DEPARTMENT OF 

ENERGY

Concerns with Major 

Construction Projects at the 

Office of Environmental 

Management and NNSA

Statement of David C. Trimble, Director 

Natural Resources and Environment

Testimony 

Before the Subcommittee on Energy and 

Water Development, and Related Agencies 

Committee on Appropriations, House of 

Representatives

For Release on Delivery 

Expected at 10 a.m. EDT

Wednesday, March 20, 2013

GAO-13-484T

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-484T, a testimony 

before the Subcommittee on Energy and 

Water Development, and Related Agencies, 

Committee on Appropriations, House of 

Representatives

March 2013

DEPARTMENT OF ENERGY

Concerns with Major Construction Projects at the 

Office of Environmental Management and NNSA

Why GAO Did This Study

DOE relies primarily on contractors to 

carry out its diverse missions and 

operate its laboratories and other 

facilities, with about 90 percent of its 

annual budget spent on contracts and 

capital asset projects. Since 1990, 

GAO has reported that DOE has 

suffered from substantial and continual 

weaknesses in effectively overseeing 

contractors and managing large, 

expensive, and technically complex 

projects. As of February 2013, EM and

NNSA remained on GAO’s list of areas 

at high risk of fraud, waste, abuse, and 

mismanagement for major contract and 

project management. 

This testimony, which is primarily 

based on GAO reports issued from 

March 2009 to December 2012, 

focuses on (1) prior GAO findings on 

DOE major projects and the impact of 

recent DOE steps to address project 

management weaknesses and 

(2) preliminary observations from 

GAO’s ongoing work on the reasons 

behind the planned increase in the 

performance baseline—a project’s 

cost, schedule, and scope—for two 

projects being constructed as part of 

NNSA’s Plutonium Disposition 

Program—the MOX facility and the

Waste Solidification Building. 

GAO is making no new 

recommendations. DOE and NNSA 

continue to act on the numerous 

recommendations GAO has made to 

improve management of the nuclear 

security enterprise. GAO will continue 

to monitor DOE’s and NNSA’s 

implementation of these 

recommendations.

What GAO Found

In response to GAO reports over the past few years on management 

weaknesses in major projects (i.e., those costing $750 million or more), the 

Department of Energy (DOE) has undertaken a number of reforms since March 

2009, including those overseen by the Office of Environmental Management

(EM) and the National Nuclear Security Administration (NNSA). For example, 

DOE has updated program and project management policies and guidance in an 

effort to improve the reliability of project cost estimates, better assess project 

risks, and better ensure project reviews that are timely and useful, and that 

identify problems early. In addition to actions taken to improve project 

management, in its 2012 work, GAO has noted DOE’s progress in managing the 

cost and schedule of nonmajor projects—those costing less than $750 million. 

DOE’s actions to improve project management are promising, but their impact on 

meeting cost and schedule targets is not yet clear. Because all ongoing major 

projects have been in construction for several years, neither EM nor NNSA has a 

major project that can demonstrate the impact of DOE’s recent reforms. 

GAO’s ongoing review of NNSA’s Plutonium Disposition Program, including 

examining recent problems with the ongoing construction of the Mixed Oxide 

(MOX) Fuel Fabrication Facility and the Waste Solidification Building at the 

Savannah River Site in South Carolina, has resulted in some preliminary 

observations that highlight the need for continued efforts by DOE to improve 

contract and project management. DOE is currently forecasting an increase in 

the total project cost for the MOX facility from $4.9 billion to $7.7 billion and a 

delay in the start of operations from October 2016 to November 2019. 

Specifically, DOE is evaluating a project baseline change proposal prepared by 

NNSA’s contractor for the MOX facility—a major project. The cost increase and 

schedule delay will not be known until DOE completes its review of the 

contractor’s proposal and DOE’s project oversight office completes an 

independent cost estimate of the project. With regard to the Waste Solidification 

Building—a nonmajor project—DOE approved a revised performance baseline in 

December 2012 to increase the cost from the initial estimate of $344.5 million to 

$414.1 million and a delay in the start of operations from September 2013 to 

August 2015. GAO’s ongoing work is focused on several areas, including the 

following: 

• critical system components’ design adequacy, 

• understanding the nuclear supplier base,

• changes in project scope,

• the effectiveness of project reviews; and

• lifecycle cost estimates for the Plutonium Disposition Program. 

GAO plans to report on this ongoing work later this year.

