MODERNIZING THE 

NUCLEAR SECURITY 

ENTERPRISE

NNSA’s Reviews of 

Budget Estimates and 

Decisions on 

Resource Trade-offs 

Need Strengthening

Report to the Subcommittee on Energy 

and Water Development, Committee on 

Appropriations, U.S. Senate

July 2012

GAO-12-806

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-806, a report to the 

Subcommittee on Energy and Water 

Development, Committee on Appropriations, 

U.S. Senate

July 2012

MODERNIZING THE NUCLEAR SECURITY 

ENTERPRISE

NNSA’s Reviews of Budget Estimates and Decisions 

on Resource Trade-offs Need Strengthening 

Why GAO Did This Study

NNSA, a semiautonomous agency 

within DOE, is responsible for the 

nation’s nuclear weapons, 

nonproliferation, and naval reactors 

programs. Since its inception in 2000, 

the agency has faced challenges in its 

ability to accurately identify the costs of 

major projects. In addition, both the 

DOE Inspector General, in 2003, and 

GAO, in 2007, reported concerns with 

NNSA’s PPBE process, specifically in 

how NNSA validates budget estimates 

and decides on resource allocations or 

trade-offs.

GAO was asked to review how NNSA 

manages programming and budgeting 

through its PPBE process. GAO 

examined (1) the current structure of 

NNSA’s PPBE process, (2) the extent 

to which NNSA reviews its budget 

estimates, and (3) how NNSA decides 

on resource trade-offs in its PPBE 

process. To carry out its work, GAO 

reviewed NNSA policies, instructions, 

guidance, and internal reports 

documenting the agency’s PPBE 

process and interviewed NNSA, DOE, 

and M&O contractor officials.

What GAO Recommends

GAO recommends that, among other 

things, DOE update the departmental 

order for budget reviews, improve the 

formal process for reviewing budget 

estimates, and reinstitute an 

independent analytical capability. The 

agency agreed in principle with six 

recommendations but not with one to 

consolidate various integrated priority 

lists. GAO continues to believe this 

recommendation has merit as 

discussed in the report. 

What GAO Found

The National Nuclear Security Administration’s (NNSA) planning, programming, 

budgeting, and evaluation (PPBE) process provides a framework for the agency 

to plan, prioritize, fund, and evaluate its program activities. Formal policies guide 

NNSA and management and operating (M&O) contractors through each of four 

phases of the agency’s PPBE cycle—planning, programming, budgeting, and 

evaluation. These phases appear to be sequential, but the process is continuous 

and concurrent because of the amount of time required to develop priorities and 

review resource requirements, with at least two phases ongoing at any time.

NNSA does not thoroughly review budget estimates before it incorporates them 

into its proposed annual budget. Instead, NNSA relies on informal, 

undocumented reviews of such estimates and its own budget validation review 

process—the formal process for assessing budget estimates. Neither of these 

processes adheres to Department of Energy (DOE) Order 130.1, which defines 

departmental provisions for the thoroughness, timing, and documentation of 

budget reviews. NNSA officials said the agency does not follow the order 

because it expired in 2003. Nevertheless, the order is listed as current on DOE’s 

website, and a senior DOE budget official confirmed that it remains in effect, 

although it is outdated in terminology and organizational structure. Additionally, 

according to NNSA officials, the agency’s trust in its contractors minimizes the 

need for formal review of its budget estimates. GAO identified three key 

problems in NNSA’s budget validation review process. First, this process does 

not inform NNSA, DOE, Office of Management and Budget, or congressional 

budget development decisions because it occurs too late in the budget cycle—

after the submission of the President’s budget to Congress. Second, this process 

is not sufficiently thorough to ensure the credibility and reliability of NNSA’s 

budget because it is limited to assessing the processes used to develop budget 

estimates rather than the accuracy of the resulting estimates and is conducted 

for a small portion of NNSA’s budget—approximately 1.5 percent of which 

received such review in 2011. Third, other weaknesses in this process, such as 

no formal evaluative mechanism to determine if corrective actions were taken in 

response to previous findings, limit the process’s effectiveness in assessing

NNSA’s budget estimates. 

NNSA uses a variety of management tools to decide on resource trade-offs 

during the programming phase of the PPBE process. One of these tools, 

integrated priority lists—which rank program activities according to their 

importance for meeting mission requirements—is to provide senior managers 

with an understanding of how various funding scenarios would affect program 

activities. However, NNSA has weakened its ability to gauge the effects of 

resource trade-offs. For example, in 2010, NNSA disbanded its Office of 

Integration and Assessments, created in response to DOE Inspector General and 

GAO recommendations that NNSA establish an independent analysis unit to 

perform such functions as reviewing proposals for program activities and 

verifying cost estimates. NNSA agreed with these recommendations and, in 

2009, instituted the office to identify, analyze, and assess options for deciding on 

resource trade-offs. Without an independent analytical capability, NNSA may 

have difficulty making the best decisions about what activities to fund and 

whether they are affordable.

View GAO-12-806. For more information, 

contact Gene Aloise at (202) 512-3841 or 

aloisee@gao.gov.
Page i GAO-12-806 Modernizing the Nuclear Security Enterprise

Letter 1 

Background 5

NNSA Has Established a Formal PPBE Process That Includes Four 

Defined Phases 6

NNSA Does Not Thoroughly Review Budget Estimates When 

Developing Its Annual Budget 10

NNSA Has Implemented Some Tools to Support Decision Making 

on Resource Trade-offs but Has Stopped Using or Developing 

Other Capabilities 17

Conclusions 23

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 26

Appendix I Objectives, Scope, and Methodology 29

Appendix II Comments from the U.S. Department of Energy 31

Appendix III GAO Contact and Staff Acknowledgments 37

Figure

Figure 1: NNSA PPBE Schedule 7

Contents
Page ii GAO-12-806 Modernizing the Nuclear Security Enterprise

Abbreviations

AFR Administrator’s Final Recommendation

DOD Department of Defense

DOE Department of Energy

M&O management and operating

NNSA National Nuclear Security Administration

OMB Office of Management and Budget

PPBE planning, programming, budgeting, and evaluation

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Page 1 GAO-12-806 Modernizing the Nuclear Security Enterprise

United States Government Accountability Office

Washington, DC 20548

July 31, 2012

The Honorable Dianne Feinstein

Chairman

The Honorable Lamar Alexander

Ranking Member

Subcommittee on Energy and Water Development

Committee on Appropriations

United States Senate

The National Nuclear Security Administration (NNSA)—a 

semiautonomous agency within the Department of Energy (DOE)—

manages the nation’s nuclear security programs, the primary goals of 

which are to maintain the safety, security, and effectiveness of the U.S. 

nuclear weapons stockpile; reduce the global threat posed by nuclear 

proliferation and terrorism; and provide nuclear propulsion systems for the 

U.S. Navy. To manage these programs, NNSA oversees eight separate 

sites—collectively known as the nuclear security enterprise—that are 

managed and operated by private contractors, known as management 

and operating (M&O) contractors.1

 

1 These sites include three national laboratories, four production plants, and one test site.

Among other things, these contractors 

operate and maintain the government-owned facilities and infrastructure 

deemed necessary to support the nuclear security enterprise and to 

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

production activities. To fund these activities, the President requested 

more than $11.5 billion for NNSA in his fiscal year 2013 budget 

submission to Congress. Sound management practices, such as linking 

program activities to defined objectives and ensuring the reliability of 

budget estimates, can help NNSA use agency resources wisely. It is 

particularly important for NNSA to embrace this approach because, as 

our past work has shown, it has faced numerous challenges in accurately 

estimating the costs of major projects since its inception in 2000. For 

example, we reported in March of this year that the estimated cost to 

construct the Chemistry and Metallurgy Research Replacement Nuclear 

Facility at NNSA’s Los Alamos National Laboratory rose from between 

$745 million and $975 million in 2005 to between $3.7 billion and $5.8 

 
 

Page 2 GAO-12-806 Modernizing the Nuclear Security Enterprise

billion in 2010—a near sixfold increase.2 In addition, in February of this 

year we testified that the estimated cost to construct the modern Uranium 

Processing Facility at NNSA’s Y-12 National Security Complex jumped 

from between $600 million and $1.1 billion in 2004 to between $4.2 billion 

and $6.5 billion in 2011—a near sevenfold increase.3 Furthermore, in 

2000 and 2009, respectively, we reported that NNSA’s efforts to extend 

the operational lives of nuclear weapons experienced a $300 million cost 

increase for the refurbishment of one warhead and a $70 million increase 

for another.4

Under section 3252 of the National Defense Authorization Act for Fiscal 

Year 2000—the NNSA Act—NNSA was required to develop a planning, 

programming, and budgeting process that operated under sound financial 

and fiscal management principles.

