Recovery Act: Most DOE Cleanup Projects Appear to Be Meeting Cost and Schedule Targets, but Assessing Impact of Spending Remains a Challenge
Published: 2010-07-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Reinvestment Act of 2009 aims to stimulate the economy, including funding for environmental cleanup projects. The Department of Energy (DOE) receives annual appropriations of $6 billion to support the cleanup of radioactive and hazardous wastes resulting from decades of nuclear weapons research and production. GAO was asked to examine (1) how DOE selected projects for funding and developed cost and schedule targets, (2) project status and extent to which projects are achieving these targets, and (3) key challenges faced and efforts to address them. GAO reviewed Recovery Act project documentation, including cost, schedule, and performance data for 84 projects at 17 sites; visited the 4 sites receiving most of the funding; and interviewed headquarters and site officials.
section_title: What GAO Found
paragraphs: DOE's Office of Environmental Management generally chose to use Recovery Act funds for cleanup projects that could be quickly started and finished. Most projects also had existing contracts, which allowed DOE to update and validate cost and schedule targets within a short time. DOE generally funded four types of projects: decontaminating or demolishing facilities, removing contamination from soil and groundwater, packaging and disposing of transuranic and other wastes, and supporting the maintenance and treatment of liquid tank wastes. In all, DOE selected 84 projects at 17 DOE sites in 12 states for Recovery Act funding, with 4 sites receiving most of the money. As of May 2010, DOE had begun work on all Recovery Act projects and reported creating about 5,600 full-time equivalent jobs at the 17 sites during the first quarter of 2010. Spending on Recovery Act projects has been slower than planned. DOE had obligated about $5.5 billion of the $6 billion in Recovery Act cleanup funding and spent about $1.9 billion of those funds. This sum is less than the $2.3 billion DOE had expected to spend by that time. DOE reported that most Recovery Act projects were achieving cost and schedule targets, although a third of projects were not. DOE has faced familiar challenges in both managing Recovery Act projects and measuring how Recovery Act funding has affected cleanup and other goals. According to DOE officials, a third of projects did not meet cost and schedule targets for some of the same reasons that have plagued DOE in the past: technical, regulatory, safety, and contracting issues. DOE has taken steps aimed at strengthening project management and oversight for Recovery Act projects, such as increasing project reporting requirements and placing tighter controls on when funds are disbursed to sites, but it is uncertain how these steps will ultimately affect Recovery Act project performance, or whether they hold the potential to be useful for cleanup work funded under annual appropriations. Measuring the impact of Recovery Act funding on job creation and DOE's cleanup goals has also been a challenge for DOE, in particular, providing an accurate assessment of the act's impact on jobs, environmental risk reduction, and the life-cycle costs of its cleanup program. DOE has used three different methodologies to assess and report jobs created, which provide very different and potentially misleading, pictures of jobs created. For example, the calculations ranged from about 5,700 jobs to 20,200, depending on the methodology used. Also, DOE has not developed a clear means of measuring how cleanup work funded by the act will affect environmental risk or reduce its footprint--the land and facilities requiring DOE cleanup. Further, it is unclear to what extent Recovery Act funding will reduce the costs of cleaning up the DOE complex over the long term. DOE's estimate of $4 billion in life cycle cost savings resulting from Recovery Act funding was not calculated in accordance with federal guidance. GAO's analysis indicates that those savings could be 80 percent less than DOE estimated. Without clear and consistent measures, it will be difficult to say whether or how Recovery Act funding has affected DOE's cleanup goals.
section_title: What GAO Recommends
paragraphs: GAO recommends four actions for DOE to improve project management and reporting: (1) determine whether project management and oversight steps adopted for Recovery Act projects would benefit other cleanup projects, (2) clarify the methodology used to calculate jobs created, (3) develop clear and quantifiable measures for determining the impact of Recovery Act funding, and (4) ensure that cost savings are calculated according to federal guidance. DOE agreed with the recommendations.

section_title: Letter
paragraphs: In response to what is generally reported to be the most serious economic  crisis since the Great Depression, the American Recovery and  Reinvestment Act of 2009 (Recovery Act) was enacted on February 17,  2009. The purposes of the act, among other aims, are to preserve and  create jobs, to promote economic recovery, and to provide investments to  increase economic efficiency by spurring technological advances in  science and health. Initially estimated to cost $787 billion, the Recovery  Act includes an estimated $580 billion in spending, including for  environmental protection. One of the departments the act directs funds  to—the Department of Energy (DOE)—received appropriations of  $6 billion to expand and accelerate its efforts to clean up numerous  contaminated sites across the country, where decades of nuclear weapons  research, development, and production left a legacy of dangerously  radioactive, chemical, and other hazardous wastes.
DOE’s Office of Environmental Management directs the cleanup of this  contamination across the DOE complex. The sites contain nuclear  reactors; chemical processing buildings; and plants, laboratories, and  maintenance facilities once used to manufacture thousands of nuclear  warheads. Cleanup activities include treating and permanently disposing  of millions of gallons of radioactive and chemical waste stored in large  underground tanks; disposing of spent nuclear fuel; removing  contaminated soil; treating contaminated groundwater; packaging and  shipping solid wastes infused with synthetic radioactive elements like  plutonium and americium for permanent disposal to a deep geologic  repository; and eliminating excess facilities, which may include  decontaminating, decommissioning, deactivating, and demolishing  obsolete structures or a combination of these activities. DOE has  estimated that the cost of this cleanup may approach $300 billion over the  next several decades.
Recovery Act funding, which DOE intends to spend over 2.5 years,  substantially boosts the Office of Environmental Management’s annual  appropriation for cleanup, of between $6 and $7 billion. DOE designated  the bulk of this new funding—almost 80 percent—to speed cleanup  activities at four large sites: the Hanford Site in Washington State; Idaho  National Laboratory in Idaho; the Oak Ridge Reservation in Tennessee;  and the Savannah River Site in South Carolina. As we have previously  reported, most of these sites have contended with various contract or  project management challenges in the past, which have resulted in  significant cost overruns or delays lasting years for some projects.
You asked us to examine (1) how DOE selected projects for Recovery Act  funding and developed cost and schedule targets, (2) the status of  Recovery Act projects and the extent to which the projects are achieving  cost and schedule targets and performance measures, and (3) key  challenges DOE has faced in carrying out these projects and its efforts to  address them.
To conduct our work, we reviewed pertinent provisions of the American  Recovery and Reinvestment Act of 2009; federal regulations guiding  government acquisition of goods and services; Office of Management and  Budget (OMB) and DOE policies, procedures, and guidance on Recovery  Act implementation; and relevant studies of Recovery Act implementation.  To determine how DOE selected projects and developed cost and  schedule targets, we reviewed relevant project documentation, including  project operating plans, DOE assessments of proposed cost and schedule  targets, and project risk assessments. We obtained data on costs,  schedules, and jobs created as of March 2010, the most recent data  available, from DOE’s Environmental Management Recovery Act Program  office. We also interviewed DOE headquarters and federal project and  contractor officials at each of the 17 sites receiving Recovery Act funding.  We interviewed officials at 13 sites by phone and visited the 4 DOE  cleanup sites receiving the bulk of the $6 billion in Recovery Act funding  for environmental cleanup: (1) the Hanford Site, (2) Idaho National  Laboratory, (3) the Oak Ridge Reservation, and (4) the Savannah River  Site. At each site, we reviewed project documentation, interviewed  officials, and observed Recovery Act work under way. In addition, at the  Hanford and Savannah River sites, we also selected a nonrandom sample  of four of the costliest projects—two projects involving demolition of  facilities, a project to remediate soil and groundwater, and a project to  package and dispose of waste—to better understand how cost and  schedule estimates were developed and to assess the reliability of  estimates for these projects. Two projects were located at the Hanford Site  and two at the Savannah River Site. To assess to what extent projects were  meeting cost and schedule targets, we reviewed March 2010 data, the most  recent available, from DOE’s system for tracking project performance,  called an earned value management system, and also reviewed data on  project-related performance measures that refer to specific cleanup  activities. To determine what key challenges DOE faced and the steps  officials took to address these challenges, we reviewed pertinent Recovery  Act project guidance and DOE project documents and reports, and  interviewed headquarters officials and federal and contractor officials at  all 17 sites. We also conferred with staff from DOE’s Office of Inspector  General. To assess the reliability of data we reviewed, we sent out  questionnaires to DOE headquarters and site officials regarding the steps  taken to ensure the accuracy of data related to measuring progress toward  cost and schedule targets, jobs created, and other project outcomes. We  determined that the data were sufficiently reliable for the purposes of our  report. Appendix I presents a more detailed description of our scope and  methodology. Appendix II provides more information on the four projects  reviewed in depth.
