a

GAO

United States General Accounting Office

Report to the Committee on Government 

Reform, House of Representatives

June 2004 NUCLEAR WASTE

Absence of Key 

Management Reforms 

on Hanford’s Cleanup 

Project Adds to 

Challenges of 

Achieving Cost and 

Schedule Goals

GAO-04-611
www.gao.gov/cgi-bin/getrpt?GAO-04-611.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robin M. 

Nazzaro at (202) 512-3841 or 

nazzaror@gao.gov. 

Highlights of GAO-04-611, a report to the

Committee on Government Reform, 

House of Representatives 

June 2004

NUCLEAR WASTE

Absence of Key Management Reforms on 

Hanford's Cleanup Project Adds to 

Challenges of Achieving Cost and 

Schedule Goals 

DOE’s initial approach called for treating 10 percent of the site’s high-level 

waste by 2018 and for operating the plant until treatment was completed in 

2046—well past a regulatory deadline to complete treatment by 2028. In 

2002, DOE decided to accelerate cleanup by about 20 years and reduce the 

project’s $56 billion cost by $20 billion. In the short term, however, several 

factors, including the accelerated approach and contractor performance 

problems, have lengthened construction time and raised contract costs by 

$1.4 billion to $5.7 billion. 

Because of long-standing problems that preceded Hanford’s contract, DOE 

has instituted reforms in both contract and project management. DOE’s 2000 

Hanford contract implemented the contract performance reforms, including 

linking contractor fees to cost and schedule performance. The contract did 

not, however, implement project management reforms, such as an overall 

plan to accomplish waste treatment by the regulatory deadline. 

Not implementing project management reforms at the outset has added to 

the risks in cleaning up Hanford’s tank waste. First, to start quickly, DOE 

committed to a “fast-track” process in which design, technology 

development, and construction are performed concurrently on different 

aspects of the project. For projects of Hanford’s complexity, this approach is 

not compatible with controlling costs and schedules. Second, DOE has 

delayed completing analyses needed to determine the most cost-effective 

approach to waste separation and may have missed savings opportunities of 

at least $50 million a year. Third, DOE has not adequately defined or 

communicated the potential effects of a legal challenge to its overall plan for

minimizing how much high-level waste is disposed of in an underground 

repository. Unless effectively managed, an adverse legal outcome could 

increase project costs by tens of billions of dollars.

High-level Vitrification Plant at Hanford’s Waste Treatment Construction Site, March 2004

The Department of Energy’s (DOE) 

Hanford Site in Washington State 

houses DOE’s largest and most 

complex nuclear cleanup project—

treating and preparing for disposal 

55 million gallons of high-level 

radioactive waste. In 2000, DOE 

awarded an 11-year, $4.3 billion 

contract to design, construct, and 

test treatment facilities at Hanford. 

GAO was asked to review 

(1) efforts to accelerate the 

project’s completion, (2) 

implementation on this project of 

agencywide management reforms, 

and (3) the challenges resulting 

from any unimplemented reforms. 

GAO recommends that DOE 

(1) follow more closely its project 

management guidance when 

acquiring complex nuclear waste 

treatment plants, especially by 

avoiding a fast-track, concurrent 

design-build approach, and 

(2) develop and provide to 

Congress a plan that includes an 

estimate of the costs and time 

frames needed to treat and dispose 

of DOE’s high-level tank wastes if 

most of these wastes must be 

disposed of in an underground 

high-level waste repository. In 

commenting on the report, DOE 

generally agreed with the 

recommendations, including 

improving its cost estimates, but 

was unwilling to develop an 

alternative treatment plan for highlevel waste until the legal issues are 

decided. GAO believes that any 

cost estimate DOE develops should 

be based on a specific plan. 
Page i GAO-04-611 Hanford Waste Treatment Project

Contents

Letter 1

Results in Brief 3

Background 7

DOE Has Revised Its Cleanup Approach to Reduce Costs and Save 

Time in the Long Term but Has Increased the Cost of Its Major 

Construction Project in the Short Term 12

Contract Performance Reforms Were in Place at Start of Project, 

Project Management Reforms Were Added Later 19

Not Implementing Key Project Management Reforms at Start of the 

Construction Project Has Added to DOE’s Challenges 26

Conclusions 37

Recommendations for Executive Action 38

Agency Comments and Our Evaluation 38

Appendixes

Appendix I: Scope and Methodology 41

Appendix II: Analysis of DOE’s Cost-Saving Estimates 44

Appendix III: Comments from the Department of Energy 47

Appendix IV: GAO Contacts and Staff Acknowledgments 49

GAO Contacts 49

Staff Acknowledgments 49

Tables Table 1: Key Events in the Hanford Waste Treatment Project 10

Table 2: Comparison between DOE’s Previous Approach 

(December 2000) and Accelerated Approach (August 2002) 

for Processing Hanford’s Tank Waste 16

Table 3: GAO Analysis of DOE’s Cost-Savings Estimate for the 

Hanford Tank Waste Treatment Project 46

Figures Figure 1: Aerial View of the Waste Treatment Plant, March 2004 14

Figure 2: Key Construction Project Dates: DOE’s Previous 

Approach Compared with Its Accelerated Approach 18
Contents

Page ii GAO-04-611 Hanford Waste Treatment Project

Abbreviations

AEA Atomic Energy Act of 1954

AEC Atomic Energy Commission

CHG CH2M Hill Hanford Group

DOE Department of Energy

EPA Environmental Protection Agency

ERDA Energy Research and Development Administration

NRC Nuclear Regulatory Commission

OMB Office of Management and Budget

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Page 1 GAO-04-611 Hanford Waste Treatment Project

United States General Accounting Office

Washington, D.C. 20548

A

June 9, 2004 Letr

The Honorable Thomas M. Davis

Chairman

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives

The Department of Energy (DOE) spends almost $20 billion a year—about 

90 percent of its fiscal year 2003 budget—on contracts, including those for 

operating its installations. These operations include extensive projects for 

treating and storing radioactive and hazardous wastes accumulated over 

more than 50 years of nuclear weapons production—a task DOE has 

estimated will cost more than $142 billion (fiscal year 2003 dollars) and will 

not be completed until 2035. DOE’s success has been mixed, with some 

cleanup projects going well but others producing few or no results after the 

expenditure of hundreds of millions of dollars. We and others have 

criticized DOE for failing to hold its contractors accountable for results and 

for inadequate management and oversight of its projects. In response, 

starting in the mid-1990s, DOE undertook two main reform initiatives—

both were designed to improve contractor performance in carrying out 

major projects. The contract performance initiative, which DOE formalized 

in 1996, included ensuring that DOE begins projects by using the 

appropriate contract type, encouraging greater competition in contract 

bids, and linking contract award fees more closely to contractor 

performance. The project management initiative, started in 1999 and 

resulting in new management guidance in 2003, required DOE and its 

contractors to implement certain management practices, such as following 

a more disciplined decision-making process for defining, planning, and 

carrying out major projects.

You asked us to review the impact of these management reform efforts at 

DOE’s largest and most complex cleanup project—the waste treatment 
Page 2 GAO-04-611 Hanford Waste Treatment Project

project1 at DOE’s Hanford Site in Washington State. Hanford’s waste 

treatment project involves more than 55 million gallons of radioactive and 

hazardous waste—enough to fill an area the size of a football field to a 

depth of more than 150 feet—stored in 177 underground tanks. DOE has 

managed this waste over the years as high-level waste.2

 The overall project 

involves two major steps: (1) designing, constructing, and testing a waste 

treatment plant3 (the construction project) and (2) operating this plant and 

others in subsequent years to process and prepare the tank waste for 

permanent disposal (the operations project). In 2000, after DOE had 

announced its agencywide contract and project management reforms, it 

awarded an 11-year, $4.3 billion contract for the construction project. In 

April 2003—as part of a nationwide effort that DOE started in 2002 to 

reduce the costs and schedule for cleaning up many of its sites—DOE 

revised Hanford’s waste treatment project, accelerating it to help meet a 

2028 deadline that the department had agreed to with Washington State in 

1989. Our analysis examines the interaction of these four separate efforts—

the contract performance initiative, the project management initiative, 

DOE efforts to accelerate cleanup at its sites, and the waste treatment 

project at Hanford. Specifically, this report examines (1) the DOE 

accelerated approach for addressing Hanford’s tank waste, including any 

changes in the construction project’s cost or schedule; (2) the extent to 

which DOE’s contract and project management reforms have been 

implemented on the construction project; and (3) the challenges resulting 

from any unimplemented reforms on the potential for completing the waste 

treatment project successfully.

This report is based on detailed work we conducted at DOE’s Hanford Site 

near Richland, Washington, and on our analysis of cost and schedule 

information and legal documents pertaining to the waste treatment project. 

We also reviewed DOE’s contract reform and project management 

initiatives, including our prior reports on those initiatives. To evaluate the 

1

This project is officially known as the River Protection Project. The Columbia River flows 

through the site, and the cleanup is designed in part to keep contamination from reaching 

the river. In this report, we refer to the project as the “waste treatment project.”

2

For this report, we use the term “high-level waste” to refer to the waste that DOE is 

managing as high-level waste. DOE’s Hanford Site is one of three DOE sites with high-level 

wastes needing treatment; the other two are the Savannah River Site in South Carolina and 

the Idaho National Laboratory.

3

The waste treatment plant consists of one facility to separate the waste, two facilities to 

treat separated portions of the waste, and one laboratory and other supporting facilities.
Page 3 GAO-04-611 Hanford Waste Treatment Project

technical aspects of the Hanford waste treatment project, we obtained the 

assistance of a physicist with extensive experience in the nuclear field. A 

detailed discussion of our scope and methodology appears in appendix I. 

We conducted our review from July 2003 through May 2004 in accordance 

with generally accepted government auditing standards.

Results in Brief DOE’s accelerated waste treatment approach calls for significant changes 

in treating and disposing of Hanford’s tank wastes as a way of saving both 

time and money when the waste treatment facilities begin operation. Under 

the approach of its December 2000, $4.3 billion contract with Bechtel 

National, Inc. (Bechtel National), DOE estimated that cleaning up the 

waste would cost about $56 billion and take until about 2046. The 

accelerated approach calls for completing waste treatment by 2028; by 

reducing cleanup by almost 20 years, DOE estimates it will save about $20 

billion. The accelerated approach came about 2 years after the 

construction contractor, operating under the assumptions of DOE’s 

previous approach, had begun to design, build, and test the waste 

treatment plant. DOE increased the contract amount for the construction 

project by $1.4 billion, to $5.7 billion, to reflect the accelerated approach’s 

added production capacity, contractor performance problems, additional 

design work, and better estimates. DOE also lengthened by 16 months the 

time for designing and building the plant. To keep the construction project 

on schedule despite the increase, however, DOE decided to shorten the 

commissioning phase—the period for testing the plant to ensure that it will 

work properly once operations begin—by nearly the same amount. As a 

result, DOE has maintained its schedule to begin operation of the waste 

treatment plant by 2011. 

DOE’s 2000 contract implemented the department’s contract performance 

initiative but not its project management initiative. Elements of the 

contract initiative in place at the contract’s start included ensuring that a 

competitive process for bidding the 2000 contract was followed and paying 

contractor performance fees on the basis of the cost and time required to 

successfully complete the plant. Because it was under pressure to meet 

regulatory milestones and keep the project moving forward, however, DOE 

awarded the contract without fully implementing its project management 

initiative, which the department had developed but not yet issued in final 

form. For example, the initiative calls for developing, at the beginning of a 

project, an approach that can meet mission requirements. The initial 

contract DOE awarded, however, called for designing and building a plant 

that would not be able to complete the cleanup by 2028, the time frame 
Page 4 GAO-04-611 Hanford Waste Treatment Project

DOE agreed to with Washington State. Similarly, the project management 

initiative calls for a project’s cost and schedule to be validated before 

setting a firm project price. At the time of contract award, however, DOE’s 

cost and schedule estimates had not been fully validated to determine if 

they were realistic. Since 2002, DOE has implemented various steps called 

for in the project management initiative, such as developing a more 

realistic baseline and increasing project contingency.