Given NNSA’s record of weak management of major 

projects, we believe improved federal oversight of NNSA’s modernization 

of the nuclear security enterprise is critical to ensuring that resources are 

spent in as an effective and efficient manner as possible.

5

 

2 GAO, Modernizing the Nuclear Security Enterprise: New Plutonium Research Facility at 

Los Alamos May Not Meet All Mission Needs, 

The NNSA Act also requires NNSA to 

annually submit to Congress a Future Years Nuclear Security Program 

plan that details NNSA’s planned expenditures for the next 5 years. The 

value of this plan depends, in part, on the accuracy of the cost estimates 

supporting each program. A realistic cost estimate provides a basis for 

accurate budgeting and effective resource allocation, which increases the 

probability of a program’s success in meeting its goals. NNSA’s first 

Administrator indicated that he intended to comply with the NNSA Act by 

instituting a planning, programming, budgeting, and evaluation (PPBE) 

process—which uses short- and long-term planning to define program 

priorities and match them to available budgetary resources—that is 

similar to the Department of Defense’s (DOD) budgetary process. As we 

GAO-12-337 (Washington, D.C.: Mar. 26, 

2012).

3 GAO, National Nuclear Security Administration: Observations on NNSA’s Management 

and Oversight of the Nuclear Security Enterprise, GAO-12-473T (Washington, D.C.: Feb. 

16, 2012).

4 GAO, Nuclear Weapons: Improved Management Needed to Implement Stockpile 

Stewardship Program Effectively; GAO-01-48 (Washington, D.C.: Dec. 14, 2000), and 

GAO, Nuclear Weapons: NNSA and DOD Need to More Effectively Manage the Stockpile 

Life Extension Program, GAO-09-385 (Washington, D.C.: Mar. 2, 2009). 

5 NNSA was created by the National Defense Authorization Act for Fiscal Year 2000 (Pub. 

L. No. 106-65, § 3201 et seq. [1999]).
 

Page 3 GAO-12-806 Modernizing the Nuclear Security Enterprise

have reported, DOD’s PPBE process logically attempts to plan programs 

and develop budgets based on high-level strategic goals, but at times it 

has been poorly implemented.6 For example, DOD decision makers often 

commit to more programs than the department can reasonably support. 

Nonetheless, DOD’s process has the potential to provide comparisons of 

the cost-effectiveness of program activities and to help managers develop 

the kinds of detailed program and budget plans called for in the NNSA 

Act. However, both the DOE Inspector General and GAO have reported 

on concerns with the development and implementation of NNSA’s PPBE 

process.7

In this context, you asked us to determine how NNSA manages its 

programming and budgeting activities through its PPBE process. For this 

report, our objectives were to examine (1) the current structure of NNSA’s 

PPBE process, (2) the extent to which NNSA reviews its budget 

estimates, and (3) how NNSA decides on resource trade-offs in its PPBE 

process.

Specifically, these reports identified deficiencies in how NNSA 

ensures the validity of its budget estimates and how it decides to allocate 

its resources (resource trade-offs). In our January 2007 report, we 

recommended, among other things, that NNSA complete all of its PPBE 

policy guidance. In response, NNSA issued PPBE policy in the form of 

policy letters that identify the responsibilities of NNSA management, 

program and site offices, and contractors throughout the agency’s PPBE 

cycle. 

To address these objectives, we analyzed NNSA documentation—

including policies, instructions, guidance, and internal reports—related to 

the implementation of NNSA’s PPBE policy across NNSA, as well as 

program-specific documentation from the Offices of Defense Programs, 

Defense Nuclear Nonproliferation, and Naval Reactors; these three 

offices correspond to NNSA’s primary missions and collectively account 

for approximately 85 percent of the President’s fiscal year 2013 NNSA 

 

6 GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could Improve 

Major Weapon System Program Outcomes, GAO-08-619 (Washington, D.C.: July 2, 

2008), and GAO, DOD Weapon Systems: Missed Trade-off Opportunities During 

Requirements Reviews, GAO-11-502 (Washington, D.C.: June 16, 2011).

7 GAO, National Nuclear Security Administration: Additional Actions Needed to Improve 

Management of the Nation’s Nuclear Programs, GAO-07-36 (Washington, D.C.: Jan. 19, 

2007); and National Nuclear Security Administration’s Planning, Programming, Budgeting, 

and Evaluation Process, DOE/IG-0614, August 2003.
 

Page 4 GAO-12-806 Modernizing the Nuclear Security Enterprise

budget submission to Congress.8 To examine the current structure of 

NNSA’s PPBE process, we reviewed NNSA policy documents, guidance, 

and instructions. To determine the extent to which NNSA reviews its 

budget estimates, we reviewed NNSA’s formal budget validation review 

process and associated internal NNSA reports and met with officials 

involved in the development, oversight, or execution of NNSA budget 

estimate reviews. To identify the tools NNSA uses to decide on resource 

trade-offs, we analyzed how NNSA determines which program activities it 

considers necessary to achieve NNSA goals. Additionally, to address all 

these objectives, we met with officials from the NNSA Offices of the 

Administrator, Management and Budget, Defense Programs, Defense 

Nuclear Nonproliferation, Naval Reactors, and Acquisition and Project 

Management; the site offices for Los Alamos, Sandia, and the Y-12 

National Security Complex; and the Naval Reactors Laboratory Field 

Office; DOE officials from the Office of Budget; and M&O contractor 

officials from Los Alamos and Sandia National Laboratories, the Y-12 

National Security Complex, and Bettis Atomic Power Laboratory.9

We conducted this performance audit from July 2011 to July 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Because NNSA’s Office of Naval Reactors is organized as a separate 

entity within NNSA reporting both to NNSA and the U.S. Navy, we also 

met with Navy officials from its offices of Financial Management and 

Budgeting, and Cost Engineering and Industrial Analysis. Appendix I 

contains a detailed description of our objectives, scope and methodology.

 

8 Six other NNSA offices are responsible for carrying out additional program activities: 

Management and Budget, Emergency Operations, Defense Nuclear Security, Chief 

Information Officer, Counterterrorism and Counterproliferation, and Acquisition and Project 

Management.

9 We selected a nonprobability sample of NNSA sites based on the levels of funding they 

receive from NNSA for the programs included in the scope of our work. Because we used 

a nonprobability sample, the results we obtained from these sites are not generalizable 

across the nuclear security enterprise; however, they did provide us with specific 

examples of how NNSA conducts PPBE activities at the site level.
 

Page 5 GAO-12-806 Modernizing the Nuclear Security Enterprise

NNSA oversees programs to carry out its missions for nuclear weapons, 

nonproliferation, and naval nuclear propulsion, for which the President’s 

budget submission to Congress requested more than $11.5 billion for 

fiscal year 2013—about 42 percent of DOE’s total budget. NNSA has 

primary mission responsibilities in three areas. First, it is responsible for 

providing the United States with safe, secure, and reliable nuclear 

weapons in the absence of underground nuclear testing and maintains 

core competencies in nuclear weapons science, technology, and 

engineering. Second, NNSA implements key U.S. government nuclear 

security, nonproliferation, and arms control activities, including securing 

vulnerable nuclear and radiological material at facilities throughout the 

world; removing plutonium and highly enriched uranium from partner 

countries; eliminating U.S. nuclear material declared surplus to defense 

needs; negotiating and providing the technical capability to verify arms 

control treaties and agreements; strengthening other countries’ capacities 

to implement nonproliferation obligations; and enhancing other nations’ 

capabilities to deter and detect illicit movement of nuclear and radiological 

materials. Third, NNSA provides the research, development, design, and 

operational support for militarily effective naval nuclear propulsion plants, 

as well as enriched uranium for fabrication into fuel for the Navy’s 

propulsion reactors. NNSA receives four congressional appropriations to 

fund its activities, three of which align with its primary missions—

Weapons Activities (for Defense Programs), Defense Nuclear 

Nonproliferation, Naval Reactors—and one that funds its management 

activities—Office of the Administrator.10

Since the Manhattan Project produced the first atomic bomb during World 

War II, NNSA, DOE, and predecessor agencies have depended on the 

expertise of private firms, universities, and others to carry out research 

and development work and efficiently operate the government-owned, 

contractor-operated facilities necessary for the nation’s nuclear defense. 

NNSA conducts its activities at research and development laboratories, 

production plants, and other facilities (collectively referred to as the 

nuclear security enterprise). Specifically, NNSA operates three national 

laboratories that design and ensure the reliability of nuclear weapons—

Lawrence Livermore National Laboratory, California; Los Alamos National 

Laboratory, New Mexico; and the Sandia National Laboratories, New 

 

10 The Weapons Activities appropriation also funds the Emergency Operations, Defense 

Nuclear Security, Chief Information Officer, Counterterrorism and Counterproliferation, 

and Acquisition and Project Management program offices.