We conducted this performance audit from June 2009 to July 2010, in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: Since the 1940s, DOE and its predecessor agencies have operated a  nationwide complex of facilities used to research, design, and  manufacture nuclear weapons and related technologies. DOE also  conducts research in energy and sciences ranging from harnessing  geothermal power as a renewable resource to the behavior of subatomic  particles colliding at nearly the speed of light. Organizationally, DOE  supports this broad range of activities with a diverse group of mission- based program elements. These include the Office of Science, charged  with conducting basic science and technology research; the National  Nuclear Security Administration, which oversees the nation’s nuclear  weapons stockpile; and the Office of Environmental Management, which  leads the department’s often complex and challenging effort to clean up  nuclear, chemical, and other hazardous wastes. Environmental  Management carries out its work at numerous DOE sites and facilities  around the country, primarily through private entities that manage the  facilities and work under contract to DOE. About 90 percent of DOE’s  annual budget (which totaled about $27 billion in fiscal year 2010) goes to  contracts with private firms. An extensive network of site offices directly  oversees the work of these contractors.
In 1990, GAO designated DOE’s contract management, including both  contract administration and project management, at high risk for fraud,  waste, abuse, and mismanagement. In the following two decades,  continued ineffective oversight and poor contract management led to  substantial cost overruns and lengthy delays on many projects overseen by  DOE, in particular, the Office of Environmental Management. DOE has  faced difficulties in developing realistic cost and schedule targets and then  achieving them, in part because of challenges addressing complex  technical issues, negotiating contracts, complying with regulatory issues,  and ensuring safety. Recently, for example, factors such as these have  delayed completion of Hanford’s Waste Treatment and Immobilization  Plant in Washington State. The project has been delayed by 8 years, while  costs have escalated, more than doubling the initial estimate, from $4.3 to  $12.2 billion. The treatment plant was one of nine major DOE construction  projects, collectively valued at about $14 billion, that as of 2009 had  exceeded both their original cost and schedule estimates. As we recently  reported, DOE has taken steps to improve its contract and management  activities, including in 2000 issuing its order 413.3A, which established a  process for managing projects, from beginning to end. The order  established five major milestones—or “critical decision points”—that span  a project’s life, beginning with approval of need and ending with project  completion. Order 413.3A specifies the requirements that must be met,  along with the documentation necessary, to move past each milestone,  including when a variety of independent reviews should occur to assess  progress. Other steps DOE has taken include developing a root-cause  analysis, a corrective action plan, and performance measures intended to  help assess progress. Nevertheless, Environmental Management’s contract  and project management activities remain on GAO’s list of programs or  agencies at high risk for fraud, waste, abuse, and mismanagement.
The Recovery Act is intended to promote economic recovery, make  investments, and minimize or avert reductions in state and local  government services. The Congressional Budget Office estimated that the  Recovery Act would increase employment by about 1.2 million to  3.6 million jobs by the end of 2010. Enacted on February 17, 2009, the act  directed that priority be given to projects that could be started quickly.  The administration referred to such projects as “shovel-ready.” Projects  funded by the Recovery Act must comply with section 1512 of the act,  which requires funding recipients to report quarterly on a number of  measures, including the amount of funds expended or obligated to  projects or activities, and the number of jobs created. The act generally  requires that all awarded funding must be obligated by September  30, 2010. Funds must be expended by September 30, 2015.
In implementing environmental cleanup work under the Recovery Act,  Environmental Management established several goals. These goals  included creating jobs; reducing DOE’s “footprint,” or area with ongoing  cleanup activity; reducing the life-cycle costs associated with hazardous  waste cleanup; completing cleanup activities at three small sites; and  meeting a number of regulatory cleanup deadlines that it might not  otherwise meet. In addition, Environmental Management set an internal  deadline to expend all Recovery Act funds and complete Recovery Act  work by the end of fiscal year 2011.
section_title: For Recovery Act Funding, DOE Generally Selected “Shovel-Ready” Projects Whose Cost and Schedule Targets Had Been Developed and Needed Minimal Work to Finalize
paragraphs: DOE generally chose to use Recovery Act funds for cleanup projects that  could be quickly started and finished. The majority of the projects selected  also had existing contracts, which allowed the department to update and  validate new cost and schedule targets within a short time frame.
subsections: section_title: Recovery Act Funding Enabled DOE to Implement Shovel-Ready Projects It Had Identified in Recent Planning Efforts
paragraphs: At the time the Recovery Act was passed, DOE was well positioned to  select projects that could be implemented quickly with Recovery Act  funding. DOE officials said they had planning efforts under way since  2006, which were aimed at identifying relatively low-risk cleanup projects  that could reduce DOE’s cleanup footprint and speed overall site  remediation. Such projects included, for example, facility demolition,  groundwater or soil remediation, or finishing work that could help  accelerate site closure. These projects generally had contracts, including  cost and schedule targets, in place; they used proven technologies, had  secured needed regulatory approvals, and were therefore considered  “shovel-ready.” (According to DOE officials, this focus on discrete, low- risk projects stemmed in part from lessons learned during a 2002 cleanup  acceleration attempt, which ultimately did not work well for complex and  costly projects.) In addition to its internal deadline to expend all  Recovery Act funds and complete work by the end of fiscal year 20 other criteria—including job creation and reducing environmental risk— ese  also influenced DOE’s selection. DOE officials said that in selecting th projects, they had to balance competing goals. For example, to begin and  complete work quickly, they chose a portfolio of cleanup projects that  may ultimately reduce DOE’s footprint—its physical presence—on the  national landscape by 372 square miles (approximately 40 percent) but  would not address the most dangerously radioactive and hazardous wastes  and the environmental risks these wastes present.
In all, DOE selected 84 projects at 17 DOE sites in 12 states for Recovery  Act funding (see fig.1) with the majority of the money going to four sites— Hanford, Idaho National Laboratory, the Oak Ridge Reservation, and  Savannah River (see app. III).
The vast majority of projects had been included in the sites’ own work  plans, such as groundwater remediation at Los Alamos National  Laboratory, but some projects also represented work newly transferred  from other program offices, such as remediation and demolition of a  former weapons facility at Oak Ridge Reservation. In general, projects  chosen for Recovery Act funding fell into four main categories of work:    Decontaminating and demolishing facilities: for example,  decontaminating and demolishing the K-33 building at the Oak Ridge  Reservation. A two-level structure that covers 32 acres (see fig. 2) was  constructed in 1954 to process and enrich uranium for use in nuclear  weapons. Although uranium enrichment operations ceased in 1985, the  building’s piping and other equipment were not removed completely until  2005, and radiological and chemical contamination remains throughout the  building. DOE had initially selected a different building for demolition, K- 27, which was also used to process and enrich uranium, but it found  unexpectedly high levels of mercury contamination, complicating that  cleanup. So in February 2010, DOE decided to instead demolish the K-33  building—a much larger building but a less-contaminated and less- complex cleanup project—at a cost of $65 million. Work began in April  2010. Given the delay in starting the project, site officials expect the  project to be completed in 2012.
Removing contamination from soil and groundwater: for example,  removing and disposing of radioactive and hazardous contaminants from  soil and groundwater at the Mound Site, a former production site for  explosives and other weapons’ components. Production at the site ceased  in 1995. The site’s contractor declared the physical completion of  environmental cleanup of the site in July 2006, although a landfill  remained, which DOE planned to monitor for contamination. Congress,  however, directed further remediation of the landfill at the site. The  project includes excavating and disposing of contaminated soils and  backfilling the site. Although work began with base funding, the funding  was insufficient to complete removal of the contamination. Recovery Act  funding of $19.7 million was applied to the project to complete remaining  work, with an expected site closure date of September 2010.
Packaging and disposing of transuranic and other wastes: for example,  characterizing and packaging transuranic wastes at multiple DOE sites for  shipment to the department’s deep geologic repository for permanent  disposal. (See fig. 3.) Transuranic wastes are typically discarded rags,  tools, equipment, soils, or other solid materials that have been  contaminated by radioactive elements, such as plutonium or americium.  About 110,000 cubic meters of these wastes were generated mostly after  1970 and then stored at various DOE sites. Because these wastes remain  radioactive for extremely long periods—hundreds of thousands of years in  some cases—most are headed for disposal at the Waste Isolation Pilot  Plant, a deep geologic repository near Carlsbad, New Mexico, designed for  transuranic waste disposal. Idaho National Laboratory plans to ship 160  transuranic waste containers—those containers that because of their high  radioactivity, must be handled remotely—to the Waste Isolation Pilot  Plant.
