U.S. Department of Energy 

 Office of Inspector General 

 Office of Audit Services 

 Audit Report 

The Disposition of Uranium-233 at 

Oak Ridge National Laboratory

DOE/IG-0834 February 2010
Department of Energy 

Washington, DC 20585 

February 18, 2010 

MEMORANDUM FOR THE SECRETARY 

FROM: Gregory H. Friedman 

 Inspector General 

SUBJECT: INFORMATION: Audit Report on "The Disposition of 

 Uranium-233 at Oak Ridge National Laboratory”

BACKGROUND

As a result of the Department of Energy's nuclear weapons program legacy, its Oak 

Ridge National Laboratory (ORNL) stores about 1.4 metric tons of uranium containing 

450 kilograms of uranium-233 (U-233). The material is currently stored in a 

deteriorating facility at ORNL that is over 60 years old. Because of its highly radioactive 

and dangerous properties, the U-233 is stored in a shielded storage location and must be 

handled in hot cells to protect workers from exposure. Since there were no 

programmatic uses for the material, the Department initiated efforts to dispose of it in 

2001. In 2003, however, the conferees to the Fiscal Year 2003 Omnibus Appropriations 

Act authorized the extraction of thorium-229, a material that is useful in medical and 

research isotope production, prior to disposal of the U-233. 

In response, the Office of Nuclear Energy (NE) developed a three-phased approach for 

the thorium extraction process. In October 2003, NE awarded a contract to Isotek 

Systems, LLC (Isotek), to plan and design the facilities needed to extract the thorium and 

process the U-233 into a stable form for storage. In November 2005, however, the 

conferees to the Fiscal Year 2006 Energy and Water Appropriations Act directed the 

Department to terminate thorium extraction and to transfer responsibility for management 

and disposition of the U-233 to the Office of Environmental Management (EM), 

effectively ending any potential for obtaining medical research isotopes from this 

process. EM began managing the project and the Isotek contract, focusing on the 

processing and subsequent disposal of the U-233 at the Department's Waste Isolation 

Pilot Plant (WIPP). EM approved the project's $384 million performance baseline on 

May 25, 2007, and authorized long-lead procurements and dismantlement activities in 

preparation for facility construction. Due to the risk associated with this disposition 

effort, we initiated this audit to determine whether the Department had adequately 

managed the U-233 disposition project. 

RESULTS OF AUDIT

The Department's U-233 disposition project had encountered a number of design delays, 

may exceed original cost estimates, and will likely not meet completion milestones. In 

particular, our testing revealed that: 

Despite four years of effort by EM and the expenditure of about $36 million, project 

planning and design had yet to be completed; and,
2 

The cost baseline was approved relying on inaccurate assumptions and, thus, is 

likely to be unreliable. 

EM initially established the performance baseline and authorized long-lead procurements 

and dismantlement activities in preparation for facility construction based on Isotek's 

claim that the project's design satisfied the Department's requirement for maturity, i.e., 

the design was 60 percent complete. Even though the Department's project management 

order requires the completion of a design review prior to baseline approval, EM elected 

to approve the baseline, a critical project milestone, without validating the status of the 

design work. EM officials told us that they had considered previous design reviews that 

were completed prior to the change in project scope. 

When EM ultimately completed the required design review in December 2007, some 

seven months after it approved the performance baseline, it discovered that the design 

was more likely in the early preliminary design stage rather than at the 60 percent design 

threshold. At that point, reviewers concluded that the contractor had based portions of 

the design on unverified assumptions in certain areas, and that once safety analyses were 

completed, additional review and possible design rework would be required. Further, it 

was not until July 2008 that the Department realized it had inaccurately assumed and 

reported to Congress in February 2006 that the deletion of thorium extraction would have 

very little effect on design. In fact, not extracting thorium had a significant effect on the 

amount of shielding that is now required and led to considerable design changes, 

including the construction of a new annex facility. EM completed another design review 

in September 2009 and concluded that additional work was still needed to reach the 60 

percent design stage of maturity. 

Problems with Federal leadership of the project, at least in part, contributed to delays in 

completing design and establishing a viable cost baseline. For example, after the 

direction to abandon thorium-229 extraction, EM had not ensured that the contract with 

Isotek was consistent with the new scope of work, a situation that impacted its ability to 

hold the contractor accountable. Further, since taking over the project in 2005, EM had 

assigned 5 different Federal project directors, with 4 different managers involved in the 

first 22 months of the project. The frequency of the change in leadership contributed to 

EM not providing a timely review of the contractor's preliminary design. Finally, 

program officials did not ensure that the contractor implemented controls necessary for 

timely completion of the design phase of the project. For example, even though it 

determined in 2006 that the contractor did not have a certified earned value management 

system to measure actual performance against baselines, EM did not compel the 

contractor to take effective corrective action. Notably, Isotek did not have a certified 

system in place until September 2009. 

