Chemical Weapons Disposal: Improvements Needed in Program Accountability and Financial Management
Published: 2000-05-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a legislative requirement, GAO reviewed the financial management of the Department of Defense's (DOD) Chemical Demilitarization Program, focusing on whether: (1) the program will meet the Chemical Weapons Convention timeframes within the costs projected; (2) obligations and liquidations of funds appropriated for the program have been adequately managed; and (3) the management structure of the program allows for coordinated accountability of the program.
section_title: What GAO Found
paragraphs: GAO noted that: (1) the Army had destroyed approximately 17.7 percent of the chemical weapons stockpile as of January 31, 2000, and could destroy about 90 percent of the stockpile by the convention's 2007 deadline, given its recent progress and projected plans; (2) however, the Army may not meet the deadline for the remaining 10 percent of the stockpile because the incineration method of destruction has not been acceptable to two of the states where the chemical stockpile is located; (3) additionally, some of the nonstockpile materiel may not be destroyed before the deadline because the proposed method of destruction has not been proven safe and effective and accepted by state and local communities; (4) the Army's $14.9 billion estimate for program costs will likely increase due to: (a) the additional time required to develop and select disposal methods for the remaining 10 percent of the stockpile and for some of the nonstockpile chemical materiel; and (b) possible delays in demolition of a former chemical weapons production facility; (5) the Army has experienced significant problems in recent years in effectively managing the use of funds appropriated for the Chemical Demilitarization Program; (6) the Army reported that as of September 30, 1999, $498 million of the $3.1 billion appropriated for the program in fiscal years 1993 through 1998 was unliquidated; (7) in an assessment of interagency orders that account for $495.1 million of the unliquidated obligations, GAO found that $63.1 million had been liquidated but was not recorded in accounting records or included in financial reports prepared by the Defense Finance and Accounting Service; (8) of the remaining $432 million, most was for work completed but not yet billed by the contractor or verified by the Defense Contract Audit Agency or for work in progress but not yet completed; (9) effective management of the Chemical Demilitarization Program has been hindered by its complex management structure and ineffective coordination among program offices and with state and local officials; (10) coordination and communication among officials responsible for elements of the program have been inadequate, thus causing confusion about what actions would be taken at certain sites; (11) DOD and Army officials have not agreed on whether or when management roles, responsibilities, and accountability should be consolidated for destruction of the chemical stockpiles in Kentucky and Colorado; and (12) consequently, state and local officials have expressed concern that no single office is accountable for achieving the desired results of the Chemical Demilitarization Program.

section_title: Letter
paragraphs: The Department of Defense’s (DOD) program to destroy chemical agents and munitions has been  controversial from its inception and has experienced delays, cost increases, and management  weaknesses. Recently, concerns over the financial management of the program surfaced following a  review by the Office of the Under Secretary of Defense (Comptroller), which suggested that  significant portions of prior years’ appropriations remained unliquidated.
This report responds to mandates contained in the National Defense Authorization Act for Fiscal Year 2000 and the House Report No. 106-244 on DOD’s Appropriations Act for Fiscal Year 2000 and to  a request from the Chairmen of the Subcommittees on Defense and Foreign Operations, Senate  Committee on Appropriations, to report on the management of the program. Accordingly, this report  discusses whether (1) the program will meet the Chemical Weapons Convention’s time frames within  the costs projected, (2) obligations and liquidations of funds appropriated for the program have been  adequately managed, and (3) the management structure of the program allows for coordinated  accountability of the program.
We are sending copies of this report to Senators Pete V. Domenici, Frank R. Lautenberg, Joseph I.  Lieberman, Fred Thompson, and Charles S. Robb and to Representatives John R. Kasich and John M.  Spratt, Jr., in their capacities as Chair or Ranking Minority Member of cognizant Senate and House  Committees and Subcommittees. We are also sending copies of this report to the Honorable William S.  Cohen, Secretary of Defense; the Honorable William J. Lynn, Under Secretary of Defense  (Comptroller); the Honorable Louis Caldera, Secretary of the Army; the Honorable James Lee Witt,  Director, Federal Emergency Management Agency; and the Honorable Jacob Lew, Director, Office of  Management and Budget. Copies will also be made available to others upon request.
GAO contacts and key contributors to this report are listed in appendix IV.
subsections: section_title: Introduction
paragraphs: Since World War I, the United States has maintained a stockpile of chemical  agents and munitions to deter the use of chemical weapons against its  troops. From 1917 through the 1960s, obsolete or unserviceable chemical  agents and munitions were disposed of by fire in an open pit, burial, and  dumping in the ocean. However, because of public concern about the  potential effects of these methods of disposal on public health and the  environment, they were discontinued during the 1970s. In 1985, the  Congress required the Department of Defense (DOD) to carry out the  destruction of the U.S. stockpile of chemical agents and munitions and  establish an organization within the Army to be responsible for the disposal  program. Over time, the Congress also directed DOD to dispose of  chemical warfare materiel not included in the stockpile and to research and  develop technological alternatives for disposing of chemical agents and  munitions. In April 1997, the U.S. Senate ratified the U.N.-sponsored  Chemical Weapons Convention, effectively agreeing to dispose of the  chemical stockpile weapons and chemical warfare materiel by April 29,  2007. If a country is unable to maintain the convention’s disposal schedule,  the convention’s management organization may grant an extension of up to  5 years.
subsections: section_title: Elements of the Chemical Demilitarization Program
paragraphs: Since the 1980s, DOD’s chemical weapons disposal activities have evolved  into the current program, known as the Chemical Demilitarization  Program. It now consists of the Chemical Stockpile Disposal Project, the  Chemical Stockpile Emergency Preparedness Project, the Nonstockpile  Chemical Materiel Product, the Alternative Technologies and Approaches  Project, and the Assembled Chemical Weapons Assessment Program.
subsections: section_title: Chemical Stockpile Disposal Project
paragraphs: In section 1412 of the Fiscal Year 1986 Department of Defense  Authorization Act (P.L. 99-145), the Congress directed DOD to destroy the  U.S. stockpile of lethal chemical agents and munitions that existed on the  date of the legislation’s enactment. The original stockpile consisted of  31,496 tons of nerve and mustard agents contained in rockets, bombs,  projectiles, spray tanks, and bulk containers. Some munitions contained  nerve agents, which can disrupt the nervous system and lead to loss of  muscular control and death. Others contained a series of mustard agents  that blister the skin and can be lethal in large amounts. The stockpile is  stored at eight sites in the continental United States and on Johnston Atoll  in the Pacific Ocean, as shown in figure 1.
In 1988, the Army formally announced its Chemical Stockpile Disposal  Project and stated that incineration on site at each of the existing stockpile  locations was the preferred disposal method. The objectives of the  program are to (1) destroy the stockpile of chemical weapons and  (2) provide maximum protection to the environment, the public, and  personnel involved in the storage, handling, and disposal of the stockpile.  To destroy the weapons, the Army uses a “reverse-assembly” procedure  that drains the chemical agent from the weapons and takes apart the  weapons in the reverse order of assembly. Once disassembled, the  chemical agents and weapons are incinerated in separate furnaces.
As of January 30, 2000, the Army had incineration-based disposal  operations under way at two sites, had destroyed approximately  17.7 percent of the original chemical stockpile, and had started  construction of disposal facilities for future disposal operations at five  other sites. The two operational disposal facilities are at the following  locations:
Johnston Atoll is located in the Pacific Ocean about 825 miles southwest  of Hawaii. The Army completed construction of its baseline incineration  disposal facility in July 1988 and started incineration operations in June  1990. It is the world’s first full-scale facility designed specifically for the  disposal of chemical weapons and is the prototype plant for the  destruction program. The stockpile at Johnston Atoll originally  contained 2,031 tons of nerve and mustard agents and represented  6.4 percent of the original stockpile.
Deseret Chemical Depot is located about 22 miles south of Tooele, Utah.  The Army completed construction of the disposal facility in August 1993  and started incineration operations in August 1996. The Army considers  this disposal facility to be a first generation incineration facility, and as  at the Johnston Atoll facility, it expects to apply lessons learned from its  operations to other disposal sites. The Deseret stockpile originally  contained 13,616 tons of nerve and mustard agents, representing  43.2 percent of the original stockpile.
