U.S. Department of Energy 

Office of Inspector General 

Office of Audit Services 

Audit Report 

National Nuclear Security 

Administration's Construction of a 

Radiological/Nuclear Complex for 

Homeland Security

DOE/IG-0775 September 2007 

 2 

• Effectively monitored project status; and, 

• Effectively communicated project status to senior Department of Energy and 

Homeland Security officials. 

In addition, without validation, the Nevada Site Office accepted the assurance of its 

contractor, Bechtel Nevada, that the project was on schedule and within budget despite 

early warning signs to the contrary. 

Our examination of the project further determined that management and coordination 

responsibilities between the Department and Homeland Security were not clearly defined 

and the project was not appropriately staffed. Specifically, the Nevada Site Office and the 

Department of Homeland Security did not develop or execute a formal agreement 

defining their respective management and coordination responsibilities until May 2006, 

or two years after Bechtel Nevada started work on the project and three months prior to 

the suspension of work. 

We also found a disturbing lack of clarity as to which agency was responsible for 

management and coordination of the project. This led to conflicting views on this 

subject, between Nevada Site Office personnel and Department of Homeland Security 

officials. Additionally, the Nevada Site Office assigned oversight responsibility for the 

effort to a program office that had limited construction project experience. For example, 

staff assigned by the program office had not managed capital asset construction projects 

and were not certified in project management as required by Department of Energy 

guidance. 

 

At the end of our field work, the Radiological/Nuclear Countermeasures Test and 

Evaluation Complex had not been completed. The Department of Homeland Security 

was evaluating options for completing the Test and Evaluation Complex -- one option 

under consideration was contracting the remaining work to the Army Corps of Engineers. 

Nevada officials estimated that as much as $10.5 million would be needed to complete 

the project. 

Even if an effective fix is implemented, completion of the project will have been 

significantly delayed and the cost will have substantially exceeded original estimates. 

More importantly, the delay may impact the Nation's testing capability to detect nuclear 

and radioactive materials in a variety of circumstances. 

We concluded that experience with the Radiological/Nuclear Countermeasures Test and 

Evaluation Complex project provides important "lessons learned" for managing the 

Department's expanding portfolio of Work for Others projects. This is particularly true 

of those with the Department of Homeland Security, which have national security 

implications. 

To their credit, NNSA and National Security Technologies, LLC, the current Nevada 

Test Site contractor, have performed several reviews of the project since September 2006. 

These reviews found project management weaknesses at the contractor level similar to 
3

those discussed in this report. To assist the Department in managing future Homeland 

Security projects, we made a number of recommendations to ensure that responsibilities 

and coordination mechanisms are agreed upon before initiating Work for Others projects, 

and that appropriate expertise is assigned to such projects. 

MANAGEMENT REACTION

Management agreed with the report's findings and recommendations and agreed to be 

more aggressive in managing future Work for Other projects. 

Attachment 

cc: Deputy Secretary 

 Administrator, National Nuclear Security Administration 

 Chief of Staff 

 Director, Policy and Internal Controls Management, NA-66 
REPORT ON NATIONAL NUCLEAR SECURITY ADMINISTRATION'S 

CONSTRUCTION OF A RADIOLOGICAL/NUCLEAR COMPLEX FOR 

THE DEPARTMENT OF HOMELAND SECURITY 

TABLE OF 

CONTENTS 

Rad/Nuc CTEC Project at the Nevada Test Site

Details of Finding ............................................................................1 

Recommendations............................................................................4 

Comments ........................................................................................5

Appendices

1. Other Matters ..............................................................................6 

2. Objective, Scope, and Methodology...........................................7 

3. Prior Audit Report.......................................................................9 

4. Management Comments ...........................................................10 
Rad/Nuc CTEC Project at the Nevada Test Site 

Background The Radiological/Nuclear Countermeasures Test and Evaluation 

Complex (Rad/Nuc CTEC) is a first of a kind, Hazardous 

Category-2 nuclear facility being constructed at the Nevada Test 

Site for the Department of Homeland Security (Homeland 

Security). The facility will allow Homeland Security to 

consolidate radiological/nuclear operational test and evaluation 

activities as well as other training and operational activities. The 

Rad/Nuc CTEC was designated as a fast-track project for 

construction to start prior to the completion of building design. 

