Modernizing the Nuclear Security Enterprise: NNSA's Budget Estimates Increased but May Not Align with All Anticipated Costs
Published: 2016-03-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Nuclear weapons are an integral part of the nation's defense strategy. Since 1992, the United States has shifted from producing new nuclear weapons to maintaining the stockpile through refurbishment. The 2010 Nuclear Posture Review —which outlines U.S. nuclear policy, strategy, capabilities, and force posture—identified long-term stockpile modernization goals for NNSA that include sustaining a safe, secure, and effective nuclear arsenal and investing in a modern infrastructure.
The National Defense Authorization Act for Fiscal Year 2011 included a provision for GAO to report annually on NNSA's nuclear security budget materials. These materials are composed of NNSA's budget request justification and its Stockpile Stewardship and Management Plan , which describes modernization plans and budget estimates for the next 25 years. This report assesses (1) changes in the estimates in the 2016 budget materials from the prior year's materials and (2) the extent to which NNSA's 2016 budget materials align with plans for major modernization efforts.
GAO analyzed NNSA's fiscal year 2015 and 2016 nuclear security budget materials, which describe modernization plans and budget estimates for the next 25 years. GAO also interviewed NNSA officials.
section_title: What GAO Found
paragraphs: In the National Nuclear Security Administration's (NNSA) fiscal year 2016 budget materials, the estimates for efforts related to modernizing the nuclear weapons stockpile total $297.6 billion for the next 25 years—an increase of $4.2 billion (1.4 percent) in nominal dollar values (as opposed to constant dollar values) compared with the prior year's budget materials. However, for certain program areas and individual programs, budget estimates changed more significantly than the overall estimates. NNSA's modernization efforts occur in four areas under the Weapons Activities appropriation account: stockpile; infrastructure; research, development, testing, and evaluation; and other weapons activities. For the stockpile area, budget estimates over 25 years increased by 13.2 percent over the nominal values in the Fiscal Year 2015 Stockpile Stewardship and Management Plan . Within the stockpile area, the estimates for life extension programs (LEP), which refurbish nuclear weapons, increased by 19.6 percent compared with the prior year's estimate, in part because of changes in the scope and schedule for some programs. In contrast, estimates for the other weapon activities area decreased by 18.1 percent, mainly because NNSA shifted two counterterrorism programs out of the Weapons Activities budget and into NNSA's separate Defense Nuclear Nonproliferation budget.
The estimates in NNSA's 2016 nuclear security budget materials may not align with all elements of modernization plans for several reasons. First, the Fiscal Year 2016 Stockpile Stewardship and Management Plan includes estimates for 2021 through 2025 that are $4.4 billion higher than the same time period in a set of out-year projections for funding levels that were included in a joint report by the Department of Defense and Department of Energy. NNSA noted this issue in the 2016 plan and stated that it will need to be addressed as part of fiscal year 2017 programming. In addition, in some years, NNSA's budget estimates for certain weapons refurbishment efforts are below the low point of the programs' internally developed cost ranges. For example, the W88 Alteration 370 budget estimate of $218 million for 2020 was below the low end of the internal program cost range of $247 million. NNSA officials stated that the total estimates for this program are above the total of the midpoint cost estimates for 2016 through 2020 and that funding for 2016 to 2019 is fungible and could be carried over to cover any potential shortfall in 2020. GAO also identified instances where certain modernization costs were not included in the estimates or may be underestimated, or where budget estimates for some efforts could increase due to their dependency on successful execution of other NNSA programs. For example, an NNSA official said that budget estimates for the IW-1 LEP—which is NNSA's first interoperable ballistic missile warhead LEP—are predicated on NNSA successfully modernizing its plutonium pit production capacity. This official stated that if there are delays in modernizing this capacity, the IW-1 LEP could bear greater costs than currently estimated. In August 2015, GAO recommended that NNSA provide more transparency with regard to shortfalls in its budget materials. NNSA agreed and said that it plans to implement this recommendation starting in its 2017 budget supporting documents.
section_title: What GAO Recommends
paragraphs: GAO is not making any new recommendations in this report. In response to GAO's draft report, NNSA provided technical comments, which were incorporated as appropriate.