In addition to performance and monitoring problems, we also learned that the 

project now faces additional challenges related to the radioactive constituents 

believed to be contained in the U-233. Program officials indicated that 

reconsideration of the design was necessitated by a January 2009 discovery that 

despite previous assumptions regarding the U-233 inventory, the material did not 

contain a sufficient amount of plutonium to qualify it for disposition in WIPP. In
3

March 2009, EM changed the waste process and the disposition path deciding 

instead to send the material to the Nevada Test Site. EM is continuing efforts to 

develop a waste form that will meet the Nevada Test Site Waste Acceptance 

Criteria. In addition to cost considerations, further disposition delays could 

potentially increase environmental and safety risks associated with the U-233.

EM management has recently acted to provide consistent management oversight to the 

project and has worked with the contractor to correct long-standing problems such as the 

absence of a certified earned value management system. To address the issues described 

in our report, we made several recommendations intended to increase the likelihood that 

the project is completed in a timely and successful manner. 

MANAGEMENT REACTION

EM concurred with the report's recommendations but noted that actions necessary to 

correct issues with project leadership and management had been completed. However, 

management agreed that it would closely monitor contractor performance until recent 

concerns that have surfaced with the project's design and cost controls can be adequately 

addressed. Specifically, recent U-233 project status reports indicate that there are still 

major concerns with the contractor's final design progress, its ability to meet cost or 

schedule milestones for final design, the confidence that can be placed in the contractor's 

earned value management system, and concerns in the areas of design configuration 

control, subcontractor oversight, and procurement. Management’s proposed actions, 

designed to help ensure the contractor's design and project baseline can be successfully 

completed and approved, are generally responsive to our recommendations. 

Attachment

cc: Deputy Secretary

Under Secretary of Energy

Chief of Staff

Assistant Secretary for Environmental Management, EM-1

Manager, Oak Ridge Office

Audit Liaison, Environmental Management, EM-33

Audit Liaison, Oak Ridge Office, SC-OR 
REPORT ON THE DISPOSITION OF URANIUM-233 AT OAK RIDGE 

NATIONAL LABORATORY 

TABLE OF 

CONTENTS 

Management of the Uranium-233 Project

Details of Finding 1 

Recommendations and Comments 4 

Appendices

1. Objective, Scope, and Methodology 6 

2. Prior Audit Report 8 

3. Management Comments 9 
MANAGEMENT OF THE URANIUM-233 PROJECT 

Project Design and Despite the expenditure of about $36 million and four years of 

Implementation effort by the Office of Environmental Management (EM), project 

planning and design had yet to be completed for the Department of 

Energy's (Department) uranium-233 (U-233) disposition project. 

In particular, the project had encountered a number of design 

delays, may exceed original cost estimates, and will likely not meet 

completion milestones. Additional design issues may develop 

because original assumptions regarding waste constituents have 

proven to be incorrect. 

Facility Design and Baseline Development

Although EM approved the U-233 disposition project performance 

baseline and authorized the start of long-lead procurements and 

dismantlement activities in May 2007, design of the disposition 

facilities has not progressed as planned. Major factors impacting 

performance were that the project's cost baseline was approved 

based on inaccurate assumptions, and as such was not being used 

by EM to manage the project at the time of our review. 

EM approved the performance baseline and granted Isotek 

Systems, LLC (Isotek), approval to start long-lead procurements 

and dismantlement activities in May 2007 despite the fact that the 

project lacked a mature design. Even though the Department's 

project management order requires the completion of a design 

review prior to baseline approval, EM elected to approve the 

baseline, a critical project milestone, based on the results from 

prior design reviews and did not validate the status of the design 

work. These reviews were performed by the Office of Nuclear 

Energy (NE) prior to changes in project scope that were mandated 

by Congress in November 2005. When EM ultimately completed 

the required design review in December 2007, some seven months 

after it approved the performance baseline, it discovered that the 

design was more likely in the early preliminary design stage rather 

than at the 60 percent design stage. Reviewers concluded that the 

contractor based portions of the design on unverified assumptions 

in the civil/structural, mechanical and piping, and the electrical and 

instrumentation and control areas. The review report noted that 

once safety analyses were complete, these areas would require 

review and potential design rework. 