View GAO-13-484T. For more information, 

contact David C.Trimble at (202) 512-3841 or 

trimbled@gao.gov. 
Page 1 GAO-13-484T 

United States Government Accountability Office

Washington, DC 20548

Chairman Frelinghuysen, Ranking Member Kaptur, and Members of the 

Subcommittee:

Thank you for the opportunity to discuss our work on contract and project 

management at the Department of Energy (DOE). DOE, the largest 

civilian contracting agency in the federal government, relies primarily on 

contractors to carry out its diverse missions and operate its laboratories 

and other facilities, with about 90 percent of its annual budget spent on 

contracts and large capital asset projects. Since 1990, we have reported 

that DOE has suffered from substantial and continual weaknesses in 

effectively overseeing contractors and managing large, expensive, and 

technically complex projects. For example, in November 1996, we 

reported on the status of DOE’s major projects and found that, as of June 

1996, most of the completed projects and at least half of the 34 ongoing 

projects were experiencing cost overruns and/or schedule slippages.1

In the 1990s, DOE began implementing a series of reforms that included 

efforts to strengthen project management practices, such as planning, 

organizing, and tracking project activities, costs, and schedules; training 

to ensure that federal project managers had the required expertise to 

manage projects; increasing emphasis on independent reviews; and 

strengthening project reporting and oversight. Furthermore, as we 

testified before this Subcommittee in March 2009,

We 

also reported that some ongoing projects were never finished and that 

three completed projects had not been used for their intended purposes 

at the time of our review.

2

 

1

GAO, Department of Energy: Opportunity to Improve Management of Major System 

Acquisitions, 

DOE undertook 

additional actions to improve contract and project management, including 

a department-wide root-cause analysis and subsequent corrective action 

plan to address identified weaknesses. We noted in our 2009 testimony 

that DOE had added nearly $14 billion and 45 years to its initial cost and 

schedule estimates of then ongoing construction projects, and added an 

additional $25 billion to $42 billion and an additional 68 to 111 years to 

initial cost and schedule estimates of ongoing environmental cleanup 

GAO/RCED-97-17 (Washington, D.C.: Nov. 26, 1996).

2

GAO, Department of Energy: Contract and Project Management Concerns at the 

National Nuclear Security Administration and Office of Environmental Management, 

GAO-09-406T (Washington, D.C.: Mar. 4, 2009).

 
 

Page 2 GAO-13-484T 

projects. We noted that the cost increases and schedule delays that 

occurred for most of these projects were attributable to an inconsistent 

application of project management tools and techniques on the part of 

both DOE and its contractors, including inadequate systems for 

measuring contractor performance, approval of construction activities 

before final designs were sufficiently complete, ineffective project reviews, 

and ineffective development and integration of the technologies used in 

these projects.

While DOE has taken many steps to improve contract and project 

management, the Office of Environmental Management (EM)—one of 

DOE’s largest program offices——and the National Nuclear Security 

Administration (NNSA)—a separately organized agency within DOE—

continue to experience significant problems completing major projects on 

time and on budget. My testimony today is based primarily on reports we 

issued from March 2009 to December 2012 that assess DOE 

management of various major construction projects. Specifically, I will 

focus my testimony on (1) prior GAO findings on DOE major projects and 

the impact of recent DOE steps to address project management 

weaknesses and (2) preliminary observations from our ongoing work for 

this Subcommittee on the reasons behind the planned increase in the 

performance baseline—a project’s cost, schedule, and scope—for two 

projects being constructed as part of NNSA’s Plutonium Disposition 

Program—the Mixed Oxide (MOX) Fuel Fabrication Facility and the 

Waste Solidification Building at the Savannah River Site in South 

Carolina.3

To develop our preliminary observations, we reviewed documents related 

to the performance baseline changes for both the MOX facility and Waste 

Solidification Building, interviewed NNSA and contractor officials, and 

visited the Savannah River Site to meet with project officials and observe 

the construction progress for both facilities. We are conducting our 

ongoing work 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 

Detailed information on our scope and methodology for our 

prior work can be found in these reports. 

 

3

Mixed oxide fuel is a mix of plutonium and uranium.
 

Page 3 GAO-13-484T 

and conclusions based on our audit objectives. We obtained NNSA’s 

views on new information in our testimony concerning our ongoing work 

on the MOX facility and Waste Solidification Building.

To manage major construction projects, DOE project directors in EM and 

NNSA are required to follow specific DOE directives, policies, and 

guidance for contract and project management. Among these is DOE 

Order 413.3B, which provides direction for planning and executing 

projects. To oversee projects and approve critical decisions, DOE 

conducts its own reviews, often with the help of independent technical 

experts. For example, for large projects (i.e., projects with a total cost of 

greater than $100 million), DOE’s Office of Acquisition and Project 

Management is required to validate the accuracy and completeness of a 

project’s performance baseline as part of each important project step.