section_title: Letter
paragraphs: Nuclear weapons are an integral part of the nation’s defense strategy.  The National Nuclear Security Administration (NNSA)—a separately  organized agency within the Department of Energy (DOE)—is responsible  for designing, producing, and maintaining the country’s nuclear weapon  stockpile. This work is largely executed at eight government-owned,  contractor-operated sites, collectively known as the nuclear security  enterprise. Since 1992, the United States has observed a moratorium on  underground testing of nuclear weapons and has shifted from producing  new nuclear weapons to maintaining the stockpile through refurbishment.  The United States has also experienced a decline in the condition of its  weapon production infrastructure. The 2010 Nuclear Posture Review— which outlines U.S. nuclear policy, strategy, capabilities, and force  posture—identified long-term modernization goals, including sustaining a  secure and effective nuclear arsenal through the life extension of existing  nuclear weapons; increasing investments to rebuild and modernize the  nation’s nuclear infrastructure; and strengthening the science, technology,  and engineering base. To meet these modernization goals, NNSA is  refurbishing nuclear weapons in the stockpile through alterations and life  extension programs (LEP); replacing or renovating decades-old  weapons-related facilities; conducting simulations and laboratory  experiments to ensure that existing weapons remain safe and reliable;  and recruiting and training personnel with the specialized skills to sustain  the nation’s nuclear weapons program and maintain the stockpile.
In addition to NNSA, two other organizations are responsible for the  nation’s nuclear weapons program. First, the Department of Defense  (DOD) is responsible for implementing the U.S. nuclear deterrent  strategy, which includes establishing the military requirements associated  with planning for the stockpile. Second, the Nuclear Weapons Council,  which is composed of representatives from DOD and DOE, facilitates  high-level coordination to secure, maintain, and sustain the nuclear  weapons stockpile.
NNSA’s modernization plans and the budget estimates to implement  these plans are described in two key policy documents, updated annually,  that together comprise NNSA’s nuclear security budget materials. First,  NNSA’s Stockpile Stewardship and Management Plan is the agency’s  formal means of communicating to Congress information on  modernization and operations plans and budget estimates over the next  25 years. Second, NNSA’s annual justification of the President’s budget  request provides program information and budget estimates for the next 5  years. This 5-year plan is called the Future-Years Nuclear Security  Program, and the budget estimates in this plan are the basis for the  funding levels approved by the Office of Management and Budget. These  estimates are identical to those presented in the first 5 years of the  Stockpile Stewardship and Management Plan. To implement NNSA’s  modernization plans, the agency’s February 2015 justification of the  President’s budget request included about $47.2 billion for 2016 through  2020, of which about $8.8 billion was for 2016. In addition to these  documents, DOD and DOE together produce a third, integrated document  on plans for the nuclear deterrent that includes information on DOD and  DOE’s modernization budget estimates. This annual report, which DOD  and DOE are required to submit jointly to the relevant Senate and House  committees and subcommittees, is referred to as the section 1043 report  or the DOD-DOE joint report.The report is to address, among other  things, the plan for the nuclear weapons stockpile and its delivery  systems, and is to include a 10-year range of modernization budget  estimates.
NNSA’s 2016 budget consists of four appropriations accounts: (1)  Defense Nuclear Nonproliferation, (2) Naval Reactors, (3) Federal  Salaries and Expenses, and (4) Weapons Activities. NNSA’s activities in  the Stockpile Stewardship and Management Plan are funded by the  Weapons Activities appropriation account. The Future-Years Nuclear  Security Program also includes information on all of NNSA’s  appropriations accounts.
The National Defense Authorization Act for Fiscal Year 2011 contains a  provision that GAO study and report annually on whether NNSA’s nuclear  security budget materials provide for funding that is sufficient to  modernize and refurbish the nuclear security enterprise as well as  recapitalize its infrastructure. This is the fifth year we have undertaken  work in response to this provision. This report assesses (1) the extent to  which NNSA’s budget estimates and plans for modernization activities  reflected in its fiscal year 2016 nuclear security budget materials differ, if  at all, from those in its fiscal year 2015 budget materials and (2) the  extent to which the fiscal year 2016 nuclear security budget materials  align with modernization plans as presented in the Stockpile Stewardship  and Management Plan.
To address these objectives, we reviewed NNSA’s 2016 budget  materials, specifically for its Weapons Activities appropriation account.  This scope is consistent with that of our August 2015 review. We  focused our review on major modernization efforts—that is, refurbishment  of nuclear weapons through LEPs and alterations and major construction  efforts to replace aging facilities for plutonium and uranium. To determine  the extent to which NNSA’s budget estimates and plans for modernization  activities differed from those in the 2015 budget materials, we compared  the information in the 2016 budget materials with the information in the  2015 materials. We also interviewed agency officials to discuss changes  in the materials from 2015 to 2016. To determine the extent to which  NNSA’s budget materials align with its modernization plans, we compared  information on the budget estimates in the 2016 budget materials with the  information on modernization plans in the same documents. We also  interviewed NNSA officials to obtain further information on changes to  modernization plans and discussed any perceived misalignments with  them.