While design work had matured to some extent by July 2008, EM 

determined that the design of components for the final processing 

and packaging of the waste form component of the project was still 

only about 30 percent complete. Specifically, the Department 

realized it had inaccurately assumed and reported to Congress in 

Page 1 Details of Finding 
 

February 2006 that the deletion of thorium extraction would have 

very little effect on design. In fact, not extracting thorium had a 

significant effect on the amount of shielding that is now required. 

This resulted in significant design changes and the decision to 

move drying and packaging operations to a new annex facility. 

These operations were moved from the original location in 

Building 3019A because the building structurally could not support 

the shielding requirements. In September 2009, after an additional 

year of effort, EM gained sufficient confidence in the design to 

begin another review. However, EM completed that review and 

concluded that additional work was still needed to reach the 60 

percent design stage of maturity. The Department indicated that it 

would not complete another life cycle cost estimate until it 

conducts a 90 percent design review, an event expected to begin in 

2010. 

Project Management Delays in completing the design and uncertainty about the eventual 

cost of the project were caused, at least in part, by inconsistent 

Federal leadership resulting in inadequate contractor oversight. 

Additionally, EM did not ensure that the contractor's partnership 

was properly structured to manage the project. 

Consistent Federal Leadership

Since taking over the project in 2005, EM has not ensured that 

appropriate Federal leadership was applied to the project. Notably, 

EM assigned five different Federal project directors in the four 

plus years that it has managed the effort. The project was managed 

by 4 separate directors in the first 22 months of its life. In some 

cases, the project director had other responsibilities which 

prevented adequate oversight of the project. An August 2006 

External Independent Review, for example, noted that the project 

did not have a permanent Federal project director. Rather, the 

assistant site manager was the designated Federal project director. 

Because of the extent of his other duties, this individual was not 

able to devote the requisite attention to Federal project director's 

tasks. 

Federal project director continuity problems impacted EM's ability 

to complete a timely review of the contractor's preliminary design 

and to ensure that the contractor had controls in place necessary for 

timely completion of the design phase of the project. As 

previously noted, EM did not review the contractor's design, as 

required by the Department's project management order 413.3A, 

before approving the performance baseline. In fact, EM did not 

perform the design review until seven months after approving the 

Page 2 Details of Finding 
 

Page 3 Details of Finding 

baseline. Additionally, EM did not ensure that the contractor 

implemented quality assurance and earned value management 

systems. EM determined in 2006, for example, that in spite of 

specific requirements to the contrary, the contractor did not have a 

certified earned value management system to measure actual 

performance against performance baselines. The Department's 

project management order specifically conditions approval of the 

project baseline on having such a system in place. EM also did not 

ensure that Isotek took effective corrective action to resolve the 

previously observed weakness. A particularly troubling example 

of this lack of action was the fact that the contractor did not have a 

certified earned value management system until September 2009. 

Finally, EM had not ensured that the contract with Isotek was 

consistent with the scope of work actually being performed by the 

contractor, a situation that impacted its ability to hold the 

contractor accountable. Since taking over the project in 

November 2005, EM had been managing the project under the 

contract negotiated with Isotek by NE. This contract required 

thorium extraction and storage rather than the treatment and 

disposition of the U-233. It was not until September 2007 that EM 

modified the contract to properly reflect the changed scope of work 

that eliminated thorium extraction and focused work on processing 

the inventory for disposal. 

Contractor Structure

Even though it assumed responsibility for managing the Isotek 

contract in 2005, EM did not act promptly to ensure that Isotek, a 

limited liability company, was organized to effectively manage the 

project. Specifically, Isotek was a partnership composed of three 

companies with no single partner having a controlling interest in 

the company until November 2007. We concluded that the lack of 

clear lines of authority in the partnership structure contributed to 

known quality assurance problems in the design phase of the 

project. Isotek had an inadequate oversight infrastructure in place 

to resolve a continuing deficiency in the design partner's 

implementation of an appropriate quality assurance program. In 

fact, it was not until September 2008 that the contractor's 

management structure was changed to better oversee the project. 

After the management restructure, Isotek acted in October 2008 to 

correct problems with the design partner, including the lack of a 

quality assurance program that they first detected in 2004.
 

Impact on Cost In addition to performance and monitoring problems, we learned 

and Risk that the project now faces additional challenges related to the 

radioactive constituents believed to be contained in the U-233. 

Program officials indicated that reconsideration of the design was 

necessitated by a January 2009 discovery that despite previous 

assumptions regarding the U-233 inventory, the material did not 

contain a sufficient amount of plutonium to qualify it for 

disposition at the Department's Waste Isolation Pilot Plant. In 

March 2009, EM changed the waste process and the disposition 

path to the Nevada Test Site and is continuing efforts to develop a 

waste form that will meet the Nevada Test Site Waste Acceptance 

Criteria. 

