 

industry practices and processes, including practices outlined in our 2009 

Cost Estimating and Assessment Guide, to meet federal and DOE 

requirements.21

 20DOE Guide 413.3-21, Cost Estimating Guide, May 2011. NNSA also issued a cost 

estimating guide that has many similarities to DOE’s cost estimating guide. See NNSA, 

Cost Estimating Guide 50.005, Jan. 11, 2010. According to NNSA officials, the NNSA 

guide was superseded and replaced by DOE’s guide.

21GAO-09-3SP. 
Page 12 GAO-15-29 DOE and NNSA Cost Estimating Practices

DOE and NNSA cost estimating requirements and guidance for programs 

are primarily defined in four documents.22

• DOE Order 130.1. This order requires all DOE and NNSA program 

budget requests be based on cost estimates that have been 

thoroughly reviewed and deemed reasonable prior to their inclusion in 

department budgets.23

• DOE Cost Estimating Guide 413.3-21. DOE’s cost estimating guide is 

primarily intended for use in managing the phases involved in the 

acquisition of a capital asset project. However, the guide states that it 

also could be used by DOE and NNSA programs in preparing cost 

estimates.

• NNSA Planning, Programming, Budgeting, and Evaluation (PPBE)

Requirements. NNSA’s PPBE process provides a framework for the 

agency to plan, prioritize, fund, and evaluate its program activities. 

This process includes a budget validation step to review the process 

contractors follow in developing program cost estimates for budgeting 

purposes.

24

• NNSA Phase 6.X Process. NNSA manages life extension programs, 

including the B61 LEP, according to a process called Phase 6.X that 

was developed by DOE in collaboration with the Department of 

Defense.25

 22According to DOE officials, DOE also defines cost estimating requirements and 

guidance for the procurement of goods and services associated with management of 

department programs. These cost estimating requirements for procurements require the 

development of “independent government cost estimates.” This report does not assess 

the cost estimating requirements and guidance associated with procurement activities and 

instead focuses on cost estimating related to the planning and budgeting for projects and 

programs. While programs rely on the acquisition of capital assets, this report does not 

address the effectiveness or efficiency of DOE or NNSA’s acquisition process.

The Phase 6.X process provides NNSA with a framework

to conduct and manage LEP activities, including the development and 

documentation of a program cost estimate.

23DOE Order 130.1, Budget Formulation, Sept. 29, 1995.

24For more information about NNSA’s PPBE process, see GAO, Modernizing the Nuclear 

Security Enterprise: NNSA’s Reviews of Budget Estimates and Decisions on Resource 

Trade-offs Need Strengthening, GAO-12-806 (Washington, D.C.: July 31, 2012). 

25Department of Defense and Department of Energy, Procedural Guideline for the Phase 

6.X Process (Washington, D.C.: Apr. 19, 2000). 

DOE and NNSA Cost 

Estimating Requirements 

and Guidance for 

Programs
Page 13 GAO-15-29 DOE and NNSA Cost Estimating Practices

Drawing from federal cost estimating organizations and industry, our cost 

estimating guide provides best practices about the processes, 

procedures, and practices needed for ensuring development of highquality—that is, reliable cost estimates.26

• Credible when it has been cross-checked with an ICE, the level of 

confidence associated with the point estimate has been identified 

through the use of risk and uncertainty analysis, and a sensitivity 

analysis has been conducted;

A high-quality cost estimate 

helps ensure that management is given the information it needs to make 

informed decisions. The guide identifies the following four characteristics 

of a high-quality cost estimate. Specifically, such an estimate is:

27

• Well-documented when supporting documentation is accompanied 

by a narrative explaining the process, sources, and methods used to 

create the estimate and contains the underlying data used to develop 

the estimate;

• Accurate when it is not overly conservative or too optimistic and 

based on an assessment of the costs most likely to be incurred; and

• Comprehensive when it accounts for all possible costs associated 

with a project, it contains a cost estimating structure in sufficient detail 

to ensure that costs are neither omitted nor double-counted, and the 

estimating teams’ composition is commensurate with the assignment.

To develop a cost estimate that embodies these four characteristics, our 

cost estimating guide lays out 12 best practice steps. For example, one 

step—determining the estimating structure—includes the need to develop 

a “product-oriented” work breakdown structure (WBS) that reflects the 

requirements and basis for identifying resources and tasks necessary to 

accomplish the project’s objectives. A product-oriented WBS is organized 

to reflect the cost, schedule, and technical performance of project 

components. Such a WBS allows a project to track cost by defined 

deliverables, promote accountability by identifying work products that are 

independent of one another, and provides a basis for identifying 

 26GAO-09-3SP.

27A risk and uncertainty analysis assesses the variability in the cost estimate from such 

effects as schedules slipping, missions changing, and proposed solutions not meeting 

users’ needs. A sensitivity analysis examines the effect of changing one assumption 

related to each project activity while holding all other variables constant in order to identify 

which variable most affects the cost estimate.

GAO Cost Estimating

Best Practices
Page 14 GAO-15-29 DOE and NNSA Cost Estimating Practices

resources and tasks for developing a cost estimate. Table 2 shows the 

four characteristics of a high-quality cost estimate with the corresponding 

steps.