DOE’s decision not to implement the project management initiative at the 

start of the construction project has added to the risk and uncertainty the 

department faces in completing both the construction and operations 

projects. The initiative’s main purpose is to minimize problems that have 

plagued DOE in the past by taking such steps as avoiding or mitigating 

high-risk strategies for constructing facilities, as well as by conducting 

rigorous analyses to support key decisions. In awarding the 2000 contract 

without these steps being fully implemented, DOE has adopted a high-risk 

strategy at Hanford. According to Hanford project officials, implementing 

project management steps subsequently, as DOE has begun to do under its 

accelerated approach, is intended to provide a more disciplined method for 

keeping the project’s cost and schedule on track. In our view, however, 

these steps cannot eliminate the risk and uncertainty resulting from the 

department’s decision not to implement the project management initiative 

from the start. This risk and uncertainty comes from three main sources:

• Using a fast-track management approach. DOE has committed to a 

“fast-track” process in which many design, technology development, 

and construction activities are performed simultaneously, thereby 

significantly increasing the risk of cost increases and schedule delays as 

the construction project progresses. Performance so far on the 

construction project has been mixed—problems have already 

contributed to the $1.4 billion construction cost increase. Furthermore, 

our review indicates that cost, schedule, and performance problems 

continue, although they have not yet affected the revised project 

baseline. For example, construction activities, such as building interior 

walls, have outpaced design, leading to delays in finishing the walls and 

the need to temporarily reassign construction workers to other tasks. In 

addition, efforts to resolve key technical challenges, including 

incorporating alternative treatment technologies, continue to fall behind 

and threaten to affect the overall project’s baseline. Hanford’s 

construction project manager acknowledged that the contract schedule 

for building and testing the plant and concurrently resolving technical 

issues was and still is high risk. Although he and other DOE officials 
Page 5 GAO-04-611 Hanford Waste Treatment Project

stated they have taken adequate steps to mitigate this risk, DOE, since 

contract award, has continued to encounter significant technical and 

other problems. Given the risk inherent in this project, we and outside 

experts believe that further cost increases, as well as schedule delays, 

are likely.

• Not fully evaluating cost-saving possibilities beyond the construction 

phase. DOE started and is moving forward on the waste treatment 

project without fully completing or conducting some of the rigorous 

analyses needed to determine the most desirable approach for 

separating waste components before further treatment. For example, as 

specified in its construction contract, DOE plans to use a material called 

“resin” to separate high-level components from the waste. The resin 

DOE selected in 2000 is available only from a single supplier, and DOE 

officials have been slow to study alternative resins that could reduce 

operating costs of the separation facility. Instead, DOE has continued to 

depend on the production capability and pricing constraints of the 

single supplier, even though other—potentially less expensive—

alternative resins exist. Finally, in late February 2004, DOE decided to 

more fully assess the cost and risks of relying on a single supplier for the 

resin. But because of the time required to test and certify an alternative 

resin, the new material may not be available in time for commissioning 

and beginning operation of the separation facility. As a result, DOE’s 

project manager estimated that this lost opportunity could increase 

project operation costs by at least $50 million a year. DOE’s slowness in 

pursuing an alternative resin stemmed from its focus on achieving the 

near-term goal of having an operating plant by 2011 and its belief that 

pursuing the alternative, cost-saving option could jeopardize achieving 

that goal.

• Inadequate planning to assess and mitigate the effects of a legal 

challenge to DOE’s overall approach to treating and disposing of highlevel radioactive waste. DOE’s strategy for treating the waste—not only 

at Hanford, but also at its other high-level waste sites at Savannah River 

and the Idaho National Laboratory—is predicated on a key legal 

assumption that has been successfully challenged in court. The 

treatment strategy rests heavily on DOE’s ability to determine that a 

majority of its tank waste can be classified as other than high-level 

waste and treated with less expensive technologies. DOE recently lost a 

court decision on this matter and is appealing the ruling. DOE has also 

pursued, unsuccessfully as of May 2004, a legislative remedy that has 

instead raised concerns about whether the department is attempting to 
Page 6 GAO-04-611 Hanford Waste Treatment Project

avoid treating some of its waste in an appropriate manner. If DOE has to 

change its current approach to treating and disposing of its waste, the 

change would have a major impact on cleanup of Hanford’s tank wastes 

as well as those at DOE’s other high-level waste sites. DOE has 

developed only rough estimates of potential cost and schedule impacts 

that this legal challenge poses, including near-term delays and overall 

effects on cleanup. These estimates for the Hanford Site range from 

about $350 million for delays if the lawsuit is resolved in DOE’s favor, to 

possibly more than $19 billion in delays and changes to the program if 

the decision against DOE is upheld. The Hanford estimate is part of a 

complexwide estimate of more than $100 billion if the lawsuit is not 

resolved in DOE’s favor. Our review indicates that these estimates may 

be significantly understated. During our review, DOE officials said they 

believe that their cost estimates and risk-mitigation plans are adequate, 

and that no further analysis is needed because DOE will ultimately 

succeed in the appeal or its legislative efforts. In our view, however, a 

more thorough analysis and full disclosure are needed concerning the 

potential risk this legal issue poses to the waste treatment project at 

Hanford and DOE’s other sites, including potential impacts on the 

project’s cost and schedule and the environmental risks associated with 

further delays. We believe full disclosure is important so that policy 

makers and others can undertake a more informed debate about DOE’s 

high-level waste program.

We are recommending that DOE (1) more closely follow its project 

management order and implementing guidance when developing and 

carrying out complex nuclear waste cleanup projects at Hanford and other 

DOE sites and (2) develop and disclose to Congress a full and complete 

estimate of the costs and time frames required to dispose of Hanford’s and 

the rest of DOE’s high-level tank wastes if, to comply with the law, DOE 

must dispose of a majority of its tank wastes in a high-level waste 

repository.

DOE agreed to follow more closely its project management order and 

guidance and to develop more complete information on the costs if DOE is 

required to dispose of a majority of its tank wastes in a high-level waste 

repository. However, DOE said it was unwilling to develop an alternative 

treatment and disposal plan until the outcome of the legal appeal has been 

determined. We believe that to be meaningful, any cost and schedule 

estimates DOE develops should be based on a specific alternative 

treatment plan.
Page 7 GAO-04-611 Hanford Waste Treatment Project

Background DOE’s Hanford Site in southeastern Washington State was established in 

1943 to produce nuclear materials for the nation’s defense. This production 

mission entailed dissolving used (“spent”) nuclear fuel to remove 

plutonium, uranium, and other materials and generated large volumes of 

high-level radioactive wastes. The wastes’ radioactive components decay in 

a process in which atoms of a radioactive element (also known as a 

“radionuclide”) spontaneously release dangerous radiation. Even short 

periods of exposure to intense radiation can cause health problems, 

including radiation sickness, burns, and even death. Because of the intense 

radiation emitted from high-level waste, the waste must be isolated and 

handled remotely behind heavy shielding. Some of the radioactive 

components can be very mobile in the environment and, if not checked, 

may migrate quickly to contaminate soils and groundwater. In addition to 

radioactive components, DOE’s high-level waste generally also contains 

hazardous components—including solvents, caustic soda, and heavy 

metals such as chromium. Radioactive waste components combined with 

hazardous components are referred to as “mixed wastes.”

Although DOE stopped producing nuclear material at Hanford in 1989, 

high-level waste tanks on the site now contain more than 55 million gallons 

of sludge, liquid, and a sandlike material called “saltcake.” This Hanford 

tank waste represents about 35 percent of the radioactivity and almost 60 

percent of the high-level waste inventory (by volume) within DOE. 

Hanford’s 177 underground waste tanks were constructed between 1943 

and 1986. The oldest 149 tanks have single-layer walls, or shells, and DOE 

has reported that 67 of these tanks are assumed to have leaked waste into 

the soil. All of the single-shell tanks are beyond their design life. The 28 

newest tanks have double-shells and are still in use, and DOE reports that 

these tanks have not leaked. Since 1989, DOE has spent about $7 billion to 

manage the waste and explore possible ways to treat and dispose of the 

wastes. As of May 2004, none of the high-level waste at Hanford has been 

treated for final disposal.

Treatment and disposal of high-level waste produced at DOE facilities, 

including Hanford, are governed by a number of federal laws that define 

the role of DOE and the Nuclear Regulatory Commission (NRC) in waste 

management. The Atomic Energy Act of 1954 (AEA) and the Energy 

Reorganization Act of 1974 established responsibility for the regulatory 
Page 8 GAO-04-611 Hanford Waste Treatment Project

control of radioactive materials, including DOE’s high-level wastes.4 The 

Energy Reorganization Act of 1974 assigned NRC the function of licensing 

facilities that are authorized for long-term storage of high-level radioactive 

waste generated by DOE and others.5

 The Nuclear Waste Policy Act of 

1982, as amended, defines high-level radioactive waste as “highly 

radioactive material resulting from the reprocessing of spent nuclear fuel, 

including liquid waste produced directly in reprocessing, and any solid 

material derived from such liquid waste that contains fission products in 

sufficient concentrations, and...other highly radioactive material that the 

[NRC]...determines...requires permanent isolation.”6

 The act also 

established a process for developing and siting a geologic repository (a 

permanent site deep underground) for the disposal of high-level waste and 

spent fuel. 

DOE’s past efforts to treat and dispose of Hanford’s tank wastes have been 

costly but have resulted in little progress. DOE’s initial cleanup strategy, 

developed in 1989, was to immobilize the wastes stored in the 28 most 

modern tanks because the department knew the most about the waste 

constituents in those tanks. DOE planned to defer until at least 2003 in 

deciding what to do with the waste in the remaining 149 tanks. The 

department spent about $23 million on renovating a World War II-era 

facility, in which it planned to conduct initial waste processing, before 

determining that the facility could not be upgraded to meet environmental 

standards. DOE abandoned this project in 1991. DOE continued designing a 

waste treatment facility, known as the Hanford Waste Vitrification Plant,7

that, beginning in late 1991, was expected to process the waste from all 177 

tanks. The resulting design, however, was too small to treat all of the waste 

in a time frame acceptable to regulators. In addition, under this scenario, 

4

The AEA authorized the Atomic Energy Commission (AEC) to provide for the safe storage 

of radioactive waste from defense-related activities. 42 U.S.C. § 2121(a)(3). Later, the Energy 

Reorganization Act of 1974 abolished the AEC, transferring responsibilities to the Energy 

Research and Development Administration (ERDA)—DOE’s predecessor—and NRC. 42 

U.S.C. §§ 5814, 5841. In 1977, ERDA was abolished, and its functions were transferred to the 

newly established DOE, explicitly leaving the management of the government’s radioactive 

waste in the hands of DOE. 42 U.S.C. §§ 7151(a), 7133(a)(8).

5

42 U.S.C. § 5842.

6

42 U.S.C. § 10101(12).

7

Vitrification is a thermal process of mixing the waste with glass-forming materials and 

melting it into glass. The glass is then poured into canisters for long-term storage or 

disposal.
Page 9 GAO-04-611 Hanford Waste Treatment Project

DOE would have completed the treatment facility before other aspects of 

the waste treatment program were fully developed—such as retrieving the 

wastes from the tanks. DOE abandoned this plan in 1993, after spending 

$418 million. DOE’s next cleanup attempt, begun in 1995, involved shifting 

more of the project and performance risk from DOE itself to its contractor 

through an approach called “privatization.” Under a fixed-price contract 

using this approach, the contractor would design, finance, build, 

commission, and operate waste treatment facilities on the Hanford Site for 

DOE. The department would pay the contractor for successfully processed 

waste placed in canisters. The first phase of this project was to involve 

treating about 10 percent of the waste, at a contract price of $3.2 billion. 

Between 1996 and 2000, however, the proposed contract price soared to 

more than $14 billion. In June 2000, DOE canceled the contract, after 

spending about $300 million, mostly on plant design. In December 2000, 

DOE awarded a new $4.3 billion “cost-reimbursable” contract with 

performance fee to complete the waste treatment plant that the previous 

contractor had begun to design.8

 In August 2002, DOE revised the project to 

more effectively meet regulatory milestones. DOE renegotiated the 

contract in April 2003 to reflect this revision and to address construction 

problems. In this report, we refer to DOE’s December 2000 plan as the 

“previous approach” and the August 2002 strategy as the “accelerated 

approach.” (Table 1 summarizes key project events discussed in this 

report.) 