All figures in the report are presented in nominal, or current, dollars,  which include projected inflation, unless otherwise noted. To assess the  reliability of the data underlying NNSA’s budget estimates, we reviewed  the data to identify missing items, outliers, or obvious errors; interviewed  NNSA officials knowledgeable about the data; and compared the figures  in the congressional budget justification with those in the Fiscal Year  2016 Stockpile Stewardship and Management Plan to assess the extent  to which they were consistent. We determined that the data were  sufficiently reliable for our purposes, which were to report the total  amount of budget estimates and those estimates dedicated to certain  programs and budgets and to compare them to last year’s estimates. All  years are in fiscal years, unless otherwise noted. A detailed description of  the scope and methodology of our review can be found in appendix I.
We conducted this performance audit from May 2015 to March 2016 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: Congress funds NNSA’s modernization efforts through various programs  and activities within the Weapons Activities appropriations account that  generally address the following four areas:
The stockpile area includes weapons refurbishments through LEPs  and other major weapons alterations and modifications; surveillance  efforts to evaluate the condition, safety, and reliability of stockpiled  weapons; maintenance efforts to perform certain minor weapons  alterations or to replace components that have limited lifetimes; and  core activities to support these efforts, such as maintaining base  capabilities to produce uranium and plutonium components. NNSA  allocates funds to activities that directly support the stockpile area  through Directed Stockpile Work within the Weapons Activities  appropriation account.
The infrastructure area includes government-owned, leased, and  permitted physical infrastructure and facilities supporting weapons  activities. NNSA’s 2016 nuclear security budget materials include  information on two major types of infrastructure activities: (1)  Infrastructure and Safety and (2) Readiness in Technical Base and  Facilities, which includes two major construction projects. First, the  Uranium Processing Facility is a construction project to replace  enriched uranium capabilities currently located in the aging Building  9212 at the Y-12 National Security Complex. This project is part of a  larger strategy to maintain NNSA’s enriched uranium capability by  relocating enriched uranium operations performed in Building 9212  into other existing buildings by 2025 and by constructing a series of  smaller buildings. Second, the Chemistry and Metallurgy Research  Replacement construction project at Los Alamos National  Laboratory, which is part of NNSA’s broader plutonium infrastructure  strategy, is composed of subprojects to move analytical chemistry and  materials characterization capabilities into two existing facilities.  NNSA’s broader plutonium infrastructure strategy also includes the  construction of at least two additional modular structures that the  Fiscal Year 2016 Stockpile Stewardship and Management Plan  reports will achieve operating capacity by 2027. The Uranium  Processing Facility and the Chemistry and Metallurgy Research  Replacement construction projects are both part of NNSA’s major  modernization efforts.
The research, development, testing, and evaluation area is  composed of programs that are technically challenging, multiyear,  multifunctional efforts to develop and maintain critical science and  engineering capabilities. These capabilities enable the annual  assessment of the safety and reliability of the stockpile, improve  understanding of the physics and materials science associated with  nuclear weapons, and support the development of code-based  models that replace underground testing.
The other weapons activities area includes budget estimates  associated with nuclear weapon security and transportation, as well  as legacy contractor pensions, among other things.
The four areas are interconnected. For example, experiments funded  under the research, development, testing, and evaluation program area  can contribute to the design and production of refurbished weapons,  which is funded under the stockpile program area. The infrastructure  program area offers critical support to both the stockpile and the  research, development, testing, and evaluation program areas by  providing a suitable environment for their various activities, such as  producing weapons components and performing research and  experimentation activities.
The U.S. nuclear weapons stockpile is composed of seven different  weapons types, including air-delivered bombs, ballistic missile warheads,  and cruise missile warheads (see table 1).
section_title: Overall Budget Estimates and Plans for Modernization Differed Little from the Previous Year’s, but Certain Programs Changed to a Greater Degree
paragraphs: NNSA’s 2016 budget estimates for modernization total $297.6 billion over  25 years, which is a slight increase from the 2015 estimates of $293.4  billion; however, for certain program areas or individual programs, budget  estimates changed more significantly. The overall increase was  moderated by a shift of two counterterrorism programs to another area of  NNSA’s budget. Program areas increased by as much as 13.2 percent or  decreased by as much as 18.1 percent. Within the stockpile program  area, which experienced the biggest increase, budget estimates for some  LEPs and an alteration increased significantly because of changes in  production schedules and scope, among other things.