Table 2: Four Characteristics of a High-Quality Cost Estimate with Corresponding Best Practices

Characteristic 12 best practice steps 

Credible • Compare the point estimate to an independent cost estimate

• Conduct sensitivity analysis

a

• Conduct risk and uncertainty analysis

Well-documented • Define the estimate’s purpose, scope, and schedule

• Define the program’s characteristics

• Identify ground rules and assumptions

• Obtain the data

• Document the estimate

• Present the estimate to management for approval

Accurate • Develop the point estimate

• Update the estimate to reflect actual costs and changes

a

Comprehensive • Develop the estimating plan

• Determine the estimating structure

Source: GAO | GAO-15-29

a

As described in the GAO Cost Estimating and Assessment Guide, developing the point estimate and 

comparing it with an independent cost estimate are separate parts of a single step. For purposes of 

assessing the extent to which a cost estimate achieves the characteristics of a high-quality cost 

estimate, developing the point estimate contributes to accuracy, and comparing the point estimate 

with an independent cost estimate contributes to credibility.

In addition to the requirements for cost estimating established by DOE 

and NNSA, according to Standards for Internal Control in the Federal 

Government, federal agencies are to employ internal control activities, 

such as functional reviews by management of projects and programs to 

compare actual performance to planned or expected results throughout 

the organization and analyze significant differences. Such reviews, which 

may include reviews of program cost estimates, are to help ensure that 

management’s directives are carried out and to determine if agencies are 

effectively and efficiently using resources.28

 28GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

Federal Standards for 

Internal Controls
Page 15 GAO-15-29 DOE and NNSA Cost Estimating Practices

DOE and NNSA cost estimating requirements and guidance for projects 

and programs generally do not reflect best practices for developing cost 

estimates. For projects, DOE requires one best practice, and DOE’s cost 

estimating guide does not fully reflect cost estimating best practices, and 

is not mandatory. For programs, DOE does not require the use of any of 

the best practices to develop cost estimates, and NNSA has taken steps 

to close gaps in the existing cost estimating framework for programs, 

such as creating a cost analysis office, but these steps have not included 

a requirement to use best practices.

DOE and NNSA cost estimating requirements and guidance for projects 

generally do not reflect best practices for developing cost estimates. 

DOE’s 2010 project management order requires the use of only 1 of the 

12 cost estimating best practice steps. Specifically, the order requires an 

ICE be prepared at CD-2 and CD-3 for projects with an estimated cost of 

$100 million or greater. The order requires the development of an ICE at 

CD-3 if warranted by risk and performance indicators or as designated by 

DOE or NNSA management. In addition, NNSA’s 2014 requirement for an 

ICE or independent cost review could subject additional projects with an 

estimate of a cost of less than $100 million to an ICE, but this would 

depend on whether NNSA chooses to conduct an ICE rather than the less 

rigorous independent cost review. None of the other cost estimating 

requirements in the order, such as the need for a cost estimate at each 

CD point, ensure that project cost estimates will be prepared in 

accordance with cost estimating best practices. For example, the order 

does not require any of the other 11 best practice steps such as 

conducting a risk and uncertainty analysis, identifying ground rules and 

assumptions, documenting the estimate, developing a point estimate, or 

determining the estimating structure. According to the DOE officials 

responsible for developing DOE’s project management order, DOE has 

chosen to not require all cost estimating best practices in the order and 

instead includes suggested approaches for developing cost estimates in 

the DOE cost estimating guide that accompanies the order. However, 

because neither DOE nor NNSA requires the use of most cost estimating 

best practices for its projects, it is unlikely that NNSA and its contractors 

will consistently develop reliable cost estimates.

DOE’s 2011 cost estimating guide describes most best practices, but it is 

not mandatory and it is not referenced in the order. We found that the 

DOE and NNSA

Cost Estimating 

Requirements and 

Guidance Generally 

Do Not Reflect Best 

Practices for 

Developing Cost 

Estimates

Projects Are Not Required 

to Meet Most Best 

Practice Steps, and 

Guidance Describes Most 

Best Practice Steps but Is 

Not Mandatory
Page 16 GAO-15-29 DOE and NNSA Cost Estimating Practices

guide fully or substantially describes 10 of the 12 best practices. 

However, the guide only partially or minimally contains information about 

the other 2 best practice steps—determining the estimating structure and 

conducting a sensitivity analysis.29 For the estimating structure, the guide 

only partially describes how to develop this structure, which primarily 

involves establishing an adequate WBS. For example, we found that the 

guide describes the need for a WBS, but it does not describe the need for 

a product-oriented WBS and does not provide enough information on how 

to create a WBS.30

In addition to the shortcomings in the description for two of the best 

practices, the use of the guide is not mandatory and, as a result, neither 

NNSA staff nor its contractors who develop cost estimates are required to 

use it. The guide states that it does not impose any new cost estimating 

requirements or establish departmental policy; it describes only 

suggested recommended approaches for preparing cost estimates. 