8

Cost-reimbursement contracts provide for payment of allowable incurred costs as 

prescribed in the contract. These contracts establish an estimate of total cost and set a 

ceiling that the contractor may not exceed, except at its own risk, without the approval of 

the contracting officer. 
Page 10 GAO-04-611 Hanford Waste Treatment Project

Table 1: Key Events in the Hanford Waste Treatment Project

Source: Compiled by GAO from DOE data.

Problems at Hanford and other DOE sites have led DOE to institute 

reforms in contract and project management. DOE relies almost entirely on 

contractors to carry out its production, research, and cleanup missions. 

The department’s history of inadequate management and oversight and of 

failure to hold its contractors accountable for results led us in the early 

1990s to designate DOE contract and project management as a high-risk 

area vulnerable to fraud, waste, abuse, and mismanagement. In response to 

these and other criticisms, DOE took steps to reform its contracting and 

project management practices. On the contracting side, in February 1994, 

DOE issued a report—Making Contracting Work Better and Cost Less—

containing 48 recommendations in three key areas: selecting alternatives to 

traditional contracting arrangements used for management and operation 

of its sites, increasing competition to improve performance, and developing 

and using performance-based contracting tools. On the project 

management side, after a series of critical reviews by the National 

Academy of Sciences and others, DOE issued order 413.3 in October 2000, 

which defined requirements for DOE project management. These 

requirements include following a formal planning and decision process; 

Date Activity

December 2000 Award of plant construction contract to Bechtel National 

(previous approach)

July and September 2002 Independent reviews of the construction contract cost and 

schedule

April 2003 Bechtel National contract modification approved 

(accelerated approach)

May 2005 Alternative treatment demonstration to begin

July 2011 Bechtel National contract planned completion date

February 2018 Regulatory milestone to complete treatment of 10 percent 

of the waste by volume (25 percent of the radioactivity)

December 2028 Regulatory milestone to complete treatment of Hanford’s 

tank waste

2046 Previous DOE baseline date for completing treatment of 

Hanford’s tank waste
Page 11 GAO-04-611 Hanford Waste Treatment Project

developing key management tools, including an acquisition strategy;9 and 

implementing effective management practices, such as minimizing project 

risk by developing mitigation strategies. DOE has implemented order 413.3 

through detailed guidance it adopted in March 2003.10

DOE carries out its tank waste cleanup program under the leadership of 

DOE’s Assistant Secretary for Environmental Management and in 

consultation with a variety of regional and local stakeholders. In addition 

to the Environmental Protection Agency (EPA) and state environmental 

agencies, which have regulatory authority in the states where the sites are 

located, stakeholders include county and local governmental agencies, 

citizen groups, advisory groups, and Native American tribes. These 

stakeholders make known their views through various public involvement 

processes, including site-specific advisory boards. Over the years, much of 

the cleanup activity has been implemented under compliance agreements 

between DOE and regulatory agencies. These compliance agreements 

provide for establishing legally enforceable schedule milestones governing 

the work to be done. The operation of Hanford’s tank waste program is 

regulated under the Hanford Federal Facility Agreement and Consent 

Order between DOE and Washington State’s Department of Ecology and 

EPA. This agreement, commonly called the “Tri-Party Agreement,” was

signed in May 1989.11 At Hanford, DOE manages the project through its 

Office of River Protection, which is a congressionally established 

organization created in December 1998 to manage tank waste issues. The 

office has a staff of about 110 DOE employees and a fiscal year 2004 budget 

of about $1.1 billion. It manages Hanford’s tank waste cleanup through two 

main contracts: a construction contract with Bechtel National for a tank 

waste treatment plant and a tank farm operations contract with CH2M Hill 

Hanford Group (CHG). Through its contract, CHG manages various 

activities in support of the waste treatment project, including planning for 

9

An acquisition strategy establishes a framework within which detailed project planning and 

execution are accomplished. An acquisition strategy defines an acceptable approach to 

meeting mission requirements and the relationships between essential project elements, 

such as project management, worker safety, and contract administration.

10In this report, we refer to DOE’s order 413.3 and implementing guidance as its “project 

management initiative.”

11The purpose of the Tri-Party Agreement is to ensure that environmental impacts 

associated with past activities are addressed and that environmental laws are complied 

with. The agreement covers many other site activities in addition to the tank wastes. It also 

outlines a process for modifying the agreement if needed.
Page 12 GAO-04-611 Hanford Waste Treatment Project

the overall project, developing alternative treatment technologies, storing 

the tank waste until treatments are available, and preparing to retrieve the 

waste from the tanks for treatment.

DOE Has Revised Its 

Cleanup Approach to 

Reduce Costs and Save 

Time in the Long Term 

but Has Increased the 

Cost of Its Major 

Construction Project in 

the Short Term

By accelerating and otherwise adjusting its previous approach to the tank 

waste project—which was unlikely to meet required deadlines—DOE 

estimates that it can shorten the project’s overall time frame by almost 20 

years and lower the cost from more than $50 billion to less than $30 billion. 

To achieve these goals, DOE has expanded the capacity of the reconfigured 

treatment facilities and made other changes to the construction phase of 

the project. These changes, plus contractor performance problems, have 

increased the $4.3 billion construction contract signed in 2000 by 33 

percent, or $1.4 billion, bringing the total contract price for the 

construction project to $5.7 billion. DOE still expects to begin operating the 

waste treatment plant by 2011.

DOE’s Previous Cleanup 

Approach Unlikely to Meet 

the Required Deadlines

DOE’s December 2000 previous approach to the tank waste project did not 

define project activities beyond 2018. The department’s plan consisted of 

(1) a first phase during which facilities would be constructed and about 10 

percent of the waste would be processed by 2018 and (2) a second phase 

during which treatment capacity would be added and the remaining waste 

would be treated. The plan involved constructing three main treatment 

facilities—a waste separation facility, a high-level waste vitrification 

facility, and a low-activity waste vitrification facility—as well as various 

support facilities. Once the plant was commissioned, DOE intended to 

separate 10 percent of the waste by volume (and about 25 percent of the 

total radioactivity) into high-level and low-activity portions of the waste12

and then vitrify the separated wastes in two treatment facilities, one for 

high-level waste and the other for low-activity waste. DOE plans to 

eventually dispose of the high-level waste in a geologic repository. 

Although DOE had planned to stabilize the low-activity waste through 

vitrification as well, it plans to dispose of this waste at a facility to be 

constructed on the Hanford Site. To accomplish treating 10 percent of the 

12There is no statutory or regulatory definition of low-activity waste. At Hanford, DOE 

defines it as solidified waste that qualifies as mixed low-level waste because it is treated to 

remove radionuclides to below 10 C.F.R. Part 61 Class C concentrations and has been shown 

to meet performance objectives equivalent to those in 10 C.F.R. Part 61 Subpart C. In this 

report, we refer to this portion of the waste as “low-activity waste.”
Page 13 GAO-04-611 Hanford Waste Treatment Project

waste by 2018, DOE designed treatment facilities with the capacity of 1.5 

metric tons per day of high-level waste glass and 30 metric tons per day of 

low-activity waste glass. Although DOE reported that this treatment 

capacity was sufficient for the project’s first phase, it was not sufficient for 

treating the remaining 90 percent of the waste. Therefore, near the end of 

the first phase of the operations project in 2018, DOE intended either to 

expand the existing treatment facilities’ capacity or to adopt another 

approach. DOE had agreed with its regulators—the state of Washington 

and EPA—to more fully define the project’s second phase by 2005.13

Under the previous approach, for the second phase of the operations 

project, DOE planned to expand the capacity of the treatment facilities in 

2018 to 6 metric tons per day of high-level waste glass and 60 metric tons 

per day of low-activity waste glass and to extend project activities until 

2046—18 years beyond the date agreed upon with regulators. This decision 

came from a DOE assessment of the requirements for the project’s second 

phase, which led the department to conclude that it could not finish waste 

treatment by 2028. To meet its regulatory commitment to complete treating 

all of the waste by 2028, DOE recognized that it would need considerable 

capacity beyond what could be added to the first-phase treatment facilities. 

However, DOE also determined that it was not feasible to obtain the 

several billions of additional dollars needed to construct waste treatment 

facilities beyond what was already under construction. DOE officials 

concluded at the time that the proposed expansion was the best the 

department could do, and that it would need to renegotiate the current 

2028 regulatory deadline for completing waste treatment with EPA and the 

Washington State Department of Ecology.

Accelerated Approach 

Defined a Complete Project 

That Would Meet Regulatory 

Deadlines and Reduce Costs

In August 2002, DOE defined an accelerated approach to address the 

processing of Hanford’s tank wastes. According to the department, this 

new approach would reduce environmental risk more quickly, save billions 

of dollars over the previous approach, and allow DOE to meet its 

regulatory commitment to complete waste processing by 2028. This 

accelerated approach grew out of a DOE-wide effort to reexamine cleanup 

and to find ways to accelerate risk reduction and reduce overall cleanup 

13In the Tri-Party Agreement, DOE has agreed to retrieve and treat at least 99 percent of the 

waste altogether. If the department succeeds, about 500,000 gallons of waste, known as the 

“tank heel,” will remain when the tanks are closed. Tank heel waste and DOE’s method of 

tank closure are outside the scope of our review.
Page 14 GAO-04-611 Hanford Waste Treatment Project

costs. In addition, DOE officials saw the accelerated initiative as a possible 

vehicle for completing tank waste treatment by 2028 instead of 2046.

DOE’s accelerated approach at Hanford differs substantially from the 

department’s previous approach and has three main elements:

• Increasing the capacity of treatment facilities now under 

construction. Under the accelerated approach, the waste treatment

plant was modified to increase waste treatment capacity. Instead of one 

“melter” able to produce 1.5 metric tons of waste glass per day in the 

high-level waste vitrification facility and three melters able to produce a 

total of 30 metric tons of waste glass per day in the low-activity waste 

vitrification facility, DOE decided to incorporate two higher capacity 

melters for treating high-level waste and two higher capacity melters for 

treating low-activity waste. DOE expects the expanded facilities to have 

the capacity for 6 metric tons of high-level waste glass and 36 metric 

tons of low-activity waste glass per day. Figure 1 shows the plant under 

construction.

Figure 1: Aerial View of the Waste Treatment Plant, March 2004
Page 15 GAO-04-611 Hanford Waste Treatment Project

• Finding an alternative treatment approach for about 60 percent of the 

low-activity waste. Under the accelerated approach, DOE has 

researched a number of alternative ways to treat a large portion of the 

low-activity waste at facilities other than the low-activity waste plant 

now under construction. The main alternative DOE is currently 

investigating involves vitrifying about 60 percent of the low-activity 

waste directly in the disposal container—a process called “bulk 

vitrification.” In 2004, DOE plans to begin constructing a pilot facility to 

further develop and demonstrate the bulk vitrification process. If the 2-

year test is successful, DOE plans to construct a bulk vitrification 

facility near the other waste treatment facilities now under 

construction. In addition, DOE continues to support development of 

another potential treatment technology for this waste, a thermal 

treatment process called “steam reforming.”

• Disposing of waste whose characteristics are consistent with 

transuranic waste without vitrifying it.14 As another alternative for 

treating part of the waste, DOE has identified 2 to 3 million gallons of 

tank waste that it manages as high-level waste but believes the waste 

does not require treatment and disposal as high-level waste. DOE has 

reported that its analysis of tank records shows that waste in those 

tanks does not come from reprocessing of spent fuel and, therefore, 

does not meet the legal definition of high-level waste. DOE plans to 

manage this waste as transuranic waste and, after drying and packaging 

the waste, ship it to the Waste Isolation Pilot Plant in New Mexico for 

disposal. DOE estimates that this approach, if approved by regulators, 

could shorten the operating project time frame by at least 3 years.

DOE expects that its accelerated approach will enable it to avoid building 

another large waste treatment plant and still meet the regulatory deadline 

of completing waste processing by 2028.15 DOE also expects that 

accelerating treatment to a completion date of 2028 will reduce overall 

project costs from about $56 billion to about $27 billion. The difference 

14Transuranic waste is defined as waste containing radionuclides with atomic numbers 

higher than 92 (the atomic number of uranium) and half-lives longer than 20 years in 

concentrations exceeding 100 nanocuries per gram. 42 U.S.C. § 2014(e)(e), 40 C.F.R. § 

191.02(i).

15The Tri-Party Agreement requires DOE to report by January 2005 on the status of its 

revised approach and submit by January 2006 an updated plan for completing waste 

processing.
Page 16 GAO-04-611 Hanford Waste Treatment Project

between the two DOE estimates is $29 billion, but DOE has stated publicly 

that it expects to achieve savings of $20 billion by accelerating the project. 