NNSA’s largest ongoing construction project involves the disposition of 

surplus U.S. weapons-grade plutonium as part of the Plutonium 

Disposition Program. Under an agreement signed in 2000, the United 

States and Russia will each dispose of at least 34 metric tons of surplus 

weapons-grade plutonium by irradiating it as MOX fuel in nuclear 

reactors. A key part of the U.S. program includes the construction of two 

nuclear facilities at DOE’s Savannah River Site: a MOX facility that will 

produce MOX fuel for nuclear reactors and a Waste Solidification Building 

to dispose of the liquid waste from the MOX facility. A third nuclear facility 

had been planned for the Savannah River Site to disassemble nuclear 

weapon pits (i.e., the spherical central core of a nuclear weapon that is 

compressed with high explosives to create a nuclear explosion)—the Pit 

Disassembly and Conversion Facility—and to provide plutonium 

feedstock for fuel fabrication. NNSA canceled the facility in January 2012

and, instead, decided to meet its feedstock requirements through existing 

facilities at DOE’s Los Alamos National Laboratory and the Savannah 

River Site, including potentially the MOX facility. NNSA spent 

approximately $730 million on the design of this facility prior to its 

cancellation.

Background 
 

Page 4 GAO-13-484T 

A basic tenet of effective project management is the ability to complete 

projects on time and within budget. DOE has continued to experience 

management weaknesses in major projects (i.e., those costing $750 

million or more). In response, since March 2009, DOE has undertaken a 

number of new reforms to improve its management of major projects, 

including those overseen by EM and NNSA. For example, DOE has 

updated program and project management policies and guidance in an 

effort to improve the reliability of project cost estimates, better assess 

project risks, and better ensure project reviews that are timely and useful 

and that identify problems early. Further, in November 2010, DOE took 

steps to enhance project management and oversight by requiring peer 

reviews and independent cost estimates for projects with values of more 

than $100 million. NNSA has also taken actions to improve the 

management of projects that it oversees. For example, in August 2012, 

the NNSA issued guidance calling for design work to be 90 percent 

complete before construction can begin to minimize design changes and 

associated cost increases and schedule delays. 

Our 2012 work examining DOE’s management of nonmajor projects—

those costing less than $750 million—indicates that DOE’s reform efforts 

have helped in managing the department’s cost and schedule targets. In 

particular, in December 2012, we reported that EM and NNSA were 

making some progress in managing some of the 71 nonmajor projects 

that were completed or ongoing for fiscal years 2008 to 2012 and that had 

a total estimated cost of approximately $10.1 billion.4 For example, we 

identified some nonmajor projects that used sound project management 

practices, such as the application of effective acquisition strategies, to 

help ensure the successful completion of these projects. This was 

consistent with what we found in our October 2012 report on EM’s 

cleanup projects funded by the American Recovery and Reinvestment Act 

of 2009.5

 

4

GAO, Department of Energy: Information Needed to Determine If Nonmajor Projects 

Meet Performance Targets,

Of the completed projects we examined, 92 percent met the 

performance standard of completing project work scope without 

exceeding the cost target by more than 10 percent, according to EM data. 

In recognition of these improvements in the management of nonmajor 

GAO-13-129 (Washington, D.C.: Dec. 19, 2012).

5

GAO, Recovery Act: Most DOE Cleanup Projects Are Complete, but Project 

Management Guidance Could Be Strengthened GAO-13-23 (Washington, D.C.: 

Oct. 15, 2012).

DOE Has Continued 

to Implement 

Reforms, but Their 

Impact Is Not Yet 

Clear 
 

Page 5 GAO-13-484T 

projects, we narrowed the focus of the designation of EM and NNSA on 

our 2013 high-risk list to major contracts and projects at EM and NNSA6

DOE’s actions to improve project management are promising, but their 

impact on meeting cost and schedule targets is not yet clear. Because all 

ongoing major projects have been in construction for several years, 

neither EM nor NNSA has a major project that can demonstrate the 

impact of DOE’s recent reforms. As we have reported in the past few 

years, ongoing major projects continue to experience significant cost 

increases and schedule delays as shown in the following examples:

. 

• In December 2012, we reported that the estimated cost to construct 

the Waste Treatment and Immobilization Plant in Hanford, 

Washington, had tripled to $12.3 billion since its inception in 2000 and 

that the scheduled completion date had slipped by nearly a decade to 

2019.7

• In March 2012, we reported that NNSA’s project to design and 

construct the Chemistry and Metallurgy Research Replacement 

Nuclear Facility—a new plutonium facility at NNSA’s Los Alamos 

National Laboratory—was expected to cost between $3.7 billion to 

$5.8 billion—nearly a six-fold increase from the initial estimate.