Three other baseline incineration disposal facilities are under construction.  In June 1997, the Army started construction of both the Umatilla facility,  located about 7 miles from Hermiston, Oregon, and the Anniston facility,  located about 50 miles east of Birmingham, Alabama. The Umatilla  stockpile contains 3,717 tons of nerve and mustard agents, or 11.8 percent  of the original stockpile. The Anniston stockpile contains 2,254 tons of  nerve and mustard agents, or 7.2 percent of the original stockpile. These  facilities are scheduled to begin destroying agents in late 2001 or early  2002. Construction of the Pine Bluff facility, located about 35 miles  southeast of Little Rock, Arkansas, started in 1999. The Pine Bluff stockpile  contains 3,850 tons of agents, or 12.2 percent of the original stockpile. The  Army plans to begin destroying chemical agents at the Pine Bluff facility in  late 2003.
section_title: Chemical Stockpile Emergency Preparedness Project
paragraphs: In 1988, DOD established the Chemical Stockpile Emergency Preparedness  Project to help communities in 10 states near the stockpile storage sites  enhance their emergency management and response capabilities in the  unlikely event of a chemical stockpile accident. The project, a companion  to the Chemical Stockpile Disposal Project, is necessary to help protect the  civilian population, workers, and the environment until disposal of the  chemical stockpile is complete. Since 1988, the Army and the Federal  Emergency Management Agency (FEMA) have assisted the civilian  communities in the vicinity of the eight chemical stockpile storage  locations and the storage installations in enhancing their emergency  response capabilities. In 1997, the Army and FEMA implemented a  management structure under which FEMA assumed responsibility for  off-post (civilian community) program activities, while the Army continued  to manage on-post chemical emergency preparedness and to provide  technical support for both on- and off-post activities. FEMA, with its  long-standing knowledge and experience in preparing for and dealing with  emergencies of all kinds, provides its expertise, guidance, training, and  other support to the civilian community. The Agency also administers the  grant funds provided to the states and counties where stockpile facilities  are located in order to carry out the program’s off-post activities.
section_title: Nonstockpile Chemical Materiel Product
paragraphs: Recognizing that the stockpile program did not include all chemical  warfare materiel, the Congress directed DOD to plan for the disposal of  materiel not included in the stockpile. Consequently, DOD implemented  the Nonstockpile Chemical Materiel Product to identify the locations,  types, and quantities of chemical materiel not included in the stockpile;  develop and implement disposal and transportation methods and  procedures; and develop plans, schedules, and cost estimates to implement  the program. This materiel, some of which dates as far back as World War I,  consists of binary chemical warfare materiel, miscellaneous chemical  warfare materiel, recovered chemical warfare materiel, former production  facilities, and buried chemical warfare materiel. These items are described  in table 1.
The locations of the nonstockpile chemical materiel, as of January 31, 2000,  are shown in figure 2.
Since the early 1990s, the Army has undertaken research and development  on several transportable systems that are designed to identify, access, and  treat chemical agents in nonstockpile munitions and decontaminate the  containers and munitions. All disposal methods are to comply with federal  and the affected state’s environmental and safety regulations. Until  recently, the Army emphasized the use of transportable treatment systems  because of the relatively small quantities and the characteristics of  nonstockpile chemical weapon materiel located at a potentially large  number of sites through the country.
section_title: Alternative Technologies and Approaches Project
paragraphs: In November 1991, because of public concern about the safety of  incineration, the Army requested the National Research Council to evaluate  potential technological alternatives to the baseline incineration process. In  the 1993 Defense Authorization Act (sec. 173), the Congress directed the  Army to use the Council’s evaluation and report on potential technological  alternatives to incineration. The Congress also directed the Army to  consider safety, environmental protection, and cost-effectiveness when  evaluating alternative technologies. Consequently, in August 1994, the  Army initiated the Alternative Technologies and Approaches Project, a  more aggressive research and development program, to investigate,  develop, and support the testing of two technologies based on chemical  neutralization of chemical agents at the bulk-only stockpile sites— Aberdeen, Maryland, and Newport, Indiana. The project focused on these  two sites because they have only one type of chemical agent stored in large  steel bulk containers. The Army is conducting this project in conjunction  with the baseline incineration program.
In 1997, the project proceeded with full-scale pilot testing of the  neutralization technologies at the following two stockpile sites:
Edgewood Chemical Activity is located at the Edgewood Area of the  Aberdeen Proving Ground, north of Baltimore, Maryland. The Aberdeen  stockpile consists of 1,625 tons (or 5.2 percent of the original stockpile)  of mustard agent stored in 1,818 ton containers. These containers are  designed for safe storage of bulk chemical agents and do not have fuzes,  warheads, or other explosive devices. The disposal technology being  tested at Aberdeen is neutralization followed by the biodegradation  process. The environmental permit was obtained from the state in  February 1999, enabling the start of site preparation activities and  construction.
Newport Chemical Depot is located 2 miles south of Newport and  32 miles north of Terre Haute in western Indiana. The Newport stockpile  consists of 1,269 tons (or 4 percent of the original stockpile) of nerve  agent stored in 1,690 ton containers. The technology being tested at  Newport was neutralization followed by a supercritical water oxidation  process. The environmental permit was obtained from the state in  December 1999, enabling the start of construction activities.
section_title: Assembled Chemical Weapons Assessment Program
paragraphs: In the National Defense Authorization Act for Fiscal Year 1997, the  Congress directed DOD to assess alternative technologies to the baseline  incineration process for the disposal of assembled chemical munitions. In  addition, section 8065 of the Department of Defense Appropriations Act,  1997, provided $40 million to conduct the Assembled Chemical Weapons  Assessment Program, a pilot program to identify and demonstrate two or  more alternatives to the incineration process for the destruction of  assembled chemical munitions. The appropriations act required the Under  Secretary of Defense for Acquisition and Technology to designate a  program manager who was not, nor had been, in direct or immediate  control of the baseline incineration program to carry out the pilot program.  The act also prohibited DOD from obligating any funds for constructing  incineration facilities at Blue Grass, Kentucky, and Pueblo, Colorado, until  180 days after the Secretary of Defense reports on alternative disposal  methods for assembled chemical weapons. The Strom Thurmond National  Defense Authorization Act for Fiscal Year 1999 requires that if a  technology other than incineration is selected for these sites, the Under  Secretary of Defense must certify in writing to the Congress that the  alternative is (1) as safe and cost-effective for disposing of assembled  chemical munitions as is incineration, (2) capable of completing the  destruction of such munitions on or before the later date of either when the  destruction would be completed if incineration were used or the  convention’s deadline, and (3) capable of satisfying federal and state  environmental and safety laws.
Because of the legislative prohibition on obligating any funds for  constructing incineration facilities and the states’ unwillingness to accept  incineration as a disposal method, the Army tentatively chose the Blue  Grass and Pueblo depots to test alternative technologies for destroying the  assembled chemical weapons.
The Blue Grass Army Depot, located in central Kentucky, has a stockpile  of weapons containing 523 tons of nerve and mustard agents, or  1.7 percent of the original stockpile.
The Pueblo Chemical Depot, located about 14 miles east of Pueblo,  Colorado, has a stockpile of weapons containing about 2,611 tons of  mustard agent, or 8.3 percent of the original stockpile.
The program involves a three-phased approach that includes the  development of technology evaluation criteria, technology assessment, and  demonstration of not less than two technologies. The public has thus far  participated in all phases of the program. During criteria development in  mid-1997, the program office developed three sets of criteria to select  proposals of technologies worthy of further evaluation, demonstration, and  implementation. From September 1997 through June 1998, the program  office selected six technologies as worthy of demonstration from  12 proposals. However, because of funding constraints, the program office  selected only three of the six technologies for further testing. This selection  was based on the program office’s evaluation of the demonstration plans  and determination of each technology’s value to the government. In May  1998, the program office determined that neutralization followed by  supercritical water oxidation was a viable solution for destroying  assembled chemical weapons containing either nerve or mustard agents. It  determined that neutralization followed by biodegradation was a viable  solution for destroying assembled weapons containing mustard agents.
The conference report for the National Defense Authorization Act for  Fiscal Year 2000 stated that the conferees had been advised that DOD  intended to conduct evaluations of the three technologies previously  selected for the demonstration program, but which had not been tested  because of funding constraints. In addition, the conference report noted  that DOD had decided to spend $40 million for this purpose. In the  conference report for the Department of Defense Appropriations Act for  Fiscal Year 2000, the conferees directed DOD to make available $40 million  to conduct demonstration testing of the three additional alternative  technologies. Program officials are now using these funds to demonstrate  these technologies. As of February 28, 2000, no decision had been made on  which of the alternative technologies or the baseline incineration process  would be used to destroy the chemical stockpile in Kentucky or Colorado.
To increase public awareness and acceptance, the program office  established, with the assistance of the Keystone Center, the Dialogue on  Assembled Chemical Weapons Assessment. The Dialogue includes  representatives of the affected communities, national citizens’ groups, state  regulatory agencies, Native American tribes, the Environmental Protection  Agency, and the Departments of Defense and the Army and participates in  the Army’s decision-making process for the program.
section_title: Management Structure of the Chemical Demilitarization Program
paragraphs: DOD and Army managers at several different levels share management  roles and responsibilities for elements of the Chemical Demilitarization  Program.
The Assistant Secretary of the Army (Acquisition, Logistics and  Technology) oversees the chemical stockpile, nonstockpile, and  alternative technologies and approaches projects. The Program  Manager for Chemical Demilitarization manages the daily operations of  these projects. The office of the program manager is organized into  distinct project areas: the Project Manager for Chemical Stockpile  Disposal, the Product Manager for Nonstockpile Chemical Materiel, and  the Project Manager for Alternative Technologies and Approaches.
The Assistant Secretary of the Army (Installations and Environment)  and FEMA share management responsibilities for the Chemical  Stockpile Emergency Preparedness Project. The U.S. Army Soldier and  Biological Chemical Command manages on-post Army activities for the  Assistant Secretary of the Army, while FEMA manages the off-post  portion of the program in the civilian communities.
The Under Secretary of Defense (Acquisition and Technology) oversees  the Assembled Chemical Weapons Assessment Program. The Program  Manager for Assembled Chemical Weapons Assessment manages daily  operations.