Further, DOE’s cost estimating guide is not referenced in the order. To 

supplement DOE’s project management order, DOE has issued a series 

of guides that provide suggested approaches to meeting the 

For the sensitivity analysis, the guide only minimally 

describes the information needed. For example, the guide suggests 

briefing management on the results of a sensitivity analysis, but it does 

not address the best practice steps on how to perform a sensitivity 

analysis. As a result, DOE and NNSA have not provided its contractors 

with all the detailed guidance needed to consistently develop reliable cost 

estimates. When we discussed our analysis of this guide and the 

shortcomings we found in regard to the guide with the DOE officials 

responsible for developing the guide, they said that they would review our 

analysis and consider revisions to the guide as appropriate. Appendix I 

provides a comparison of the extent to which DOE’s cost guide contains 

information on the 12 best practice steps.

 29The ratings we used in this analysis are as follows: “Fully” means that the guide included 

information that satisfied the best practice; “Substantially” means that the guide included 

the majority of the information to satisfy the best practice; “Partially” means that the guide 

included information satisfying part of the best practice; “Minimally” means that the guide 

included information satisfying a minor part of the best practice; and “Not” means that the 

guide did not include any information that satisfied the best practice.

30OAPM issued a WBS handbook in August 2012 to provide federal project directors and 

contractors suggested guidance and best practices for developing a product-oriented 

WBS that should be used for all projects within DOE. However, the handbook is not 

referenced in DOE’s project management order and, as noted in the handbook, it does 

establish any new project requirements.
Page 17 GAO-15-29 DOE and NNSA Cost Estimating Practices

requirements, some of which are specified in the order. There are a total 

of 18 separate guides, including guides that provide suggested 

approaches on topics such as systems engineering, earned value 

management systems, and project closeout.31 The order references some 

of these guides as appropriate so that the user of the order is made 

aware of the existence of the suggested approaches that are included in 

the guides. However, because the cost guide was issued in 2011, a year 

after DOE’s latest version of the order was issued, the order contains no 

reference to this guide that a preparer of a cost estimate could use in 

developing an estimate, or that a reviewer could use in reviewing one, 

and users of the order may not be aware of the guide’s availability and 

may not benefit from its usefulness.

DOE and NNSA programs are not required to meet any cost estimating 

best practices. NNSA officials explained that NNSA cost estimating 

practices for programs are limited, de-centralized, and inconsistent, and 

are not governed by a cost estimating policy or single set of NNSA 

requirements and guidance. According to these officials, each NNSA 

program office uses different practices and procedures for the 

development of cost estimates that are included in the NNSA annual 

budget. In addition, these officials also explained that, while there are no 

specific requirements on how program cost estimates should be 

developed or reviewed, all NNSA programs must follow DOE’s budget 

formulation order and NNSA’s PPBE process, but the order does not 

require, and the PPBE process does not direct the use of best practices 

in developing cost estimates. In 2012, we reported on NNSA’s PPBE 

process, and we noted significant deficiencies in NNSA’s implementation 

of its PPBE process.32

 31An earned value management system compares the value of the work accomplished

during a given period with the value of the work scheduled to be accomplished during that 

period. Differences from the scheduled work plan are measured in both cost and schedule 

variances. Such a system tracks whether completed activities are costing more or less 

than expected. 

Specifically, we found that the process does not 

ensure the development of fully credible program cost estimates, and that 

the review of the cost estimates supporting DOE’s budget was not 

sufficiently thorough to ensure the credibility and reliability of NNSA’s 

budget estimates. We also found that NNSA was not following DOE’s 

budget formulation order that requires that budget requests be based on 

32GAO-12-806.

Programs Are Not 

Required to Meet 

Any Cost Estimating 

Best Practices
Page 18 GAO-15-29 DOE and NNSA Cost Estimating Practices

cost estimates that have been thoroughly reviewed and deemed 

reasonable by the cognizant program organization. NNSA officials told us 

that they do not follow DOE’s budget formulation order because it expired 

in 2003. Additionally, according to NNSA officials, NNSA’s trust in its 

contractors minimizes the need for formal review of its budget estimates.

In our 2012 report on the NNSA’s PPBE process we recommended that, 

among other things, DOE update the departmental order for budget 

reviews, improve the formal process for reviewing budget estimates, and 

reinstitute an independent analytical capability to provide senior decision 

makers with independent program reviews. The agency agreed in 

principle with these recommendations, but it has not taken action to fully 

implement them. According to NNSA officials, as of August 2014, NNSA 

has suspended the budget review process and several options for 

replacing this process are under review.

In the absence of a DOE or NNSA requirement for programs to follow 

cost estimating best practices, we found that managers for the programs 

we reviewed—the B61 LEP and the Plutonium Disposition Program—

used different processes in developing cost estimates for these programs. 

Specifically:

• B61 LEP. NNSA managers for the B61 LEP use the Phase 6.X 

Process which, among other things, involves the direction to establish 

a cost and schedule baseline for the program. However, according to 

the NNSA B61 LEP project manager, since the Phase 6.X Process 

does not define how cost estimates should be developed, the B61 

management team developed an approach for developing cost 

estimates for the program using various sources, including direction 

under the Phase 6.X Process, as well as DOE’s project management 

order and cost guide and our cost-estimating guide. This effort 

resulted in the management team producing a document that defines 

the strategy and provides guidance for completing the cost estimate 

for the B61 LEP. We reviewed this document and found that it does 

not stipulate that NNSA program managers or its contractors must 

follow any DOE or NNSA requirements or guidance for the 

development of a program cost estimate when developing the 

estimate for the B61 LEP.