Homeland Security approved funding for the project was $33 

million. Bechtel Nevada (Bechtel) initiated the design and 

construction of the complex. In March 2006, the National Nuclear 

Security Administration (NNSA) announced that effective July 1, 

2006, National Security Technologies, LLC (NSTec), would 

become the new contractor, thus assuming responsibility for 

project completion. 

Management of the NNSA's Nevada Site Office (Nevada) did not effectively manage 

Rad/Nuc CTEC Project the Rad/Nuc CTEC project to ensure that it would be completed on 

schedule and within cost limitations. Specifically, Nevada did not 

follow project management requirements and did not adequately 

administer the Bechtel contract. 

 Project Management

Department of Energy (Department) Order 413.3 provides 

guidance for the acquisition of capital assets and construction 

projects. The Order establishes requirements for risk management, 

cost and schedule baselines, and periodic reviews of project 

performance. Our review showed, however, that Nevada did not 

ensure that cost and schedule baselines were prepared, coordinated, 

and used for project management; aggressively manage Rad/Nuc 

CTEC project risk; and, effectively communicate project progress 

with senior management. 

 Cost and Schedule Baselines

Although Homeland Security approved a funding amount of 

$33 million in July 2005, Nevada did not ensure that Bechtel 

prepared a final approved cost and schedule baseline and an 

integrated schedule. This cost baseline would show how much the 

project would cost within the defined scope and allow management 

to assess whether the project's scope could be completed within 

available funds. In addition, Bechtel did not ensure departmental 

schedules, such as engineering, procurement, and construction, 

Page 1 Details of Finding 
were integrated in a master plan and schedule for project activities. 

The lack of integration between procurement and construction 

schedules had direct impacts on the project and its workers. For 

example, progress on the Rad/Nuc CTEC project was delayed 

three months when equipment and building materials including a 

crane, pipe fittings, and windows for the project were unavailable. 

As a result, craft workers assigned to the Rad/Nuc CTEC project 

had to be redirected to other Bechtel projects at the Nevada Test 

Site. 

 Risk Management

Fast-track projects are at risk of costly changes since construction 

begins before a facility is completely designed. Although 

construction of the Rad/Nuc CTEC project was expedited, 

sufficient contingency funds were not allocated to the project to 

account for construction changes that occurred as the design 

matured. According to NNSA guidance, contingency for a special, 

first of a kind construction project such as the Rad/Nuc CTEC 

should be about 20-30 percent. However, in June 2005, the 

Nevada Site Office Manager approved a contingency of 16.3 

percent. The contingency amount was insufficient to compensate 

for the approximately 150 cost trends and changes made to the 

baseline by Bechtel. In fact, the contingency was depleted by 

April 2006 with only 59 percent of the project construction 

completed. 

Additionally, although a risk management plan for the project was 

developed in March 2005, which identified excessive project team 

turnover as a risk, the plan was not updated to identify and mitigate 

an increased risk associated with a change in contractors 

announced by NNSA in March 2006. Specifically, effective July 

2006, NSTec assumed responsibility for the project as a result of 

NNSA's competition of its management and operating contract for 

the Nevada Test Site. As a result of the contractor transition, the 

Rad/Nuc CTEC lost its entire contractor project management team. 

NSTec employees, with no prior project knowledge, assumed 

responsibility for the project after the contract transition. 

 Progress Reviews

Further, Nevada made limited use of progress reviews or other 

Departmental reporting tools to monitor construction activity and 

to communicate with senior management. During Fiscal Years 

2004 through 2006, for example, the Nevada Site Office Manager 

held only four progress reviews on the Rad/Nuc CTEC project, 

Page 2 Details of Finding 
instead of the quarterly meetings suggested in the Department's 

project management guidance. Also, critical performance 

information and monthly status reports were not entered into the 

Department's Project Assessment and Reporting System, which is 

used to report to senior managers whether a project is on track to 

meet its performance baselines. These monitoring tools, if 

effectively used, would have increased communication with senior 

management about the status of the Rad/Nuc CTEC project's 

activities, events, milestones, and deliverables. 