The management structure for the program is discussed in more detail in  chapter 4.
section_title: International Efforts to Eliminate Chemical Agents and Weapons
paragraphs: In 1993, the United States, Russia, and more than 150 nations signed the  U.N.-sponsored Convention on the Prohibition of the Development,  Production, Stockpiling and the Use of Chemical Weapons and on Their  Destruction, commonly referred to as the Chemical Weapons Convention.  In October 1996, the 65th nation ratified the Chemical Weapons  Convention, making the convention effective on April 29, 1997. On  April 24, 1997, the Senate ratified the convention, committing the United  States to dispose of its unitary chemical weapons, binary chemical  warfare materiel, recovered chemical warfare materiel, and former  chemical weapons production facilities by April 29, 2007. The Army  classifies unitary chemical weapons as chemical stockpile weapons and  classifies binary chemical warfare materiel, recovered chemical warfare  materiel, former chemical weapons production facilities, and  miscellaneous chemical warfare materiel as nonstockpile chemical  materiel. If a country is unable to meet the convention’s disposal  schedule, the convention’s Organization for the Prohibition of Chemical  Weapons may grant an extension, although in no case may the deadline be  extended past April 29, 2012.
section_title: Our Prior Concerns With the Chemical Demilitarization Program
paragraphs: Since its beginning, the Chemical Demilitarization Program has been beset  by controversy over disposal methods, delays of 2 to 3 years more than the  Army anticipated in obtaining needed federal and state environmental  permits and other approvals, and increasing costs. In prior reports, we  expressed concern about the Army’s lack of progress and the rising cost of  the program. For example, in 1991 we reported that continued problems in  the program indicated that increased costs and additional time to destroy  the chemical stockpile should be expected and recommended that the  Army determine whether faster and less costly technologies were available  to destroy the stockpile. In a 1994 report on the nonstockpile program, we  concluded that the Army’s plans for disposing of nonstockpile chemical  warfare materiel were not final and that its costs were likely to change. In  1997, we reported that the program cost and schedule were largely driven  by the degree to which DOD and the affected states and communities  agreed with the proposed method to dispose of the chemical weapons and  materiel. In July 1999, we reported that, although sizable unliquidated  obligations were reported for the program from prior years, program funds  did not appear to be available for other uses. In addition, we reported that  these unliquidated obligations were caused by a number of factors, such as  delays in obtaining environmental permits and technical delays. See related  GAO products at the end of this report.
Our objectives, scope, and methodology are described in appendix I.
section_title: Most Chemical Weapons and Materiel Could Be Destroyed Before the Convention’s 2007 Deadline
paragraphs: The Army has destroyed approximately 17.7 percent of the original  chemical weapons stockpile and could destroy 90 percent of its stockpile  of chemical agents and munitions and most of its nonstockpile chemical  warfare materiel before the Chemical Weapons Convention’s 2007  deadline, given its recent progress and projected plans. The Army has  disposal operations under way at two stockpile sites and has started  construction of disposal facilities for future destruction operations at five  other sites—these seven sites store 90 percent of the chemical stockpile.  However, because of the additional time required to develop and select  disposal methods that are acceptable to the state regulatory agencies and  local communities in Kentucky and Colorado, which store the remaining  10 percent of the original stockpile, the Army will not meet the 2007  deadline at these sites. In addition, the disposal of some nonstockpile items  may exceed the 2007 deadline because of delays in the testing of and  obtaining permits for key disposal systems for recovered chemical warfare  materiel and because of possible delays in the demolition of a former  chemical weapons production facility. Given past program experience,  these types of delays are likely to occur and will add to program costs. The  Army estimates that the program will cost $14.9 billion; it has spent  approximately $6.2 billion and estimates that the program will cost another  $8.7 billion. To identify opportunities to reduce the cost of the program,  officials have developed and implemented several cost-reduction initiatives  associated with contracting for the stockpile disposal facilities and  increasing the public awareness and acceptance of the program.
subsections: section_title: Ninety Percent of the Chemical Stockpile Could Be Destroyed Before the Convention’s 2007 Deadline
paragraphs: In prior reports, we have expressed concern about the Army’s lack of  progress in destroying the stockpile of chemical agents and munitions.  Despite these early delays, the Army is now making progress toward  establishing the capabilities needed to destroy the stockpile. Absent  unanticipated delays, the Army could destroy about 90 percent of the  stockpile before the convention’s 2007 deadline. However, because of the  additional time required to research, develop, test, and verify new disposal  methods that may be environmentally acceptable to the state regulatory  agencies and local communities in Kentucky and Colorado, destruction  activities at these locations, which store the remaining 10 percent of the  stockpile, are not likely to start before the 2007 deadline.
subsections: section_title: The Army Has Made Progress in the Destruction of the Chemical Stockpile
paragraphs: Since the Army formally announced its stockpile disposal project in 1988, it  has disposal operations under way at two sites and has started  construction of disposal facilities for future operations at five other sites. It  is now operating stockpile disposal facilities at Johnston Atoll and Tooele,  Utah, which together stored 49.7 percent of the total original stockpile. Of  this amount, 5,572 tons (17.7 percent of the original stockpile) of chemical  agents have been destroyed, and another 10,075 tons (32 percent of the  original stockpile) are scheduled for disposal at the two sites. In addition,  the Army has started to build chemical weapons disposal facilities at  Aberdeen, Maryland; Anniston, Alabama; Newport, Indiana; Pine Bluff,  Arkansas; and Umatilla, Oregon. As shown in figure 3, these sites stored  40.4 percent of the total original stockpile.
Significant actions in the implementation of disposal operations for 90 percent of the stockpile have been completed. Such actions include the  selection of a disposal method and the granting of environmental permits  by state and local governments. The disposal method for the remaining  10 percent of the stockpile stored in Kentucky and Colorado has not yet  been selected because the 1997 Defense Appropriations Act requires an  examination of alternative disposal methods under the Assembled  Chemical Weapons Assessment Program.
section_title: Disposal Operations at Seven of Nine Stockpile Sites Could Be Completed Before the 2007 Deadline
paragraphs: The Army’s most recent schedule shows that disposal operations are  expected to be completed at seven of the nine stockpile sites with at least  5 months to spare, most sites have at least 18 months to spare, before the  2007 deadline. However, the schedules for completion at the Maryland and  Indiana sites, which are pilot testing alternative disposal technologies, are  more uncertain because of the need to further test the alternatives  proposed for these locations. For the remaining two sites in Kentucky and  Colorado, disposal methods have not yet been selected because the 1997  Defense Appropriations Act requires an examination of alternative disposal  methods under the Assembled Chemical Weapons Assessment Program.  Figure 4 depicts the Army’s current disposal schedules for these sites.
As part of the Alternative Technologies and Approaches Project, Aberdeen,  Maryland, and Newport, Indiana, have pilot projects to investigate,  develop, and support the testing of disposal technologies based on  chemical neutralization processes. The Army has started site preparation  and construction activities for the full-scale pilot facilities at both  locations, but the schedules for testing the technologies at these sites are  based primarily on research, modeling, and input from engineers and  scientists and not on full-scale operations. It is premature to assume that  operations at these sites will successfully demonstrate the technologies  without some initial delays associated with the design and operation of the  pilot plant. Until the pilot tests are completed, the schedules for these sites  remain uncertain, and the sites may not have as long a period before the  2007 deadline as shown in figure 4.
On February 2, 2000, officials from the Assembled Chemical Weapons  Assessment Program provided schedules showing that disposal operations  at Blue Grass, Kentucky, and Pueblo, Colorado, will not start until after the  2007 deadline because of the time required to validate and certify the  alternative technologies and obtain environmental permits. However,  program officials are optimistic that operations could be completed within  the possible 5-year extension to the deadline. Two other reviews of the  program also concluded that the two sites would not meet the 2007  deadline. In August 1999, a National Research Council brief by the  Chairman of the Assembled Chemical Weapons Committee concluded that  disposal operations using an alternative technology in Kentucky and  Colorado would not be completed by December 2007. In September 1999,  an Arthur Andersen, Limited Liability Partnership, consulting report  prepared for the office of the Deputy Assistant Secretary of the Army for  Chemical Demilitarization concluded that the estimated completion dates  for these sites ranged between May 2011 and December 2015, well beyond  the 2007 deadline.
The protocol for selecting an alternative technology for the destruction of  assembled chemical munitions stored in Kentucky or Colorado has not yet  been determined and remains under study. If a technology other than  incineration is selected for these sites, the 1999 Defense Authorization Act  requires the Under Secretary of Defense for Acquisition and Technology to  certify in writing to the Congress that the alternative is (1) as safe and  cost-effective for disposing of assembled chemical munitions as  incineration, (2) capable of the destruction of such munitions on or before  the later date of the completion of destruction if incineration were used or  the convention’s deadline, and (3) capable of satisfying federal and state  environmental and safety laws. DOD and Army officials were assessing  these three conditions and identifying the criteria for making the  certification. At the same time, the Congress directed that DOD make  available, and DOD actually committed, funds in fiscal year 2000 to award  contracts to evaluate and demonstrate three additional technologies for the  Assembled Chemical Weapons Assessment Program. Program officials  were also determining whether the Under Secretary of Defense could issue  the required certification before demonstrating the three additional  technologies.