• Plutonium Disposition Program. In February 2014, we found that 

NNSA’s life-cycle cost estimate for the Plutonium Disposition Program 
Page 19 GAO-15-29 DOE and NNSA Cost Estimating Practices

did not follow all key steps for developing high-quality cost estimates 

in part because it did not have a requirement to develop a life-cycle 

cost estimate33

NNSA took some actions to improve independent review and analysis of 

program estimates. For example, in April 2013, NNSA created the Office 

of Program Review and Analysis. According to NNSA, this office is 

intended to improve NNSA’s ability to plan and budget by providing senior 

leadership independent advice on resource allocations to ensure the best 

use of the agency’s resources, including evaluating cost estimates of 

NNSA projects and programs.

. According to NNSA officials, DOE’s project 

management order includes requirements for development of cost 

and schedule estimates for a capital asset project, such as the MOX 

facility or Waste Solidification Building, but does not specify equivalent 

requirements for a program like Plutonium Disposition, which includes 

multiple projects as well as supporting activities. As a result, when 

developing the life-cycle cost estimate for the Plutonium Disposition 

Program, NNSA officials used an ad hoc approach to adapt DOE 

requirements for managing projects in DOE’s project management 

order. NNSA officials also said that its April 2013 life-cycle cost 

estimate did not include all the steps of a high-quality, reliable 

estimate in part because NNSA considered the estimate to be draft 

and therefore had not fully implemented plans for developing it. We 

recommended in this report that DOE conduct a root cause analysis 

of the Plutonium Disposition Program’s cost increases and ensure 

that future estimates of the program’s life-cycle cost and schedule for 

the program meet all best practices for reliable estimates. We also 

recommended that DOE revise its project management order to 

require life-cycle cost estimates covering the full cost of programs that 

include both construction projects and other efforts and activities not 

related to construction. DOE concurred with recommendations to 

analyze the programs cost increases and revise and update the 

program life-cycle cost estimate following best practices. DOE did not 

agree to update its project management order to require life-cycle cost 

estimates of programs. However, we continue to believe that this 

recommendation has merit and should be fully implemented.

DOE and NNSA began taking some actions to improve cost estimating. 

For example, DOE OAPM has embarked on a Cost Estimating and 

 33GAO-14-231.
Page 20 GAO-15-29 DOE and NNSA Cost Estimating Practices

Scheduling Initiative to systematically improve DOE’s policies and 

guidance. Some of the near term efforts include development of a LifeCycle Cost handbook, a Key Performance Parameters and Statement of 

Work handbook, and Analysis of Alternatives guidance. In addition, 

NNSA’s Office of Defense Programs has taken steps to fill the existing 

gaps in the cost estimating framework for programs. For example, in 

2011, Defense Programs established an Office of Cost Policy and 

Analysis to provide it with a cost analysis capability. In March 2014, 

NNSA’s Office of Program Integration issued a cost estimating 

improvement plan, which includes proposed guidance for conducting cost 

estimate briefings to the Office of Defense Programs Assistant Deputy 

Administrator, establishing a defense programs database, and 

implementing various process improvements to improve cost accounting 

and performance. While these efforts are intended to improve, among 

other things, cost estimating practices, none of these efforts include 

establishing requirements to follow cost estimating best practices.

NNSA’s project and program reviews for fiscal years 2009 to 2014 

identified cost estimating weaknesses that can be attributed to not 

following best practices. DOE and NNSA require reviews of projects, 

including reviews of cost estimates at various CD points and at the 

discretion of project managers; however, because DOE and NNSA do not 

require reviews of program cost estimates, the extent of weaknesses in 

program cost estimates is largely unknown.

Of the 50 NNSA project reviews conducted from February 2009 through 

February 2014, 39 identified a total of 113 cost estimating weaknesses.

We determined that 71 of the 113 weaknesses—or about 63 percent—

can be attributed to not following 4 of the 12 best practice steps. These 

four steps are:

• determining the estimating structure,

• identifying ground rules and assumptions,

Project Reviews 

Indicate Cost 

Estimating 

Weaknesses and 

Program Reviews Are 

Not Required and 

Therefore the Extent 

of Weaknesses Is 

Largely Unknown

Project Reviews Identified 

Cost Estimating 

Weaknesses That Can Be 

Attributed to Not Following 

Best Practices
Page 21 GAO-15-29 DOE and NNSA Cost Estimating Practices

• conducting risk and uncertainty analysis, and

• documenting the estimate.

For example, as part of this review, we examined NNSA’s 2012 

independent review of the Nuclear Material Safeguards and Security 

Upgrades Project at Los Alamos National Laboratory and it identified 

three weaknesses, one of which can be attributed to not following the 

best practice of updating the estimate to reflect actual costs and changes. 

In particular, the review found deficiencies in the estimate that could lead 

to an inaccurate cost and schedule estimate for the project. In another 

example, a 2012 review of NNSA’s Waste Solidification Building identified 

four weaknesses, including not following the best practice of conducting 

risk and uncertainty analysis. Several other reviews that we examined 

found similar weaknesses in project cost estimating. For example, the 

2012 Independent Project Review of the MOX Fuel Fabrication Facility at 

the Savannah River Site identified flaws in the project’s cost estimate that 

include: (1) basic assumptions concerning project reserves and 

contingency cost; (2) data reliability of cost information considering the 

design maturity of the project; (3) the sensitivity analysis; and (4) the 

project risk analysis. The review also concluded that the most significant 

risk to the project’s success was NNSA’s under-estimation of the cost to 

complete the facility.