Supporting the maintenance and treatment of liquid tank waste: for  example, upgrading the infrastructure used to stabilize and maintain the  tanks that store chemical and radioactive waste at the Hanford Site.  Projects funded through the Recovery Act are accelerating specific  upgrades, such as installing new ventilation systems to prevent the buildup  of hazardous and volatile gases produced in the tanks. The waste is  gradually being transferred from the oldest, deteriorating underground  tanks to larger, newer tanks in preparation for processing in the waste  treatment plant, which is expected to start operating in 2019.
section_title: DOE Updated and Validated Cost and Schedule Targets for Recovery Act Projects
paragraphs: To implement Recovery Act work, DOE updated (or, for new work,  developed) cost and schedule targets for each project. Once these targets  were established, DOE followed the process established by order 413.3A  for reviewing and assessing the targets’ validity and the reasonableness of  the price of the associated contract. Reviews fell into two general  categories:    Program reviews: Performed by DOE officials with no vested interest in a  project, such reviews are to determine if a project’s scope, cost and  schedules, safety, and technology are valid and appropriate. Program  reviews for projects estimated to cost no more than $100 million are  known as independent project reviews. Program reviews for projects  estimated to cost $100 million or more are known as external independent  reviews.
Cost reviews: These reviews verify that the contractors’ price estimates  adequately reflect the programs’ scope and are reasonable for the work to  be accomplished. Cost reviews for projects valued at $100,000 or more are  known as independent government cost estimates. Cost reviews for  projects valued at $5 million or more are known as independent reviews  and validations.
Both of these categories of reviews serve to highlight any potential issues  or problems with contracts, as well as offer an opportunity for DOE and its  contractors to define and perform any needed corrective action. For  example, the Savannah River Site’s external independent review to assess  cost and schedule estimates and readiness to begin construction found  that the contractor had not produced sound cost and schedule estimates  or risk management plans nor clearly defined the scope of Recovery Act  work to decommission certain buildings. The site’s contractor responded  with a corrective action plan that spelled out actions to remedy these  shortcomings. Reviews have also found contracts where information was  missing. At Hanford, for example, the external independent review found  that some of the Recovery Act projects had not fully defined the scope of  their work or established cost and schedule targets at the time of the  review. In other cases, the reviews found contracts that lacked sufficient  “contingencies,” that is, sufficient cushions built into the cost and  schedule estimates in case of unforeseen technical or programmatic  problems. For example, Idaho National Laboratory did not initially include  a contingency estimate in its schedule for the site’s Recovery Act  activities. Reviews also uncovered concerns about project  implementation, such as contractors’ inability to start work as quickly as  planned. For instance, at the Moab Site, Utah, an initial program review  found that the contractor’s procurement office was unable to acquire  needed equipment to operate at full capacity, slowing work at the site.
In addition, DOE decided to disburse funding for Recovery Act cleanup  projects in phases, requiring site officials to complete a series of steps  before releasing the funds. For example, initial funding—equal to  30 percent of obligated funds—was released only after sites had certified  that contracts were finalized for the Recovery Act projects.
section_title: DOE Has Begun Work on All Projects, Most Appear to Be Meeting Cost and Schedule Targets, and Spending Overall Has Been Slower Than Planned
paragraphs: DOE has begun work on all of its Recovery Act projects, spent over  $1.9 billion of its $6 billion in Recovery Act funding, and created more than  5,600 jobs at the 17 cleanup sites selected for funding. DOE reported that  the majority of Recovery Act projects were achieving cost and schedule  targets, although about one-third were not. In addition, inconsistencies  exist between some projects’ cost and schedule performance and progress  shown by other performance measures, such cubic meters of soil  remediated.
subsections: section_title: DOE Reported All 84 Recovery Act Projects Are Under Way, Creating About 5,600 Jobs, but Overall Spending Has Been Slower Than Planned
paragraphs: Work has begun on each of DOE’s 84 Recovery Act cleanup projects and,  as of May 2010, each of the projects was still in progress. The first project  planned for completion—an effort to remove contaminated soil and  groundwater at the Mound Site in Ohio—is scheduled to finish in  September 2010, according to DOE. According to DOE monthly reports,  most of the other 83 projects are expected to be completed by September  2011, DOE’s internal target for completing all Recovery Act work. DOE’s  monthly project reports from early 2010 indicated that 20 projects were  scheduled for completion after fiscal year 2011, including 11 of the 14  projects at the Savannah River Site. More recently, however, DOE  headquarters officials said that at least nine projects would not be  completed before the September 2011 deadline. These projects include    a project at Savannah River to clean up transuranic waste, which was  delayed as the site awaited approval to ship its waste to the Waste  Isolation Pilot Plant for permanent disposal, according to DOE;   a project to demolish a uranium enrichment and processing facility at the  Oak Ridge Reservation, which began late, according to DOE; and   a facility-decommissioning project at Idaho National Laboratory, which  was delayed because of technical difficulties.
In March 2010, DOE reported that Recovery Act cleanup work had  resulted in more than 5,600 full-time-equivalent jobs at all 17 sites in 12  states. Over 80 percent of these jobs were located at the four sites— Hanford, Idaho National Laboratory, the Oak Ridge Reservation, and  Savannah River—that together received 80 percent of Recovery Act  funding. The number of full-time jobs created varied from site to site. For  example, DOE reported that 5 jobs were created at the Energy Technology  Engineering Center in California, a 90-acre site currently engaged in  deactivation and decommissioning activities to clean up the nuclear waste  generated during years of nuclear research, and nearly 1,400 jobs were  created at Savannah River, a 310-square-mile site where a number of DOE  cleanup activities are taking place, including the stabilization, treatment,  and disposal of nuclear waste generated during decades of development  and production of nuclear weapons and materials.
DOE’s spending on Recovery Act projects has been slower than the  department had planned. As of May 2010, a little over a year into the  program, DOE had obligated about $5.5 billion (92 percent) of the  $6 billion in Recovery Act cleanup funding and had spent about $1.9 billion  of those funds—slightly less than the $2.3 billion DOE had expected to  spend through May 2010. Spending rates varied across sites, from  76 percent of obligated funds spent at the Energy Technology Engineering  Center in California to 23 percent at Argonne National Laboratory in  Illinois. On a project-by-project basis, as of March 2010, amounts spent  ranged from less than 1 percent of total estimated project cost (a  $142 million project to decommission a reactor at Savannah River) to  84 percent of estimated project cost (a $17 million project to  decommission a reactor at Brookhaven National Laboratory). In some  cases, according to DOE officials, the slower spending at a site or on a  given project resulted from technical and management challenges that  may have slowed progress. In other cases, however, DOE had planned to  spend less money early on: for example, DOE estimated slower spending  during the first several months of a project to remediate contaminated soil  and groundwater at Hanford because fewer workers were needed for the  work’s first, less complex phase, according to a site official. DOE’s plans  for that project show an increase in the rate of spending Recovery Act  funds beginning in May 2010, once excavating the contaminated soil is  under way. Table 1 shows Recovery Act spending on DOE cleanup  projects through May 2010. In commenting on a draft of this report, DOE  stated that the initial project spend plans for the Recovery Act were  developed prior to finalizing the contracts for the work. Now, with the  exception of nine projects for which the scope of work changed, DOE  officials expect to spend over 95 percent of project funds by the end of  fiscal year 2011.
section_title: A Majority of Recovery Act-Funded Projects Appear to Be Meeting Cost and Schedule Targets, Although Inconsistencies Exist between Some Targets and Performance Measures
paragraphs: A key set of metrics DOE uses to determine whether projects, including  those funded by the Recovery Act, are meeting their cost and schedule  targets comes from DOE contractors’ earned value management system.  Earned value is a project management tool that combines measurements  of scope, schedule, and cost in a single integrated system that can be used  by DOE contractors to manage programs. According to DOE  headquarters and site officials, DOE monitors this earned value  information monthly from headquarters, as well as weekly or daily at some  sites. Using these data, DOE reported that, as of March 2010, 57 of the 84  Recovery Act projects—about two-thirds—were meeting both cost and  schedule targets. About 20 percent of projects were meeting either their  cost or schedule target, but not both, and the remaining 11 percent had  missed both targets altogether. Projects meeting and missing targets  spanned the range of project types, including facility demolitions,  groundwater remediation, and infrastructure upgrades. Appendix IV  provides performance information by project number for Recovery Act  projects.