However, we believe that DOE’s cost-savings estimate is significantly 

overstated. (See app. II for a discussion of our concerns about DOE’s costsavings estimate.) Table 2 summarizes the overall differences between 

DOE’s previous approach and its accelerated approach.

Table 2: Comparison between DOE’s Previous Approach (December 2000) and 

Accelerated Approach (August 2002) for Processing Hanford’s Tank Waste 

Source: Compiled by GAO from DOE data.

a

The difference between the two DOE estimates is $29 billion, but DOE has stated publicly that it 

expects to achieve a savings of $20 billion by accelerating the project. Neither savings figure 

represents savings DOE can expect to realize, however, because its cost estimates have not been 

properly developed. To address these problems, we used a present-value analysis, in which dollars are 

discounted to a common year to reflect the time value of money. See appendix II for a comparison of 

DOE’s estimated savings with our calculation.

Previous approach

Element of approach

Capacity from 

2011 to 2018

Capacity after 

2018 

Accelerated 

approach

Daily treatment capacity 

of treatment facilities:

High-level waste glass

Low-activity waste 

glass

1.5 metric tons/day

30 metric tons/day

6 metric tons/day

60 metric tons/day

6 metric tons/day

36 metric tons/day

Role of alternative 

treatment approaches, 

such as bulk vitrification

None None Treat 60 percent of 

low-activity waste 

Overall treatment 

completed

N/A 2046 2028

Life-cycle cost (2003 to 

completion in nominal 

dollars)

N/A $56 billiona $27 billiona
Page 17 GAO-04-611 Hanford Waste Treatment Project

Accelerated Approach and 

Other Project and 

Contractor Performance 

Issues Have Lengthened the 

Design and Construction 

Phases and Increased

Contract Price by $1.4 

Billion

DOE renegotiated its contract with Bechtel National to address several 

factors, including accelerating the overall project to adjust for the project’s 

changed scope, revising the project schedule to increase construction time, 

resolving contractor claims, and overcoming contractor performance 

problems that had occurred to that point. The project’s changed scope 

required design rework and other equipment and facility changes to add 

capacity in the treatment facilities and to separate a planned analytical 

laboratory from the waste separation facility. For example, in the high-level 

waste treatment facility, the contractor had to increase individual floor 

heights, resulting in the building height increasing 7 feet, to ease the 

complexity of construction and for added operational flexibility. DOE has 

estimated that these changes in scope will cost about $250 million. 

DOE and Bechtel National have also agreed that about $325 million in 

increased cost stems from Bechtel’s engineering and project management 

problems as well as from delays in completing design work. DOE and 

Bechtel National have not agreed on the cause of the remaining $850 

million in cost increases, which resulted from estimation errors and 

omissions and from various design and construction issues. However, DOE 

and Bechtel National resolved the disputed $850 million by changing the 

contract and modifying the performance incentives to hold the contractor 

more responsible for future cost increases. As a result of the contract 

renegotiation, the contract price has risen by $1.4 billion (33 percent), to 

$5.7 billion. In addition, the dates for certain interim steps of the 

construction project have been modified, although the completion date for 

the contract remains the same so that DOE can maintain its schedule to 

begin operations of the waste treatment plant by 2011 (see fig. 2)
Page 18 GAO-04-611 Hanford Waste Treatment Project

Figure 2: Key Construction Project Dates: DOE’s Previous Approach Compared with Its Accelerated Approach

a

Cold commissioning refers to testing facilities using simulated tank waste.

b

Hot commissioning refers to testing facilities using actual tank waste.

12/2000 7/2001 9/2006 2/2007 12/2007 7/2011

Contract 

signing

Begin

construction

Complete testing and

begin cold commissioninga

Complete cold commissioning

and begin hot commissioningb

7 62 5 10 43

12/2000 7/2002 1/2008 8/2008 12/2009 7/2011

Complete construction

and begin testing

Complete testing and

begin cold commissioning

19 66 7 16 19

Accelerated approach

Actual

Number of months

Complete contract

Complete contract

Complete cold commissioning

and begin hot commissioning

Complete construction

and begin testing

Previous approach

Contract 

signing

Begin

construction

Source: GAO analysis of DOE data.

Missed milestone
Page 19 GAO-04-611 Hanford Waste Treatment Project

Contract Performance 

Reforms Were in Place 

at Start of Project, 

Project Management 

Reforms Were Added 

Later 

When the contract was originally awarded in 2000, DOE implemented key 

elements of its contract performance initiative but chose not to implement 

its project management reforms. At the time, DOE had just adopted the 

project management reforms resulting from its project management 

initiative, but implementing guidance was not in place. As the waste 

treatment project got under way and performance problems began to 

surface, DOE began to put in place many of the project management 

initiative’s key elements. 

Key Contract Performance 

Reforms Were in Place 

When Contract Was 

Awarded 

At the time of the December 2000 contract award, DOE was implementing 

key elements of its contract performance initiative throughout the DOE 

complex to help improve contractor performance and achieve project cost 

and schedule goals. These elements included ensuring that the type of 

contract was appropriate for a project’s characteristics and risk level, 

competing contracts to ensure that the government receives the best offer, 

and using performance-based incentives to reward contractors for good 

performance and penalize them for poor performance. DOE has worked 

toward implementing this contract initiative, which includes these key 

elements, since 1994.16

The December 2000 Hanford waste treatment project construction contract 

incorporated key provisions of DOE’s contract performance initiative. For 

example: 

• In accordance with a key element of its 1994 contract performance 

initiative to select a project-appropriate contract type, DOE decided on 

16In 1996, we reported on DOE’s implementation of the contract performance initiative and 

noted that although the department had begun to apply the initiative’s principles in newly 

negotiated contracts, full implementation of the initiative’s requirements could take years. 

See U.S. General Accounting Office, Department of Energy: Contract Reform Is 

Progressing, but Full Implementation Will Take Years, GAO/RCED-97-18 (Washington, 

D.C.: Dec. 10, 1996). Again in 2002, we reported that although DOE had made progress in 

implementing key requirements on its projects, it needed to take additional actions to 

ensure that its projects were achieving the improved results this initiative was intended to 

achieve. See U.S. General Accounting Office, Contract Reform: DOE Has Made Progress, 

but Actions Needed to Ensure Initiatives Have Improved Results, GAO-02-798

(Washington, D.C.: Sept. 13, 2002). Further, a 1999 review by the National Research Council 

noted that DOE has taken steps to reform its contracting practices but cautioned that major 

challenges remained, such as to consistently negotiate contracts that are favorable to the 

government. See National Research Council, Improving Project Management in the 

Department of Energy (Washington, D.C.: June 1999).
Page 20 GAO-04-611 Hanford Waste Treatment Project

a cost-reimbursement contract type for the waste treatment plant. 

Following our criticisms of DOE’s earlier privatization approach,17 DOE 

decided that a cost-reimbursement contract with incentive fees would 

be more appropriate than a fixed-price contract using a privatization 

approach for the Hanford project and would better motivate the 

contractor to control costs through incentive fees.

• DOE decided that a competitive procurement was appropriate for the 

Hanford project. After holding a series of meetings with interested 

vendors to discuss contract options and how to promote competition, 

DOE established an open competition for which two competing teams—

Bechtel National and Fluor Vitrification Group—offered proposals. DOE 

selected the Bechtel National team, concluding that it offered the best 

technical approach and project management, the highest qualifications 

of key personnel, and the best record of past performance.

• Finally, DOE put in place a performance-based approach to hold the 

winning contractor accountable for meeting cost and schedule targets. 

For example, DOE provided Bechtel National with an opportunity to 

earn up to $276 million in cost incentives if it met a target cost of $3.97 

billion. In addition, the contract provided Bechtel National with $20 

million more if it met the schedule date of February 2007 for specified 

testing of the facility. Nevertheless, although the contractor could earn 

the fee for meeting these goals, the contract also included a provision 

that retaining all fees above the minimum guaranteed fee was 

conditional upon the successful completion of plant testing once 

construction was complete. If the contractor did not successfully test 

the plant at the end of construction, it would have to repay all of the 

incentive fees above the minimum. A DOE official involved with the 

project at the time said this provisional fee concept was intended to 

follow the contract reform initiative in holding the contractor 

accountable for the quality of work performed. 

After the contract was awarded, however, costs began to increase and 

delays to occur. In response, DOE further adjusted the contract’s incentive 

structure to encourage the contractor to perform better. For example, the 

initial contract fee structure stipulated that the contractor would receive a 

17See U.S. General Accounting Office, Nuclear Waste: Observations on DOE’s Privatization 

Initiative for Complex Cleanup Projects, GAO/T-RCED-00-215 (Washington, D.C.: June 22, 

2000).
Page 21 GAO-04-611 Hanford Waste Treatment Project

minimum fee of $79 million regardless of performance and set a maximum 

total fee of $595 million. In a 2003 contract modification, DOE eliminated 

the minimum guaranteed fee and required the contractor to meet a 

performance standard to earn any fees. The revised contract sets a 

maximum fee of $425 million, as follows: $200 million for meeting a target 

cost, $60 million for meeting four construction completion milestones, $54 

million for meeting other schedule requirements, and $111 million for 

meeting performance-testing criteria demonstrating the facility’s ability to 

treat the waste. DOE made this change following a 2002 review that 

concluded that the original incentives were not functioning effectively, 

because the cost had risen to a point where the contractor was no longer 

incentivized to contain costs. In internal contracting documents, DOE 

noted that the current incentive structure is better balanced and should 

increase the contractor’s motivation to control costs and, at the same time, 

improve on-time performance and operations quality.

Project Management 

Reforms Were Not in Place 

at Contract Award 

Unlike the contract performance initiative, which has existed since 1994, 

DOE’s project management initiative had just been issued at the time of the 

2000 contract award. Its provisions were in the early stages of 

implementation throughout DOE, and no formal implementation guidance 

had been issued.18 Based on good project management practices, this 

project management initiative establishes a more rigorous decision-making 

process containing specific requirements to be completed at each project 

decision point. These requirements include preparing an overall project 

strategy, performing up-front planning, and having a thorough design and 

review of these plans by headquarters. The initiative also requires

conducting risk evaluations of the projects; comparing budgeted with 

actual expenditures; and completing certain requirements, such as a 

significant portion of design, before proceeding with construction. 

Because DOE had not issued formal guidance under its project 

management initiative, reforms that the department did not implement in 

the December 2000 contract included the following:

• The project management initiative requires that a project acquisition 

strategy be developed during the early planning stages of a project. At 

18DOE order 413.3—formally adopted in October 2000—identified the basic requirements 

that DOE officials were to follow in managing their projects. Guidance outlining how the 

initiative’s requirements should be implemented was not adopted until March 2003.
Page 22 GAO-04-611 Hanford Waste Treatment Project

the time of contract award for the construction project, however, DOE 

did not have an approved acquisition strategy describing how it planned 

to meet long-term goals for treating all of Hanford’s tank waste by 

regulatory deadlines. Without such a plan, DOE could not demonstrate 

whether the plant being built under the construction contract would 

meet the long-term goals.

• DOE’s project management initiative stresses that projects must 

undergo thorough up-front planning. This process includes waiting until 

a design is at a certain level of completion before setting a firm project 

price. For simple, less-complex projects, the project management 

initiative recommends that a design be up to 35 percent complete before 

setting the project price. Although the initiative does not give a 

definitive completion design level for more complex projects, according 

to the Deputy Director for Project Management in DOE’s Office of 

Engineering and Construction Management, the aggregate design of a 

complex project should adhere to a similar standard, so that a sufficient 

level of design is completed in order to make a reasonably accurate cost 

estimate. Waiting until a design is more complete, especially on projects 

like the Hanford waste treatment plant that are complex, one-of-a-kind 

nuclear facilities, allows DOE to identify many of the design 

uncertainties and to estimate costs more accurately. Contrary to 

guidance adopted in March 2003, however, DOE set its December 2000 

contract price when the design was less than 15 percent complete.