We also found that the remaining 42 weaknesses could be attributed to 

not following seven other best practice steps. These best practices are

• developing an estimating plan,

• defining program characteristics,

• obtaining data,

• developing a point estimate and comparing it to an ICE,

• conducting a sensitivity analysis,

• presenting the estimate to management for approval, and

• updating the estimate to reflect actual costs and changes.

Appendix II includes the cost estimating weaknesses we identified for 

each of the project reviews we assessed and the best practice step not 

followed to which the weakness can be attributed to not following.
Page 22 GAO-15-29 DOE and NNSA Cost Estimating Practices

DOE and NNSA do not require reviews of programs, including reviews of 

program cost estimates. As a result, reviews of cost estimates for 

programs are limited, and the extent to which program cost estimates 

have weaknesses is largely unknown. While program reviews are not 

required, we identified and analyzed three LEP program reviews from the 

beginning of fiscal year 2009 through February 2014, two of which were 

reviews of the B61 LEP. These identified several weaknesses in the cost 

estimates for this program that can be attributed to not following three 

best practice steps: (1) obtaining data, (2) defining program 

characteristics, and (3) determining the estimating structure. For example, 

both reviews identified weaknesses in obtaining the data needed to 

compile the B61 cost estimate. In addition, one of the reviews noted that 

the estimate was not based on a sound program definition, while the 

other review stated that a standard WBS was not used to develop the 

B61 LEP cost estimate. Both reviews concluded that the B61 cost 

estimate is inaccurate, with one review noting that the program will cost 

approximately $3.6 billion more than NNSA’s 2011 $6.5 billion Weapon 

Design and Cost Report estimate.

While we did not identify any additional reviews of cost estimates for 

NNSA programs, we reported in February 2014 on the results of our 

review of the cost estimates for the Plutonium Disposition Program.34

Without a requirement for conducting program reviews, NNSA does not 

have the appropriate internal controls necessary for assessing program 

We 

concluded that the life-cycle cost estimate for the overall program was not 

reliable and found that it did not fully reflect the characteristics of highquality, reliable estimates as established by best practices. Specifically, in 

developing its April 2013 draft life-cycle cost estimate of $24.2 billion for 

the Plutonium Disposition Program, we found that NNSA followed several 

cost estimating best practices; including obtaining the data, defining the 

estimate’s purpose, and defining the program’s characteristics. However, 

we also found that NNSA did not follow other key steps such as 

conducting an independent cost estimate and, as a result, the estimate 

was not reliable. We recommended, among other things, that NNSA 

revise and update the program’s life-cycle estimate using cost estimating 

best practices, including conducting an independent cost estimate. NNSA 

agreed with this recommendation.

 34GAO-14-231.

Program Reviews Are 

Limited to LEPs So the 

Extent of Cost Estimating 

Weaknesses in NNSA 

Programs Is Largely 

Unknown
Page 23 GAO-15-29 DOE and NNSA Cost Estimating Practices

performance. According to the Standards for Internal Control in the 

Federal Government, federal agencies are to employ internal control 

activities, such as functional reviews by management of projects and 

programs to compare actual performance to planned or expected results 

throughout the organization and analyze significant differences. Such 

reviews are to help ensure that management’s directives are carried out 

and to determine if agencies are effectively and efficiently using 

resources.

DOE and NNSA have taken action in recent years to improve costestimating practices, including the corrective actions that were 

implemented as part of the department’s 2008 root-cause analysis, which 

DOE later reported as having effectively mitigated most of the root causes 

of the most significant contract and project management challenges. 

Nonetheless, NNSA continues to struggle with significant cost overruns 

on its major projects. Because DOE does not require the use of most of 

the 12 cost estimating best practices for its projects and programs, it is 

unlikely that NNSA and its contractors will consistently develop reliable 

cost estimates. In addition, while DOE has developed a cost estimating 

guide, it does not fully describe all 12 cost estimating best practices. As a 

result, DOE and NNSA have not provided its contractors with all the 

detailed guidance needed to consistently develop reliable cost estimates. 

Also, because DOE Order 413.3B has not been updated since 2010, it 

omits reference to the supplemental cost estimating guide; users of the 

order may not be aware of the guide’s availability and may not benefit 

from its usefulness. Finally, without a requirement for conducting reviews 

of programs with project-like characteristics, including the life-cycle cost 

estimates of these programs, neither DOE nor NNSA have appropriate 

internal controls to assess the quality of program performance over time.

To enhance NNSA’s ability to develop reliable cost estimates for its 

projects and for its programs that have project-like characteristics, we 

recommend the Secretary of Energy take the following five actions:

• Revise DOE’s project management order to require that DOE, NNSA, 

and its contractors develop cost estimates in accordance with the 12 

cost estimating best practices.

• Revise DOE’s cost estimating guide so that it fully reflects the 12 cost 

estimating best practices.