In addition to tracking earned value metrics, DOE also evaluates project  performance by reviewing project-specific performance measures. As of  March 2010, DOE reported that across the complex, progress on five of  seven selected performance measures was meeting or exceeding targets  (see fig. 4). These measures relate to the specific cleanup activities under  way at a given site, such as cubic meters of waste disposed of or the  number of radioactive facilities decommissioned. Historically, DOE has  used such measures to track cleanup progress complexwide. DOE  developed several new performance measures specific to Recovery Act  projects. These include, for example, cubic meters of transuranic waste  that have been prepared and certified for shipment to the Waste Isolation  Pilot Plant, a measure that supplements existing measures tracking only  the amount of transuranic waste actually disposed of. Some sites have also  developed site- or project-specific cleanup measures, such as the  Savannah River Site, which is measuring cubic yards of grout (a  cementlike material) poured into decommissioned reactor facilities, and  the Hanford Site, which is measuring the number of waste tank systems  that are upgraded.
While DOE is using performance measures to track progress on most of its  84 Recovery Act projects, progress on 31 projects has not been tracked  using any performance measures, for two main reasons. First, 18 of the 31  projects do not yet have any corresponding performance measures  assigned. According to a DOE Recovery Act Program official, performance  measures are being developed for most of these 18 projects. Five of the 18  projects will not be assigned any performance measures, however,  because the work does not lend itself to meaningful performance  measures, the work is almost complete, or earned value data are deemed  sufficient to track the projects’ progress, according to DOE. For example,  DOE will rely primarily on earned value measures to track progress on a  project to maintain and monitor the physical condition of inactive facilities  at the Savannah River Site. Second, the remaining 13 of 31 projects  currently have performance measures assigned for tracking progress, but  the planned work associated with those measures has not begun. For  example, for a particular project at the Hanford Site to identify and  dispose of contaminated soil, the performance measure is cubic meters of  soil disposed of. But because work during the project’s first several  months involved identifying the extent of the contamination (before  beginning actual excavation of contaminated soil), this particular  performance measure will not be useful for tracking progress until the first  planned disposal of contaminated soil in October 2010.
For the remaining 53 projects that had performance measures in place as  of March 2010, results were mixed. Of these projects, DOE reported in its  monthly reports that 38 were meeting all their performance measure  targets, and 15 were missing some or all of their targets (see fig 5). For  example, a project at the Savannah River Site to treat and dispose of  several types of solid waste had five performance measures tracking  progress, as of March 2010, including metric tons of depleted uranium  packaged for disposal, number of waste drums disposed of, and cubic  meters of debris and soil disposed of. As of March 2010, the project was  falling short on three of its five performance measures. Among other aims,  the project was supposed to prepare about 11,600 metric tons of depleted  uranium for disposal, but only about 4,000 metric tons had actually been  prepared because of a delayed start on the project, according to site  officials.
In reviewing projects’ earned value cost and schedule target data and  projects’ associated performance measures, we found that the results as  assessed by performance measures were sometimes inconsistent with the  results shown by earned value data for cost and schedule targets. A given  project might have met cost and schedule targets but have nevertheless  fallen short in meeting performance measure targets. For example, at the  Hanford Site, a project to dispose of contaminated soil and debris met or  bettered its cost and schedule targets, but a related performance measure  showed that none of the contaminated material had been disposed of as  planned. Conversely, earned value data for a project to demolish  contaminated buildings at Idaho National Laboratory showed that the  project was not meeting its cost and schedule targets but was meeting all  of its performance measures, such as square footage of facilities  demolished. In commenting on a draft of this report, DOE officials stated  that earned value scores and other project performance information are  intended to provide complementary insights into overall performance.  Officials said that when differences among the indicators arise,  headquarters officials follow up with federal and contractor officials at the  site to determine the reasons for these differences.
section_title: DOE Has Taken Steps to Help Address Potential Problems but Continues to Face Key Challenges in Managing Projects and Measuring Their Impact
paragraphs: DOE’s Recovery Act work is well into its second year, and the department  faces familiar challenges. While DOE has taken steps to strengthen project  management activities, as of March 2010, about one-third of projects did  not achieve cost or schedule targets, or both. According to DOE officials,  many schedule delays and cost problems could be traced to the same  types of issues that have troubled DOE in the past—technical challenges,  regulatory issues, and contracting delays. In addition, it is unclear how  Recovery Act funding has affected job creation and the department’s  environmental cleanup goals or, in particular, to what degree this  additional funding will reduce DOE’s footprint, related environmental  risks, and future cleanup costs.
subsections: section_title: DOE Has Taken Steps to Help Projects Achieve Cost and Schedule Targets, Although Some Project Management Issues Remain
paragraphs: To help Recovery Act projects achieve their cost and schedule targets,  DOE has taken steps to strengthen project management and oversight,  such as adding federal oversight staff, increasing project reporting  requirements, and placing tighter controls on when and how funds are  disbursed to cleanup sites. First, DOE created a management structure to  oversee Recovery Act projects separately from its cleanup projects funded  by annual appropriations. At the headquarters level, DOE created an  Environmental Management Recovery Act program office, where  experienced DOE staff oversee site reporting and project review  requirements for Recovery Act work. In addition, DOE assigned a certified  on-site federal project director to oversee each Recovery Act project. All  federal project directors for Recovery Act projects are senior managers  certified by the Project Management Career Development Program  Certification Review Board. DOE also created a new position for cleanup  sites—a Recovery Act site representative—who reports project status to  DOE’s headquarters’ Recovery Act program office and the Office of  Environmental Management’s Consolidated Business Center. Recovery  Act site representatives are expected to monitor and report to the  Recovery Act program office on technical, programmatic, regulatory,  environmental, safety and health, and fiscal issues and concerns. The  business center provides project management support, such as assistance  in cost estimating and analysis.
Second, DOE increased oversight via new and more frequent reporting  requirements for Recovery Act work. In addition to reporting the number  of jobs funded by the act, sites report to Environmental Management’s  Recovery Act program office—on a monthly, rather than quarterly, basis— projects’ progress toward cost and schedule targets, as well as progress on  performance measures. Sites also are to report whether contractors are  completing certain tasks (milestones) on time, or whether contractors  have missed their targets. Third, DOE has disbursed Recovery Act funding  to sites in phases and required site officials to complete and document a  series of tasks before funding can be released at each phase. For those  cases where a site does not satisfactorily complete these tasks, DOE  officials said they are prepared to withhold additional funding until the site  has complied with the requirements. For example, one of the requirements  for receiving funding is that a project receives a favorable project review,  which involves an assessment of cost and schedule targets and project  management plans. At the Savannah River Site, because a July 2009  external independent review of a decontamination and decommission  project found that the contractor had failed to produce sound cost and  schedule estimates or risk management plans as required, DOE shifted  $200 million it had intended to allocate to that contractor to a different  project managed by a second contractor at the site. DOE subsequently  implemented corrective actions at the site, including management  changes. DOE has not taken similar steps to increase oversight of projects  within its broader environmental cleanup program, and it is uncertain how  or whether the actions taken to strengthen project management and  oversight of Recovery Act projects will benefit management of DOE’s  larger portfolio of cleanup projects.
As of March 2010, nearly one-third of Recovery Act projects were facing  cost or schedule difficulties or both—despite DOE’s efforts to choose low- risk, straightforward, shovel-ready projects for funding and to increase  oversight—and overall spending was somewhat slower than expected.  About halfway through DOE’s planned Recovery Act program, slightly less  than one-third of the department’s $6 billion allocation had been spent.  Officials attributed these difficulties to technical, regulatory, safety, and  contracting problems—some of the same issues that have challenged  DOE’s project management in the past. For instance:    Technical challenges: Some Recovery Act projects faced technical  problems, such as the discovery of unanticipated wastes that require  additional time and effort to remediate or an inability to obtain necessary  materials or equipment in a timely manner. For example, unexpected  levels of contamination—discovered after cost and schedule targets under  the Recovery Act had been established—have delayed the  decommissioning and demolition of the former Experimental Breeder  Reactor II (one of 52 nuclear reactors at Idaho National Laboratory). In  determining the extent of contamination at the facility and planning the  decommissioning effort, DOE discovered that a portion of the reactor  contained a layer of asbestos insulation between the reactor’s outer steel  shell and its inner concrete lining and that the concrete lining was also  filled with asbestos. As of May 2010, according to DOE officials, the  contractor had to slow the work to figure out how to best address this  unexpected contamination, and as a result, this $118 million project is not  expected to be completed by September 2011. At the Savannah River Site,  a $304 million project to accelerate disposal of 5,000 cubic meters of  transuranic waste cannot be completed until 2012 because of problems  obtaining the proper containers for shipping the waste to the Waste  Isolation Pilot Plant. When the site could not obtain large containers in a  timely manner, workers instead packaged the waste into smaller  containers—a process that was time-consuming and costly, officials said.  In early June 2010, DOE officials said the Nuclear Regulatory Commission  issued a certification of compliance for the large containers. According to  a Savannah River Site official, the new containers will enable workers to  package the waste more efficiently and at lower cost. Still, as a result of  this delay, the project is expected to be completed in 2012, later than  planned.