Background 
 

Page 6 GAO-12-806 Modernizing the Nuclear Security Enterprise

Mexico and California; and four nuclear weapons production sites—the 

Pantex Plant, Texas; the Y-12 National Security Complex, Tennessee; 

the Kansas City Plant, Missouri; and the Savannah River Site, South 

Carolina; as well as the Nevada National Security Site.

NNSA’s relationship with its contractors has been formally established 

over the years through its M&O contracts—contracting strategies that 

give these contractors responsibility to carry out major portions of NNSA’s 

missions and apply their scientific, technical, and management 

expertise.11 M&O contractors at NNSA sites operate under NNSA’s 

direction and oversight but largely independently of one another. Various 

headquarters organizations within NNSA develop policies and NNSA site 

offices, colocated with NNSA’s sites, conduct day-to-day oversight of the 

M&O contractors, and evaluate the M&O contractors’ performance in 

carrying out the sites’ missions. 

According to NNSA’s policy, the NNSA PPBE process is composed of 

four phases—planning, programming, budgeting, and evaluation—and 

their associated activities. The different phases of PPBE appear 

sequential, but because of the amount of time required to develop and 

review resource requirements, the process is continuous and concurrent 

with at least two phases ongoing at any given time, including phases for 

different fiscal years. Figure 1 shows the four phases and the months 

during which each phase is scheduled to occur, according to NNSA 

policies and guidance.

 

11 Management and operating contracts are agreements under which the government 

contracts for the operation, maintenance, or support, on its behalf, of a government-owned 

or -controlled research, development, special production, or testing establishment wholly 

or principally devoted to one or more of the major programs of the contracting federal 

agency. Federal Acquisition Regulation, 48 C.F.R. § 17.601. 

NNSA Has 

Established a Formal 

PPBE Process That 

Includes Four Defined 

Phases 
 

Page 7 GAO-12-806 Modernizing the Nuclear Security Enterprise

Figure 1: NNSA PPBE Schedule

a

NNSA policy for budget validation calls for validation activities to begin in the April-May time frame 

and continue to September each year. However, in practice, the schedule of these activities can vary 

from year to year. For example, the NNSA memorandum initiating the budget validation process in 

2011 scheduled validation activities to occur from June to October of that year.

Planning. According to NNSA policy, in this phase, scheduled to begin 

annually in November, NNSA is to identify the goals it needs to achieve 

over the next 5 years and the program activities needed to meet these 

goals. According to NNSA officials, these goals are defined in a variety of 

documents, including presidential directives, policy statements, and DOE 

and NNSA strategic plans. This phase begins with the issuance of 

NNSA’s annual Strategic Planning Guidance, which provides any updates 

to the strategic plans and identifies any emerging issues. The NNSA 

program offices use this guidance to conduct their own internal planning 

processes, update their multiyear plans, including revising or adding 

program activities needed to meet the agency’s goals.
 

Page 8 GAO-12-806 Modernizing the Nuclear Security Enterprise

Programming. According to NNSA policy, in this phase, scheduled to 

begin annually in February, NNSA is to determine which program 

activities and funding levels it will include in its budget proposal to DOE 

for the fiscal year beginning in October of the following calendar year. 

This determination is based on analysis of the activities’ estimated costs, 

as well as the need to meet the NNSA goals defined in the planning 

process. To determine these activities, NNSA program offices are to work 

with their contractors to obtain estimates for the cost of the program 

activities identified in the planning phase and determine how to 

accomplish these activities within anticipated funding levels, which are 

defined in annual NNSA Program and Fiscal Guidance. NNSA program 

offices are to then rank these activities in order of priority for meeting 

program goals and document these decisions in integrated priority lists. 

These lists can include proposed program activities above the anticipated 

funding levels specified in NNSA guidance—these proposed activities are 

known as unfunded requirements. Using these lists, as well as other 

briefing materials, a group of senior NNSA officials including the heads of 

all program offices—the Program Review Council—then is to meet with 

the Principal Deputy Administrator to discuss and defend each program’s 

proposed program activities. After reviewing the deliberations of the 

Program Review Council and the associated documents provided by the 

program offices, the NNSA Administrator is to decide on resources tradeoffs that result in the combination of program activities that best meet 

NNSA’s goals over the 5-year period covered by the Future Years 

Nuclear Security Program plan. The Administrator is responsible for 

issuing the Administrator’s Final Recommendations (AFR), scheduled to 

be completed in May at the conclusion of the programming phase, to 

document NNSA’s justification for its priorities and to serve as the basis 

for the agency’s participation in DOE’s program review process, the 

Strategic Resources Review.

Budgeting. According to NNSA policy, this phase is to integrate NNSA 

planning and programming priorities and budget estimates into DOE’s 

departmental budget process and consists of the following three parts:

• Budget formulation. During formulation, which is scheduled to begin 

annually in July for the fiscal year beginning in October of the 

following calendar year, NNSA submits its proposed budget to DOE 

and participates in the Strategic Resources Review. If DOE’s budget 

deliberations result in changes to NNSA’s proposed budget, NNSA 

may have to rebalance its work activities. In September each year, 

DOE submits its proposed budget to the Office of Management and 

Budget (OMB) for review. Depending on OMB revisions, NNSA may 
 

Page 9 GAO-12-806 Modernizing the Nuclear Security Enterprise

need to again revise its work activities. These revisions are 

incorporated into the President’s final budget request for DOE, which 

is submitted to Congress in February.

• Budget validation. According to NNSA guidance, the agency uses its 

budget validation review process to ensure its budget request is 

consistent with NNSA priorities and its budget estimating processes 

are reasonable. NNSA policy calls for NNSA’s Office of PPBE to 

manage a three-phase process of validating approximately 20 percent 

of NNSA’s programs each year, so that 100 percent of its budget is 

validated every 5 years.12 Programs to undergo validations are to be 

determined by a combination of factors, including Program Managers’ 

request, Administrator direction, and/or significant external 

interest/high program visibility. During Phase I of the process, 

scheduled for completion in June, before the beginning of the fiscal 

year in October, program officials determine if their activities conform 

with strategic guidance and program plans and review their methods 

for formulating budgets. In Phase II, scheduled annually for July to 

September, NNSA contractors or program offices, whichever 

developed the budget estimates, conduct a self-assessment of their 

budget planning, formulation, and cost-estimating processes. Phase II 

self-assessments are to be reviewed by a team—known as a 

validation review team—that comprises NNSA headquarters and site 

office staff. During Phase III, scheduled to occur from July through 

August, these validation review teams also review the cost-estimating 

practices used by the NNSA contractors and program offices. 

Importantly, NNSA’s validation guidance emphasizes that reviews 

should focus on the processes used to formulate budget plans and 

derive budget estimates rather than on the accuracy of the resulting 

estimates. According to this guidance, validation review teams are to 

issue a report on their findings on Phases II and III in September to 

inform NNSA, DOE, and OMB decisions for the following year’s 

budget cycle.

• Budget execution. According to NNSA policy, during this process, 

DOE and NNSA are to allocate, distribute, and control funds to 

achieve the priorities established in the programming phase, and to 

maintain the fiscal limits set up in the budgeting phase, which are 

 

12 NNSA’s Office of PPBE is organizationally located within the NNSA Office of 

Management and Budget.
 

Page 10 GAO-12-806 Modernizing the Nuclear Security Enterprise

subject to appropriation of funds by Congress. The execution 

coincides with the fiscal year and commences once appropriated 

funds become available—whether by appropriation or Continuing 

Resolution—at the beginning of the fiscal year every October.

Evaluation. According to NNSA policy, NNSA is to employ an ongoing 

cycle of evaluations to review program performance. Evaluations are to 

include annual and quarterly NNSA performance reviews, performance 

reviews conducted as part of the Government Performance and Results 

Act, reviews conducted by OMB, and DOE oversight activities.

NNSA does not thoroughly review budget estimates before it incorporates 

them into its annual budget request. Instead, it relies on undocumented, 

informal reviews of these estimates by site and headquarters program 

office officials and the formal budget validation reviews, which conclude 

after the submission of the President’s budget to Congress. Neither of 

these processes meets DOE provisions for ensuring the credibility and 

reliability of agency budgets, as defined in DOE Order 130.1. According 

to senior NNSA officials, NNSA does not comply with DOE Order 130.1 

because it believes the order expired in 2003 and therefore no longer 

applies to NNSA budget activities. Furthermore, they stated that the need 

for a formal review of budget estimates is minimized, in part, because of 

the inherent trust between NNSA and its M&O contractors. Additionally, 

we identified three key problems in NNSA’s formal budget validation 

review process: it occurs too late to affect budget decisions, is not 

sufficiently thorough, and includes other weaknesses that limit its 

effectiveness.