It is unlikely that an alternative technology can be validated, certified, and  implemented in Colorado and Kentucky in time to meet the convention’s  2007 deadline. In addition, insufficient time remains for the Departments of  Defense and the Army to meet the 2007 deadline at these two sites using  the baseline incineration process. According to the Army’s 1998 annual  report on the program, to meet the destruction schedule required by the  convention, authority to proceed with the baseline incineration process in  Colorado and Kentucky was required before June 30, 1999. Even so, DOD  and Army officials were discussing whether to grant such authority for  both Colorado and Kentucky. These officials were preparing two notices of  intent announcing the preparation of separate environmental impact  statements for the disposal of the stockpile in Colorado. One  environmental impact statement will focus on whether to pilot test  alternative technologies in Colorado or at two other sites. The other  environmental impact statement is to be specific to Colorado and will focus  on which disposal method—the baseline incineration process, a modified  incineration process, or an alternative technology—should be used in  Colorado. Some program officials believe it may still be possible to meet  the 2007 deadline by using a modified incineration process to destroy the  stockpile in Colorado. However, according to state officials, the Army  would have great difficulty in obtaining environmental permits for any type  of chemical agent incineration in Colorado or Kentucky. Each state has  requirements for obtaining environmental permits that could prevent or  slow the implementation of incineration in the two states.
section_title: Significant Obstacles Could Prevent the Nonstockpile Product From Meeting the Convention’s 2007 Deadline
paragraphs: The Army has made progress in destroying most caterories of its  nonstockpile chemical materiel as required by the Chemical Weapons  Convention. However, the disposal operations for some recovered  chemical warfare materiel may exceed the convention’s 2007 deadline  because the Army needs more time to develop and prove the proposed  disposal methods will be safe and effective and will be accepted by state  and local communities. Further, the demolition of a section of a former  chemical weapons production facility in Indiana may exceed the 2007  deadline because the chemical stockpile stored there must be destroyed  before demolition of the facility can begin. Any slippage in the stockpile  disposal schedule, which is considered optimistic by some involved in the  program, will cause demolition operations of the facility to extend past the  deadline.
subsections: section_title: The Army Has Made Progress in the Disposal of Nonstockpile Chemical Materiel
paragraphs: The Army has destroyed a large portion of its nonstockpile chemical  warfare materiel. Table 2 summarizes the status of the Army’s efforts to  destroy binary chemical warfare materiel, miscellaneous chemical warfare  materiel, recovered chemical warfare materiel, and former chemical  weapons production facilities.
section_title: Change in the Proposed Disposal Method Could Delay Disposal of Some Recovered Chemical Warfare Materiel
paragraphs: The disposal of some recovered chemical warfare materiel could exceed  the convention’s 2007 deadline because of technical issues and cost  increases associated with key disposal methods. In addition, the Army has  experienced delays in obtaining state permits and approvals to test and  implement these methods. Because of these factors, program officials are  considering alternative disposal methods to replace the problematic  systems.
Until recently, the Army was developing four types of integrated  transportable destruction systems for nonstockpile materiel. These  systems and their status are briefly described in table 3. Each system was  expected to use a neutralization process, through which the chemical agent  would be mixed with chemicals that would convert the agent into waste  compounds. This waste would be much less hazardous than the chemical  agent and would be sent to commercial treatment, storage, and disposal  facilities that specialize in the treatment of hazardous industrial waste.
Nonstockpile officials stated that the research and development of the four  treatment systems described in table 3 have reached the point where the  Army must decide whether it wants to complete development and make the  systems available for deployment in the field. In the case of the two  munitions management devices, the Army has experienced technical  problems and cost overruns. In addition, it experienced delays in obtaining  state permits and approvals to test the prototype for the munitions  management device (version 1). The required permits to test the system  had not been approved as of February 2, 2000.
Because of the problems and delays, nonstockpile product officials were  considering alternative disposal methods to replace the two munitions  management devices. For example, they were deliberating over the  possibility of destroying recovered chemical warfare materiel stored in  Oregon and Colorado in stockpile disposal facilities and disposing of the  recovered materiel stored in Maryland and Arkansas in neutralization-based disposal facilities specially designed for nonstockpile  materiel. However, officials still need more time to prove that the  alternatives will safely and effectively destroy recovered chemical materiel.  Environmental issues similar to those affecting the testing of the prototype  munitions management devices are also likely to affect the Army’s ability to  obtain the environmental approvals and permits for the alternatives.  Consequently, until the alternatives for disposing of the recovered chemical  warfare materiel are proven and accepted by the state and local  communities, this portion of the nonstockpile product is at risk of  exceeding the 2007 deadline.
section_title: Destruction of Former Production Facility in Indiana May Not Meet the Convention’s 2007 Deadline
paragraphs: A portion of a former production facility at Newport, Indiana, classified as  a nonstockpile requirement, may not be destroyed before the convention’s  2007 deadline because the chemical stockpile agent stored there must be  destroyed before destruction of the facility can begin. The weapons were  scheduled to be destroyed by December 2004. Although nonstockpile  program officials were confident that their schedule provides sufficient  time to complete demolition of the facility before the 2007 deadline,  slippages in the disposal of the chemical stockpile could extend  nonstockpile operations past the deadline. As previously discussed, the  Newport, Indiana, stockpile schedule is at risk because the Army needs  more time to demonstrate whether the proposed alternative technology— developed by the Alternative Technologies and Approaches Project but not  yet proven in full-scale operations—will safely and effectively destroy the  stockpile. In addition, state officials believe the disposal schedule is too  ambitious because it is based on processing 600 containers filed with nerve  agent during pilot testing, more than they believe is realistic in the time  allowed. State officials said the Army’s schedule for the pilot test phase  might not allow sufficient time for program participants to fully evaluate  the new technology before full-scale operations are scheduled to start.
section_title: Program Costs Will Likely Exceed $14.9 Billion Estimate
paragraphs: The Chemical Demilitarization Program has a long-standing history of  experiencing significant cost growth. The Army estimates that the program  will cost $14.9 billion; it has spent approximately $6.2 billion. However,  the $14.9 billion cost estimate does not include the costs associated with  the schedule slippages likely in Kentucky and Colorado and in the  Nonstockpile Chemical Materiel Product. Army officials said that they  were revising their cost estimates. However, the Army will likely need more  time to develop a reliable baseline to estimate the cost for the closure and  remediation of the chemical stockpile disposal facilities, adjacent areas,  and miscellaneous materiel contaminated during disposal operations. At  the same time, program officials have initiated some actions to contain  costs.
subsections: section_title: The Army Estimates the Program Will Cost $14.9 Billion
paragraphs: As shown in table 4, the Army estimates that the program will cost  $14.9 billion; the Congress has appropriated nearly $6.2 billion through  fiscal year 1999. Since 1985, the Army’s cost estimate for the Chemical  Stockpile Disposal Project, the largest portion of the program, has  increased significantly from the initial $1.7 billion estimate to nearly  $10 billion. The major reasons for the cost increases in the stockpile  project include (1) overly optimistic program assumptions and estimates  by program officials, (2) enhancements to respond to concerns for  maximizing the safety of the public and environment, (3) technical  problems resulting in lower than expected disposal rates, and (4)  additional legislative and program requirements. In 1997, we reported that  until the disposal methods for nonstockpile materiel were developed and  proven and accepted by state and local communities, the Army would not  be able to predict the cost of the nonstockpile product with any degree of  accuracy.
The working life cycle cost estimate for the Chemical Demilitarization  Program shown in table 4 does not include the costs associated with  schedule slippages likely in the disposal of the chemical stockpile stored in  Kentucky and Colorado and the nonstockpile materiel. The cost estimates  are based on the assumption that the disposal of the chemical stockpile and  nonstockpile materiel would be completed before the 2007 deadline, which  we believe is unlikely. Historically, schedule delays increase direct costs  such as labor, emergency preparedness, and management of the program.  In addition, until disposal methods for the stockpile stored in Kentucky and  Colorado have been selected, proven to be safe and cost-effective, and  accepted by the affected states and localities, the Army will be unable to  accurately estimate disposal costs for these sites. Similarly, the cost of  destroying recovered chemical warfare materiel will be uncertain until the  product manager has demonstrated disposal methods for nonstockpile  items and the methods have received permits and have been accepted by  the affected states and localities. The cost estimate shown in table 4 for the  Nonstockpile Chemical Materiel Product does not included possible costs  after the 2007 deadline.
The Army also needs additional time to develop a reliable baseline to  estimate the costs for the closure and remediation of the chemical  stockpile disposal facilities, adjacent areas, and miscellaneous materiel  contaminated during disposal operations. According to program officials,  these costs may increase because of uncertainties regarding remediation  requirements and standards for these facilities and other materiel, such as  personal protection suits worn by the workers and miscellaneous  equipment, contaminated during disposal operations. Individual states will  establish the environmental requirements for remediating these facilities  and nearby areas. Consequently, the environmental requirements and  standards to use in estimating the cost to remediate these facilities have  not yet been fully determined. Furthermore, because no stockpile disposal  facility has yet to be remediated, the Army lacks real time experience on  which to estimate these costs.
section_title: The Army Has Management Initiatives Under Way to Control Cost Growth
paragraphs: In response to the National Defense Authorization Act for Fiscal Year 1996,  the program office for chemical demilitarization has developed and  implemented several cost-reduction initiatives. Because the majority of  Chemical Stockpile Disposal Project costs are in the contracts for the  construction and operation of the disposal facilities, the program office  implemented a management approach that includes in-depth reviews of the  contracts. According to program officials, these reviews may provide the  office with a better understanding of the contractor’s approach to planning,  enhance performance analyses and forecasting, and produce cost savings  during negotiations with contractors. Additionally, the chemical  demilitarization office expects cost savings to accrue through  implementation of programmatic lessons learned, where opportunities to  reduce costs are routinely investigated and applied as the program moves  forward.