• The project management initiative recommends that a project’s baseline 

be reviewed and validated throughout the life of the project. According 

to independent reviews performed in 2002, DOE awarded the Hanford 

construction contract with a project cost baseline—$3.97 billion—that 

had not been appropriately validated.19 Instead, the contract included a 

requirement that the contractor review the previous contractor’s design 

and cost—or perform a “due diligence” review—after signing the 

contract to assess needed changes to ensure that the facility would meet 

requirements. The independent reviewers concluded that this due 

diligence requirement had left it ambiguous regarding whether changes 

in the project’s scope proposed by the contractor would be allowed as 

19See U.S. Department of Energy, External Independent Review, Independent Cost Review:

CD-3C Review of the Waste Treatment and Immobilization Plant Project (Washington, 

D.C.: September 2002), and Report of the Independent Team for the Hanford Waste 

Treatment Plant Project Review (Washington, D.C.: July 1, 2002).
Page 23 GAO-04-611 Hanford Waste Treatment Project

contract cost increases. As a result, the project was more vulnerable to 

increasing costs.

• DOE’s project management initiative recommends that cost and 

schedule baselines be fully achievable and that, to ensure a “high” 

confidence of success, they build in appropriate contingency funding in 

case of unforeseen events—that is, additional funding and schedule 

flexibility based on a project’s degree of risk. In the December 2000 

contract, however, DOE accepted a project cost and schedule baseline 

that had only a 50 percent chance of succeeding on time and within 

budget, according to an internal DOE assessment of the construction 

contract. A subsequent independent review of the project found that 

both the project cost and the contingency allowance were too low for a 

project of this complexity, and the reviewers recommended raising the 

estimated project cost and the contingency allowance to provide the 

project with an 80 percent chance of success.

DOE proceeded with the December 2000 contract award without putting 

these key project management requirements in place for two main reasons. 

First, according to the former Deputy Manager of the Hanford waste 

treatment project, the department believed that it had already met the 

intent of its project management initiative—for example, defining the 

“mission need,” or what the project was intended to accomplish, and 

specifying certain design and engineering requirements in the early 

planning and design stages under the previous contractor. DOE also had a 

system in place to monitor financial information and report on the project’s 

financial status, as required under the project management initiative. 

Furthermore, the December 2000 contract included requirements for the 

contractor to develop project management documents either identical or 

similar to those under the project management initiative. For example, the 

contract required the contractor to develop a project execution plan, 

summarizing critical information necessary to manage a project. The 

contract also required a quarterly risk assessment report, which met 

certain project management requirements for effective risk management. 

At the time, the then Assistant Secretary of Environmental Management 

said that, with these steps, the project had met the “equivalent” of many 

project management requirements and could move forward, despite not 

having officially followed the requirements for the earlier planning stages. 

Second, these decisions were made while the department was undergoing 

regulatory pressure to keep the cleanup moving forward. For example, 

after canceling the earlier (privatization) contract in June 2000, DOE 

committed to awarding a new construction contract by January 2001, and 
Page 24 GAO-04-611 Hanford Waste Treatment Project

the state of Washington was threatening to take legal action if DOE missed 

that deadline. DOE had agreed to begin construction by July 2001, and it 

wanted to demonstrate that it could meet this regulatory milestone.

Since 2002, DOE Has Been 

Implementing Management 

Practices Aimed at 

Strengthening Management 

of the Construction 

Contract

Two independent reviews in the midst of performance problems after the 

2000 contract award identified significant project management deficiencies 

and recommended fuller implementation of project management reforms. 

These reviews found that many of the required project-planning documents 

were either in draft form or inadequately prepared. For example, the 

reviewers found that DOE’s draft project execution plan was outdated and 

incomplete. In addition, the reviewers noted that the December 2000 

contract cost estimate was understated, and, therefore, the actual cost of 

the project had not been communicated to DOE headquarters or to 

Congress. Furthermore, the reviewers observed that the aggressive 

schedule in the baseline was unrealistic. Maintaining such a schedule 

would compound the risk of further unanticipated cost increases. The 

reviewers recommended that the baseline not be approved with its existing 

schedule, but rather that the cost and schedule targets be increased to a 

more realistically attainable goal. In addition to recommendations from 

these reviews to more fully implement project management requirements, 

directions in 2002 from the Assistant Secretary for Environmental 

Management strongly emphasized adhering to project management 

requirements on all DOE projects.

Following the independent reviews’ recommendations, DOE has been 

implementing its project management initiative on Hanford’s waste 

treatment project, putting in place certain requirements lacking in the 

December 2000 contract, including the following:

• Developing a project acquisition strategy. DOE is now developing a 

plan (acquisition strategy) for how it will meet overall waste treatment 

goals for the project. This strategy addresses how DOE can process all 

of its waste by the 2028 regulatory milestone. As of May 2004, this 

acquisition strategy was under development.

• Setting a contract price after design is at a greater level of completion.

When DOE renegotiated the construction contract price of nearly $6 

billion in its April 2003 modification, plant design was about 40 percent 

complete. A March 2003 internal DOE review of the proposed change to 

the contract price, which is based on a greater level of design 

completion, stated that the new price appears to be more reasonable.
Page 25 GAO-04-611 Hanford Waste Treatment Project

• Proceeding with a baseline that has been reviewed and approved. The 

Hanford waste treatment project is now operating under a baseline that 

has been validated and approved by DOE headquarters, and additional 

management practices have been put into place by the current 

management to take a more disciplined approach to keeping the project 

cost and schedule on track. When it renegotiated the contract price in 

April 2003, DOE had established a “minimum essential” initiative in 

which it identified areas of work, such as construction of a container 

storage building, that it believed were not essential to successful project 

operation, thus helping to reduce the project’s overall cost. At the 

contract renegotiation, DOE identified about $67 million in work that 

was unnecessary to the project and could be eliminated.

• Increasing contingency funding for unforeseen cost increases. The 

April 2003 revised project baseline included $550 million in contingency 

funding to allow DOE an 80 percent chance of meeting the contract cost 

and schedule. To better control the use of this funding, DOE also 

implemented a joint DOE-contractor managed board to authorize which 

unforeseen cost increases will be funded using contingency funds. DOE 

established this board to more tightly ensure that unforeseen project 

changes do not increase the current cost baseline. In addition to this 

contingency, DOE also set aside another $100 million for unforeseen 

technical and programmatic risks.

Even with these steps, further concerns about the project’s baseline cost 

and schedule exist. For example, out of concern about the reliability of the 

project’s renegotiated cost and schedule, the conference report 

accompanying the Energy and Water Development Appropriations Act for 

2004 directed the U.S. Army Corps of Engineers to conduct a detailed, 

independent review of the project’s cost and schedule baseline. The report 

is to be issued to the House and Senate Committees on Appropriations and 

may be available to the public by early summer 2004.
Page 26 GAO-04-611 Hanford Waste Treatment Project

Not Implementing Key 

Project Management 

Reforms at Start of the 

Construction Project 

Has Added to DOE’s 

Challenges

DOE’s decision not to implement the project management initiative at the 

beginning of the Hanford waste treatment construction project has 

increased the risks and uncertainties the department will face in 

completing both the construction project and the operations project to 

clean up the Hanford Site. Three main consequences of DOE’s failure to 

implement project management reforms earlier are heightened risk from 

using a fast-track approach for plant construction, missed potential costsaving opportunities, and lack of a sufficient risk management strategy for 

DOE to address legal challenges to its waste treatment strategy.

Fast-track Project 

Management Approach 

Increases the Risk of 

Encountering Problems

To minimize the time required to complete construction, DOE has followed 

a fast-track approach to the construction project, carrying out plant design, 

construction, and technology development activities simultaneously. Under 

this approach, design and construction activities take place in stages, with 

construction of some sections of a facility under way before those sections 

are fully designed. DOE’s project management initiative, however, cautions 

that such a fast-track, design-build approach should be used only in limited 

situations, such as when work scope requirements are well defined, the 

project is not complex, and technical risks are limited. When these 

conditions do not exist, a fast-track approach is a risky management 

strategy. According to DOE’s project management guidance, a fast-track 

approach to large, complex, one-of-a-kind projects is inherently high risk.

The construction project at Hanford departs from conditions appropriate 

for fast-track management. For example, DOE has acknowledged that the 

waste treatment plant is the largest, most complex environmental cleanup 

project in the United States. The plant incorporates waste treatment 

processes that have never previously been combined into facilities the size 

and capacity of those envisioned at Hanford. Furthermore, key 

uncertainties still exist regarding the condition of the waste to be treated 

and the best technologies to use for certain treatment processes.

Despite these risks, DOE has chosen this approach to keep the 

construction project moving forward so that the plant can be completed in 

time to meet regulatory milestones. DOE selected a contractor for the 

December 2000 contract award that, it believed, had experience with the 

fast-track approach and would be able to maintain the contract schedule. 

DOE also took steps to manage the increased risk associated with a fasttrack approach, establishing contingency funding measures in case of 
Page 27 GAO-04-611 Hanford Waste Treatment Project

unforeseen occurrences and linking performance fees specifically to cost 

and schedule goals. 

Despite the risk-mitigation actions taken in 2003, the fast-track approach 

may result in continuing problems on the construction project. For 

example:

• Construction is outpacing design, resulting in delays in completing 

planned work. Although DOE doubled the funding for engineering and 

other professional services to help ensure that design work was 

completed on schedule, construction has outpaced design. This lag has 

delayed completion of interior walls in the treatment facilities and led to 

the need to temporarily reassign construction workers to other tasks. 

According to the DOE construction project manager, the project 

baseline has not yet been affected, but if the problem persists, both cost 

and schedule could be affected.

• Shortening the facility commissioning period may limit plant 

reliability. In its April 2003 contract modification, DOE extended the 

construction schedule by 16 months because of delays and design 

changes. To complete the construction project by 2011 while increasing 

the construction phase, DOE reduced by nearly the same period the 

commissioning phase, when the facilities’ complex treatment processes 

will be tested and brought into sound working order. Because of this 

shorter commissioning time, DOE reduced the testing to be conducted 

on actual wastes. As a result, the contractor plans to test only two of 

Hanford’s four waste types during this period. According to experts we 

contacted, including former DOE and contractor officials and industry 

technology development managers who have been involved in plant 

start-up operations, this commissioning approach could overlook 

significant problems until after the plant becomes fully operational. 

These experts have noted that corrective actions at that time could be 

more costly and time-consuming than if the problems were found during 

the commissioning phase. DOE Hanford managers have countered that 

although the period for testing plant operations using actual wastes has 

been reduced, the period for testing simulated waste has been expanded 

by several months. While they expect operational challenges during the 

commissioning period, DOE officials believe that their current 

commissioning strategy will be sufficient to test the plant adequately.

• Resolving key technical challenges for processing the waste has fallen 

behind. To keep the construction project on schedule, DOE has 
Page 28 GAO-04-611 Hanford Waste Treatment Project

acknowledged that it needs to expedite the resolution of key technical 

challenges facing the project. One such challenge involves the 

generation of hydrogen gas during waste separation activities. The 

Defense Nuclear Facilities Safety Board stated in October 2002 and 

again in September 2003 that problems with this flammable gas, 

involving buildup of gas in excess of safety limits, could result in 

significant safety and operational problems. Bechtel National has been 

addressing this issue through design changes. However, even though it 

has been more than 1 year since the Board first raised this issue, this 

problem has yet to be fully resolved. An even more critical technical 

challenge involves how the wastes are mixed during treatment 

processes. To expedite resolution of this technical challenge, Bechtel 

National initially decided to rely on computer modeling of special 

mixers, called “pulse jet mixers.” But because computer modeling did 

not provide adequate assurance that the mixers would work, the 

contractor decided in April 2003, just 9 months before the design 

configuration for the mixers was to be completed, to conduct more 

stringent tests. Efforts to resolve the uncertainties associated with the 

mixers have delayed the testing schedule by more than 4 months, 

increased costs by more than $15 million, and postponed the purchase 

of several thousand feet of pipe for the treatment facilities. In March 

2004, Bechtel National reported that modifying the facility design to 

reflect improvements to the mixers could require an additional $70 

million and take about 16 months to complete. In its March 2004 

monthly contract status report, Bechtel National stated that such delays 

have affected the project’s critical path and will increase costs.