NNSA does not have a thorough, documented process for assessing the 

validity of its budget estimates prior to their inclusion in the President’s 

budget submission to Congress, thereby limiting the reliability and 

credibility of the budget submission. Specifically, according to NNSA 

officials from NNSA’s Offices of Management and Budget, Defense 

Programs; Defense Nuclear Nonproliferation; and the site offices for Los 

Alamos, Sandia, and Y-12, during the programming phase of PPBE, site 

and headquarters program office officials conduct informal, 

undocumented reviews of the budget estimates that M&O contractors 

submitted to determine their reasonableness, though some officials noted 

NNSA Does Not 

Thoroughly Review 

Budget Estimates 

When Developing Its 

Annual Budget

NNSA’s Process for 

Reviewing Budget 

Estimates Is Not Thorough 

or Documented
 

Page 11 GAO-12-806 Modernizing the Nuclear Security Enterprise

that the level of review may vary across site and headquarters program 

offices.13

The practices the site and headquarters program offices follow do not 

align with the criteria for thoroughness or documentation established in 

DOE Order 130.1. Specifically, DOE Order 130.1 states that contractordeveloped budget estimates should be thoroughly reviewed and deemed 

According to these officials, this informal review is often 

conducted by comparing current budget estimates with those from 

previous years because the work is largely the same from year to year. If 

the estimates are similar, and no major programmatic change has taken 

place, site office and headquarters program office officials said that they 

generally view these budget estimates as reasonable for inclusion in 

NNSA’s budget estimate. However, site office officials told us that their 

ability to thoroughly review budget estimates is limited. For example, 

according to NNSA officials at the Los Alamos Site Office, they do not 

have the personnel needed or the time, because of other laboratory 

management responsibilities, to oversee the laboratory’s budget 

estimation practices. They told us that only one dedicated budget analyst 

is employed at the site office and, because of insufficient personnel 

resources in the office, a majority of this analyst’s time is spent 

conducting work that is not directly related to budget oversight. NNSA 

officials from the Y-12 Site Office also told us that they informally review 

budget estimates when they initially submit them to headquarters 

program offices. However, they also stated that they become more 

involved in reviewing budget estimates when the agency is formulating its 

final budget submission, and the M&O contractors are asked to develop 

multiple iterations of budget estimates based on various hypothetical 

funding scenarios. However, these officials also stated that their reviews 

are not documented. NNSA officials from Defense Programs’ Office of 

Analysis and Evaluation told us that the presence of certified cost 

engineers—individuals with professional certification in the field of cost 

assessment and program management—at the NNSA site offices could 

enhance NNSA’s ability to understand how M&O contractors and 

programs develop budget estimates and assess those estimates.

 

13 According to NNSA officials, site office officials conduct these informal reviews of the 

budget estimates for activities funded by the Weapons Activities appropriation because 

they are developed by the M&O contractors. Conversely, they stated that the budget 

estimates for the Defense Nuclear Nonproliferation Appropriation are developed by 

program federal employees at NNSA Headquarters. For these activities, contractors 

compete for projects based upon submitted proposals and funding availability. 
 

Page 12 GAO-12-806 Modernizing the Nuclear Security Enterprise

reasonable prior to their inclusion in agency budgets and that these 

reviews should be documented. Senior officials from NNSA’s Office of 

Management and Budget told us that the agency does not strictly adhere 

to DOE Order 130.1 because it believes that the order has expired and no 

longer applies to NNSA budget activities. According to these officials, this 

order expired in 2003, and they are unaware of any other DOE or federal 

government requirement to conduct budget validation reviews.14 They 

further stated that NNSA is conducting budget validation reviews only 

because it considers them to be a good business practice and that NNSA 

will work with DOE on updating the order if DOE initiates that process. 

NNSA officials stated that, if DOE updated and reissued DOE Order 

130.1, it would comply to the extent that it had the resources to do so.

However, DOE Order 130.1 remains listed on DOE’s “All Current 

Directives” website, and a senior DOE budget official told us that DOE 

Order 130.1 remains an active order. Additionally, this official stated that 

a key principle of DOE Order 130.1—federal oversight of contractors’ 

practices for budget formulation—is appropriate and valid. This official 

noted, however, that the order is outdated in terms of the terminology it 

uses to describe DOE—it was issued in 1995, predating the 2000 

establishment of NNSA—and should be updated to reflect the 

department’s current organizational structure. Furthermore, in March 

2009, we issued a cost-estimating guide—a compilation of costestimating best practices drawn from across industry and government—in 

which we reported that validation is considered a best practice to ensure 

that cost data are credible and reliable for use in justifying estimates to 

agency management.15

In contrast, NNSA’s Office of Naval Reactors’ is jointly staffed and funded 

by both NNSA and the Navy and is therefore subject to naval and DOD, 

As a result, NNSA’s site and headquarters 

program office reviews of budget estimates are neither thorough nor 

documented. According to the Principal Deputy Administrator, NNSA 

continues to face challenges in moving away from its historical process 

for developing budgets based solely on the unreviewed estimates 

produced by NNSA M&O contractors and that NNSA’s practices for 

understanding its program activity costs are not as sufficient as they need 

to be.

 

14 DOE Notice 251.45 extended DOE Order 130.1 until May 1, 2003.

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

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).
 

Page 13 GAO-12-806 Modernizing the Nuclear Security Enterprise

as well as NNSA, standards for reviewing contractor-developed budget 

estimates. The Office of Naval Reactors conducts a semiannual 

process—known as budget confirmation—to review all contractordeveloped budget estimates. This review is conducted and documented 

by NNSA technical experts and approved by the Director of the Office of 

Naval Reactors; this director manages both NNSA and the Navy’s 

activities within the office and has final budgetary decision authority. 

Officials in NNSA’s Office of Management and Budget told us that the 

Office of Naval Reactors’ process is much more rigorous than that used 

by other NNSA program offices we reviewed. Furthermore, NNSA has 

exempted the Office of Naval Reactors from NNSA’s formal budget 

validation review process because of management’s confidence in the 

quality of the office’s budget confirmation process.

Senior officials in NNSA’s Office of Management and Budget told us that 

NNSA does not have the financial and personnel resources needed to 

conduct budget estimate reviews with the same rigor as the Navy and 

DOD. Furthermore, these officials said, the need for a formal review of 

M&O contractor-developed budget estimates is minimized within NNSA 

because site office officials have historical knowledge of work with 

NNSA’s M&O contractors that allows them to assess the reasonableness 

of M&O contractor-developed budget estimates without conducting a 

formal review and because of the “inherent trust” between NNSA and its 

M&O contractors that results from its contracting strategy with them. 

Specifically, one of these officials stated that, to a large extent, only the 

M&O contractors are in a position to know the scientific and engineering 

details of nuclear weapons and the associated work scope and funding 

necessary to ensure their safety and reliability. However, for the last 10 

years, we have reported that NNSA has significant weaknesses in its 

ability to control costs and effectively manage its M&O contractors.16 We 

are therefore concerned that NNSA management continues to deny the 

need for NNSA to improve its processes for developing credible and 

reliable budget estimates.

 

16 GAO-01-48, GAO-07-36, and GAO-12-337. 
 

Page 14 GAO-12-806 Modernizing the Nuclear Security Enterprise

We identified three key problems in NNSA’s annual budget validation 

review process—its formal process for assessing M&O contractor- and 

program-developed budget estimates. First, NNSA’s annual budget 

validation review process occurs too late in the budget cycle to inform 

NNSA, DOE, OMB, and congressional budget development or 

appropriations decisions. DOE Order 130.1, which is referenced in

NNSA’s policy for its budget validation review process, states that 

agencies should thoroughly review budget estimates before using these 

estimates to develop budgets. However, NNSA’s Phase II and Phase III 

budget validation reviews are scheduled to begin 5 months after the 

President submits his budget to Congress. Additionally, during each of 

the past four budget validation cycles, NNSA did not complete its budget 

validation reports for at least 12 months following the President’s budget 

submission to Congress and at least 4 months after the beginning of the 

fiscal year for which NNSA reviewed the budget estimates. Therefore, 

Congress considered the budget request for NNSA and appropriated 

funds to it, and NNSA executed these funds to M&O contractors, before 

NNSA had published the results of the budget validation reviews. 

Because of their timing, NNSA’s budget validation reviews cannot inform 

NNSA’s budget development, DOE or OMB reviews, or Congress’ 

appropriation processes. According to NNSA policy, the timing of NNSA’s 

budget validation review process is designed to inform the NNSA, DOE, 

and OMB budgeting processes for the fiscal year following that for which 

the budget validation reviews were conducted. However, the timing of the 

publication of the budget validation review reports for each of the last 4 

years precluded even such delayed consideration because they were 

issued following the OMB budget formulation process for the following 

fiscal year.