To increase public awareness and trust, the program office for chemical  demilitarization has hosted periodic environmental forums on the  Chemical Demilitarization Program. These forums have allowed the public  to exchange information with officials from various organizations  associated with the program and were intended to increase public  awareness and gain acceptance of the program and thereby reduce costs  associated with extended environmental permit schedules and litigation  actions. Similarly, to increase public awareness and acceptance, the  program office for assembled chemical weapons assessment has convened,  with the assistance of the Keystone Center, the Dialogue on Assembled  Chemical Weapons Assessment. The Dialogue includes representatives of  the affected communities, national citizens groups, state regulatory  agencies, Native American tribes, the Environmental Protection Agency,  and the Departments of the Defense and the Army and has participated in  the Army’s decision-making process for the program.
section_title: Conclusions
paragraphs: The Army could destroy 90 percent of its stockpile of chemical agents and  munitions and most of its nonstockpile chemical warfare materiel before  the Chemical Weapons Convention’s 2007 deadline, given its recent  progress and projected plans. However, because of the additional time  required to develop and select disposal methods that are acceptable to the  state regulatory agencies and local communities in Kentucky and Colorado,  the Army will not meet the 2007 deadline at these sites. These sites store 10 percent of the original stockpile. In addition, the disposal of some  nonstockpile items may exceed the 2007 deadline because of technical  problems with key disposal systems for recovered chemical warfare  materiel and because of possible delays in demolition of a former chemical  weapons production facility in Indiana. Given past program experience,  these types of delays are likely to occur and will add to program costs.
section_title: The Army Has Not Adequately Managed the Liquidation of Program Funds
paragraphs: The Army has experienced problems in recent years in managing its  liquidations of program funds. Concerns over the financial management of  the Chemical Demilitarization Program surfaced following a February 1999  review by the Office of the Under Secretary of the Defense (Comptroller),  which suggested that significant portions of prior years’ obligations  remained unliquidated and could be used for other purposes. In July 1999,  we reported that sizable unliquidated obligations existed for the program  from prior years. During this review, we examined the transactions for  which most of these obligations were recorded, a type of interagency order  known as a military interdepartmental purchase request. We found that the  program had more than $3.1 billion in budget authority from fiscal  years 1993-98 appropriations as of September 30, 1999, of which a reported $498 million (16.1 percent) was unliquidated. Some unliquidated  obligations exist because of the lack of management attention and  fragmented structure for tracking and managing liquidations; procedural  delays in reporting liquidation transactions in the defense financial system,  auditing and liquidating obligated funds on completed contracts, and  deobligating excess funds; and delays in executing the program schedule.
Several recent factors have affected and will continue to affect the  reduction of the unliquidated obligations. The Army can liquidate some of  its obligations as soon as construction and procurement are under way at  the chemical stockpile sites that recently obtained environmental permits.  In addition, congressional reductions in the administration’s budget  requests for fiscal years 1999 and 2000 will likely reduce the future buildup  of unliquidated obligations. At the time of our review, the Army had begun  to improve its management of appropriated funds and liquidations of  obligations for the Chemical Demilitarization Program, but these  improvements have not been consistently and systematically implemented  across all program elements, and it is too early to tell their effect.
subsections: section_title: Prior Reviews Report Weaknesses in the Management of Program Funds
paragraphs: Concerns over the financial management of the program surfaced  following a review by the Office of the Under Secretary of the Defense  (Comptroller), which suggested that significant portions of prior years’  obligations remained unliquidated and could be used for other purposes. In  July 1999, we reported that there were sizable unliquidated obligations  reported for the program from prior years.
The financial management issue of the program surfaced in February 1999,  following a quick program review summarized in internal memorandums  prepared by an official in the Office of the Under Secretary of the Defense  (Comptroller). The memorandums suggested that significant portions of  prior years’ obligations remained unliquidated and could be reprogrammed  to other uses. On July 26, 1999, the office issued a more comprehensive  report, stating that 26 percent of the Chemical Demilitarization Program’s  appropriations were unexpended. The report also notes that delays in  executing the program resulted in the accumulation of funds that were out  of phase with the specific time when the contracted work was actually  performed, resulting in the accumulation of unliquidated obligations.  Consequently, the funds were not available for other immediate defense  priorities and programs. The report also identified procedural delays in  reporting financial transactions in the defense financial system and  programmatic delays in executing the program schedule because of permit,  technical, and contractual issues that contributed to the program’s  unliquidated obligations.
In July 1999, we reported that sizable unliquidated obligations existed for  the Chemical Demilitarization Program from prior years, but the unused  funds did not appear to be available for other uses. Our review of $382.1 million (62.6 percent) of the reported $610.5 million in unliquidated  obligations for fiscal years 1992-98 showed that $150.6 million (39.4 percent  of our sample) had already been spent but was not recorded in accounting  records or included in financial reports prepared by the Defense Finance  and Accounting Service (DFAS). Further, the remaining $231.5 million in  unliquidated obligations in our sample was scheduled to be liquidated by  November 2000. In addition, we reported that these obligations were  unliquidated because of several factors, such as delays in obtaining  environmental permits and technical delays. At the same time, we  identified a number of factors, including states’ approvals of environmental  permits to start construction of chemical stockpile disposal facilities and  congressional deferments in the administration’s budget request for the  program, that have affected or will affect the reduction of unliquidated  obligations.
section_title: About 16.1 Percent of Prior Years’ Obligations Were Unliquidated
paragraphs: As of September 30, 1999, the Chemical Demilitarization Program had more  than $3.1 billion in budget authority from fiscal years 1993-98, of which  $38.9 million was no longer obligated for specific program areas. (See table 5.) Nearly this entire amount was obligated previously for program  requirements that were completed for less cost than initially estimated and  was deobligated and reclassified as program reserve. Most of these  unobligated funds are no longer available because their authorized periods  for obligation expired. At the same time, the program office had a reported  $498 million (16.1 percent) in unliquidated obligations from fiscal  years 1993-98.
In addition, the program office reported that it had $804 million in budget  authority in fiscal year 1999 funds. Of this amount, $70.7 million was  unobligated and $381.3 million in obligations was unliquidated. However, it  is important to note that the budget authority for fiscal year 1999 is  relatively recent and that some of the funds are still available for obligation  and liquidation and may continue to be available for several years  depending on the type of fund. The budget authority for 1999 research and  development funds under the chemical demilitarization appropriation is  available for obligation during fiscal year 2000, 1999 procurement funds are  available for obligation for fiscal years 2000 and 2001, and 1999 military  construction funds are available for obligation for fiscal years 2000 through  2003. The obligations incurred under each of these chemical  demilitarization appropriation subdivisions may be liquidated up to 5 years  following the end of the funds’ periods of availability for obligation before  the fund account is closed.
section_title: Assessment Indicates That Most Unliquidated Obligations Were Accounted For
paragraphs: During this review, we focused our analysis on the unliquidated obligations  for fiscal years 1993-98. On the basis of our analysis of 428 military  interdepartmental purchase requests with $495.1 million in unliquidated  obligations (or 99.4 percent of the total reported unliquidated obligations),  we determined that $63.1 million (12.7 percent) in payments had been  made but was not recorded in the accounting records or financial reports  prepared by DFAS. (See table 6.) Of the remaining $432 million in  unliquidated obligations, most was for work completed but not yet billed  by the contractor or verified by the Defense Contract Audit Agency  (DCAA), or for work being done but not yet completed. Included in this  amount is $10.4 million that program officials could not explain the reasons  for the unliquidated balances.
As shown in table 6, 240 purchase requests included a reported $62.6 million in unliquidated operations and maintenance obligations. Of  this amount, $5.3 million had been liquidated, according to documents  provided by the program office and its contractors, but not yet recorded as  liquidated in DFAS accounting data and financial reports. Of the remaining  $57.2 million in unliquidated obligations, program officials identified $32.3 million for work that had been completed, but they were awaiting  other actions such as final billing by the contractor or audit by DCAA.  Another $18.6 million of the $57.2 million is obligated for ongoing purchase  requests, for which most of the obligations are scheduled to be liquidated  between now and January 2001. Program officials were unable to explain  the reasons for $6.3 million of the unliquidated obligations.
In addition, 97 purchase requests included a reported $339.5 million in  unliquidated procurement obligations. Of this amount, $52.6 million had  been liquidated, according to documents provided by the program office  and its contractors, but not recorded as liquidated in DFAS financial data.  Of the remaining $286.9 million in unliquidated obligations, program  officials identified $2.7 million for work that had been completed, but they  were awaiting other actions such as final billing by the contractor or audit  by the DCAA. Another $283.5 million is obligated for ongoing purchase  requests, for which most of the obligations are scheduled to be liquidated  between now and the end of 2001. Program officials were unable to explain  the reasons for almost $700,000 in unliquidated obligations.