As we have demonstrated in a number of contract management 

reviews in the past, poor project administration and performance 

frequently increase total project costs. In November 2008, for 

example, the project's contractor proposed a revised cost baseline 

of $477 million, a cost increase of approximately $93 million. 

Because the project baseline was approved based on faulty 

assumptions related to design maturity, we were unable to 

specifically determine whether these increases will ultimately 

materialize. EM has not approved the contractor's proposal 

pending its decisions regarding process design changes and the 

outcome of future design reviews, and as such, cannot determine 

the total cost of the project. In addition to cost and schedule 

impacts, further disposition delays also potentially increase 

environmental and safety risks associated with U-233 identified by 

the Defense Nuclear Facilities Safety Board in 1997. 

RECOMMENDATIONS EM management has recently acted to provide consistent project 

management oversight to the project and has worked with the 

contractor to correct long-standing problems such as the absence of 

a certified earned value management system. In order to help 

ensure the timely and successful completion of the U-233 

disposition project, we recommend that the Assistant Secretary, 

Environmental Management, ensure that: 

1. Consistent and adequate Departmental leadership is 

maintained; 

2. The contractor's performance on the U-233 disposition 

project provides a sound basis for final design and 

baseline approval, as required by Departmental project 

management orders; and,

Page 4 Recommendations 
 

3. Future limited liability companies have a majority 

ownership partner and are structured to provide adequate 

leadership over the project. 

MANAGEMENT AND EM concurred with the report and its recommendations and stated 

AUDITOR that all actions necessary to close Recommendations 1 and 3 were 

COMMENTS complete. Regarding Recommendation 1, EM stated that the 

current Federal project director has provided consistent leadership 

for more than 20 months. In response to Recommendation 3, EM 

explained that they evaluate the management structure of limited 

liability companies as an element in the Request for Proposal 

evaluation criteria. Additionally, EM requires the limited liability 

companies to identify a single point of contact to address contract 

and project matters. 

During an exit conference to discuss management's comments on a 

draft of this report, regarding Recommendation 2, EM asserted that 

the U-233 disposition project is currently being managed in 

accordance with Departmental project management orders; 

however, continuing concerns identified in the area of project 

management were the direct result of poor contractor performance. 

In December 2009, the Federal project director informed EM of 

major concerns with the contractor's progress on the project's final 

design. Specifically, the project director noted that the contractor 

will not meet its cost or schedule milestones for final design, an 

issue that, in our opinion, calls into question the confidence that 

can be placed in the ability of the contractor's earned value 

management system to keep the project on track. In January 2010, 

additional concerns were identified in the areas of design 

configuration control, subcontractor oversight, and procurement. 

We clarified Recommendation 2 to more accurately emphasize the 

role that the contractor's performance has played in project delays 

and cost increases. As a result, EM agreed to keep 

Recommendation 2 open until the contractor's 90 percent design 

review and project baseline can be successfully completed and 

approved, respectively. 

We consider management's comments generally responsive to our 

recommendations. 

Page 5 Recommendations and Comments 
Appendix 1 

OBJECTIVE The objective of this audit was to determine whether the 

Department of Energy (Department) had adequately managed the 

Uranium-233 (U-233) project. 

SCOPE We conducted the audit from November 2008 to December 2009 at 

Department Headquarters in Washington, D.C., and the Oak Ridge 

Office in Oak Ridge, Tennessee. The audit scope included U-233 

disposition efforts since November 2005 when the project was 

transferred from the Office of Nuclear Energy to the Office of 

Environmental Management (EM).

METHODOLOGY To accomplish the audit objective, we: 

• Reviewed regulations, directives, contract requirements, 

and performance measures relating to the U-233 

disposition project; 

• Determined and evaluated the current status of the U-233 

disposition project; 

• Reviewed the baseline and other project management tools 

associated with the disposition project; 

• Evaluated internal controls associated with the U-233 

project; 

• Reviewed prior audits and reviews relating to the 

disposition project; and, 

• Held discussions with key Department and contractor 

officials responsible for dispositioning the U-233. 

We conducted this performance audit 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 objective. We believe that the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objective. The audit included tests 

of controls and compliance with laws and regulations necessary to 

satisfy the audit objective. Because our review was limited, it 

would not necessarily have disclosed all internal control 

deficiencies that may have existed at the time of our audit. The 

U-233 disposition project did not meet all of its specific

Page 6 Objective, Scope, and Methodology 
Appendix 1 (continued) 

performance measures in 2009 associated with the Government 

Performance and Results Act of 1993. Also, we did not rely upon 

computer processed data to accomplish our audit objective. 