Second, NNSA’s budget validation review process is not sufficiently 

thorough to ensure the credibility and reliability of NNSA’s budget. DOE 

Order 130.1 states that budgets should be based on budget estimates 

that have been thoroughly reviewed by site and headquarters program 

offices. However, NNSA’s budget validation review process is limited to 

assessing the processes M&O contractors and programs used to develop 

budget estimates rather than the accuracy of the resulting budget 

estimates.17

 

17 The criteria used by validation review teams to assess the reasonableness of budget 

estimation processes include completeness, consistency, reasonableness, and 

documentation.

NNSA’s 2010 budget validation review guidance states that 

NNSA’s Formal Budget 

Validation Review Process 

Occurs Too Late to Affect 

Budget Decisions and Is 

Not Sufficiently Thorough
 

Page 15 GAO-12-806 Modernizing the Nuclear Security Enterprise

the agency lacks the resources and expertise needed to thoroughly 

evaluate the accuracy of budget estimates on its own and therefore relies 

on assessments of the reasonableness of the processes used by M&O 

contractors to develop budget estimates. NNSA officials from the Los 

Alamos and Y-12 Site Offices told us that they believe the budget 

validation review process would benefit NNSA more if it more thoroughly 

assessed the budgetary processes M&O contractors used to develop 

their budget estimates. Furthermore, NNSA policy and budget validation 

review guidance stipulate that 20 percent of the agency’s programs

should be reviewed annually to help ensure its validity, but NNSA’s formal 

validation process actually results in significantly smaller portion of its 

budget being reviewed. For example, in 2011, NNSA’s annual budget 

validation guidance identified four programs subject to budget validation 

review—the Engineering Campaign, Nuclear Counterterrorism Incident 

Response, Global Threat Reduction Initiative, and Fissile Materials 

Disposition—each of which is conducted at multiple NNSA sites.18

Third, other weaknesses in NNSA’s budget validation review process limit 

its effectiveness as a resource to assess the validity of its budget 

estimates. In particular, NNSA workgroups that reviewed the 2007 and 

2008 budget validation review cycles recommended that NNSA formally 

evaluate the status of recommendations made during previous budget 

validation reviews. However, NNSA has not incorporated a formal 

mechanism for implementing an evaluation into its budget validation 

review process. NNSA officials at the Los Alamos and Y-12 site offices 

also told us that not having such an evaluative mechanism was a 

However, NNSA conducted validation reviews at only one site for each of 

these programs, which resulted in a formal validation review of 

approximately 12, 21, 15, and 4 percent of each of those programs’ total 

budgets, respectively, which, together, constituted 1.5 percent of NNSA’s 

budget request for fiscal year 2012.

 

18 The Engineering Campaign provides modern components and engineering science 

capabilities to ensure the safety, security, reliability, and performance of the stockpile. The 

Nuclear Counterterrorism Incident Response program responds to and mitigates nuclear 

and radiological incidents worldwide. The Global Threat Reduction Initiative works in the 

United States and internationally to convert research reactors and medical isotope 

production processes from the use of highly enriched uranium, remove and dispose of 

excess nuclear and radiological materials, and protect high-priority nuclear and 

radiological sources from theft. The Fissile Materials Disposition program supports the 

downblending of highly enriched uranium that is excess to U.S. defense needs and is 

planning to assist Russia in modifying reactors in that country.
 

Page 16 GAO-12-806 Modernizing the Nuclear Security Enterprise

weakness in NNSA’s budget validation process. Without a formal 

mechanism, NNSA is limited in its ability to measure (1) any progress 

M&O contractors or programs have made in their processes for 

estimating budgets in response to recommendations from previous 

budget validation reviews and (2) the effectiveness of NNSA’s budget 

validation review process. For example, a 2010 budget validation review 

of the Readiness Campaign recommended that the program more 

formally document its budget processes, guidance, and estimating 

assumptions.19 Furthermore, a 2009 budget validation review of the 

Elimination of Weapons Grade Plutonium Production program found that 

the program could not provide documentation of its internal budget 

processes.20 However, in both instances, NNSA did not follow up to 

determine if the programs had addressed these concerns during 

subsequent budget validation reviews. Additionally, budget validation 

reviews do not always include recommendations to improve M&O 

contractor or program processes for estimating budgets when they 

identify potentially serious weaknesses in those M&O contractor’s or 

programs’ ability to develop cost estimates. For example, according to a 

2010 budget validation review of budget estimation activities for the 

Nonproliferation and Verification Research and Development program at 

Sandia National Laboratories, six of the eight projects reviewed lacked 

sufficient documentation to support their cost estimates, including two that 

lacked any supporting documentation.21

 

19 The Readiness Campaign identifies, develops, and deploys new or enhanced 

processes, technologies and capabilities to meet current nuclear weapon design, 

production, and dismantlement needs and provide quick response to national security 

requirements.

The report noted the importance 

of credible cost estimates, but it did not formally recommend any remedial 

improvements and rated the overall processes used to develop those cost 

estimates as satisfactory. Additionally, NNSA officials in the Defense 

Programs’ Office of Analysis and Evaluation told us that the cost 

information used to support budget validation review reports is often 

flawed or nonexistent.

20 The Elimination of Weapons Grade Plutonium Production program seeks to facilitate 

the closure of Russian nuclear reactors by building or refurbishing replacement fossil fuel 

plants.

21 The Nonproliferation and Verification Research and Development program’s mission is 

to conduct needs-driven research, development, testing, and evaluation of new 

technologies that are intended to strengthen the United States’ ability to prevent and 

respond to nuclear, chemical, and biological attacks.
 

Page 17 GAO-12-806 Modernizing the Nuclear Security Enterprise

During the programming phase of PPBE, NNSA uses a variety of 

management tools, such as integrated priority lists and requirements and 

resources assessments, to support its programming phase and assist 

senior managers in making decisions on resource trade-offs. However, it 

has stopped using these capabilities or developing others.

NNSA uses the following management tools to decide on resource tradeoffs during the programming phase of its PPBE process:

Integrated priority lists. NNSA’s policy for the programming phase 

stipulates that each of NNSA’s nine program offices is to annually 

develop an integrated priority list that ranks program activities according 

to their importance for meeting mission requirements. These lists provide 

senior NNSA and DOE managers with an understanding of how various 

funding scenarios would affect program activities. Specifically, these lists 

rank the priority of program activities that are within anticipated 

appropriation levels—which are of the highest priority—as well as those 

that NNSA would fund if the appropriation levels were sufficiently high to 

do so. For example, the program activity listed last on an integrated 

priority list would be the first to forgo funding if appropriation levels are 

lower than anticipated. Conversely, these lists define program activities—

unfunded requirements—that would be funded if appropriation levels are 

higher than anticipated. NNSA instructions for the programming phase 

stipulate that the agency is to combine the nine program office-developed 

integrated priority lists into four that correspond to the four congressional 

appropriations NNSA receives. Three of the integrated priority lists—

those of the Offices of the Administrator, Defense Nuclear 

Nonproliferation, and Naval Reactors—correspond directly to specific 

appropriations,22

 

22 According to NNSA officials, the integrated priority list developed by NNSA’s Office of 

Management and Budget includes all activities funded by the Office of the Administrator 

appropriation.

but NNSA does not combine the six others that 

represent activities funded by the Weapons Activities appropriation into a 

NNSA Has 

Implemented Some 

Tools to Support 

Decision Making on 

Resource Trade-offs 

but Has Stopped 

Using or Developing 

Other Capabilities

NNSA Has Developed and 

Implemented Some Tools 

to Assist Management in 

Deciding on Resource 

Trade-offs 
 

Page 18 GAO-12-806 Modernizing the Nuclear Security Enterprise

single integrated priority list. NNSA officials stated that these six others 

represent separate and distinct mission areas and only the Administrator 

can decide on the resource trade-offs among them. Of the six program 

offices funded by the Weapons Activities appropriation, Defense 

Programs accounts for a large majority—approximately 82 percent—of 

the funding requested in NNSA’s fiscal year 2013 budget submission to 

Congress. According to officials in NNSA’s Office of Management and 

Budget, the Administrator is responsible for deciding on how to allocate 

resources across program offices. However, these decisions are not 

documented or reflected in a single integrated priority list for program 

activities funded by the Weapons Activities appropriation. By not 

combining these lists, NNSA is limiting the formal documentation 

available to inform DOE about how various Weapons Activities 

appropriation funding scenarios would affect the program activities 

conducted by these six program offices. Specifically, because these six 

lists are not integrated, it is unclear which program activities would be 

affected by changes to appropriation levels or which programs across the 

six lists are of the highest priority.