Further, 76 purchase requests included a reported $19.7 million in  unliquidated research and development obligations. Of this amount,  $5.2 million had been liquidated, according to documents provided by the  program office and its contractors, but not recorded as liquidated in DFAS  financial data. Of the remaining $14.5 million in unliquidated obligations,  program officials identified $1.3 million for work that had been completed,  but they were awaiting other actions such as final billing or audit. Another  $9.7 million of the $14.5 million was obligated for ongoing purchase  requests, for which most of the obligations are scheduled to be liquidated  before June 2000. Program officials were unable to explain the reasons for  $3.5 million of the unliquidated obligations.
Last, we found $73.3 million in unliquidated military construction  obligations managed by the U.S. Army Corps of Engineers. The Corps of  Engineers uses integrated financial systems to manage and account for  obligations and liquidations. Unlike the separately located, nonintegrated  financial systems used by the program offices for chemical demilitarization  and assembled chemical weapons assessment, the Corps of Engineers  system contains real-time obligation and liquidation data. The $73.3 million  in obligations will be liquidated as specialized government-furnished  equipment is delivered and installed and the ongoing construction efforts  are completed. The construction of the disposal facilities in Alabama and  Oregon is scheduled to be completed in the first quarter of fiscal year 2001,  and the disposal facility in Arkansas is expected to be completed in the first  quarter of fiscal year 2002.
section_title: Reasons for Some Unliquidated Obligations
paragraphs: Some unliquidated obligations are due to the lack of management attention  and the decentralized organizational structure for managing program  activities and tracking liquidations; procedural delays in reporting  liquidation transactions in DFAS accounting data and financial reports;  procedural delays in auditing and liquidating obligated balances on  completed contracts; and delays in executing the program schedule  because of permit, technical, and contractual issues.
subsections: section_title: Management Delays
paragraphs: Contributing to unliquidated balances have been delays due to the lack of  management attention and decentralized organizational structure for  managing program activities and tracking liquidations.
subsections: section_title: Lack of Management Attention
paragraphs: The lack of attention to tracking and managing liquidations has contributed  to the accumulation of unliquidated obligations. According to DOD and  Army officials, the program office for chemical demilitarization has  historically prioritized the management and timely obligation of  appropriations and given much less attention to tracking and managing  liquidations and deobligating excess funds. Despite beginning to track and  liquidate obligations more aggressively, program officials still could not  readily provide us the obligation and liquidation status for some purchase  requests or determine whether the unliquidated obligations were for  completed or ongoing efforts. Instead, program officials generally had to  obtain liquidation data from performing entities, such as other government  agencies and outside contractors, and in many cases testimonial data was  the best data they could provide. Some officials said they did not  systematically receive financial reports with liquidation data. Additionally,  they gave little priority to deobligating unliquidated balances associated  with completed or closed contracts. This lack of attention is partially  reflected in the inability of program officials to explain the status of $10.4  million in unliquidated obligations across all funding categories except for  military construction.
section_title: Decentralized Organizational Structure
paragraphs: Different organizations are responsible for various elements of the  Chemical Demilitarization Program. For example, the U.S. Army Corps of  Engineers is responsible for managing military construction funds and  most of the program’s procurement funds. FEMA and the U.S. Army Soldier  and Biological Chemical Command share responsibility for managing funds  appropriated for the Chemical Stockpile Emergency Preparedness Project.  FEMA is responsible for off-post emergency preparedness activities and  the Soldier and Biological Chemical Command is responsible for on-post  activities. In addition, the Program Manager for Assembled Chemical  Weapons Assessment manages the Assembled Chemical Weapons  Assessment Program funding, and the Program Manager for Chemical  Demilitarization manages the execution of funds appropriated for the  chemical stockpile, nonstockpile, and alternative technologies and  approaches projects. Within the program office for chemical  demilitarization, project managers are responsible for the execution of  funds provided to their respective projects. Within this decentralized  organizational structure, these program elements manage their obligations  and liquidations as separate operating entities, and in some cases, there  was confusion as to which program element or organization was  accountable for tracking and managing the unliquidated obligations.
section_title: Procedural Delays
paragraphs: Procedural delays have accounted for the accumulation of some of the  unliquidated obligations. Some liquidation transactions were not reported  in accounting records and financial reports prepared by DFAS in a timely  way, and program officials have been reluctant to deobligate unliquidated  excess funds on completed contracts until DCAA validates labor rates and  other contract costs.
subsections: section_title: Accounting and Procedural Delays
paragraphs: According to program officials, processing and reporting liquidation data  have taken 90 to 120 days before the data were included in accounting  records and financial reports prepared by DFAS. For example, contractors  have taken several weeks to validate and process liquidations by their  subcontractors and report them to the program office, which has its own  processes and procedures to complete before reporting to DFAS.  Furthermore, DFAS requires time to input and report its liquidation data to  its financial system. We recently reported that DOD’s payment and  accounting processes are complex, generally involving separate functions  carried out by individual offices using different systems. These processes  can contribute significantly to delays in reporting the liquidation of  obligations to responsible program officials.
section_title: Contract Closure Delays
paragraphs: According to Army officials, DCAA has taken several months to review and  approve costs associated with completed contracts. Program officials have  generally waited until DCAA validated labor rates and other contract costs.  These audits may adjust labor rates or other costs, requiring additional  payments from the remaining obligated funds.
section_title: Program Delays
paragraphs: Contributing to the unliquidated balances have been delays in executing  the program schedule because of environmental permit, technical, and  contractual issues.
subsections: section_title: Environmental Permit Delays
paragraphs: Program officials found that the time required to actually gain  environmental permit approvals, particularly in Oregon, Alabama, and  Arkansas, exceeded estimates. The additional time was mainly attributable  to a variety of both internally and externally driven requirements. For  example, satisfying safety and environmental design changes resulting  from programmatic lessons learned, new state and federal regulatory  requirements, and new interpretations of existing regulatory requirements  in some cases significantly extended the projected schedules. Although  funds were obligated to support the three sites based on initial permit  issuance projections, the program office could not liquidate some  obligations until after construction began, which was contingent on the  issuance of the environmental permits.
section_title: Technical Delays
paragraphs: According to program officials, lessons learned from ongoing disposal  operations at Johnston Atoll and Utah resulted in technical and design  changes for future facilities that required additional time and resources.  While these changes were being incorporated, liquidation of obligated  funds proved to be slower than program officials expected.
section_title: Contractual Delays
paragraphs: According to program officials, the award of several construction and  procurement contracts has been delayed due to protests by losing bidders.  For example, the award of the construction contract for the disposal  facility in Arkansas was delayed a year due in part to a bid protest.  Accordingly, obligations for this contract could not be liquidated until  resolution of the protest.
section_title: Recent Factors Reducing Unliquidated Obligations
paragraphs: Recently, approvals of environmental permits by state regulatory agencies  at five chemical stockpile disposal sites resulted in initiation of  construction activities and procurement actions and greater disbursement  of obligated funds. Additionally, actions by the Congress and the Office of  the Under Secretary of the Defense (Comptroller) to reduce the funding  requested for the program decreased the amount of funds available for  obligation and better aligned funding with the program’s execution. This  action decreases the likelihood that these funds will be obligated far in  advance of when they are needed.
The Army’s recent receipt of the required environmental permits and  approvals by the state regulatory agencies at five chemical stockpile  disposal sites has resulted in initiation of construction activities and  procurement actions and greater pay-out of obligated funds. The  environmental permits for the construction of the disposal facilities in  Oregon and Alabama were approved in 1997. The execution of these  construction projects has allowed and will continue to allow the program  office to liquidate construction and procurement obligations for these  locations. In addition, the environmental permits were approved in 1999 for  the construction of disposal facilities in Arkansas, Indiana, and Maryland,  which should allow the program office to liquidate construction and  procurement obligations for these locations.
Congressional actions to reduce the funding requested for the program  have decreased and are expected to continue to decrease the program’s  unliquidated balances. In the DOD and military construction  appropriations acts for fiscal year 1999, the Congress appropriated  $78 million less than the administration requested for operations and  maintenance, procurement, and research and development activities and  appropriated $50.5 million less than requested for military construction  projects. Similarly, in the fiscal year 2000 DOD and military construction  appropriations acts, the Congress appropriated $140 million less than the  administration requested for operations and maintenance, procurement,  and research and development activities and appropriated $93 million less  than requested for military construction projects. These actions reduced  the amount of funds available for obligation and better aligned funding with  the program’s execution, decreasing the likelihood that these funds will be  obligated far in advance of when they are needed.
In their review of the Army’s fiscal year 2001 budget request for the  Chemical Demilitarization Program, the Office of the Under Secretary of  the Defense (Comptroller) recommended, and the Deputy Secretary of  Defense approved, reductions to the Army’s budget request for fiscal  year 2001 to better align funding in the year it would be executed. For  example, because of the delays in the Alternative Technologies and  Approaches Project, DOD reduced the Army’s budget request for  construction funds by $25 million for the Maryland site. It concluded that  the contractor would be unable to execute construction work scheduled  for fiscal year 2001. Similarly, DOD reduced fiscal year 2001 funding for  equipment installation at Newport, Indiana, by $7.2 million because of the  delays in the Alternative Technologies and Approaches Project. Further,  DOD reduced the Army’s request for the Assembled Chemical Weapons  Assessment Program by $42 million because of expected delays in  executing the program during fiscal year 2001.
section_title: Financial Improvements Have Not Been Consistently and Systematically Implemented Across All Program Elements
paragraphs: Although the Army has started to improve its management of obligations  and liquidations of obligated funds for the Chemical Demilitarization  Program, these improvements have not been consistently and  systematically implemented across all program elements. These  inconsistencies are due in part to the decentralized financial management  structure of the program.