 Contract Administration

As the project progressed, Nevada accepted Bechtel's assurances, 

without validation, that the project was on schedule and within 

budget despite early warning signs to the contrary. For example, 

the Earned Value Management System used by Nevada and 

Bechtel, identified cost and schedule performance indicators; 

however, both entities ignored key warning signs indicating 

potential schedule and cost overruns. Nevada accepted Bechtel's 

assurances that the project was still on track without validating 

Bechtel's explanations for low performance indicators. Starting in 

January 2006, cost and schedule indicators continually decreased 

below the desired measurement levels. Although Bechtel reported 

these low performance indicators, it assured Nevada that delays 

would not affect the overall schedule or budget because the delays 

were not on the critical path. Nevada accepted Bechtel's 

explanation and did not request additional information to 

determine how these delays would be overcome. However, we 

found that some of the delays such as the previously mentioned 

crane, which was delayed for more than three months, were 

essential to completing the project and were symptomatic of larger 

problems such as the lack of an integrated master plan. 

Responsibilities and The project was not effectively managed because management and 

Assignments coordination responsibilities were not clearly defined. Specifically, 

Nevada and Homeland Security did not have a formal agreement 

defining their respective management and coordination 

responsibilities until May 2006, or 28 months after Bechtel started 

work on the project. For example, there was no agreement between 

Nevada and Homeland Security regarding how cost estimate 

increases would be handled; that is, whether Homeland Security 

would increase funding or reduce project scope. Without such an 

agreement, cost increases were absorbed by contingency until the 

funds were exhausted. Further, without an agreement, coordination 

and communication problems occurred. Several Homeland

Page 3 Details of Finding 
Security officials, for example, told us that they were not provided 

enough detail about the project status and were unaware until July 

2006, that available funds were not adequate to complete work. 

We also found conflicting views among Nevada personnel and 

Homeland Security officials about which agency was responsible 

for management and coordination of the project. A Nevada 

official, for example, told us that Homeland Security was 

responsible for management of the project; however, Homeland 

Security officials told us that Nevada prohibited them from directly 

contacting Bechtel to discuss project status. 

Additionally, Nevada assigned oversight responsibility for the 

project to a program office that had limited construction project 

experience. For example, staff assigned to the project had not 

previously managed construction projects under Department Order 

413.3. The staff assigned to the project also was not certified in 

project management as required by Department guidance. In 

addition, a Nevada official told us that staffing resources were not 

adequate to review contractor performance on Work for Others 

projects. 

Project Impact As of February 2007, Nevada and NSTec estimated an additional 

ten months and approximately $7.4-10.5 million were needed to 

complete the project. Homeland Security officials, at the time of 

our review, were considering several options including de-scoping 

the project or contracting the remaining work to the Army Corps of 

Engineers under a fixed price contract. 

 Inadequate project management and contract administration 

resulted in additional costs to the government and delays in the 

completion of the Rad/Nuc CTEC project. As a result, Homeland 

Security's testing capability to detect radiological and nuclear 

materials that could move across and through our borders, tunnels, 

bridges and toll plazas has been reduced. Also, Homeland 

Security's consolidation of its radiological/nuclear operational test 

and evaluation activities, and other training and operational 

activities will be delayed. 

RECOMMENDATIONS We recommend that the Administrator, NNSA: 

1. Establish, prior to initiating Work for Others projects, 

 Memorandums of Agreement that at a minimum specify 

 responsibilities for: 

 a. Monitoring contract performance, 

Page 4 Recommendations 
 b. Approving project baselines and baseline changes to 

 cost, scope and schedule; and, 

 c. Communicating project status to senior Department 

 and customer management. 

 

2. Ensure that construction projects, including Work for 

Others efforts, are managed by Department offices with 

appropriate experience, including certified project 

directors. 

 

 

MANAGEMENT NNSA management agreed with our report findings and 

COMMENTS recommendations related to Work for Others issues, particularly as 

it relates to Homeland Security. Specifically, management stated 

they would review Work for Others processes and procedures and 

appropriately establish roles and responsibilities in future 

agreements. In addition, NNSA intends to provide updated 

guidance to the site offices on conducting Work for Others 

projects. 

 Management comments are included in its entirety in Appendix 4. 

AUDITOR Management's comments were responsive to our 

COMMENTS recommendations. 