Regulatory issues: Some sites have also faced regulatory issues that  require additional time to address. For example, DOE is working on a  $38 million Recovery Act cleanup project at the Energy Technology  Engineering Center—which was once involved in nuclear reactor  development and testing—in partnership with the Environmental  Protection Agency (EPA). Under an interagency agreement between EPA  and DOE, EPA has responsibility for conducting a comprehensive  characterization of radioactivity at the site, in accordance with  Comprehensive Environmental Response, Compensation, and Liability Act  (CERCLA) processes. When this CERCLA characterization is completed,  DOE can develop an environmental impact statement and proceed with  facility demolition and groundwater and soil cleanup. According to site  officials, however, EPA’s characterization activities are taking longer than  expected.
Safety issues: Safety concerns also affected project progress. For  example, a project at the West Valley Demonstration Project in New York  to process transuranic wastes for disposal is not meeting either cost or  schedule expectations, according to site officials, because of safety issues  that have slowed progress. DOE site officials said that after work started  on the project, air monitors showed that contamination in the work area  exceeded allowable limits. Although the workers were already wearing  respirators, the air monitors’ warning prompted site officials to require  workers to wear additional protective gear to complete the work. This  additional gear, which includes bubble suits, is more cumbersome and  contributed to slower-than-expected progress. Nevertheless, DOE expects  the $4.2 million effort to be completed by December 2010 as planned.
Contracting delays: Delays in finalizing new contracts or contract  modifications have also led to cost and schedule difficulties. For example,  three of the four indefinite-delivery/indefinite-quantity contracts at the  Oak Ridge site in Tennessee have not been finalized. (Such contracts  constitute standing arrangements for goods and services and introduce  greater flexibility into the contracting process.) The four projects involve  cleaning up contaminated soil and decontaminating or demolishing excess  facilities, including demolishing a radioisotope development laboratory, a  wooden building originally constructed in the 1940s for a variety of  processing and research activities. Unoccupied since 1998, the dilapidated  building contains both radioactive and hazardous materials. The contract  has not been finalized for this project and, as a result, work cannot begin.  Site officials at Oak Ridge Reservation said that finalizing this type of  contract often takes longer than they expect or plan for. In addition, one of  the contracts for the Oak Ridge site was protested by prospective  contractors, also delaying the projects.
section_title: Recovery Act Impact on Job Creation and Environmental Cleanup Goals Is Unclear
paragraphs: In reporting the number of jobs created as a result of Recovery Act  spending, DOE has reported three substantially different figures, which  can be confusing and potentially misleading. Also unclear is how much  impact Recovery Act spending will have on the department’s  environmental cleanup goals, such as reducing environmental risks from  nuclear and hazardous wastes and long-term costs of maintaining excess  facilities and monitoring stored wastes and contaminated soil and  groundwater.
subsections: section_title: Determining Impact of Recovery Act Spending on Job Creation Is Problematic Because DOE Calculates Jobs Created Using Three Different Methodologies
paragraphs: DOE has wrestled with calculating and reporting jobs created—a  requirement of the Recovery Act—publicly reporting three vastly different  figures. Recovery Act reporting requirements direct agencies to count  hours worked under a prime contractor—the nonfederal entity that  receives Recovery Act funding directly from the federal government.  OMB guidance states that agencies are to report jobs created as full-time  equivalents (FTE) calculated by totaling the number of hours charged by  workers to Recovery Act projects in a given quarter and dividing the sum  by the total number of work hours representing a full work schedule.
While DOE has used this required figure, it has also chosen to calculate  and publicize two additional figures that represent jobs created: (1) the  sum of both prime contractor and subcontractor FTEs and (2) the number  of people who have charged time to Recovery Act activities—without  regard to the number of hours worked—which DOE refers to as “head  count” or “lives touched.” DOE officials stated that because the  department relies largely on subcontractors to carry out the cleanup work,  reporting only prime contractor FTEs substantially understates the  employment impact of DOE’s Recovery Act program. The number of prime  contractor FTEs DOE reported to OMB as of March 2010 was 5,655, while  the sum for both prime contractors and subcontractors for the same  period was nearly twice that, at 10,018. The head count, or number of  workers engaged for any length of time in Recovery Act work, was  substantially higher still (see table 2).
DOE’s job creation calculations are problematic because they are  confusing and potentially misleading. DOE frequently publicizes all three  figures to represent the employment impact of Recovery Act funding on  communities near DOE cleanup sites, without explaining how the figures  were calculated. But only FTEs for prime contractors are counted in a  manner that can be compared with other federal recipients of Recovery  Act funds. It is this number that DOE reports on the federal Web site  FederalReporting.gov. DOE officials said they had tried to gain permission  from OMB to include subcontractor FTEs in this official count, but OMB  has not changed its guidance. In commenting on a draft of this report,  however, DOE stated that federal acquisition regulations have changed  and, effective with the third quarter of fiscal year 2010, DOE will report  both prime contractor and subcontractor FTEs. Further, DOE’s  calculation of head count is potentially misleading for two reasons. First,  counting the number of people carrying out Recovery Act work, rather  than the time they have actually spent in such work, implies that one  person engaged in 2 hours of work per week is equivalent to one person  engaged in 40 hours of work per week. The economic benefits to the  worker, however, differ significantly. Second, the estimate includes a  count of those people who contributed to the manufacture of materials or  equipment purchased by prime contractors and subcontractors to support  Recovery Act work, an estimate that is difficult to verify, according to site  officials.
section_title: The Impact of Recovery Act Spending on Cleanup and Other Goals Remains Unclear
paragraphs: In addition to inconsistencies in how the department measures job  creation, DOE has no clear means of determining how cleanup work  funded by the act will reduce environmental risk, if at all. While a key  departmental goal for the funding is to reduce DOE’s footprint, or area of  ongoing cleanup activity, just what this goal entails is unclear. DOE is  using a comprehensive list of existing measures to assess environmental  cleanup performance, including additional measures developed under its  Recovery Act program. Existing measures include such metrics as amount  of hazardous material packaged or disposed of, number of facilities  demolished, number of sites for which remediation has been completed,  and number of sites closed. Recovery Act project-specific measures are  similar to department measures, although more specific, such as number  of groundwater wells installed or square feet of facilities demolished.  These project-specific performance measures, however, focus on outputs  and are not directly linked to long-term outcomes such as reducing risks.  For example, the performance measures do not indicate what impact  installing groundwater wells or demolishing facilities will have on  reducing risks to human health and the environment. Moreover, the way  progress is measured is sometimes inconsistent, and many projects have  no performance measures established to date. As a result, project-specific  performance measures reveal very little about the outcomes DOE intends  to achieve with Recovery Act funding, in particular, how DOE will  measure the impact that Recovery Act funding will have on the long-term  condition of large tracts of land under DOE management or on DOE’s  footprint. Headquarters officials defined footprint reduction as “physical  completion of activities with petition for regulatory approval to follow.”  Some federal cleanup site officials, however, said they were confused by  DOE’s footprint reduction goal and uncertain how they are to take credit  for having achieved it. For example, it is not clear whether footprint  reduction includes total square footage of facilities owned by DOE, acres  of land surrounding those facilities and owned or controlled by DOE,  contaminated soil and groundwater beneath the facilities, some  combination of all of these things, or something else entirely. Without a  clearly defined and consistent measure of its footprint, it will be difficult  for DOE to report whether or how Recovery Act funding has affected  progress toward this key DOE cleanup goal.