In July 1999, the Program Manager for Chemical Demilitarization mandated  monthly reporting of obligations, disbursements, and planned and actual  cost information by the managers for chemical stockpile, nonstockpile, and  the alternative technologies and approaches projects. The manager also  reminded all project managers of the importance of effective funds  management, including the management of cost as well as schedule and  technical performance. Consequently, officials started examining the  unliquidated obligations and deobligating those determined as no longer  needed. In addition, they started working with their contractors and other  defense agencies to expedite the reporting of financial transactions and  developing methods for capturing and reporting obligations, liquidations,  and accrual data.
While these are positive steps, the program office has not fully  implemented these improvements for the timely capturing and reporting of  obligations, liquidations, and accruals and could not explain $10.4 million  in unliquidated obligations. The program office did not have an  independent, integrated system to track obligations, liquidations, and  accrual data and has relied mostly upon data in accounting records or  financial reports prepared by DFAS. For example, the Chemical Stockpile  Emergency Preparedness Project and the Assembled Chemical Weapons  Assessment Program were not included in the Chemical Demilitarization  Program Manager’s monthly reporting requirement because the U.S. Army  Soldier and Biological Chemical Command manages the funds for the two  programs. Further, the managers for the chemical stockpile, nonstockpile,  and alternative technologies and approaches projects have implemented  different systems to comply with the program manager’s mandate for a  monthly reporting of obligations, liquidations, and planned and actual cost  information.
section_title: Conclusions
paragraphs: Although program officials have acted and are acting to improve the  financial management of the program, problems remain. No systematic  approach exists across all program elements to help ensure the consistent,  effective execution and expenditure of funds appropriated for the program,  and a relatively small amount of unliquidated obligations remain  unexplained. Some unliquidated obligations exist because of the lack of  management attention and decentralized structure for tracking  liquidations. Other unliquidated obligations exist because of procedural  delays in reporting financial transactions in the defense financial system, in  auditing and liquidating obligated balances on completed contracts, and in  deobligating excess funds, and delays in executing the program schedule.  Several recent factors, including the recently approved environmental  permits and congressional actions to reduce funding for the program, have  decreased and will likely reduce the future buildup of unliquidated  obligations. However, because the improvements in its financial  management have not been consistently and systematically implemented,  the Army cannot ensure that its unliquidated obligations will receive  consistent attention to bring about a better alignment of funds with the  execution of the program on an ongoing basis. In response to a draft of this  report, the Army has recently initiated actions to address our concerns  over the financial management of the program. Given the long-standing  nature of these concerns, management oversight is essential to the  effective implementation of the Army’s actions.
section_title: Recommendations
paragraphs: We recommend that the Secretary of Defense monitor the Army’s actions to develop a systematic approach for ensuring the timely, effective  expenditure of funds appropriated for all elements of the Chemical  Demilitarization Program and direct program officials to account for the $10.4 million in unliquidated  obligations that officials could not give an explanation for, or explain  why the funds had not been liquidated.
section_title: Agency Comments and Our Evaluation
paragraphs: In its written comments on our draft report, DOD agreed with our  recommendations to develop a systematic approach for ensuring the  timely, effective expenditure of funds appropriated for all elements of the  Chemical Demilitarization Program and direct program officials to account  for the $10.4 million in unliquidated obligations that they could not explain.  However, DOD disagreed that the Secretary of Defense should direct the  Secretary of the Army to implement the recommendations because the  Program Manager for Chemical Demilitarization had already initiated  implementation actions. We are encouraged by the Program Manager’s  actions, which once completed should address the concerns raised in our  draft report. Given these actions and the long-standing nature of our  concerns, we modified our recommendations to call for the Secretary of  the Defense to monitor the Army’s actions to ensure that it completes them  fully and in a timely way and that appropriate results are obtained.
FEMA concurred with the recommended principle of a systematic  approach for ensuring the timely, effective expenditure of funds and  elaborated on its actions implementing the principle behind the  recommendation. Because the recommendation to explain the  $10.4 million in unliquidated obligations pertains to the Army, FEMA had  no comment on that recommendation.
section_title: Program Management Has Been Hindered by Complex Structure and Ineffective Coordination
paragraphs: Effective management of the Chemical Demilitarization Program has been  hindered by its complex management structure and ineffective  coordination among program offices and with state and local officials.  Several changes in the organization and structure of the program during  1997-99, including some changes to implement legislative requirements,  divided the management roles, responsibilities, and accountability among  several different levels within the Departments of Defense and the Army. In  addition, accountability for program performance has been unclear, and  coordination and communication among certain program elements and  state and local officials have been inadequate. Further, officials of the  Departments of Defense and the Army have not agreed on whether or when  management roles, responsibilities, and accountability should be  consolidated for destruction of the chemical stockpiles at Blue Grass,  Kentucky, and Pueblo, Colorado. Consequently, state and local officials  have raised concerns that no single office is accountable for achieving the  desired results of the program’s various elements. In addition, the Congress  has expressed concern about the management of the program.
subsections: section_title: Complex Management Structure
paragraphs: As the program has been expanded beyond its original single purpose of  destroying the stockpile to encompass a broader range of missions, to  include compliance with the Chemical Weapons Convention, the  organization and structure of the Chemical Demilitarization Program have  changed and become increasingly complex. At times, these changes have  resulted in the fragmentation of the responsibilities for management and  oversight of the program. For example, several different levels within the  Departments of Defense and the Army now share oversight and  management responsibilities.
subsections: section_title: Evolution of the Management Structure
paragraphs: As provided for in the original legislation establishing the Chemical  Demilitarization Program, the Army, as executive agent for the program,  established a Program Manager for Chemical Demilitarization who was  responsible for management of the destruction of the stockpile. This  Program Manager reported directly to the Assistant Secretary of the Army  (Installations and Environment). Once the estimated cost of the program  reached a certain dollar amount, as required by statute, the Army formally  designated it to be a major defense acquisition program subject to  congressional reporting requirements and Office of the Secretary of  Defense review and approval of various milestones. So that this major  defense acquisition program could be managed in the acquisition chain in  accordance with the DOD Directive 5000 series, program responsibility  was transferred to the Assistant Secretary of the Army (Acquisition,  Logistics and Technology) from the Assistant Secretary of the Army  (Installations and Environment). To support the enhanced oversight role of  the Office of the Secretary of Defense, an office was established in the  office of the Assistant to the Secretary of Defense (Nuclear, Chemical, and  Biological Defense Programs) to provide oversight responsibility for the  Chemical Demilitarization Program regarding policy guidance, budget  authority, and annual reporting requirements. The Program Manager  continued to report directly to the Assistant Secretary of the Army  (Acquisition, Logistics and Technology) in his capacity as the Army  Acquisition Executive and the Program Manager remained responsible for  executing the existing elements of the program, except for the Chemical  Stockpile Emergency Preparedness Project. Under a memorandum of  understanding, the responsibility for the latter project resides with the  Assistant Secretary of the Army (Installations and Environment) in  conjunction with FEMA.
section_title: Current Structure Has Three Separate Lines of Authority
paragraphs: There are three different lines of authority within the Departments of  Defense and the Army for elements of the Chemical Demilitarization  Program (see fig. 5). This structure resulted from congressional and DOD  actions affecting various elements of the program. For example, the  Congress wanted greater emphasis on the management of efforts to  research and develop alternative technologies for destroying assembled  chemical weapons. To achieve that goal, it directed that these research and  development efforts be conducted separately from the baseline  incineration activities. DOD, as part of its downsizing theOffice of the  Secretary of Defense, devolved management responsibilities to the Army.  In addition, to improve the management of the Chemical Stockpile  Emergency Preparedness Project, the Army and FEMA changed the  management structure for the project.
The current organization has created a complex management structure and  separated responsibilities. For example:
In the 1997 Defense Appropriations Act (sec. 8065), the Congress  required the Under Secretary of Defense (Acquisition and Technology)  to designate a program manager who was not, nor had been, in direct or  immediate control of the baseline reverse assembly incineration  demilitarization program to carry out a new pilot program. In response  to the act, DOD established the office of the Program Manager for  Assembled Chemical Weapons Assessment, independent of the Program  Manager for Chemical Demilitarization, to implement the pilot program.  The purpose of this legislation was to separate this pilot program from  the baseline incineration activities. Achievement of that goal also meant  that two program offices would share responsibilities associated with  disposal activities in Kentucky and Colorado. As discussed later,  ineffective coordination between these offices has hindered the  program management.