An exit conference was held with EM's Deputy Assistant Secretary 

for Program and Site Support on February 3, 2010. 

Page 7 Objective, Scope, and Methodology 
Appendix 2 

PRIOR AUDIT REPORT

• Meeting Medical and Research Needs for Isotopes Derived from Uranium-233

(DOE/IG-0795, May 2008). The Office of Inspector General determined that the 

Department of Energy (Department) would not have sufficient quantities of uranium233 (U-233) and its progeny isotopes to support U.S. medical and research needs. The 

Department is the only domestic producer of progeny isotopes from U-233 and current 

production is insufficient to meet medical and scientific research needs. At present, no 

viable alternative methods of production of actinium and bismuth have been 

demonstrated or proven. U-233 also is used to support other Department missions 

such as the National Nuclear Security Administration's Test Readiness Program. 

Page 8 Prior Audit Report 
Department of Energy

Washington, DC 20585

January 15, 2010

MEMORANDUM FOR GEORGE W. COLLARD

ASSISTANT INSPECTOR GENERAL

FOR PERFORMANCE AUDITS

OFFICE OF INSPECTOR GENE~~ .

FROM:

ASSISTANT

INES R. TRIAY

SECRETARY FOR

~). (/'

ENVIRONMENTAL MANAGEMENT

SUBJECT: Draft Audit Report on "The Disposition ofUranium-233

at Oak Ridge National Laboratory"

This memorandum responds to your December 16,2009, memorandum requesting

review and comments on subject draft audit report (IG-32 A09ET008). The Office of

Environmental Management (EM) appreciates the opportunity to provide comments. EM

has no comments on the report.

EM concurs with all three ofthe recommendations contained in the draft audit report.

EM has been working closely with the Department ofEnergy, Office ofthe Inspector

General (DOE-IG) on this audit; therefore, we believe that the actions taken to date are

in-line with the recommendations received from the IG and the recommendations are

considered to be complete.

Currently, the Uranium-233 (U-233) Material Downblending and Disposition Project at

Oak Ridge National Laboratory (ORNL) is operating to the November 2008 proposed

baseline as an interim baseline until design reaches 90 percent maturity. At that time, a

new estimate and baseline change proposal will be developed.

RECOMMENDATIONS

Recommendation 1: Consistent and adequate Departmental leadership is maintained.

Action Plan: The current Federal Project Director (FPD) was appointed in April 2008

and has provided consistent project leadership for over 20 months. In addition, a Deputy

FPD position was added to the team in November 2008 and has beenfilled by the same

person for the last 14 months. This has providedproject continuity while also supporting

succession planning in the event other changes in project management (i.e., retirement,

promotion, or other career opportunity) take place.

Estimated Completion Date: Complete.

Printed with soy ink on recycled paper
Recommendation 2: Project management complies with Departmental management

orders.

Action Plan: The U-233 Material Downblending and Disposition Project is currently

being managed under DOE Order 413.3. The cur~ent Federal Project Director (FPD)

was certified as a Level 3 FPD through the Project Management Career Development

Program (PMCDP) in September 2008; this is the appropriate level ofcertification for

the project. The Deputy FPD and anotherfull-time project staffmember were certified

as Level J through the PMCDP in November 2009. To maintain certification, 60 hours

ofcontinuing education must be completed every two years.

Estimated Completion Date: Complete.

Recommendation 3: Future limited liability companies have a majority ownership

partner and are structured to provide adequate leadership over the project.

Action Plan: The approach that EMhas taken with respect to limited-liability companies (LLC) is to evaluate the LLC management make-up as an element in the Requestfor

Proposals (RFP) evaluation criteria. This is included as part ofthe management plan.

EM-HQ also has a clause for the LLC to identify a single point ofcontact (POC) to address contract andproject matters. With respect to the U-233 contractor, EM has ensured the voting rights ofIsotek Systems, LLC member companies were restructured so

EnergySolutions had majority voting rights. As a result, EnergySolutions became the

single point ofaccountability for the Department on this project.

Estimated Completion Date: Complete.

If you have any further questions, please contact Mr. Fred Butterfield of my staff at

(202) 586-3110.

cc:

G. Boyd, ORO

1. Echenberg, ORO

T. Pooler, ORO

C. Shafik, CF-1.2

D. Williams, CF-1.2

D. Chung, EM-2

F. Marcinowski, EM-3

J. Boone, EM-4.1

M. Gilbertson, EM-50

F. Butterfield, EM-51
IG Report No. DOE/IG-0834

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