Requirements and Resources Assessments. During the 2010 and 2011 

programming cycles, NNSA used its Requirements and Resources 

Assessment process to independently assess the need to conduct new 

program activities and unfunded requirements. According to the NNSA 

handbook for this process, officials in NNSA’s Office of Management and 

Budget review program offices’ budget submissions for activities that are 

either above anticipated funding levels or are for new activities. For these 

assessments, officials are to analyze specific factors related to these 

activities, such as their need for meeting agency priorities and the 

reasonableness of the assumptions used to produce their budget 

estimates. The objective of this process is to ensure that new program 

activities and unfunded requirements are needed to meet NNSA priorities. 

For example, according to officials in NNSA’s Office of Management and 

Budget, the use of the Requirements and Resources Assessment 

process was a contributing factor in reducing the amount of unfunded 

program activities included in NNSA’s budget from approximately $1 

billion for fiscal year 2012 to approximately $80 million for fiscal year 

2013. Furthermore, draft NNSA guidance states that the process has 

identified inconsistencies in the quality of estimates and the level of 

insight and understanding program managers have regarding the fidelity 

of the estimates supporting their budgets. According to officials in NNSA’s 

Office of Management and Budget, this process is a simple and effective 

tool for providing management with additional information on the need to 

conduct proposed new program activities or unfunded requirements. 
 

Page 19 GAO-12-806 Modernizing the Nuclear Security Enterprise

However, these officials also stated that this process is time-consuming 

and would not be practical or efficient to apply to the entirety of NNSA 

program activities because it was designed to assess program 

components rather than entire programs; they added that other types of 

program reviews or validations would be better suited for conducting 

program needs analysis on an enterprise-wide basis. Additionally, 

because the NNSA Office of Integration and Assessments, which was

responsible for conducting these assessments, was dissolved in 2010, 

officials in NNSA’s Office of Management and Budget told us that they 

may discontinue the use of Requirements and Resources Assessment 

process in future programming cycles. Furthermore, in the current austere 

budget environment, they do not foresee any programs proposing 

activities that are either new or above anticipated funding levels. 

Therefore, the continued use of this process in future programming cycles 

is uncertain. However, we believe that NNSA has demonstrated this 

process can be an important tool for assessing the necessity to fund 

certain activities in order to meet its mission requirements.

Enterprise Portfolio Analysis Tool. NNSA’s Office of Defense Programs is 

implementing a data system—the Enterprise Portfolio Analysis Tool—

designed to provide a consistent framework for managing the PPBE 

process within Defense Programs, which accounts for 54 percent, or $6.2 

billion, of the President’s $11.5 billion fiscal year 2013 budget request for 

NNSA. As we testified in February 2012, a tool such as this could help 

NNSA obtain the basic data it needs to make informed management 

decisions, determine return on investment, and identify opportunities for 

cost saving.23

 

23

Currently, this tool includes a mechanism to identify when 

decisions on resource trade-offs must be made if, for example, M&O 

contractor-developed budget estimates for program requirements exceed 

the budget targets NNSA provided for those programs. Additionally, the 

tool is to incorporate Defense Programs’ common work activity 

structure—known as its work breakdown structure—to facilitate an 

analysis of consistent budget data from across the NNSA enterprise. 

Specifically, the tool may allow Defense Programs managers to compare 

the budget estimates for analogous activities across the nuclear security 

enterprise regardless of which M&O contractor or program is conducting 

them. Furthermore, Defense Programs officials stated that they eventually 

plan to use this tool to compare budget estimates of program activities 

GAO-12-473T. 
 

Page 20 GAO-12-806 Modernizing the Nuclear Security Enterprise

with the amounts the programs ultimately expended, but they said that 

the introduction of this capability is not imminent. According to Defense 

Programs and M&O contractor officials, the implementation of this tool is 

placing an additional labor burden on NNSA M&O contractors because of 

the quantity of historical budget data that need to be entered into it. 

However, according to Defense Programs officials, once these initial 

historical data are entered, the M&O contractors will need to annually 

update the system with the most recent year’s data.

NNSA no longer has an independent analytical capability to perform such 

functions as reviewing proposals for program activities and verifying cost 

estimates. In addition, since 2009, the NNSA Administrator has not 

formally documented his decisions on resource trade-offs at the close of 

the programming phase in the AFR. Furthermore, NNSA has not 

completed cost estimating guidance to assist NNSA program managers in 

identifying reliable M&O contractor practices for estimating costs for 

operations and sustainment activities. By not using these capabilities, 

NNSA has reduced its ability to decide on resource trade-offs because it 

has not enhanced, made formal, or implemented capabilities that it had 

already, to varying degrees, developed or used.

The DOE Inspector General and GAO, recommended in 2003 and 2007, 

respectively, that NNSA establish an independent analysis unit to perform 

such functions as reviewing proposals for program activities and verifying 

cost estimates.24

 

24 DOE/IG-0614 and 

NNSA agreed with these recommendations and, in 

2009, instituted the Office of Integration and Assessments to identify, 

analyze, assess, and present to senior NNSA management options for 

managing its programs and making decisions on resource trade-offs. The 

specific responsibilities of this office included analyzing program 

performance, evaluating programming and funding alternatives, and 

assessing the implementation and effectiveness of process improvement 

initiatives. Furthermore, this office managed the Requirements and 

Resources Assessment process during the 2010 programming cycle. 

However, NNSA disbanded the office in 2010, 18 months after it was 

formally created. NNSA officials also told us that it was never properly 

staffed, which thereby limited its effectiveness.

GAO-07-36. 

NNSA Does Not Use 

Capabilities That Were 

Previously Implemented or 

Partially Developed to 

Support Its Programming 

Activities

Independent Analytical 

Capability 
 

Page 21 GAO-12-806 Modernizing the Nuclear Security Enterprise

In the memorandum establishing the Office of Integration and 

Assessments, NNSA stated that it expected the office, in conjunction with 

DOE’s Office of Cost Analysis, to provide DOD-like analytical resources 

across NNSA.25

Even though NNSA has had difficulty in maintaining an agencywide 

independent analytical capability, NNSA’s Principal Deputy Administrator 

told us that NNSA remains supportive of the concept of an independent 

Since then, however, DOE has also eliminated its Office 

of Cost Analysis. With both of these offices now gone, neither NNSA nor 

DOE has independent cost assessment or program evaluation 

capabilities analogous to those of DOD. In contrast, because NNSA’s 

Office of Naval Reactors is organized as a separate entity within NNSA 

reporting both to NNSA and the U.S. Navy, unlike the rest of NNSA, it is 

subject to the Navy’s independent analytical resources, such as 

assessments by the Naval Sea Systems Command’s Office of Cost 

Engineering and Industrial Analysis and the Naval Center for Cost 

Analysis, which conduct independent reviews and analyses of program 

cost estimates. Furthermore, DOD has an Office of Cost Assessment and 

Program Evaluation, which has a similar function but with a purview that 

extends across DOD, including the Navy. These layers of independent 

review approximate NNSA’s vision for independent analysis, as described 

in the memorandum establishing the Office of Integration and 

Assessments. Following the dissolution of the Office of Integration and 

Assessments in 2010, NNSA’s Office of Defense Programs created the 

Office of Analysis and Evaluation to conduct similar program review 

functions. However, the capabilities of this office are limited by several 

factors. For example, because the office is positioned within Defense 

Programs, it does not have purview to conduct analysis on any of NNSA’s 

other programs, which, in total, constitute nearly half of the agency’s 

budget request for fiscal year 2013. Additionally, according to Defense 

Programs officials, this office does not have the capability to self-initiate 

reviews of programs but rather is instructed by Defense Programs’ 

management on what activities to assess, thereby limiting the office’s 

independence. Furthermore, NNSA officials from this office stated that 

properly staffing the office remains a challenge because many qualified 

individuals left DOE and NNSA when they eliminated the Offices of Cost 

Analysis and Integration and Assessments, respectively.

 

25 DOE established the Office of Cost Analysis in order to improve the department’s costestimating capabilities and better ensure that its project cost estimates are reliable by 

providing a new independent cost-estimating function for the department.
 

Page 22 GAO-12-806 Modernizing the Nuclear Security Enterprise

analytical unit to conduct assessments of programs agencywide. 

However, senior NNSA officials told us that creating and developing the 

capabilities of such an office would be difficult in the current budget 

environment and that therefore NNSA has no current plans to institute 

such a capability.

The NNSA Administrator has not formally documented his decisions on 

resource trade-offs at the close of the programming phase in the AFR 

since 2009, which is inconsistent with NNSA policy and instructions. 

When issued, this document articulated the Administrator’s rationale and 

methodology for deciding on resource trade-offs during the programming 

phase of the PPBE process—which one senior official in NNSA’s Office of 

Management and Budget described as an important component of the 

PPBE process—to support in his budget proposal to DOE and to better 

facilitate NNSA’s participation in DOE’s Strategic Resources Review. 