A 1998 Defense Reform Initiative downsized the Office of the Secretary  of Defense and resulted in the devolvement of the DOD office  overseeing the Chemical Demilitarization Program from DOD to the  Army. Consequently, the Office of the Deputy Assistant Secretary of the  Army (Chemical Demilitarization) was formed in February 1998 from a  consolidation of the existing DOD oversight office and the Army staff  office that assisted the Army Assistant Secretary in performing his  chemical weapons demilitarization functions. While this devolvement  resulted in a consolidation of staff offices in the Army Secretariat, it still  did not clear up the existing ambiguity in responsibilities, lines of  authority, and accountability. For example, the responsibility of the  Deputy Assistant Secretary of the Army (Chemical Demilitarization) is  limited to oversight of the stockpile, nonstockpile, and alternative  technologies and approaches projects. While this office reports directly  to the Assistant Secretary of the Army (Acquisition, Logistics and  Technology), it has no direct management control of the Program  Manager for Chemical Demilitarization, who also reports directly to the  Assistant Secretary. During our review, we received conflicting  descriptions and inconsistent organizational charts concerning the  relationship and responsibilities of the offices of the Deputy Assistant  Secretary of the Army (Chemical Demilitarization) and the Program  Manager for Chemical Demilitarization. This indicates some amount of  confusion among those involved in the program regarding who is  accountable. DOD, as part of the devolvement, planned to consolidate within the  Army Secretariat management responsibility for the Assembled  Chemical Weapons Assessment Program. For example, as noted in the  transition plan for the reform initiative, program oversight for the  Assembled Chemical Weapons Assessment Program was to be  delegated to the Assistant Secretary of the Army (Acquisition, Logistics  and Technology) and the Program Manager for Assembled Chemical  Weapons Assessment was to report directly to the Assistant Secretary.  The Under Secretary of Defense (Acquisition and Technology) was to  evaluate and certify the effectiveness of the alternative technologies as  required by legislation. However, in the Conference Report  accompanying the 1999 Defense Authorization Act, the conferees  agreed that the Program Manager for Assembled Chemical Weapons  Assessment should continue to report directly to the Under Secretary of  Defense (Acquisition and Technology) rather than the Assistant  Secretary of the Army (Acquisition, Logistics and Technology).
In 1997, the Secretary of the Army and the Director of FEMA entered  into a memorandum of agreement that revised the management  structure of the Chemical Stockpile Emergency Preparedness Project in  an effort to streamline and improve the management of the program.  Under the agreement, FEMA assumed full responsibility and authority  for off-post project activities, and the U.S. Army Soldier and Biological  Chemical Command assumed responsibility for the on-post portion of  the project. As a result of the agreement, the Assistant Secretary of the  Army (Installations and Environment) assumed oversight  responsibilities for the project. In addition, the Chemical Stockpile  Emergency Preparedness Project was removed from the offices of the  Program Manager for Chemical Demilitarization and the Assistant  Secretary of the Army (Acquisition, Logistics and Technology).
section_title: Unclear Accountability for Program Results and Inadequate Coordination and Communication
paragraphs: The Chemical Demilitarization Program has a complex structure that  separates management roles, responsibilities, and accountability for  achieving program results. In addition, effective management of the  program has been hindered further by ineffective coordination among  program offices and with state and local officials. Consequently,  accountability for program performance is unclear, and state and local  officials have expressed concern about conflicting information and the lack  of a single office to be clearly accountable for the execution of the  program. We also found instances where coordination and communication  among project managers for the program were inadequate. In addition, the  Congress has expressed concern about the management of the program.
subsections: section_title: State and Local Concerns Over Conflicting Information
paragraphs: In order to comply with congressional direction, program managers for  chemical demilitarization and assembled chemical weapons assessment  currently share responsibilities associated with disposal of the chemical  stockpile at Blue Grass, Kentucky, and Pueblo, Colorado. For example, the  Program Manager for Chemical Demilitarization is responsible for the  destruction of the chemical stockpile, and at the same time, the Program  Manager for Assembled Chemical Weapons Assessment is responsible for  developing and testing alternative technologies for disposing of the  assembled chemical weapons at these sites. However, the activities of  these offices have not always been effectively coordinated. This has led to  difficulties in presenting a clear, coordinated message to affected state and  local officials regarding the overall program goals for these sites.  According to several state and local officials, spokespersons for these two  programs have made conflicting and inconsistent statements about the  possible disposal methods for the chemical stockpile stored in Kentucky  and Colorado. Consequently, this confusion has created the public  perception of the program at these two sites that DOD lacks a single vision  for destroying the chemical stockpile in a judicious manner.
The lack of coordination will pose even greater problems in the future in  implementing the decisions selecting the most appropriate disposal  method to use in Kentucky and Colorado. Specifically, if an alternative  technology is selected for use at these sites, views differ on which program  office should manage the disposal operations after the pilot project starts.  Specifically:
Some program officials believe that the Program Manager for Chemical  Demilitarization should assume responsibility for disposal operations  after the method of destruction is selected for use in Kentucky and  Colorado. As provided for in the original legislation establishing the  Chemical Demilitarization Program, the Army established the office of  the Program Manager for Chemical Demilitarization and made it  responsible for management of the destruction of the stockpile. Officials  believed that this office would be more skilled at managing the  construction and operation of these disposal facilities based on its  experience at other stockpile sites. Also, it would match the  management structure being employed in Aberdeen, Maryland, and  Newport, Indiana, where the Program Manager for Chemical  Demilitarization has overall responsibility for implementing the pilot  projects to test alternative technologies for disposing of chemical agents  in bulk containers.
Other program officials believe that the Program Manager for  Assembled Chemical Weapons Assessment should continue to manage  the program through the completion of the pilot-scale testing of  alternative technologies for the disposal of assembled chemical  weapons stored in Kentucky and Colorado. In section 142 of the 1999  Defense Authorization Act, the Congress directed that the Program  Manager continue to manage the development and testing, including the  demonstration and pilot-scale testing, of alternative technologies for the  destruction of assembled chemical weapons. The Congress further  directed the Program Manager to act independently of the Program  Manager for Chemical Demilitarization. Program officials believed this  could continue the enhanced communications the program office  achieved with these states and local communities through the Dialogue  initiative discussed previously and retain the expertise the office  obtained on alternative technologies for destroying assembled chemical  weapons.
DOD and the Army have not resolved issues related to future management  roles and responsibilities should a full-scale pilot project start for  demonstrating an alternative technology at Kentucky and Colorado be  implemented. In any case, closer cooperation will be required between  these program offices in the future. The adoption of any alternative  disposal method for pilot-scale testing will depend on a certification to the  Congress that the alternative is as safe and cost-effective as the baseline  incineration process for disposing of assembled chemical weapons and will  meet the destruction deadline.
section_title: Inadequate Coordination and Communication Among Project Managers
paragraphs: In some instances, coordination and communication among project  managers for the program were inadequate. For example, as previously  discussed, the Program Manager for Chemical Demilitarization’s efforts to  improve the office’s management of funds had not been consistently and  systematically implemented across all program elements. In another case,  officials of the stockpile and nonstockpile projects in Arkansas had not  coordinated their efforts to obtain environmental permits and approvals for  their disposal operations. This could have a significant effect on the start of  one or both disposal operations because the state of Arkansas has limited  resources to review and approve permit changes that will be needed to  begin operations. Although concerned that nonstockpile activities could  delay the state’s approval of permit changes, stockpile officials at the site  did not know the status or schedule for nonstockpile activities.  Additionally, some public outreach offices for the program did not have  information related to emergency preparedness activities, such as  information booklets and evacuation routes maps. According to outreach  officials, they did not routinely provide emergency preparedness  information to the public because those activities were managed by the  U.S. Army Soldier and Biological Chemical Command and FEMA, not by  the Program Manager for Chemical Demilitarization.
section_title: Congressional Concern About the Management of the Program
paragraphs: The Congress has expressed concern about the management of the  Chemical Demilitarization Program. For example, in the 2000 Defense  Appropriations Act, section 8159, the Congress directed the Secretary of  Defense to report on the management of the Chemical Demilitarization  Program, including an assessment of the Assembled Chemical Weapons  Assessment Program. Some in the Congress have also expressed concern  that, in recent budget submissions, DOD included the budget for the  Chemical Demilitarization Program as part of the Army’s budget. In its  report on the 2000 Defense Authorization Act, the House Armed Services  Committee reaffirmed its belief that, as required by the original statute  establishing the program, chemical demilitarization funds should be set  forth in a DOD-wide budget account, not in the budget accounts for any  military department. This was to emphasize that destruction of the  chemical stockpile is a national issue that affects all of DOD, not just a  single military service. It stated that the Committee intended to keep  chemical demilitarization funding separate to prevent these funds from  being subject to internal service budget priorities and to avoid artificially  inflating the budgets of any military department.
section_title: Conclusions
paragraphs: Effective management of the Chemical Demilitarization Program has been  hindered by its complex management structure and ineffective  coordination among program offices and with state and local officials. This  has been the case particularly at the Kentucky and Colorado sites, which  were not expected to meet the convention’s 2007 deadline for destruction  of their stockpiles. As the program’s mission has been expanded, some  fragmentation in the management roles, responsibilities, and accountability  among various program participants has resulted. While the Department of  the Army is now responsible for most elements of the mission to destroy  the stockpile, in accordance with congressional direction, responsibility for  the Assembled Chemical Weapons Assessment Program remains with a  separate program manager that reports directly to the office of the  Secretary of Defense. Regarding the future management of this program,  officials of the Departments of Defense and the Army have not agreed on  the most appropriate management structure for accomplishing the  destruction of the chemical stockpile stored in Kentucky and Colorado.  Without resolution, these issues leave the effectiveness of the program at  risk.
section_title: Recommendations
paragraphs: We recommend that the Secretary of Defense direct the Secretary of the  Army to clarify the management roles and responsibilities of program  participants, assign accountability for achieving program goals and results,  and establish procedures to improve coordination among the program’s  various elements and with state and local officials.
section_title: Agency Comments
paragraphs: Both DOD and FEMA concurred with the recommendation.