Page 5 Comments 
Appendix 1 

OTHER MATTERS

During our review, we found that the Nevada Site Office (Nevada) decided to reduce Bechtel 

Nevada's (Bechtel) facility operations award fee by $686,995 due to deficiencies in its oversight 

of the Radiological/Nuclear Countermeasures Test and Evaluation Complex (Rad/Nuc CTEC) 

project. The award fee reduction decreased the amount of fees paid to the contractor by Nevada 

for managing and operating the Nevada Test Site. However, Nevada did not reduce the fixed fee 

of $1.2 million paid to Bechtel for the Rad/Nuc CTEC project. This fee was paid by the 

Department of Homeland Security (Homeland Security). Since Bechtel's poor performance 

directly impacted the Rad/Nuc CTEC project, it may also have been more appropriate to reduce 

the amount of fixed fee paid by Homeland Security. In response, Nevada officials told us that 

they believed the National Nuclear Security Administration's (NNSA) Work for Others policy 

required the payment of a fixed fee and precluded a fee reduction. We noted, however, that the 

Department of Energy regulations included in the Bechtel contract state that "fees, including 

fixed fees, may be reduced when performance deliverables are not met." Accordingly, we 

suggest that NNSA ensure that all sites understand its Work for Others policy, especially 

regarding reductions in fixed fees paid to contractors who have not performed as expected.

Page 6 Other Matters 
Appendix 2 

OBJECTIVE Our objective was to determine if the Nevada Site Office (Nevada) 

effectively managed the Radiological/Nuclear Countermeasures 

Test and Evaluation Complex project. 

SCOPE The audit was performed between September 2006 and July 2007, 

at the Nevada Site Office and National Security Technologies, 

LLC in Las Vegas, Nevada. The scope was limited to the activities 

associated with Department of Homeland Security (Homeland 

Security) sponsored work from October 2005 through September 

2006. 

METHODOLOGY To accomplish the objective, we: 

• Reviewed applicable Federal and Departmental regulations, 

Departmental Orders, internal policies and procedures, and 

Homeland Security project documents; 

• Reviewed prior audits and reviews from the Office of 

Inspector General, Government Accountability Office, 

National Nuclear Security Administration (NNSA) and 

contractors; 

• Analyzed Nevada and contractor compliance with 

Departmental Orders for the acquisition of capital assets, 

including their administration, monitoring, project reviews, 

scheduling, risk management and trending practices; 

• Assessed compliance with the Government Performance 

and Results Act of 1993; and, 

• Interviewed appropriate NNSA, Homeland Security, and 

contractor personnel. 

The audit was conducted in accordance with generally accepted 

government auditing standards for performance audits and 

included limited tests of internal controls and compliance with 

laws and regulations to the extent necessary to satisfy the audit 

objective. Because our review was limited, it would not 

necessarily have disclosed all internal control deficiencies that may 

have existed at the time of our audit. We relied on computer 

processed data to accomplish our audit objective and performed 

limited testing on the data we used to satisfy the audit objective. 

NNSA established performance measures under the Government 

Performance and Results Act of 1993. While there were no 

Page 7 Objective, Scope, and Methodology 
Appendix 2 (continued) 

specific performance measures related to Work for Others, 

performance in this area was assessed under the contractor's 

general management performance. NNSA waived an exit 

conference. 

Page 8 Objective, Scope, and Methodology 
Appendix 3 

PRIOR AUDIT REPORT

• Nuclear Detection Devices (DOE/IG-0720, February 2006). The Department of 

Energy (Department) had not developed procedures that detailed how research 

being conducted by the national laboratories for the Department of Homeland 

Security (Homeland Security) should be coordinated with parallel or similar 

research sponsored by the Department. In addition, the Department had not 

developed procedures nor required reporting Homeland Security funded research 

to Headquarters or any other central entity. As a result, neither the Department 

nor Homeland Security had a complete inventory of research being conducted at 

the national laboratories. The Office of Inspector General recommended that the 

Department establish formal procedures to coordinate radiation detection research 

being conducted by the national laboratories, regardless of the funding source. 

Page 9 Prior Audit Report 
Appendix 4 

Page 10 Management Comments 
IG Report No. DOE/IG-0775

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