According to senior NNSA officials, the Administrator considered the AFR 

to be a useful management tool but decided to discontinue issuing it 

because of concerns that its contents, which are predecisional Executive 

Branch deliberative material and embargoed from public release by OMB 

Circular A-11, could be leaked and thereby reduce the flexibility of DOE 

and OMB in making final decisions regarding the President’s Budget. 

Instead of the AFR, the Administrator now develops an internal document 

called “Administrator’s Preliminary Decisions,” which is not required in 

NNSA policy, guidance, or instructions; contains more generalized 

information; and does not have the rationales, methodologies, and 

justifications for decision making on resource trade-offs that were 

previously incorporated into the AFR.

NNSA developed a draft guide—the Program Managers’ Guide to 

Understanding and Reviewing Cost Estimates for Operations and 

Sustainment Activities—in 2010 to assist NNSA program managers in 

identifying reliable M&O contractor practices for estimating costs for 

operations and sustainment activities—activities not related to 

construction; according to this guide, these activities constitute 

approximately 80 percent of NNSA’s annual budget. This guide was also 

created to supplement the information provided in NNSA’s Business 

Operating Procedure 50.005, Establishment of an Independent Cost 

Estimate Policy and interim Cost Estimating Guide 50.005, which 

Administrator’s Final 

Recommendations 

Issuance of Supplemental 

Guide on Cost Estimating
 

Page 23 GAO-12-806 Modernizing the Nuclear Security Enterprise

identifies best practices for preparing cost estimates.26 However, the 

Program Managers’ Guide to Understanding and Reviewing Cost 

Estimates for Operations and Sustainment Activities was largely 

completed but never finalized before NNSA dissolved the Office of 

Integration and Assessments, which had drafted the guide, and NNSA 

officials said the agency has no plans to complete or issue it. According to 

officials in NNSA’s Office of Management and Budget, NNSA drafted this 

guide because it recognized that supplemental information focused on 

operations and sustainment activities cost estimates—the development of 

which, according to this guide, are not governed by any specific NNSA 

guidance or processes—could enhance the tools available to program 

managers in evaluating cost estimates and how they are translated into 

budget estimates. The objective of the guide was to provide an instructive 

document to facilitate program managers’ ability to understand what 

constitutes a rigorous process for ensuring quality operations and 

sustainment cost estimates on an ongoing basis and evaluate the 

reasonableness those estimates. This guide also defined key 

components of cost estimating to clarify the responsibilities and 

expectations of NNSA program managers and included instructions for 

how NNSA program managers can assess the quality of budget 

estimates submitted by M&O contractors. NNSA officials with Defense 

Programs’ Office of Analysis and Evaluation told us that additional 

guidance on how to assess the costs of operations and sustainment 

activities could enhance program managers’ ability to assess the 

reliability and credibility of cost estimates.

NNSA has established a formal four-phase PPBE process that uses 

short- and long-term planning to define program priorities and match them 

to available budgetary resources. However, DOE and NNSA have not 

taken adequate steps to make this process as effective and efficient as 

possible. In particular, DOE Order 130.1, which defines DOE’s provisions 

for budget activities, references outdated terminology and organizations 

that no longer exist within the department, leading to confusion regarding 

 

26 The information included in NNSA’s interim Cost Estimating Guide 50.005 is applicable 

to all cost estimating activities, but one senior official in NNSA’s Office of Acquisition and 

Project Management told us that it is most useful for construction and capital asset 

projects, which are land, structures, equipment, and information technology used by the 

federal government and have an estimated useful life of 2 years or more, as well as 

strategic assets that are unique physical or intellectual property that is of long-term or 

ongoing value to an enterprise. 

Conclusions 
 

Page 24 GAO-12-806 Modernizing the Nuclear Security Enterprise

the order’s applicability and requirement for implementation. As a result, 

NNSA believes that the order has expired and that it is not required to 

adhere to its provisions. By not adhering to these provisions, NNSA is 

reducing the credibility of its budget proposals. Moreover, NNSA’s 

process for developing budget estimates continues to rely heavily on its 

M&O contractors to develop budget estimates without an effective, 

thorough review of the validity of those estimates. Without thorough 

reviews by site and headquarters program offices of budget estimates, 

NNSA cannot have a high level of confidence in its budget estimates or in 

its ability to make informed decisions on resource trade-offs and to 

enhance the credibility and reliability of its budget. Furthermore, NNSA’s 

formal budget validation review process does not sufficiently ensure the 

credibility and reliability of NNSA’s budget, primarily because of 

deficiencies in the timing of these reviews. Also, without a formal 

mechanism to evaluate the status of recommendations made during 

previous budget validation reviews, NNSA is limited in its ability to 

measure any progress M&O contractors or programs have made to their 

budget estimating processes.

NNSA has reduced its ability to decide on resource trade-offs because it 

has not enhanced, made formal, or implemented capabilities that it has 

already, to varying degrees, developed or used. In particular, NNSA does 

not follow its instructions for preparing an integrated priority list for each 

congressional appropriation, as it does not combine the six priority lists 

that represent activities funded by the Weapons Activities appropriation 

into a single integrated list. By not combining these lists into a single 

integrated priority list, NNSA is limiting the formal documentation 

available to inform DOE which program activities would be affected by 

changes to this appropriation. Moreover, NNSA instituted and then 

disbanded an independent analytic capability that would provide it with an 

independent cost assessment or evaluation capabilities of the 

reasonableness and affordability of various programs and projects 

proposed by NNSA offices. By disbanding its independent analytical 

capability, NNSA is losing its ability to improve its cost-estimating 

capabilities and better ensure that its project cost estimates are credible 

and reliable. Because of the fiscal constraints in the current budget 

environment, it is all the more critical that NNSA have the capability to 

conduct independent cost analyses to enhance its ability to make the 

most effective and efficient resource decisions on resource trade-offs. 

Despite previous recommendations that DOE’s Inspector General made 

in 2003, and that we made in 2007, to institute an independent analytical 

capability to assess programs throughout all of NNSA, NNSA continues to 

lack such a function. Not having this capability could preclude NNSA from 
 

Page 25 GAO-12-806 Modernizing the Nuclear Security Enterprise

making the best decisions about what activities to fund and whether they 

are affordable. In addition, NNSA may cease using its Requirements and 

Resources Assessment process—which is intended to provide some 

independent analysis of new program activities and unfunded 

requirements—in future PPBE budget cycles because it does not 

anticipate program proposals for new activities or unfunded requirements. 

By not retaining this process, NNSA would lose an important tool for 

assessing the necessity to fund certain activities in order to meet its 

mission requirements.

Furthermore, NNSA no longer follows its policy to issue the AFR. Without 

a formal document, NNSA and DOE have no formal record of the 

Administrator’s rationale and methodology for deciding on resource tradeoffs during the programming phase of the PPBE process. We recognize 

that NNSA needs to hold confidential, internal budgetary and resource 

trade-off deliberations; however, we do not believe that this need 

supersedes NNSA policy or the benefits provided by documented 

decision making during programming, which one senior NNSA official 

described to us an important component in NNSA’s PPBE process. Not 

issuing the AFR (or some similarly precise documentation) places the 

Administrator in conflict with official NNSA policy and with an important 

PPBE precept—the importance of transparency.

Finally, NNSA developed draft guidance in 2010 to assist NNSA program 

managers in identifying reliable M&O contractor practices for estimating 

costs for operations and sustainment activities. Such guidance would 

better equip NNSA program managers to more accurately evaluate the 

reasonableness of cost estimates, but this guidance is in draft form and 

NNSA has no plans to complete and issue it. Without such guidance, 

NNSA program managers are limited in their ability to assess the 

reliability and credibility of budget estimates.

To enhance NNSA’s ability to better ensure the validity of its budget 

submissions, and to decide on resource trade-offs, we recommend that 

the Secretary of Energy take the following seven actions:

• Direct the DOE Office of Budget to formally evaluate DOE Order 

130.1 and revise as necessary, and communicate any revisions to the 

NNSA Administrator so that the agency will have updated provisions 

for assessing the quality of its budget estimates.

Recommendations for 

Executive Action
 

Page 26 GAO-12-806 Modernizing the Nuclear Security Enterprise

• Direct the Administrator of NNSA to:

• Develop a formal process, or amend its budget validation review 

process, to ensure that all budget estimates are thoroughly 

reviewed by site and headquarters program offices, and that these 

reviews are timed to inform NNSA, DOE, OMB, and congressional 

budget decisions.

• Once this process is developed, incorporate a formal mechanism 

to evaluate the status of recommendations made during previous 

budget validation reviews so that NNSA can measure M&O 

contractors’ and programs’ progress in responding to deficiencies 

with their budget estimates.