• Depending on a technology not fully tested on Hanford tank wastes to 

meet regulatory milestones. To meet its regulatory milestone for 

completing treatment of Hanford’s tank waste by 2028, DOE is 

attempting to incorporate a technology before its effectiveness has been 

fully demonstrated on Hanford’s tank wastes. For example, DOE is 

relying heavily on the assumption that a treatment technology called 

“bulk vitrification” will succeed. Although this technology is being 

managed outside of the scope of DOE’s construction project, it is critical 

to the cleanup program because the technology is expected to treat up 

to 60 percent of the Hanford’s low-activity waste. DOE’s current plans 

depend on this technology to meet its 2028 cleanup date, even though its 

effectiveness has not been fully tested. As a result, to demonstrate that 

this technology will work on Hanford’s tank wastes, DOE has adopted 

an aggressive schedule to begin constructing a pilot facility later in 2004 

and to conduct formal testing over about 2 years, beginning in May 2005. 
Page 29 GAO-04-611 Hanford Waste Treatment Project

Although initial tests with simulated waste have led DOE to consider 

this technology promising, Hanford’s waste management director has 

stated that the size and treatment capacity of a full-scale plant cannot be 

confirmed until testing is completed. Because DOE is relying on bulk 

vitrification to process the majority of low-activity waste, any problems 

in developing this treatment capability will likely extend the duration of 

the waste treatment project and increase its overall cost. DOE’s initial 

schedule may already be threatened because awarding a contract to 

build the test facility is about 6 months behind schedule.

Beyond these potential problems with the construction project, the fasttrack approach raises other concerns. First, DOE’s construction project 

manager has acknowledged that the schedule for constructing and testing 

facilities and concurrently resolving technical issues continues to be high 

risk. In addition, Bechtel National reported in January 2004 that it was 

concerned about being able to meet its planned construction schedule. 

Second, engineering and construction experts we contacted within the 

industry, national research organizations, and academia expressed concern 

that proceeding with DOE’s fast-track approach could create higher costs, 

schedule delays, and facilities not fully capable of treating the waste. Third, 

a 2002 study by the National Research Council reported that DOE should 

proceed with caution when managing “first-of-a-kind” projects using a fasttrack approach.20 The council concluded that developing technology 

concurrently with project engineering, design, and construction activities 

increases an already high degree of uncertainty. The council said such 

projects are risky, costly, and likely to produce facilities needing significant 

modifications to ensure that they will work properly. Fourth, the Defense 

Nuclear Facilities Safety Board cautioned in June 2002, and again in March 

2004, that a fast-track approach could lead to expensive plant 

modifications or to the acceptance of increased public health and safety 

risks. Finally, DOE’s record with the fast-track approach on complex 

20See National Research Council, Progress in Improving Project Management at the 

Department of Energy, 2002 Assessment (Washington, D.C.: National Academies Press, 

2003).
Page 30 GAO-04-611 Hanford Waste Treatment Project

nuclear cleanup facilities is not good.21 DOE could not identify for us a 

single instance where this approach to constructing a large, complex 

nuclear cleanup facility resulted in a project that was completed on time 

and within budget.

Delays in Evaluating Risks 

and Costs Associated with 

Waste Separations May Cost 

$50 Million or More

DOE has delayed evaluating the most desirable approach to take in 

separating waste components before further waste treatment can occur. 

Separating Hanford’s waste into its various components is crucial to DOE’s 

treatment and disposal plans, and, as of April 2004, DOE was relying on a 

single supplier of a costly key substance in the separation process. Waste 

separation involves sequential filtering and removing major high-level 

constituents, such as cesium-137 and strontium-90, from the waste. The 

separation process at Hanford includes a technology called “ion exchange,” 

in which the waste flows through columns containing a specially designed 

substance, or resin, that chemically collects specific high-level waste 

components on its surface as they pass through the columns. The high-level 

waste components are then washed from the resin and accumulated as part 

of the high-level waste stream. Bechtel National will obtain this resin from 

a single, small supplier.

DOE faces two significant risks regarding resin supply: acquiring the resin 

in sufficient quantities to operate the separation facility and the cost of the 

resin DOE selected. The first risk is that DOE decided to acquire the resin 

from a small supplier that may not have the long-term production capacity 

to supply the resin in required quantities—about 6,250 gallons per year. In a 

December 2003 letter to Bechtel National, the manufacturer stated it can 

produce 1,600 gallons of resin over a 12-month period to meet initial 

commissioning needs. Although the manufacturer assured Bechtel 

National that it will eventually be able to produce enough resin for fullscale treatment operations, as of April 2004, contractor and DOE 

management officials had not verified that the supplier actually has this 

21We have reported on the cost and schedule problems associated with DOE’s use of a fasttrack, design-build approach in our reviews of other DOE projects. For example, see U.S. 

General Accounting Office, Nuclear Waste: Hanford Tank Waste Program Needs Cost, 

Schedule, and Management Changes, GAO/RCED-93-99 (Washington, D.C.: Mar. 8, 1993); 

Nuclear Waste: Department of Energy’s Project to Clean Up Pit 9 at Idaho Falls Is 

Experiencing Problems, GAO/RCED-97-180 (Washington, D.C.: July 28, 1997); Nuclear 

Waste: Process to Remove Radioactive Waste from Savannah River Tanks Fails to Work,

GAO/RCED-99-69 (Washington, D.C.: Apr. 30, 1999); and Nuclear Waste: Management 

Problems at the Department of Energy’s Hanford Spent Fuel Storage Project, GAO/TRCED-98-119 (Washington, D.C.: May 12, 1998).
Page 31 GAO-04-611 Hanford Waste Treatment Project

capacity. These officials stated that they are relying on the manufacturer’s 

December 2003 assurance that it can produce the quantity of resin needed 

for full-scale operations. Bechtel National stated that it is not responsible 

for ensuring that the supplier can provide resin beyond its plant 

commissioning commitments. The second risk is the potentially high cost 

of purchasing the resin from a single source without price competition. 

Information obtained in December 2003 indicates that the resin may cost 

about $10,000 per gallon. Over a single year of operating the separation 

facility, resin costs alone could amount to about $62 million. According to 

the project’s research and technology manager, however, it may be possible 

to use an alternative, that may be an equally effective but significantly less 

expensive resin, that may be available from commercial suppliers. This 

alternative resin may cost about $1,000 to $2,000 per gallon, or about $6 

million to $12 million per year. DOE and contractor officials, including the 

research and technology manager and the project’s manager, confirmed 

that pursuing an alternative resin could substantially increase the reliability 

of supply and reduce plant operating costs.

DOE has taken steps to address these project risks, but delays in 

developing a viable risk-mitigation strategy may cost DOE $50 million a 

year or more in lost savings opportunities. As early as its December 2000 

contract award date, DOE recognized that depending on a single resin 

source was high risk. Although Bechtel National began evaluating 

alternative resins in 2002, DOE took no formal action on the issue until 

2003. After we and others raised this issue with DOE in early 2003, the 

department modified the contract in April 2003 to require the contractor to 

continue research on alternative resins for use as an option to the resin 

specified in the December contract. Initial testing on alternative resins, 

completed by the contractor in late 2003, showed promising results for a 

resin costing significantly less than the original. Given the estimated cost of 

the two resins, the potential cost savings of using the alternative resin for 1 

year of operation could result in a savings of between $50 million to $56 

million, according to the project manager. The contractor, however, did not 

aggressively pursue development of an alternative resin, even though it was 

authorized to do so, deciding to defer any significant exploration of 

alternative resins until fiscal year 2007 or later. The contractor explained 

that an alternative resin was not needed to achieve its contractual 

commitment of delivering an operational facility. In addition, the 

contractor was unsure whether it could successfully develop another resin 

in time for plant commissioning and said that spending money on an 

alternative resin could worsen projected 2005 and 2006 funding 

constraints.
Page 32 GAO-04-611 Hanford Waste Treatment Project

In late February 2004, DOE directed Bechtel National to test and qualify an 

alternative resin in time for commissioning the separation facility. Although 

testing an alternative resin is important in properly managing project risk, 

with the limited time to certify an alternative resin, DOE could for several 

years after treatment operations begin be exposed to the risk of having an 

uncertain supply of resin available to support waste separation operations 

and of having to pay a higher cost for the resin. The contractor will have 

about 2 years to fully test and qualify an alternative resin if the resin is to be 

available for procurement by mid-2006 and for plant commissioning in 

2008. Two years may be too little time because the qualifying process took 

nearly 10 years for the original resin. Even if the contractor can 

successfully qualify the resin within 2 years, it will still have to obtain 

sufficient quantities for plant commissioning. The contractor’s research 

and technology manager told us that this schedule is extremely tight and 

will be challenging to meet. Thus, DOE may for considerable time be 

dependent on the production capability and pricing of a single supplier for 

a substance critical to the waste separation process.

DOE Has Not Adequately 

Assessed or Mitigated a 

Legal Challenge to Its Highlevel Waste Treatment 

Strategy

A third challenge DOE must address to successfully manage its waste 

treatment project is to fully assess the risks of a legal challenge to its 

approach for treating and disposing of the tank wastes and to develop an 

adequate mitigation strategy for addressing those risks. DOE’s project 

management initiative requires that the department assess significant risks, 

quantify the potential impacts, and develop a mitigation plan for addressing 

these risks. DOE, however, has not fully assessed the risks associated with 

the legal challenge, has only very rough estimates of the potential impacts 

on the waste treatment project’s cost and schedule, and has not developed 

a comprehensive mitigation strategy. 

Legal Challenge to DOE’s Highlevel Waste Treatment and 

Disposal Strategy Threatens to 

Derail Cleanup

DOE had developed a process for determining the conditions under which 

some of its tank wastes could be considered for disposal as other than highlevel waste. This process was defined in DOE order 435.1 and was generally 

called a process for determining that certain waste resulting from 

reprocessing is “waste incidental to reprocessing.”22 To meet criteria set 

forth in this order for considering tank wastes as other than high-level 

wastes, DOE had to determine that the waste (1) has been or will be 

22The phrase “waste incidental to reprocessing” refers to wastes resulting from reprocessing 

spent nuclear fuel that DOE considers not to be high-level waste.
Page 33 GAO-04-611 Hanford Waste Treatment Project

processed to remove key radioactive components to the maximum extent 

technically and economically practical; (2) will be disposed of in 

conformance with the safety requirements for low-level waste as 

established in NRC regulations; and (3) will be put in a solid physical form 

and not exceed radioactivity levels set by NRC for the most radioactive 

category of low-level waste, referred to as “Class C standard.”23 Once 

satisfied that these requirements were met for a specific segment of the 

waste, DOE planned to obtain a technical review of this determination 

from NRC. NRC’s role was to determine whether DOE had appropriately 

followed the criteria in order 435.1.24 After a favorable determination from 

NRC, DOE would have considered the waste segment to be “incidental” 

waste for purposes of treating and disposing of the waste.

The legal basis of DOE’s plan to apply different treatment and disposal 

approaches to segments of its tank wastes has been challenged in the 

courts. In March 2002, a lawsuit filed by the Natural Resources Defense 

Council and others challenged DOE’s authority to proceed with its planned 

approach. The plaintiffs argued that DOE’s plan violated the Nuclear Waste 

Policy Act by allowing high-level radioactive waste to be classified and 

treated as something other than high-level waste. In a brief in support of 

their position, plaintiffs expressed the concern that DOE would use its 

incidental waste determination process to permanently leave intensely 

radioactive waste in the tanks after only minimal treatment. In a July 2, 

2003, federal district court ruling, the court agreed with the plaintiffs that 

the portion of DOE’s order 435.1 setting out its incidental waste 

determination process violated the Nuclear Waste Policy Act and found 

that that part of the order was invalid. The court concluded that the act 

“allows DOE to treat the solids to remove fission products, thereby 

permitting reclassification of the waste,” but does not permit the same 

option for the liquid portion of the waste, which may not be reclassified 

and must be treated as high-level waste.25 This ruling poses a significant 

barrier to DOE’s plan to segment the tank wastes for treatment and 

disposal purposes, and it raises the possibility that DOE might need to find 

23As specified in NRC regulations (10 C.F.R. § 61.55(a)(2)(iii)), Class C low-level waste must 

meet the most rigorous requirements for low-level waste form to ensure stability and 

requires additional measures at the disposal site to protect against inadvertent intrusion.

24Although order 435.1 does not require DOE to obtain NRC’s concurrence with its 

incidental waste determinations, DOE did so to obtain an independent assessment of its 

evaluation of waste as incidental to reprocessing.