Furthermore, it is also uncertain how much DOE can expect to save in life- cycle costs of its environmental cleanup program as a result of Recovery  Act funding. DOE Recovery Act program officials estimated that as much  as $4 billion in life-cycle savings would be realized by doing the work  under Recovery Act funding sooner rather than later, as originally  planned. Officials stated that savings are to be achieved by avoiding costs  such as those for long-term maintenance, security, and waste monitoring.  DOE’s $4 billion estimate, however, includes an estimate for savings that  could be achieved because of inflation—by avoiding the higher costs of  materials and labor in the future. In addition, DOE’s estimates do not take  into account the time value of money. That is, they do not account for the  fact that costs incurred in the future are worth less than costs incurred  sooner. According to standard economic analysis, OMB guidance on  benefit-cost analysis, as well as DOE’s guidance on life-cycle cost analysis,  life-cycle analyses should be based on cost adjusted for both inflation and  the time value of money—that is, on cost in present-value dollars. In  contrast, DOE’s comparison of its base program life-cycle cost estimate  and its Recovery Act program estimate is based on current dollars and  does not correct for either the effect of inflation on prices or the time  value of money. Our analysis of DOE’s cost savings, taking the appropriate  factors into account, found that DOE’s $4 billion savings estimate may be  overstated by as much as 80 percent. GAO has previously taken issue with  DOE’s method of calculating savings in life-cycle costs. DOE officials  have said that when estimating life-cycle cost savings from Recovery Act  work, they prefer to use current dollars, which take into account  increasing costs due to inflation. An official said that using current dollars  provides for a more direct comparison with DOE’s budget submission to  Congress.
section_title: Conclusions
paragraphs: DOE expected that Recovery Act funding would help it achieve several  goals, including accelerating the cleanup effort and reducing the footprint  of facilities and contamination at 17 of its sites, creating jobs, and reducing  total remaining cleanup costs. As the halfway mark in DOE’s Recovery Act  work approaches, the department has made progress toward completing  cleanup projects and the majority, although not all, of these projects  appear to be meeting cost and schedule targets. In carrying out its  Recovery Act work, DOE has implemented additional steps to address  familiar contract and project management challenges, by providing stricter  controls over how and when funds are disbursed to cleanup sites,  increasing reporting requirements, and paying greater attention to project  oversight. Although we do not yet know what effects each of these  additional steps to improve project management and increase oversight of  Recovery Act projects will ultimately have on DOE’s ability to meet  projects’ cost and schedule targets, some of the steps could be found  useful for Recovery Act cleanup work, as well as carry the potential to be  beneficial for projects funded under annual appropriations. The  department has been less successful in implementing steps to better  assess the results of its Recovery Act work. Specifically, DOE faces  challenges in accurately assessing the effects of Recovery Act spending on  job creation, environmental risk, footprint reduction, and long-term  cleanup costs. Regarding jobs created, OMB requires that job creation  figures be calculated and reported using a standard methodology. DOE,  however, has chosen to also use two additional methodologies to calculate  and publicly report job creation figures, which potentially provides a  misleading picture of actual jobs created. DOE sites also do not have a  means of determining how cleanup funded by the act will reduce  environmental risk, if at all, or how DOE will measure progress toward its  goals for footprint reduction. Further, DOE is not following OMB’s or its  own internal guidance in calculating cost savings that might accrue from  completing cleanup projects sooner using Recovery Act funding. The  methodology chosen by the department appears to significantly overstate  savings from Recovery Act spending. Without clear performance goals and  consistent and meaningful methodologies for measuring outcomes  stemming from Recovery Act spending, it will be difficult for the  department or others to accurately assess the benefits gained from the $6  billion of Recovery Act funding directed to the department.
section_title: Recommendations for Executive Action
paragraphs: To help ensure successful completion of Recovery Act projects and apply  lessons learned to DOE’s larger cleanup effort, we recommend that the  Secretary of Energy direct the Assistant Secretary of Environmental  Management to take the following four actions:    Determine whether additional project management and oversight steps  adopted for Recovery Act projects, such as more frequent reporting, have  proven beneficial and whether these steps would be effective and  appropriate for DOE’s cleanup projects funded under annual  appropriations.
Clarify the methodology used to calculate any supplemental job creation  figures in addition to prime contractor and subcontractor FTEs, such as  head count—that is workers who have charged any amount of time to  Recovery Act projects—so that users of this information fully understand  what each number represents and its significance and limitations.
Develop clear, quantifiable, and consistent measures for determining the  impact of Recovery Act funding on environmental risk. As part of this  effort, clearly define what the DOE footprint consists of, determine how  changes to the footprint will be measured, and ensure that all DOE sites  report changes to their footprint in a consistent and comparable manner.
Ensure that savings estimates over the life of the cleanup projects are  calculated according to OMB and DOE guidance, so that these estimates  accurately represent potential savings and reflect costs adjusted for both  inflation and the time value of money.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOE for its review and comment. In  written comments, the Assistant Secretary for Environmental Management  stated that DOE concurred with our four recommendations contained in  the report and indicated that some of the actions we are recommending  have already been taken. Regarding the first recommendation—to evaluate  the effectiveness of additional project management and oversight steps  adopted for Recovery Act projects and determine if these steps would be  effective for projects funded under annual appropriations—DOE indicated  that some steps had been taken. These include requiring more frequent  reviews of projects. DOE stated it is still evaluating the potential benefit to  the base program of other steps taken to manage Recovery Act projects. In  responding to the second recommendation on the methods used to  calculate job creation figures, DOE stated that a recent change to federal  acquisition regulations, which will result in the reporting of both prime  contractor and subcontractor jobs in FederalReporting.gov, will negate  GAO’s concern on the matter. Our concern, however, centered on ensuring  that users of DOE’s three job creation figures—prime contractor FTEs,  prime contractor and subcontractor FTEs, and head count—understand  exactly what the figures represent. The head count figure is not reported  into FederalReporting.gov and, as we note in our report, was a  significantly higher figure than prime contractor or subcontractor job  figures. In its detailed comments, DOE stated that it has posted guidance  on its Web site regarding the methodologies used to calculate job creation  figures and will also include a one-page explanation sheet with job  numbers presented to stakeholders or the public. We have reworded this  recommendation to enhance its clarity. Third, DOE stated that it agreed  with GAO’s recommendation to have clear, quantifiable, and consistent  measures of footprint reduction and has taken steps to better define this  concept and communicate the definition to all its sites. While we agree  that DOE has made progress on defining footprint reduction, the focus of  our recommendation was broader, emphasizing the development of clear,  quantifiable, and consistent measures for determining the impact of  Recovery Act funding on environmental risk. While we recognize that DOE  collects information related to project risks, as it stated in its response, the  information collected concerns risks associated with successfully carrying  out a project, not quantifying the reduction in environmental risks  themselves. DOE went on to point out that its performance measures are  focused on outputs that are directly tied to cleanup of the site. Outputs,  such as cubic meters of soil remediated, do provide a measure of work  performed, but they may not easily translate into the outcome in terms of  environmental risk reduction due to Recovery Act funds spent at each site.  We maintain that DOE needs to continue to develop measures for  determining the impact of Recovery Act funding on reducing  environmental risks. DOE also expressed concern over the method we  used to determine project performance, as well as our assessment that  inconsistencies exist between some projects’ cost and schedule  performance and other measures. We modified the draft to address these  concerns. In responding to our recommendation on calculating life-cycle  cost savings, DOE agreed stating that it is currently following OMB and  DOE guidance. As we noted in our report, however, the $4 billion in  savings that DOE has stated will result from Recovery Act projects could  be overstated by as much as 80 percent because the calculation does not  take into account the time value of money and inflation.
DOE’s written comments are presented in appendix V. In addition, DOE  provided detailed technical comments, which we incorporated as  appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, and other interested parties. The  report is also available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff members have any questions regarding this report,  please contact me at (202) 512-3841 or aloisee@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine how the Department of Energy (DOE) selected projects for  funding under the American Recovery and Reinvestment Act of 2009  (Recovery Act) and developed cost, schedule, and performance targets,  we reviewed key provisions of the Recovery Act and Office of  Management and Budget (OMB) guidance regarding the act. We also  reviewed various DOE guidance documents regarding project  management and project reviews (orders 413.3A, 413.3-8 and 413.3-9),  cost-estimating procedures (order 430.1-1), and the use of earned value  management techniques (order 413.3-10). In addition, we reviewed key  project planning and management documents. These included project  operating plans, DOE assessments of project cost and schedule targets,  and earned value management system certifications. We also reviewed  OMB and DOE guidance on collecting and reporting data on jobs created  and DOE’s most recent performance accountability annual reports. To  gain a better understanding of how projects were selected and the steps  officials took to develop cost and schedule targets, we interviewed DOE  headquarters officials and officials at each of the 17 sites receiving  Recovery Act funding—once after initial project implementation, and  again several months later. We visited the four DOE cleanup sites  receiving the bulk of the $6 billion in Recovery Act funding for  environmental cleanup: (1) the Hanford Site, (2) Idaho National  Laboratory, (3) the Oak Ridge Reservation, and (4) the Savannah River  Site. For each site, we reviewed project documentation, interviewed  officials, and observed Recovery Act work under way. We also selected a  nonrandom sample of four of the costliest projects—including soil and  groundwater remediation, facility demolition, and disposal of waste—to  better understand how the cost estimates were developed and to assess  the reliability of the estimates for these projects. Two projects were at the  Hanford Site and two at the Savannah River Site. Further information on  the four projects appears in appendix II.