Conclusions

Recommendations for 

Executive Action
Page 24 GAO-15-29 DOE and NNSA Cost Estimating Practices

• Revise DOE’s project management order to include references to the 

DOE cost estimating guide, where applicable.

• Revise DOE directives that apply to programs to require that DOE and 

NNSA and its contractors develop cost estimates in accordance with 

the 12 cost estimating best practices, including developing life-cycle 

cost estimates for programs.

• Revise DOE requirements and guidance that apply to programs to 

ensure that program reviews are conducted periodically, including 

reviews of the life-cycle cost estimates for programs.

We provided DOE with a draft of this report for its review and comment. In 

its written comments, reproduced in appendix III, DOE agreed with the 

report’s recommendations. In regard to the report’s first 

recommendation—revise DOE’s project management order to require

that DOE, NNSA, and its contractors develop cost estimates in 

accordance with the 12 cost estimating best practices—DOE stated in its 

written comments that DOE’s order for project management (DOE O 

413.3B) will be assessed for revision following the issuance of the 

revision to DOE-STD-1189, Integration of Safety into the Design Process, 

currently scheduled for November 2016. DOE stated that it has 

established a log of issues to be addressed when revising Order 413.3B, 

which includes this recommendation. DOE also stated that this 

recommendation will be fully considered during this revision process. In 

the interim, DOE stated that its cost estimating guide incorporates the 12 

cost estimating best practices, albeit not in the same format as our 

guidance. DOE also stated that it has begun internal efforts for the 

publication of a Departmental Cost Estimating and Schedule Policy and 

that the policy will complement existing cost estimating guidance and will 

incorporate our cost estimating guidance. DOE stated that the time frame 

for this policy to be issued is still to be determined. Further, DOE stated 

that DOE’s Office of Acquisition and Project Management will continue to 

incorporate the 12 cost estimating best practices in its independent cost 

estimating activities. Additionally, DOE explained that the curriculum of 

the Project Management Career Development Program requires cost and 

schedule estimating courses and that this training incorporates the 12 

cost estimating best practices. We are pleased that DOE agreed with our 

recommendation and that it has interim measures to improve cost 

estimating before it plans to implement the recommendation. However, 

while these may be useful interim measures, the unspecified, open-ended 

date for updating the project management order that contains 

requirements (i.e., sometime after November 2016) and the statement 

that the cost estimating best practices will be considered, not 

Agency Comments
Page 25 GAO-15-29 DOE and NNSA Cost Estimating Practices

incorporated, may indicate DOE’s lack of urgency or concern about the 

need to implement this recommendation.

In regard to the report’s second recommendation—revise DOE’s cost 

estimating guide so that it fully reflects the 12 cost estimating best 

practices—DOE stated in its written comments that it will begin updating 

the cost estimating guide in the first quarter of fiscal year 2015. The 

update efforts are to elevate the significance of the 12 cost estimating 

best practices within the content of the guide, although DOE did not 

specify when it might complete this update. We are pleased that DOE 

agreed with our recommendation and that it plans to take action during 

the current quarter of this fiscal year. However, we are concerned that in 

its written comments DOE did not specify whether it plans to revise the 

guide to better include the two areas in the guide we found were deficient 

and that the lack of a completion date may indicate DOE’s lack of urgency 

or concern about the need to implement this recommendation.

In regard to the report’s third recommendation—revise DOE’s project 

management order to include references to the DOE cost estimating 

guide, where applicable—DOE stated in its written comments that its 

project management order will be assessed for revision following the 

issuance of the revision to DOE-STD-1189, currently scheduled for 

November 2016, and that this recommendation will be fully considered 

during the order revision process. In the interim, DOE stated that its 

directives website points to the guides that accompany Order 413.3B as 

the best practices guidance for implementation of Order 413.3B 

requirements. We are pleased that DOE agreed with our recommendation 

and that its website includes links to the guides that accompany the 

project management order. However, our report noted the deficiencies 

associated with the existing cost estimating guide, and DOE did not 

specify plans for addressing those deficiencies. In addition, we are 

concerned that the unspecified, open-ended date for updating the project 

management order that contains requirements (i.e., sometime after 

November 2016) and the statement that referencing the cost estimating 

guide will be considered, not completed, may indicate DOE’s lack of 

urgency or concern about the need to implement this recommendation.

In regard to the report’s fourth recommendation—revise DOE directives 

that apply to programs to require that DOE and NNSA and its contractors 

develop cost estimates in accordance with the 12 cost estimating best 

practices, including developing lifecycle cost estimates for programs—

DOE stated in its written comments that it is in the process of 

substantially revising the existing 1995 DOE Order 130.1, Budget 
Page 26 GAO-15-29 DOE and NNSA Cost Estimating Practices

Formulation, and that as part of this effort, DOE will assess the 

requirement for program cost estimates and will revise the order to 

provide more specificity on the cost estimating requirements. Further, 

DOE stated that the revised order will (1) define which DOE and NNSA 

program budget requests require cost estimates and (2) clarify that cost 

estimates for program budget submissions shall be conducted in 

accordance with the DOE cost estimating guide (or its successor policy). 

DOE estimated that it would complete this process in September 2016. 

We are pleased that DOE agreed with our recommendation. 