• Combine the integrated priorities lists for each of the program 

offices funded within the Weapons Activities appropriation into a 

single integrated priorities list, as stipulated in NNSA instructions, 

to better inform DOE which program activities would be affected 

by changes to this appropriation.

• Reinstitute an independent analytical capability to provide senior 

decision makers with independent program reviews, including an 

analysis of different options for deciding on resource trade-offs, 

and facilitate NNSA making the best decisions about what 

activities to fund and whether they are affordable. As part of this 

capability, formally retain the Requirements and Resources 

Assessment process to review proposed new activities and 

unfunded requirements.

• Reinstitute the issuance of the Administrator’s Final 

Recommendations to document the Administrator’s rationale and 

methodology for deciding on resource trade-offs to support in his 

budget proposal to DOE and to better facilitate NNSA’s 

participation in DOE’s budget process.

• Complete and formally issue the Program Managers’ Guide to 

Understanding and Reviewing Cost Estimates for Operations and 

Sustainment Activities so that program managers will be better 

equipped to evaluate the reasonableness of cost estimates.

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

its written comments, NNSA, responding on behalf of DOE, provided 

observations on the report’s findings and stated that it generally agreed in 

principle with six of our seven recommendations and did not concur with 

one. NNSA did not concur with our recommendation to combine the 

integrated priorities lists for all program offices funded by the Weapons 

Activities appropriation into a single integrated priorities list, as is 

stipulated by NNSA instructions for the programming phase of PPBE.

Agency Comments 

and Our Evaluation
 

Page 27 GAO-12-806 Modernizing the Nuclear Security Enterprise

NNSA agrees that the integrated priorities lists are a useful tool to 

facilitate NNSA and DOE decision-making. However, NNSA states that it 

believes reaching management consensus on a single integrated 

priorities list for these program offices would be a difficult, time consuming 

process and that its current approach for deciding on resource trade-offs 

is effective and efficient. We acknowledge that NNSA uses a variety of 

tools in addition to integrated priorities lists to conduct programming

activities, but we continue to believe that combining the integrated 

priorities lists for all program offices funded by the Weapons Activities 

appropriation could enhance the agency’s ability to support its decisions 

on resource trade-offs for DOE consideration during the Strategic 

Resources Review. However, NNSA stated in its comments that it would 

consider the development of more robust integrated priority lists if 

circumstances require changes to its current approach. 

NNSA further acknowledged that aspects of its PPBE process could be 

improved but disagreed with our report’s characterization of its budget 

estimate review processes as not being thorough. NNSA commented that 

it believes that our conclusions overemphasize some procedural areas for 

potential improvement, without accurately considering the cumulative 

effectiveness of NNSA’s PPBE process as a whole. We continue to 

believe that the agency’s processes for reviewing budget estimates are 

not sufficiently thorough to ensure the credibility and reliability of those 

estimates and do not meet the provisions defined in DOE Order 130.1. 

Specifically, the reviews conducted by site and headquarters program 

office officials are informal and undocumented, and NNSA’s budget 

validation review process—the agency’s formal process for assessing 

M&O contractor- and program-developed budget estimates—does not 

assess the accuracy of budget estimates and is conducted for a small 

portion of the agency’s annual budget. NNSA’s letter is reproduced in 

appendix II.

NNSA also provided technical comments, which we incorporated 

throughout the report as appropriate.

We are sending this report to the Secretary of Energy, the Administrator 

of NNSA, the appropriate congressional committees, and other interested 

parties. In addition, the report is available at no charge on the GAO 

website at http://www.gao.gov. 
 

Page 28 GAO-12-806 Modernizing the Nuclear Security Enterprise

If you or your staff have any questions about this report, please contact 

me at (202) 512-3841 or aloisee@gao.gov. Contact points for our Office 

of Congressional Relations and Public Affairs may be found on the 

last page of this report. Key contributors to this report are listed in 

appendix III.

Gene Aloise

Director, Natural Resources and Environment
Appendix I: Objectives, Scope, and 

Methodology

Page 29 GAO-12-806 Modernizing the Nuclear Security Enterprise

The objectives of our review were to determine (1) the current structure of 

the National Nuclear Security Administration’s (NNSA) planning, 

programming, budgeting, and evaluation (PPBE) process; (2) the extent 

to which NNSA reviews its budget estimates; and (3) how NNSA decides 

on resource trade-offs in its PPBE process.

To determine the current structure of NNSA’s PPBE process, we 

reviewed the NNSA policies and other headquarters-developed 

instructions and guidance documents that define how the process is 

designed to function. We also reviewed program-specific PPBE 

documentation from the Offices of Defense Programs, Defense Nuclear 

Nonproliferation, and Naval Reactors; these three offices correspond to 

NNSA’s primary missions and collectively account for approximately 85 

percent of the President’s fiscal year 2013 NNSA budget submission to 

Congress. We also interviewed officials from NNSA’s Office of 

Management and Budget, which is responsible for managing NNSA’s 

PPBE process, as well as the offices of Defense Programs, Defense 

Nuclear Nonproliferation, and Naval Reactors to discuss how NNSA’s 

PPBE process is designed to function.

To determine the extent to which NNSA reviews its budget estimates, we 

reviewed DOE Order 130.1 and NNSA policies, instructions, and 

guidance that define how such reviews are to be conducted. We also 

analyzed documentation of the formal budget validation reviews 

conducted by NNSA for the last five review cycles, as well as the results 

of two NNSA workgroups that evaluated the budget validation review 

process. Furthermore, we interviewed officials involved in the 

development, oversight, or execution of NNSA budget estimate reviews 

from the NNSA Offices of the Administrator, Management and Budget, 

Defense Programs, Defense Nuclear Nonproliferation, Naval Reactors, 

and Acquisition and Project Management; the site offices for Los Alamos, 

Sandia, and the Y-12 National Security Complex, and the Naval Reactors 

Laboratory Field Office; DOE officials from the Office of Budget; and M&O 

contractor officials from Los Alamos and Sandia National Laboratories, 

the Y-12 National Security Complex, and Bettis Atomic Power 

Laboratory.1

 

1 We selected a nonprobability sample of NNSA sites based on the levels of funding they 

receive from NNSA for the programs included in the scope of our work. Because we used 

a nonprobability sample, the results we obtained from these sites are not generalizable 

across the nuclear security enterprise; however, they did provide us with specific 

examples of how NNSA conducts PPBE activities at the site level.

Because NNSA’s Office of Naval Reactors is organized as a 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 30 GAO-12-806 Modernizing the Nuclear Security Enterprise

separate entity within NNSA reporting both to NNSA and the U.S. Navy, 

we also met with Navy officials from its Offices of Financial Management 

and Budgeting, and Cost Engineering and Industrial Analysis.

To determine how NNSA decides on resource trade-offs, we reviewed 

NNSA policies, instructions, and guidance for its programming process. 

Based on these documents, we identified the tools that NNSA uses, or 

has used, to assist NNSA management in deciding on resource trade-offs 

and reviewed documentation of how these tools were applied by program 

offices and NNSA management during the programming phases of 

previous PPBE cycles. We also interviewed officials from the NNSA 

Offices of the Administrator, Management and Budget, Defense 

Programs, Defense Nuclear Nonproliferation, Naval Reactors to discuss 

how they decide on, and document, resource trade-offs.

We conducted this performance audit from July 2011 to July 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from the U.S. 

Department of Energy

Page 31 GAO-12-806 Modernizing the Nuclear Security Enterprise

Appendix II: Comments from the U.S. 

Department of Energy
Appendix II: Comments from the U.S. 

Department of Energy

Page 32 GAO-12-806 Modernizing the Nuclear Security Enterprise
Appendix II: Comments from the U.S. 

Department of Energy

Page 33 GAO-12-806 Modernizing the Nuclear Security Enterprise
Appendix II: Comments from the U.S. 

Department of Energy

Page 34 GAO-12-806 Modernizing the Nuclear Security Enterprise
Appendix II: Comments from the U.S. 

Department of Energy

Page 35 GAO-12-806 Modernizing the Nuclear Security Enterprise
Appendix II: Comments from the U.S. 

Department of Energy

Page 36 GAO-12-806 Modernizing the Nuclear Security Enterprise
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 37 GAO-12-806 Modernizing the Nuclear Security Enterprise

Gene Aloise, (202) 512-3841, or aloisee@gao.gov

In addition to the contact named above, Dan Feehan (Assistant Director),

Robert Baney, Matthew Tabbert, and Eugene Wisnoski made significant 

contributions to this report. Cheryl Peterson, Jeremy Sebest, Rebecca 

Shea, Carol Herrnstadt Shulman, and Kiki Theodoropoulos provided 

technical assistance.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(361316)
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