To determine the status of the Recovery Act projects and the extent to  which projects are achieving cost and schedule targets and performance  measures, we used contractor data submitted to the Office of  Environmental Management and assembled under its integrated planning,  accounting, and budgeting system. Information we reviewed from this  database consisted of cost and schedule targets; monthly cost and  schedule performance; earned value management system data; and key  agencywide, site, and project performance metrics. To assess the  reliability of data we reviewed, we sent out questionnaires to DOE  headquarters and site officials regarding the steps taken to ensure the  accuracy of data related to measuring progress in meeting project cost and  schedule targets, jobs created, and other project outcomes. Although in a  few instances we found data of questionable reliability at some of the  sites, we determined that, overall, these data were sufficiently reliable for  the purposes of our report.
To determine what key challenges DOE faced and the steps officials have  taken to address these challenges, we reviewed independent internal and  external project reviews, program reviews, and corrective action plans.  We attended an April 2010 Environmental Management conference at  which site officials exchanged information on their experiences  implementing Recovery Act cleanup projects. We reviewed DOE Office of  Inspector General reports on the Recovery Act and conferred with  Inspector General staff. We interviewed headquarters officials and officials  at all 17 sites and reviewed responses to the data reliability questionnaires  sent to and completed by contractor and federal project management  officials for all 84 projects. To recalculate the life-cycle cost savings that  would result from the Recovery Act, we obtained DOE’s life-cycle cost  estimates for each project before and after the Recovery Act. We  converted these estimates to constant dollars using the appropriate  inflation factors for each project provided to us by DOE. We then  converted those estimates to present value using real discount rates from  OMB. For each project, we used the discount rate for the time period that  most closely corresponded with the length of the project under  consideration.
We conducted this performance audit from June 2009 to July 2010, in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Description of Four Projects Reviewed in Depth
paragraphs: We selected four Recovery Act projects for an in-depth review of their cost  and schedule estimates and the reliability of these estimates. These  projects came from the list of projects funded at the two DOE’s sites  receiving the most Recovery Act funding—the Hanford and Savannah  River sites.
subsections: section_title: Hanford
paragraphs: DOE’s Hanford Site in southeastern Washington State was established in  1943 to produce nuclear materials for the nation’s defense. Although DOE  stopped producing nuclear material at Hanford in 1989, millions of gallons  of high-level radioactive waste from production still remain on site. The  primary mission at Hanford is site cleanup, including waste removal and  containment and soil and groundwater remediation to protect the nearby  Columbia River. The Richland Operations Office at the Hanford Site  received $1.6 billion from the Recovery Act for cleanup activities and is  funding 10 projects. The projects are to demolish nuclear and support  facilities, clean up waste sites and contaminated groundwater, and retrieve  solid waste from burial grounds. Recovery Act funding to accelerate  cleanup of facilities, waste sites, and groundwater along the Columbia  River will help the site decrease its active area of cleanup from 586 to 75  square miles or less by 2015, which is more than 5 years ahead of the  current schedule. We selected the following two Hanford projects for in- depth cost and schedule reliability review:    U Plant D&D: The U Plant is a former processing facility on the site’s  Central Plateau, where special nuclear materials were recovered and  converted for shipment to other sites for weapons manufacture and  assembly. Plant facilities were built in 1944 and operated until 1964. Other  than minor decontamination work, the facility has been unused and  deserted since operations ceased. The Recovery Act project’s scope  includes preparing the U Plant for decommissioning by clearing the facility  of equipment and grouting the reactor’s cells, as well as deactivating,  decommissioning, decontaminating, and demolishing 16 ancillary facilities.  The project is expected to be completed by September 2011, at a cost of  $257 million.    100 K Area remediation: The 100 K Area comprises two former  plutonium production reactors along the Columbia River. None of the  reactors is still operational, and contamination from the former  production processes and facilities is a key cleanup objective. The scope  of this Recovery Act project includes decontaminating and demolishing 30  industrial and radiological facilities associated with the reactors within the  100 K area, as well as cleaning up or characterizing 23 waste sites. The  project is expected to be completed by September 2011, at a cost of $203  million.
On the basis of our in-depth reviews, DOE partially met industry best  practices for ensuring that the estimates were accurate, comprehensive,  well documented, and credible as detailed in GAO cost estimating guide.  While DOE carried out many best practices for developing its estimates, in  some instances, it did not. For example, when preparing estimates for both  of these projects, DOE did not create a plan to ensure that the estimates  were developed by people with expertise in cost and schedule estimating  and did not test the reasonableness of its estimates against known costs  for similar activities.
section_title: Savannah River
paragraphs: The Savannah River Site was constructed in the early 1950s to produce  tritium and plutonium for use in nuclear weapons. Historically the site has  supported five nuclear reactors, two chemical separation plants, a heavy- water extraction plant, a nuclear fuel and target fabrication facility, a  tritium extraction facility, and waste management facilities. Although the  site no longer produces plutonium, some of its missions continue, such as  the extraction of tritium for nuclear warheads. The site received $1.6  billion under the Recovery Act, which is funding 14 projects. Overall,  Recovery Act projects at Savannah River are expected to accelerate  transuranic waste disposal by 4 years, and the decommissioning of the  nuclear facilities by at least 5 years. We selected two of Savannah River’s  Recovery Act projects for in-depth cost and schedule estimate and  reliability review:    Accelerated transuranic waste disposition: The purpose of this project is  to accelerate the characterization, packaging, and disposal of 4,200 cubic  meters of transuranic waste from the site’s former production of nuclear  weapons. The waste will then be shipped to DOE’s Waste Isolation Pilot  Plant for permanent disposal. In addition, the project’s current scope  includes repackaging of 800 cubic meters of transuranic waste into smaller  containers in preparation for shipment. The project is expected to be  completed in September 2012, at a cost of $304 million.
P&R Area completion general plant projects and operations: “P&R Area”  refers to the P and R reactors, two of the site’s first nuclear production  reactors, which started operating in 1953 and 1954, respectively. The  buildings and associated infrastructure, such as railroad tracks used to  transfer radioactive material from the reactors to other site facilities, have  remained unused since the facilities ceased operations in 1964 (R reactor)  and 1988 (P reactor). The scope of the Recovery Act project includes  decommissioning the two reactors, as well as removing the railroad tracks.  The project also includes remediation of contaminated soil under the  tracks. The project is expected to advance completion of the P and R area  cleanup by 5 to 6 years.
On the basis of our in-depth reviews of these two projects, DOE partially  met best practices for ensuring that the estimates were credible,  comprehensive, and well documented and minimally met best practices  associated with ensuring that the estimates were accurate. For example,  DOE did not compare its cost and schedule estimates to an independent  cost estimate, a step that helps ensure accuracy. Instead, the department  relied on internal project reviews, which were not as rigorous.