Moreover, we found that DOE’s incentives and management 

controls were inadequate for ensuring effective project management, 

and that DOE had in some instances prematurely rewarded the 

contractor for resolving technical issues and completing work.

8

 

6

We update our list of areas at high risk of fraud, waste, abuse, and mismanagement 

every 2 years. GAO, High-Risk Series: An Update, 

In 

February 2012, NNSA deferred construction of the facility by at least 

an additional 5 years, bringing the total delay to between 8 and 12 

years from NNSA’s initial plan. A number of major problems 

contributed to this increase, including infrastructure-related design 

changes.

GAO-13-283 (Washington, D.C.: 

February 2013).

7

GAO, Hanford Waste Treatment Plant: DOE Needs to Take Action to Resolve Technical 

and Management Challenges, GAO-13-38 (Washington D.C.: Dec. 19, 2012). 

8

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

Los Alamos May Not Meet All Mission Needs, GAO-12-337 (Washington, D.C.: 

Mar. 26, 2012).
 

Page 6 GAO-13-484T 

• In November 2010, we reported that NNSA’s plans to construct a 

modern Uranium Processing Facility at its Y-12 National Security 

Complex in Oak Ridge, Tennessee, had experienced significant cost 

increases.9 More recently, in September 2011, NNSA estimated that 

the facility would cost from $4.2 billion to $6.5 billion to construct—a 

nearly seven-fold cost increase from the original estimate. In addition, 

NNSA has delayed the expected completion date by 11 years, to 

2023. In the November 2010 report, as well as in a January 2010 

report,10

In regard to nonmajor projects, while we reported in December 2012 on 

progress by EM and NNSA in managing nonmajor projects, we also found 

that of the 71 nonmajor projects that EM and NNSA completed or had 

under way from fiscal years 2008 to 2012, 23 projects did not meet or 

were not expected to meet one or more of their three performance targets 

for scope, cost, and completion date.

we found a number of major problems that contributed to this 

increase, including preparation of a cost estimate in 2007 that did not 

meet all cost estimating best practices. Also, 6 of 10 technologies to 

be used in the facility were not sufficiently mature, which could lead to 

cost and schedule delays if the technologies do not perform as 

intended.

11

In these reports and others, we have made recommendations calling on 

DOE to ensure that project management requirements are consistently 

followed, to improve oversight of contractors, and to strengthen 

accountability, among others. DOE has generally agreed with these 

recommendations and has taken action to address many of them. We will 

We also noted that, for 27 

projects, many had insufficiently documented performance targets for 

scope, cost, or completion date, which prevented us from determining 

whether they met their performance targets. As we noted in our February 

2013 high-risk report, while we have shifted our focus to major contracts 

and projects, we will continue to monitor the performance of these 

nonmajor projects.

 

9

GAO, Nuclear Weapons: National Nuclear Security Administration’s Plans for Its Uranium 

Processing Facility Should Better Reflect Funding Estimates and Technology Readiness, 

GAO-11-103 (Washington, D.C.: Nov. 19, 2010).

10GAO, Actions Needed to Develop High–Quality Cost Estimates for Construction and 

Environmental Cleanup Projects, GAO-10-199 (Washington, D.C.: Jan. 14, 2010).

11GAO-13-129. 
 

Page 7 GAO-13-484T 

continue to monitor DOE’s project management and its implementation of 

their actions to resolve project management weaknesses.

Our ongoing review of NNSA’s Plutonium Disposition Program, including 

examining recent problems with the ongoing construction of the MOX 

facility—a major project—and the Waste Solidification Building—a 

nonmajor project—has resulted in some preliminary observations that

highlight the need for continued efforts by DOE to improve contract and 

project management. DOE is currently forecasting an increase in the total 

project cost for the MOX facility from $4.9 billion to $7.7 billion and a 

delay in the start of operations from October 2016 to November 2019. 

Specifically, DOE is evaluating a project baseline change proposal 

prepared by NNSA’s contractor for the MOX facility.12

Our ongoing work is focused on several areas, including the following:

The cost increase 

and schedule delay will not be known until DOE completes its review of 

the contractor’s proposal and DOE’s project oversight office completes an 

independent cost estimate. DOE currently plans to complete its review 

and approve a new project baseline by September 2013. With regard to 

the Waste Solidification Building, DOE approved in December 2012 a 

revised performance baseline to increase the cost from the initial estimate 

of $344.5 million to $414.1 million and a delay in the start of operations 

from September 2013 to August 2015.