In regard to the report’s fifth recommendation—revise DOE requirements 

and guidance that apply to programs to ensure that program reviews are 

conducted periodically, including reviews of the lifecycle cost estimates 

for programs—DOE again stated that it is in the process of substantially 

revising the existing DOE Order 130.1, and that as part of this effort, the 

department will assess requirements for program reviews and the linkage 

between program reviews and the budget formulation process. Further, 

DOE stated that the revised order will clarify requirements for program 

reviews and specify how such reviews—to include lifecycle cost 

estimates—can best support the budget formulation process. NNSA is to 

review these requirements and adjust NNSA-specific policies and 

guidance as appropriate. DOE estimated that it would complete this 

process in September 2016. We are pleased that DOE agreed with our 

recommendation.

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 is 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members 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.

David C. Trimble

Director, Natural Resources and Environment
Appendix I: Comparison of DOE Cost Guide to 

GAO’s Best Practices for Cost Estimating

Page 27 GAO-15-29 DOE and NNSA Cost Estimating Practices

12 key steps/best practices Fully Substantially Partially Minimally Not

Define estimate’s purpose, scope, and schedule. •

Develop the estimating plan. •

Define the program. •

Determine the estimating approach—work 

breakdown structure (WBS).

•

Identify the ground rules and assumptions. •

Obtain the data. •

Develop the point estimate and compare it to an 

independent cost estimate.

•

Conduct sensitivity analysis. •

Conduct risk and uncertainty analysis. •

Document the estimate. •

Present the estimate to management. •

Update the estimate to reflect actual costs and 

changes.

•

Source: GAO analysis of DOE Guide 413.3-21 (2011) | GAO-15-29

Note: The ratings we used in this analysis are as follows: “Fully” means that the guide included 

information that satisfied the best practice; “Substantially” means that the guide included the majority 

of the information to satisfy the best practice; “Partially” means that the guide included information 

satisfying part of the best practice; “Minimally” means that the guide included information satisfying a 

minor part of the best practice; and “Not” means that the guide did not include any information that 

satisfied the best practice.

Appendix I: Comparison of DOE Cost Guide 

to GAO’s Best Practices for Cost Estimating
Appendix II: Cost Estimating Weaknesses 

Identified in All Completed NNSA Project 

Reviews February 2009 - February 2014 and 

GAO’s Best Practices for Cost Estimating

Page 28 GAO-15-29 DOE and NNSA Cost Estimating Practices

# Review type

Review 

date

GAO 12 steps (see table legend) Total 

weak1 2 3 4 5 6 7 8 9 10 11 12 nesses

Idaho National Laboratory 

Material Security and Consolidation Project

1 Independent project review 2009    3

Kansas City Plant

Responsive Infrastructure Manufacturing & Sourcing & National Secure Manufacturing Center Occupancy Project

2 Peer review 2011 0

Los Alamos National Laboratory

Chemistry and Metallurgy Research Replacement Facility 

3 Independent project review 2010 0

4 Independent project review 2011   2

Los Alamos Neutron Science Center Refurbishment Project

5 Independent project review / 

independent cost review

2009    3

Nuclear Materials Safeguards and Security Upgrades Project Phase I & II

6 Independent project Review 2009 0

7 Peer review 2011   2

8 Peer review 2012    3

9 Peer review 2013   2

Radioactive Liquid Waste Treatment Facility Upgrades Project 

10 Independent cost estimate 2010   2

11 Independent project review 2010     4

12 Independent cost review 2012       6

13 Independent project review 2012  1

TA-55 Reinvestment Project - Phase II 

14 Independent project review 2009      5

Transuranic (TRU) Waste Facility 

15 Independent project review 2010     4

16 Independent project review 2011   2

17 Independent cost estimate 2013  1

Sanitary Effluent Reclamation Facility Expansion 

18 Independent project review 2009 0

Science and Engineering Complex 

19 Independent project review 2009      5

Appendix II: Cost Estimating Weaknesses 

Identified in All Completed NNSA Project 

Reviews February 2009 - February 2014 and 

GAO’s Best Practices for Cost Estimating 
Appendix II: Cost Estimating Weaknesses 