section_title: Appendix III: Recovery Act Project Cost Data through March 2010
subsections: section_title: Project description
paragraphs: (percentage of total cost)
1. CH-ANLE-0040.NEW.R1.1  D&D:Building 310  $1,602 (11%)
2. CH-ANLE-0040.NEW.R1.2  D&D: Building 330  2,459 (7%)
3. CH-ANLE-0040.NEW.R1.3  D&D: Alpha-Gamma Hot Cell Facility  4,042 (15%)
4. CH-ANLE-0040.NEW.R1.4  TRU waste processing  7,458 (32%) 15,561 (16%)
Brookhaven National Laboratory (NY)
D&D: Brookhaven Graphite Research Reactor  14,378 (84%)
D&D: High Flux Beam Reactor  8,842 (42%)
D&D: High Flux Beam Reactor  3,469 (82%) 26,689 (63%)
Energy Technology Engineering Center (CA)
D&D: EPA radiological characterization  2,775 (7%) 3,332 (21%) 6,107 (11%)
Hanford Site: Office of River Protection (WA)
Tank waste support: Tank farm infrastructure upgrades  20,968 (21%)
Tank waste support: Other infrastructure upgrades  3,473 (13%)
Tank waste support: Facility upgrades  13,808 (15%)
Tank waste support: Waste feed infrastructure upgrades  9,093 (15%)
Tank waste support: SY transfer line upgrade  988 (6%) 48,330 (16%)
Hanford Site: Richland Operations Office (WA)
D&D: Plutonium Finishing Plant  79,470 (24%)
Solid waste disposal: Mixed low-level waste treatment  20,873 (41%) 57,159 (32%)
Soil and groundwater cleanup: Treatment and monitoring 44,267 (30%)
D&D: U Plant/other  70,579 (28%)
D&D: Outer Zone  15,222 (13%)
D&D: 100 K Area  44,293 (17%)
D&D: Disposal facility expansion  25,412 (69%)
D&D: Remedial action/footprint reduction  7,896 (6%)
D&D: 618-10 burial grounds  11,345 (15%) (percentage of total cost) 376,516 (24%) 16,935 (56%) 39,501 (40%)
Soil and groundwater cleanup: Buried waste  3,860 (18%)
Soil and groundwater cleanup: In-situ grouting  1,693 (7%)
Soil and groundwater cleanup: Operations  17,520 (80%)
D&D: 39 facilities  30,314 (63%)
D&D: 29 facilities  18,518 (35%)
D&D: Nuclear Energy facilities  21,110 (18%) 159,451 (34%)
Los Alamos National Laboratory (NM)
Soil and groundwater cleanup: Material Disposal Area B  17,820 (19%)
Soil and groundwater cleanup: Groundwater wells  16,272 (36%)
D&D: Defense-related facilities  11,681 (20%)
D&D: Nondefense-related facilities  4,315 (29%) 50,088 (24%)
Soil and groundwater cleanup: Mill tailings  38,214 (35%) 38,214 (35%)
Soil and groundwater cleanup: Operable Unit 1  9,242 (47%) 9,242 (47%) 20,024 (44%) 20,024 (44%) 31,578 (25%)
D&D: East Tennessee Technology Park  18,885 (16%)
D&D: Y-12 facility  2,417 (48%)
D&D: Y-12 remediation preparation  14,326 (33%)
D&D: Disposal facility expansion  16,026 (36%)
D&D: Y-12 excess material  41,025 (28%)
D&D: Y-12 biology complex  7,224 (24%)
D&D: Y-12 9206 filter house  3,503 (50%) (percentage of total cost)
D&D: Defense legacy material removal  170 (2%)
D&D: Defense facility demolition  12,366 (32%)
D&D: Defense remedial actions  7,868 (9%)
D&D: Nondefense legacy material removal  649 (2%)
D&D: 2000 complex  4,968 (38%)
D&D: Misc. facility demolition  3,493 (16%) 164,498 (23%)
D&D: C-410  3,001 (27%)
D&D: C-340  8,319 (23%)
D&D: C-746-A  9,212 (29%) 20,532 (26%)
Solid waste disposal: UMC disposition  4,767 (30%)
D&D: X-701B plume remediation  15,191 (31%)
D&D: X-533  5,456 (26%)
D&D: X-633  6,381 (37%)
D&D: X-760  2,282 (14%) 34,077 (29%)
TRU waste processing: Canyon complex support  25,692 (76%) 167,678 (52%) 82,830 (27%)
Tank waste support: Waste systems recapitalization  24,958 (14%)
Tank waste support: Contractor pension payment  4,919 (19%)
D&D: P and R Area completion  85,393 (52%)
D&D: P reactor  1,052 (1%)
D&D: P ash basin  5,188 (17%)
D&D: R reactor  3,727 (2%)
D&D: R ash basin  3,668 (31%)
D&D: M and D Area completion  8,255 (48%)
D&D: Sitewide completion  94,260 (43%)
D&D: Test reactor decommissioning  708 (7%)
D&D: Surveillance and maintenance  2,567 (44%) 510,895 (32%) (percentage of total cost)
Separations Process Research Unit (NY)
D&D: Building G2 and H2  13,274 (36%)
D&D: Contaminated soil removal, North Field  4,829 (33%) 18,103 (35%)
SLAC National Accelerator Laboratory (CA)
5,225 (66%) 5,225 (66%) 17,953 (34%) 31,660 (31%) 2,248 (14%) 51,861 (30%)
West Valley Demonstration Project (NY)
2,234 (53%)
D&D: Main plant  11,802 (28%)
D&D: Other facilities  7,961 (29%) 21,997 (30%) $1,577,410 (27%)
section_title: Appendix IV: Recovery Act Project Performance through March 2010
paragraphs: Brookhaven National Laboratory (NY)
Energy Technology Engineering Center (CA)
Hanford Site: Office of River Protection (WA)
Hanford Site: Richland Operations Office (WA)
Los Alamos National Laboratory (NM)
Separations Process Research Unit (NY)
SLAC National Accelerator Laboratory (CA)
West Valley Demonstration Project (NY)
D&D: Main plant  D&D: Other facilities  Legend:  = Positive,  = Negative, = Performance measure with no planned work  Positive cost performance means that the value of work performed is greater than what the work  actually cost to accomplish. For example, if the earned value of work completed by a contractor is $5  million, and the work actually cost $5 million or less to complete, then cost performance is considered  positive. Schedule performance is also measured in dollars, but in this case, positive performance  means that the value of the work completed in a given period is greater than what had been planned.  For example, if the contractor is given 1 month to complete $5 million of work and completes that  earned value of work by that deadline or earlier, then schedule performance is considered positive.  DOE considers cost and schedule targets to be positive until they drop below 90 percent of the target.  That is, work could come slightly under expectations—but not less than 90 percent of the target—and  still be considered positive.
Negative cost performance means that the value of work performed is less than what the work  actually cost to accomplish. For example, if the earned value of work completed by a contractor is $5  million, but the work actually cost $6.7 million, cost performance would be considered negative.  Schedule performance is also measured in dollars, but in this case, negative performance means that  the value of the work completed in a given period is less than what had been planned. For example, if  the contractor is given 1 month to complete $10 million of work but completes only $5 million in  earned value of work by that deadline, then schedule performance is considered negative.
Performance measures are currently in place for the associated projects, but the planned work  associated with these measures has not yet begun. As a result, these measures do not yet provide a  meaningful way to monitor progress made on the projects. DOE considers performance targets to be  positive until they drop below 90 percent of the target. That is, work could come slightly under  expectations—but not less than 90 percent of the target—and still be considered positive.
section_title: Appendix V: Comments from the Department of Energy
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Janet Frisch, Assistant Director;  Antoinette Capaccio; Ellen W. Chu; Heather Dowey; Jennifer Echard; Jeff  Larson; Mehrzad Nadji; John G. Smale Jr.; Stacey Steele; Kiki  Theodoropoulos; and Ginny Vanderlinde made key contributions to this  report.
section_title: Related GAO Products
paragraphs: Department of Energy: Actions Needed to Develop High-Quality Cost  Estimates for Construction and Environmental Cleanup Projects.  GAO-10-199. Washington, D.C.: January 14, 2010.
Nuclear Waste: Uncertainties and Questions about Costs and Risks  Persist with DOE’s Tank Waste Cleanup Strategy at Hanford.  GAO-09-913. Washington, D.C.: September 30, 2009.
Department of Energy: Contract and Project Management Concerns at  the National Nuclear Security Administration and Office of  Environmental Management. GAO-09-406T.Washington, D.C.:   March 4, 2009.
Nuclear Waste: Action Needed to Improve Accountability and  Management of DOE’s Major Cleanup Projects. GAO-08-1081.  Washington, D.C.: September 26, 2008.
Nuclear Waste: DOE Lacks Critical Information Needed to Assess Its  Tank Management Strategy at Hanford. GAO-08-793. Washington, D.C.:  June 30, 2008.
Department of Energy: Office of Science Has Kept Majority of Projects  within Budget and on Schedule, but Funding and Other Challenges May  Grow. GAO-08-641. Washington, D.C.: May 30, 2008.
Hanford Waste Treatment Plant: Department of Energy Needs to  Strengthen Controls over Contractor Payments and Project Assets.  GAO-07-888. Washington, D.C.: July 20, 2007.
Department of Energy: Consistent Application of Requirements Needed  to Improve Project Management. GAO-07-518. Washington, D.C.: May 11,  2007.
Department of Energy: Major Construction Projects Need a Consistent  Approach for Assessing Technology Readiness to Help Avoid Cost  Increases and Delays. GAO-07-336. Washington, D.C.: March 27, 2007.
Hanford Waste Treatment Plant: Contractor and DOE Management  Problems Have Led to Higher Costs, Construction Delays, and Safety  Concerns. GAO-06-602T. Washington, D.C.: April 6, 2006.
Nuclear Waste: Better Performance Reporting Needed to Assess DOE’s  Ability to Achieve the Goals of the Accelerated Cleanup Program.  GAO-05-764. Washington, D.C.: July 29, 2005.
Department of Energy: Further Actions Are Needed to Strengthen  Contract Management for Major Projects. GAO-05-123. Washington, D.C.:  March 18, 2005.
Nuclear Waste: Absence of Key Management Reforms on Hanford’s  Cleanup Project Adds to Challenges of Achieving Cost and Schedule  Goals. GAO-04-611. Washington, D.C.: June 9, 2004.