25Natural Resources Defense Council v. Abraham, 271 F.Supp.2d 1260 (D. Idaho 2003).
Page 34 GAO-04-611 Hanford Waste Treatment Project

an alternative strategy to its accelerated approach for cleaning up 

Hanford’s tank wastes. DOE has appealed this decision.

DOE’s Risk Assessment and 

Mitigation Planning Are 

Inadequate

DOE’s project management initiative defines risk as “the measure of the 

potential inability to achieve overall project objectives within defined 

scope, cost, schedule and technical constraints” and emphasizes that all 

projects should have a risk assessment and mitigation strategy. Such an 

assessment must identify any technical, cost, or schedule risks to the 

project; quantify potential cost and schedule impacts; and develop and 

implement a strategy to mitigate or properly manage those risks. According 

to the Deputy Director for Project Management in DOE’s Office of 

Engineering and Construction Management, which oversees 

implementation of DOE’s project management initiative, managers should 

analyze both the consequence to the project if the risk occurs and the 

likelihood of a risk’s occurring. He noted that if the potential impact to the 

project is significant and the likelihood of a risk occurring is highly 

probable, DOE managers must develop a formal risk-mitigation plan 

detailing the potential risks, impacts, and actions taken and planned to best 

mitigate the risk. The project management initiative describes effective risk 

management as “an essential element of every project” and makes it clear 

that risk management should occur continuously throughout a project. 

DOE has not conducted a thorough risk assessment of the potential effects 

of the legal challenge on the Hanford tank waste treatment project. 

Although a draft internal study concludes that the legal challenge presents 

a high risk to DOE’s high-level waste program,26 DOE has only very rough 

estimates of the consequences for its cleanup program. These estimates, 

which are not part of Hanford’s formal risk management plan, cover both 

near-term impacts on cost and schedule if the lawsuit delays cleanup but is 

ultimately resolved in DOE’s favor and long-term impacts if the outcome 

continues to go against DOE. The department estimated that in the near 

term, a 2-year slip in cleanup would cost an additional $350 million at

26See Department of Energy, High-Level Waste—Risk Reduction Project (HLW-RPP): 

Managing Waste to Reduce Risk—HLW (Washington, D.C.: May 20, 2003).
Page 35 GAO-04-611 Hanford Waste Treatment Project

Hanford. We found no analysis supporting this estimate.27 DOE officials 

said this $350 million near-term estimate was not tied to specific activities 

on the waste treatment project but represented the approximate cost of an 

extra year of maintaining waste in the tanks. Regarding the long-term 

impacts if DOE must treat and dispose of all of its tank wastes as high-level 

waste, DOE has provided rough, unvalidated estimates for both the 

Hanford site ($19 billion) and its entire high-level waste program (more 

than $100 billion). Again, we found little rigorous analysis to support either 

estimate. For example, the $19 billion Hanford estimate is based, in part, on 

a configuration and capacity of the low-activity treatment facility that DOE 

is no longer considering because that configuration could result in an 

unacceptably high heat load. The Hanford estimate also includes a 

potential cost of $6 billion to remove and dispose of 149 tanks after waste 

has been retrieved. Information that DOE provided to us in April 2004, 

however, indicates this cost could be closer to $67 billion. Further, the $19 

billion Hanford estimate does not include the additional costs to DOE for 

disposing of approximately 86,000 more canisters of treated waste than 

currently planned in a deep geological repository. On the basis of a recent 

disposal estimate of $650,000 per canister, this cost alone could add $56 

billion to the Hanford estimate.28 The estimate for Hanford is part of DOE’s 

complexwide estimate of “more than $100 billion” cost impact if outcomes 

continue to go against DOE. These revised Hanford estimates and other 

recent information from DOE indicate that the department’s complexwide 

estimate of more than $100 billion may also be significantly understated. 

For example, within its $100 billion estimate, DOE included $30 billion for 

disposal of additional canisters that would be produced complexwide. In 

response to our request, however, DOE acknowledged the $30 billion was 

too low and recalculated the figure, resulting in a revised estimate of more 

than $90 billion for this component of its complexwide estimate.

27During DOE’s fiscal year 2003 financial statement audit, DOE provided its independent 

auditors with the $350 million estimate for Hanford, based on a delay in selecting a 

supplemental technology for treating low-activity waste. According to the contractor’s 

project manager, however, as of April 2004, DOE was moving forward with trying to award a 

contract to test and develop bulk vitrification, the technology DOE has tentatively selected 

to treat a majority of Hanford’s low-activity waste.

28DOE originally estimated $30 billion to dispose of approximately 180,000 additional 

canisters at a geological repository. DOE did not define how much of the $30 billion applied 

to each site, but recently the department recalculated those costs and acknowledged that 

this cost could be $43 billion at Hanford alone (based on a per canister cost of $500,000). We 

used the most recent per canister disposal cost of $650,000 provided to us by the 

department in arriving at our estimate of $56 billion.
Page 36 GAO-04-611 Hanford Waste Treatment Project

A main aspect of DOE’s risk-mitigation planning—its pursuit of a legislative 

remedy—has also been inadequate.29 Regarding the legislative remedy, 

DOE has not been effective in developing complete and objective 

supporting information and effectively communicating that information to 

decision makers or other stakeholders. In addition to using only rough 

estimates, DOE has raised stakeholder concerns about its true intentions. 

For example, after the court ruling, DOE drafted proposed language to 

amend the Nuclear Waste Policy Act of 1982, as amended, to give DOE 

specific authority to make incidental waste determinations.30 The state of 

Washington and others raised concerns that the proposed language would 

leave DOE with too much discretion regarding how to make these 

determinations. The state of Washington has been concerned that DOE 

may use such authority to permanently and inappropriately leave highly 

radioactive waste in the tanks. To date, DOE has not been effective in 

countering these concerns or in explaining to its stakeholders or other 

decision makers why the incidental waste determination process is in the 

public’s best interest.

The potential consequences for Hanford’s tank waste project, and for 

DOE’s other high-level waste sites, could be far-reaching and significant. 

DOE’s own analysis suggests several consequences could occur. In the 

worst case, wastes could remain on-site untreated for longer periods of 

time, posing a continued threat to workers, the public, and the 

environment. Complexwide, DOE would likely need to find a different 

strategy to treat all of its tank waste for disposal at a geologic repository. 

Treated waste, at much larger volumes than now estimated, could 

overwhelm the currently planned geologic repository, hastening the need 

for additional repository capacity. For example, DOE estimates that it 

would need to send an additional 180,000 canisters of waste from all sites 

to a repository if it must dispose of most of its waste as high-level waste. 

DOE’s current plans call for sending about 20,000 canisters to a repository. 

Furthermore, the plant now under construction at Hanford may not be 

configured to most effectively treat waste if all of the waste is destined for 

29DOE’s other main risk-mitigation approach involves appealing the court ruling. After the 

July 2003 decision, DOE appealed to the Ninth Circuit Court of Appeals. As of May 2004, no 

date had been set for oral arguments in this case.

30Before the court ruling, we had recommended that DOE seek clarification of its authority 

from Congress. See U.S. General Accounting Office, Nuclear Waste: Challenges to 

Achieving Potential Savings in DOE’s High-Level Waste Cleanup Program, GAO-03-593

(Washington, D.C.: June 17, 2003).
Page 37 GAO-04-611 Hanford Waste Treatment Project

a repository. For example, all of the tank wastes may need to be treated 

through the waste treatment plant, making supplemental technology 

development unnecessary. Since the current plant would be unable to 

process all of the tank waste by 2028 without using supplemental 

technologies, DOE may need to consider alternatives, such as building a 

second waste treatment plant. DOE does not currently have estimates of 

these scenarios.

Despite these deficiencies in risk assessment and mitigation planning, DOE 

believes its current risk assessment and mitigation plan are sufficient. 

According to DOE, its cost estimates were intended only to illustrate 

potential impacts to its high-level waste program in a worst-case scenario, 

and, because the department believes it will ultimately be successful either 

in the appeals process or through legislative avenues, a more detailed risk 

assessment is not needed. In our view, the uncertainties associated with 

this legal challenge to its waste treatment program are precisely why DOE 

needs a thorough and objective assessment of the risks and a mitigation 

plan that includes complete and effective communication with decision 

makers and other stakeholders.

Conclusions After years of effort and after spending hundreds of millions of dollars and 

making several false starts, DOE is now constructing a plant to use in 

treating and preparing for disposal of a major portion of Hanford’s highlevel tank wastes. But DOE began plant construction before it had a 

complete acquisition strategy in place, and it is carrying out technology 

development, plant design, and construction activities simultaneously. In 

going forward, DOE faces significant challenges that will likely continue to 

affect cost and completion dates, including the challenge of continuing to 

manage concurrent development, design, and construction. DOE will need 

to minimize the cost and schedule growth that will likely continue and to 

take full advantage of cost-reduction opportunities over the life of the 

project. DOE must also carefully assess and manage the implications of 

legal challenges to its overall approach to treating and disposing of highlevel tank wastes. We believe that full disclosure of the potential impacts to 

its high-level waste program is important so that policy makers and others 

can undertake a more informed debate.
Page 38 GAO-04-611 Hanford Waste Treatment Project

Recommendations for 

Executive Action

We recommend that the Secretary of Energy take the following two 

actions:

• follow more closely DOE’s project management order and implementing 

guidance when acquiring complex nuclear waste treatment plants at 

Hanford and other DOE sites, especially by avoiding a fast-track, 

concurrent approach to the design, technology development, 

construction, and testing of such plants, and

• develop and provide to Congress a plan that includes an estimate of the 

costs and time frames needed to treat and dispose of Hanford’s and the 

rest of DOE’s high-level tank wastes if the current court ruling is upheld 

and if a majority of DOE’s tank wastes must be disposed of in a highlevel waste repository.

Agency Comments and 

Our Evaluation

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

written comments, DOE’s Assistant Secretary for Environmental 

Management generally agreed with the report’s recommendations. The 

Assistant Secretary also provided technical comments as an enclosure to 

the letter, which we have incorporated as appropriate. DOE’s written 

comments on our draft report are included in appendix III.

Regarding the report’s two recommendations, DOE agreed to follow more 

closely its project management guidance when acquiring complex nuclear 

waste treatment plants, especially by avoiding a fast-track, concurrent 

approach to designing and constructing such plants. Concerning our 

recommendation to develop and provide to Congress a plan that includes 

an estimate of the costs and time frames to treat and dispose of DOE’s highlevel wastes, if a majority of the wastes must be disposed of in a high-level 

waste repository, DOE agreed that it should develop more complete 

information on the costs to give Congress a better sense of the magnitude 

of those costs. However, DOE said it was unwilling to develop an 

alternative treatment and disposal plan until the outcome of the legal 

appeal has been determined. In our view, to be meaningful, any cost and 

schedule estimates that DOE develops should be based on a specific 

alternative treatment plan.

In an enclosure to the letter, DOE disagreed with our view that it should 

use present values when disclosing the cost savings between alternative 

approaches. DOE said that present-value techniques tend to hide the full 
Page 39 GAO-04-611 Hanford Waste Treatment Project

value of future costs due to discounting, and that using current dollars 

provides for a more direct comparison with a project’s life-cycle cost and 

DOE’s budget. However, although using current dollar estimates may be 

appropriate for budget purposes, as we discuss in our report, standard 

economic analysis as well as Office of Management and Budget guidelines 

(see app. II), state that present-value analysis is the standard methodology 

to use for comparing costs of different alternatives that occur at different 

times (e.g., DOE’s accelerated and baseline approaches). Present-value 

analysis reflects the time value of money—that cost savings are worth 

more if they are incurred sooner and worth less if they occur in the future. 

Contrary to DOE’s comment that present-value techniques “hide” the full 

value of future costs, present-value analysis reveals the true costs of 

projects and is the appropriate method to use to reliably estimate and 

compare costs. 

DOE also disagreed with our statement that its $20 billion cost-savings 

estimate for the Hanford waste treatment project is overstated and 

misleading. We believe DOE’s $20 billion cost-saving estimate is overstated 

because it is not based on a present-value analysis as discussed above, and 

the estimate is misleading because it is a point estimate that does not 

consider uncertainties inherent in the waste treatment project and implies 

a degree of accuracy that is not warranted. Furthermore, as we noted in the 

report, DOE’s $20 billion cost-saving estimate could not be derived from 

DOE’s reported costs for its baseline and accelerated approaches. (See app. 

II.) 