• Critical system components’ design adequacy. According to NNSA 

officials and the contractor for the MOX facility, one of the primary 

reasons for the proposed cost increase and schedule delay is due to 

inadequately designed critical system components, such as the 

gloveboxes used in the facility for handling plutonium and the 

infrastructure needed to support these gloveboxes. According to these 

officials, although the design of the facility is based on a similar facility 

in France, the cost of adapting the French design to the design needs 

of this project was not well understood when the project was approved 

for construction. The performance baseline for the MOX facility was 

also set several years before NNSA issued guidance in 2012 to set 

cost and schedule baselines only after design work is 90 percent 

 

12A project’s baseline change proposal provides a complete description of a proposed 

change to an approved performance baseline, including the resulting impacts on the 

project’s cost, schedule, and scope.

GAO’s Ongoing 

Review of NNSA’s 

Plutonium Disposition 

Program Highlights 

the Need for 

Continued Efforts to 

Address Project 

Management 

Weaknesses 
 

Page 8 GAO-13-484T 

complete. As part of our ongoing work, we are evaluating whether 

such guidance would have been useful for NNSA to apply to the MOX 

facility, as well as the potential impact this guidance might have had 

on mitigating cost increases and schedule delays.

• Understanding the nuclear supplier base. According to NNSA officials 

and the contractor for the MOX facility, another primary reason for the 

proposed cost increase and schedule delay is not adequately 

understanding the ability of the nuclear industry to fabricate and 

deliver nuclear-quality components to meet the project schedule. 

Under the terms of the MOX facility contract, the contractor was 

required to submit, beginning at the completion of preliminary design, 

semiannual reports regarding the condition of the construction and 

equipment markets and identify factors, such as availability of labor, 

materials, and equipment that may affect the cost or schedule for 

completing the MOX facility. As part of our ongoing work, we plan to 

review these reports to understand the extent to which the contractor 

had assessed market conditions.

• Changes in project scope. Our ongoing review of the MOX facility 

includes examining NNSA’s direction to its contractor to add to the 

scope of the construction contract to include capability that NNSA had 

planned for the cancelled Pit Disassembly and Conversion Facility. As 

part of our ongoing work, we will examine the extent to which this

change in scope affects the cost and schedule of the project and the 

extent to which this change is consistent with a December 2012 

memo from the Deputy Secretary of Energy that emphasizes the 

importance of improving upfront planning, including changes in scope, 

as well as defining contract requirements prior to issuing a solicitation.

• Effectiveness of project reviews. NNSA project reviews of the MOX 

facility and the Waste Solidification Building have identified challenges 

to meeting the facilities’ performance baselines and made related 

recommendations. For example, 2011 and 2012 peer review reports 

of the MOX facility identified concerns regarding installation rates for 

equipment and recommended that realistic installation rates be 

included in the cost estimate. However, the NNSA contractor’s 2012 

baseline change proposal ultimately cited installation rates as one of 

the drivers of the proposed cost increase. As part of our ongoing 

work, we are continuing to gather information on what actions NNSA 

and its contractor took when the 2011 peer review first raised the 

concern and the extent to which any actions were taken in response 

to the review. We are also continuing to gather information on project 

reviews of the Waste Solidification Building, to determine how 
 

Page 9 GAO-13-484T 

responsive program officials were to the findings and 

recommendations of these reviews. 

• Life-cycle cost estimate for the Plutonium Disposition Program. In 

addition to setting the cost and schedule performance baselines of the 

MOX facility and Waste Solidification Building, NNSA has developed a 

life-cycle cost estimate for the overall effort of the Plutonium 

Disposition Program to dispose of at least 34 metric tons of surplus 

weapons-grade plutonium. NNSA officials told us that there has never 

been a review of this life-cycle estimate by an outside entity but that 

they are conducting an independent assessment of portions of the 

life-cycle cost estimate, including the operating cost of the MOX 

facility. As part of our ongoing work, we are reviewing NNSA’s 

preliminary life-cycle cost estimate and the steps NNSA is taking to 

validate this cost estimate.

We plan to report on this ongoing work later this year.

Chairman Frelinghuysen, Ranking Member Kaptur, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions that you may have at this time.

If you or your staff members have any questions about this testimony, 

please contact me at (202) 512-3841 or trimbled@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this testimony. GAO staff who made key 

contributions to this testimony are Dan Feehan and Kiki Theodoropoulos, 

Assistant Directors; and Joseph Cook, and Cristian Ion.

GAO Contact and 

Staff 

Acknowledgments 

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