Identified in All Completed NNSA Project 

Reviews February 2009 - February 2014 and 

GAO’s Best Practices for Cost Estimating

Page 29 GAO-15-29 DOE and NNSA Cost Estimating Practices

# Review type

Review 

date

GAO 12 steps (see table legend) Total 

weak1 2 3 4 5 6 7 8 9 10 11 12 nesses

Nevada National Security Site

Device Assembly Facility Argus Installation Project

20 Independent cost review 2013   2

Pantex Plant

High Explosives Pressing Facility 

21 Peer review 2012  1

22 Peer review 2013 0

Operations Systems Development and Integration Project 

23 Independent project review 2009       6

24 Independent project review 2010   2

Pantex Renewable Energy Project 

25 Independent project review 2009       6

26 Independent project review 2009   2

Sandia National Laboratory 

Test Capabilities Revitalization Project 

27 Independent project review 2011    3

Savannah River Site 

Mixed Oxide (MOX) Oxide Fuel Fabrication Facility Project 

28 Independent project review 2009   2

29 Peer review 2011    3

30 Independent project review 2012      5

31 Peer review 2012   2

Pit Disassembly and Conversion Project 

32 Independent project review 2010    3

Waste Solidification Building Project 

33 Independent project review 2010 0

34 Peer review 2011    3

35 Peer review 2012     4

36 Peer review 2012    3

37 Construction project review 2012  1

38 Construction project review 2013     4

Y-12 Security Complex

Nuclear Facility Risk Reduction Project 

39 Independent project review 2009   2

40 Independent project review 2010 0

41 Independent project review 2011 0
Appendix II: Cost Estimating Weaknesses 

Identified in All Completed NNSA Project 

Reviews February 2009 - February 2014 and 

GAO’s Best Practices for Cost Estimating

Page 30 GAO-15-29 DOE and NNSA Cost Estimating Practices

# Review type

Review 

date

GAO 12 steps (see table legend) Total 

weak1 2 3 4 5 6 7 8 9 10 11 12 nesses

42 Construction project review 2013  1

Security Improvements Project 

43 Independent project review 2009   2

Uranium Processing Facility 

44 Independent cost estimate 2010    3

45 Independent project review 2010    3

46 Independent cost estimate 2011     4

47 Independent project review 2011  1

48 Independent project review 2012 0

49 Other 2012 0

50 Peer review 2013 0

Total Weaknesses 0 4 10 15 23 7 5 8 20 13 1 7 113

Source: GAO analysis of National Nuclear Security Administration project reviews. | GAO-15-29.

a

The 2013 Independent Cost Estimate (ICE) review of the Transuranic (TRU) Waste Facility did not 

identify the lack of a point estimate and comparison of the estimate to an independent cost estimate 

as a weakness. However, in our analysis of the ICE review, we found that this step was not 

completed and have therefore identified it as a weakness.

Legend: GAO 12 Best Practice Cost Estimating Steps 

Step Description Summary of associated tasks

1. Define estimate’s purpose. Determine purpose, scope, required level of detail of estimate, as well as who will 

receive estimate. 

2. Develop estimating plan. Determine cost estimating team, schedule, and outline tasks in writing. 

3. Define program characteristics. Identify technical characteristics of planned investment, quality of data needed, and 

plan for documenting and updating information. 

4. Determine estimating structure 

(WBS).

Define the elements of the cost estimate, including best method for estimating costs and 

potential cross-checks, and standardized structure.

5. Identify ground rules and 

assumptions.

Define what the estimate will include and exclude, key assumptions (such as life-cycle 

of investment), schedule or budget constraints, and other elements that affect estimate. 

Assumptions should be measurable, specific, and consistent with historical data. 

Assumptions should be based on expert and technical judgment.

6. Obtain data. Create data collection plan, identify sources, collect valid and useful data, analyze data 

for cost drivers and other factors, and assess data for reliability and accuracy.

7. Develop a point estimate and 

compare it to an independent cost 

estimate.

Develop cost estimation model and calculate estimate, in constant dollars for 

investments that occur over multiple years, and other cross checks and validation, and 

compare estimate to an independent estimate and previous estimates. Update as more 

data are available.

8. Conduct sensitivity analysis. Test the sensitivity of cost elements to changes in input values, ground rules, and 

assumptions.
Appendix II: Cost Estimating Weaknesses 

Identified in All Completed NNSA Project 

Reviews February 2009 - February 2014 and 

GAO’s Best Practices for Cost Estimating

Page 31 GAO-15-29 DOE and NNSA Cost Estimating Practices

Step Description Summary of associated tasks

9. Conduct risk and uncertainty 

analysis.

Determine which cost elements pose technical, cost, or schedule risks; analyze those 

risks; and recommend a plan to track and mitigate risks. A range of potential costs, 

based on risks and uncertainties, should be identified around a point estimate.

10. Document the estimate. Document all steps used to develop the estimate so it can be recreated, describing 

methodology, data, assumptions, and results of risk, uncertainty, and sensitivity 

analysis.

11. Present estimate to management for 

approval.

Develop briefing on results, including information on estimation methods and risks, 

making content clear and complete so those unfamiliar with analysis can comprehend 

estimate and have confidence in it.

12. Update the estimate to reflect actual 

costs and changes.

As technical aspects of project change, the complete cost estimate should be regularly 

updated and, as project moves forward, cost and schedule estimates should be tracked.

Source: GAO-09-3SP | GAO-15-29
Appendix III: Comments from the

Department of Energy

Page 32 GAO-15-29 DOE and NNSA Cost Estimating Practices

Appendix III: Comments from the

Department of Energy
Appendix III: Comments from the

Department of Energy

Page 33 GAO-15-29 DOE and NNSA Cost Estimating Practices
Appendix III: Comments from the

Department of Energy

Page 34 GAO-15-29 DOE and NNSA Cost Estimating Practices
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 35 GAO-15-29 DOE and NNSA Cost Estimating Practices

David C. Trimble, (202) 512-3841 or trimbled@gao.gov

In addition to the individual named above, Daniel Feehan, Assistant 

Director; Antoinette Capaccio; Jennifer Echard; Mark Braza; Mike 

Meleady; Alison O’Neill; and Peter Ruedel made key contributions to this 

report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(361459)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537.

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube.

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.

Visit GAO on the web at www.gao.gov.

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.