As arranged with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after the 

date of this report. At that time, we will send copies to other interested 

congressional committees and to the Secretary of Energy. We will also 

make copies available to others upon request. In addition, the report will be 

available at no charge on the GAO Web site at http://www.gao.gov.
Page 40 GAO-04-611 Hanford Waste Treatment Project

If you or your staff have any questions on this report, please call me on 

(202) 512-3841. Other staff contributing to this report are listed in appendix 

IV.

Robin M. Nazzaro

Director, Natural Resources

and Environment
Page 41 GAO-04-611 Hanford Waste Treatment Project

Appendix I

Scope and Methodology ApApenednxidexiIs

To develop information on the Department of Energy’s (DOE) cleanup 

strategy for Hanford tank waste and how the strategy has evolved since 

December 2000, we analyzed information and documents provided by DOE 

officials and contractors at the Hanford Site and DOE headquarters. We 

also toured the project’s construction site. To assess the construction 

contract, including its cost and schedule, we reviewed the contract; 

contract modifications; and related documents, including the contractor’s 

monthly progress reports and independent and headquarters reviews, and 

analyzed various related studies. We also discussed the progress of the 

project with Washington State regulators and Environmental Protection 

Agency officials; DOE headquarters officials, including the Assistant 

Secretary for Environmental Management; and Bechtel National, Inc., 

(Bechtel National) officials. To assist in evaluating the technical aspects of 

DOE’s approaches, we obtained assistance from our technical consultant, 

Dr. George Hinman, who has a Doctor of Science degree in physics and is 

Professor Emeritus at Washington State University. Dr. Hinman has 

extensive nuclear energy experience in industry, government, and 

academia. To develop information on the impact of DOE’s initiative to 

accelerate cleanup of the waste, we reviewed DOE reports and studies and 

discussed them with key headquarters and field staff. We also reviewed 

various studies on the proposed supplemental technologies and other 

methods being considered by DOE and discussed them with program 

officials at the Hanford Site and DOE headquarters. We also discussed 

these issues with Washington State regulators. We relied on dollar figures 

as provided by DOE but took various steps—such as reviewing cost 

validation reports, analyzing budget formulation documents, documenting 

cost estimating assumptions, and obtaining clarifications from DOE budget 

officials—to ensure that these data were sufficiently reliable for purposes 

of this report. To estimate the potential savings from accelerating the 

project, we analyzed DOE’s life-cycle cost estimates using a commercially 

available risk analysis program called “Crystal Ball” (see app. II). We did 

not assess DOE’s efforts to address any waste remaining in the tanks after 

retrieval is completed or DOE’s plans to close the tanks. Both of these 

topics were outside the scope of our review.

To examine the extent to which DOE’s contract performance initiative and 

project management initiative have been implemented on the Hanford 

project, we reviewed DOE’s contract reform report—Making Contracting 

Work Better and Cost Less—and DOE order 413.3 and its implementing 

guidance. We interviewed DOE headquarters officials from the Office of 

Engineering and Construction Management and the Office of Procurement 

Assistance. We reviewed the original and modified contract, related project 
Appendix I

Scope and Methodology

Page 42 GAO-04-611 Hanford Waste Treatment Project

management documentation, and various reviews of the project. We 

gathered documentation on contract reforms and project management 

reforms at Hanford and also interviewed DOE officials at Hanford. We 

discussed contract management and project management issues with 

outside experts, including staff from the National Academy of Sciences, the 

U.S. Army Corps of Engineers, experts who took part in the 2002 reviews of 

the waste treatment contract, and staff from the Department of the Navy’s 

Nuclear Naval Program.

To determine the impact of DOE’s fast-track, design-build plant 

construction approach on contract success, we reviewed various DOE and 

contractor studies and interviewed knowledgeable officials. In addition, we 

discussed this approach with several independent experts, including a 

former senior manager of DOE’s environmental management program, an 

Exxon operations manager involved in facility start-up operations, and our 

technical consultant, to obtain their views on any benefits or potential risks 

DOE is facing. To determine the potential cost and schedule impact 

associated with the resin needed for DOE’s waste separation plant, we 

reviewed DOE and contractor studies, risk assessments, and cost and 

schedule evaluations. We discussed the implications of these studies with 

the officials involved; our consultant, Dr. Hinman; and DOE and contractor 

officials.

To address the legal challenge DOE faces, we obtained DOE’s summary 

estimates of life-cycle cost and schedule impacts to its high-level waste 

program at its three high-level waste sites if DOE lost the current court 

challenge. We also obtained summary information relating to DOE’s 

estimate of near-term cost increases to its overall high-level waste program 

if a 2-year delay in the program occurred. DOE provided a summary table 

that showed, by site, such information—including additional years of 

treatment processing needed if litigation outcome was unfavorable, 

additional number of high-level waste canisters that would need to be 

produced, and additional storage costs. For the Hanford Site, we also 

requested, and DOE provided, more detailed analysis supporting its 

summary near term and longer term estimates. The information DOE 

provided included a summary cost comparison of four different waste 

treatment scenarios, including the current approach DOE is following. We 

also obtained from DOE basic assumptions used in calculating these 

scenarios and qualifications to these data. We discussed the Hanford 

estimates with DOE officials. In addition, we obtained from key DOE 

officials responses to a series of questions focusing on the reliability of the 

Hanford estimates. These questions covered issues such as the 
Appendix I

Scope and Methodology

Page 43 GAO-04-611 Hanford Waste Treatment Project

methodology used to develop the estimates, internal review of the 

estimates, and confidence level associated with the estimates. Also, 

because these same estimates—for DOE’s entire high-level waste program, 

not just Hanford—were reported in note 17 in DOE’s Fiscal Year 2003 

Performance and Accountability Report (financial statements), we 

interviewed the auditors who performed the review of the financial 

statements for DOE. We obtained the auditors’ supporting documentation 

and discussed with them the reliability of these estimates. Given our review 

of the documentation provided by DOE and our discussions with DOE 

officials, we have reservations about the reliability of these data. These 

issues are discussed in this report.

For determining DOE’s risk-mitigation efforts, we gathered documentation 

relevant to DOE’s legislative proposal. We discussed DOE’s risk-mitigation 

strategy with officials from the state of Washington. We also asked DOE to 

provide its assessment of its risk-mitigation efforts for the Hanford waste 

treatment project as a result of the lawsuit concerning its waste treatment 

and disposal strategy. We did not evaluate DOE’s litigation strategy. 

We conducted our review from July 2003 through May 2004 in accordance 

with generally accepted government auditing standards.
Page 44 GAO-04-611 Hanford Waste Treatment Project

Appendix II

Analysis of DOE’s Cost-Saving Estimates ApendxiI

DOE has estimated that by accelerating cleanup of the high-level tank 

wastes at its Hanford Site, it can realize savings of as much as $20 billion by 

shortening the time frame for completing the project by almost 20 years 

and better aligning waste treatment and disposal approaches with the 

wastes’ characteristics. Our review of DOE’s savings estimate suggests that 

the estimate is overstated and misleading. The savings estimate is 

overstated because DOE did not consider the time value of money or 

properly adjust its estimates for inflation. The savings estimate is 

misleading because DOE used point estimates of costs that do not consider 

uncertainties inherent in this type of analysis, such as projecting costs for 

new or untested technologies or treatment options. 

• DOE’s savings estimate is overstated because it did not consider the 

time value of money or properly adjust for inflation. According to 

standard economic analysis and guidance developed by the Office of 

Management and Budget (OMB),1

 cost-comparison analyses should be 

based on life-cycle costs of competing alternatives with future costs 

discounted to present values, that is, adjusted both for inflation and the 

time value of money. According to this guidance, DOE should have first 

converted the annual expected costs of cleanup for both its baseline 

estimate and its accelerated approach estimate to their present value in 

2003 and then compared the two present-value costs. In contrast, DOE’s 

comparison of its baseline estimate with its accelerated estimate is 

based on values that are simply the sum of current dollar values of 

future costs. As a result, DOE’s methodology does not reflect an 

accurate comparison of its baseline estimate with the accelerated 

approach estimate.

• DOE’s cost-saving estimate is misleading because it did not consider 

uncertainties inherent in DOE’s waste cleanup program. According to 

OMB guidance, agencies should attempt to characterize the nature and 

source of uncertainty associated with their data and report data 

uncertainties or the full range of values within which their estimates can 

fall. Uncertainties inherent in DOE’s tank waste program include the 

future costs of new technologies and waste treatment options that are 

not fully tested and the overall duration of waste treatment activities. 

For example, DOE expects to reduce treatment costs significantly based 

on a technology called “bulk vitrification.” The life-cycle cost estimate 

1

OMB Circular No. A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of 

Federal Programs (Washington, D.C.: Oct. 29, 1992).
Appendix II

Analysis of DOE’s Cost-Saving Estimates

Page 45 GAO-04-611 Hanford Waste Treatment Project

developed for this technology, however, is preconceptual and will likely 

increase as this technology is developed, according to the bulk 

vitrification project manager. DOE has not developed an estimate of the 

range of possible costs for this technology and has not reflected this 

uncertainty in its cost-savings estimate.

To correct for DOE’s methodological errors and illustrate their potentially 

significant effect, we obtained DOE’s available annual cost and budget 

estimates for the project, but we considered the effects of the time value of 

money and inflation. In addition, although we were not able to adjust DOE’s 

cost-savings estimate to demonstrate the effects of all uncertainties, for 

illustrative purposes we included the uncertainty associated with changes 

in interest rates. Rather than using one interest rate in the savings estimate, 

as DOE did, we included in our analysis a range of interest rates, which 

resulted in a range of possible project costs.2

Table 3 summarizes the differences in the cost-savings estimate between 

DOE’s approach and our present-value analysis that reflects the uncertainty 

associated with future interest rates. Our analysis shows that the estimated 

savings from DOE’s accelerated approach could range from $10 billion to 

$13 billion, with a mean value of $12 billion. In other words, the estimated 

cost savings DOE can expect from implementing its accelerated cleanup 

approach is about $12 billion, or about half of the projected savings the 

department has reported.

2

We assumed that real (adjusted for inflation) annual interest rates would range from a 

minimum of 2.92 percent to 5.39 percent with the likeliest value of 3.84 percent. We used an 

Excel spreadsheet and a commercially available risk analysis program, called “Crystal Ball,” 

to perform this analysis. This program randomly selects values for the interest rate from the 

given range and uses each value in the spreadsheet to calculate the savings.
Appendix II

Analysis of DOE’s Cost-Saving Estimates

Page 46 GAO-04-611 Hanford Waste Treatment Project

Table 3: GAO Analysis of DOE’s Cost-Savings Estimate for the Hanford Tank Waste 

Treatment Project 

Source: GAO analysis of DOE data.

a

According to the project’s budget team leader, this figure is the approved 2001 baseline (including 

adjustments).

b

This figure is Hanford’s approved 2003 accelerated estimate.

c

The actual difference is $29 billion. Since implementation of its accelerated initiative, DOE has stated 

publicly that it expects to achieve savings of $20 billion.

d

These figures represent the means of our present-value analysis. 

e

Values represent the maximum and minimum of the range of estimated values from the present-value 

analysis when uncertainties are incorporated.

Dollars in billions

Description of estimates

Baseline 

estimate

Accelerated 

estimate

Estimated 

savings 

DOE’s life-cycle cost estimates for 

fiscal year 2001 baseline and 2003 

accelerated approach (current 

dollars) $56a $27b $20c

GAO’s present-value analysis 

results for the DOE baseline and 

accelerated estimate (constant 

2003 dollars) $26d $14d $12d

Range of present-value analysis 

results (constant 2003 dollars) $23–$29e $13–$15e $10–$13e
Page 47 GAO-04-611 Hanford Waste Treatment Project

Appendix III

Comments from the Department of Energy ApendxiI
Appendix III

Comments from the Department of Energy

Page 48 GAO-04-611 Hanford Waste Treatment Project
Page 49 GAO-04-611 Hanford Waste Treatment Project

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Robin M. Nazzaro (202) 512-3841

William R. Swick (206) 287-4800

Staff 

Acknowledgments

In addition to those individuals named above, Chris Abraham, Ellen Chu, 

Bob Crystal, Doreen Eng, Doreen Feldman, George Hinman, Nancy 

Kintner-Meyer, Mehrzad Nadji, Tom Perry, Emily Pickrell, and Stan 

Stenersen made key contributions to this report.

(360372)
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