subsections: section_title: Overall Budget Estimates for Modernization Increased Slightly from Those in 2015 Plans but with Some Significant Realignments and Changes within Program Areas
paragraphs: According to the Fiscal Year 2016 Stockpile Stewardship and  Management Plan, NNSA’s estimates for the next 25 years total $297.6  billion for modernization activities—an increase of approximately $4.2  billion, or 1.4 percent (in nominal, or current dollar, values), from the  $293.4 billion NNSA reported in the 2015 plan. These budget estimates,  which are for activities in the Weapons Activities area, are provided in the  four areas discussed above: stockpile; infrastructure; research,  development, testing, and evaluation; and other weapons activities. The  overall increase was moderated by the shift of two counterterrorism  programs from the Weapons Activities budget into NNSA’s separate  Defense Nuclear Nonproliferation budget. The two counterterrorism  programs that were moved out of the Weapons Activities budget together  totaled approximately $8 billion. According to NNSA’s 2016 budget  justification, this realignment is intended to provide greater clarity  regarding the total funding and level of activity in the counterterrorism  area. The realignment of these programs, along with other smaller  decreases in the other weapons activities category, together accounted  for an 18.1 percent decrease in the other weapons activities category  during the 25-year period covered by the plan. Without the realignment of  the two counterterrorism programs, the increase in NNSA’s overall  Weapons Activities budget in the 2016 plan would have been  considerably larger, totaling approximately $12.3 billion, or 4.2 percent,  over the 2015 Weapons Activities budget. Table 2 details the changes in  NNSA’s 25-year budget estimates from 2015 to 2016 for the four main  areas in which modernization efforts are funded under Weapons  Activities.
In addition, budget estimates changed significantly for certain program  areas and individual programs. Notably, the 2016 budget materials  estimate that during the next 25 years, $117.2 billion will be needed for  the stockpile area, which is an increase of $13.7 billion, or 13.2 percent,  over the prior year’s budget materials. Part of this increase resulted from  the addition of approximately $3 billion to support the Domestic Uranium  Enrichment program, as well as increases in estimates for weapons  refurbishment activities, particularly LEPs, as discussed later in this  report. The 2016 budget materials indicate a decrease of approximately  $1.8 billion for infrastructure activities during the next 25 years, compared  with the 2015 estimates, in part because of reductions in recapitalization  and site operation budget estimates. The 2016 budget materials  increased proposed spending on research, development, testing, and  evaluation activities by approximately $900 million during the same  period. This increase resulted in part from an increase in estimates for the  Inertial Confinement Fusion Ignition and High Yield program.
Budget estimates in the Fiscal Year 2015 Stockpile Stewardship and  Management Plan cover 2015 to 2039, while those in the 2016 plan cover  2016 to 2040. We compared the two sets of estimates by summing up the  current dollar values for each, which is how NNSA reports the estimates.  The total from the 2016 plan is different from the 2015 plan’s total in that  the former includes the year 2040 and excludes the year 2015. Because  of the effect of inflation, this comparison could make the difference  between the 2016 projection and the 2015 projection appear higher than  it would be in the case of a comparison of the two series in real dollar  values or in a comparison that looks strictly at the years that overlap from  each plan.
section_title: Budget Estimates for Some Major Modernization Efforts Have Increased Significantly
paragraphs: In the Fiscal Year 2016 Stockpile Stewardship and Management Plan,  estimates for some major modernization projects increased significantly  from those in 2015. Specifically, regarding the weapons refurbishment  efforts—which are captured within the stockpile category in the budget— the 2016 budget materials indicate that during the next 25 years, $49.8  billion will be needed to support LEPs and other weapons alteration  activities, which is an increase of $8.2 billion, or 19.6 percent, compared  with the prior year’s estimate of $41.7 billion. This increase resulted  partly from the change in the scope and schedule for some programs, as  discussed below.
The W88 Alteration 370 effort expanded to include a conventional  high explosive replacement while retaining the original schedule for a  first production unit in 2020. To support this replacement, NNSA  shifted planned spending for other programs—including $15.1 million  originally planned for the W76-1 LEP—toward this effort. The Fiscal  Year 2016 Stockpile Stewardship and Management Plan reported that  the agency also shifted planned spending intended for surveillance of  B61 and B83 bombs into the conventional high explosive replacement  effort. The Fiscal Year 2016 Stockpile Stewardship and Management  Plan estimated the total cost for the W88 Alteration 370 at $2 billion  over the 25-year period covered by the plan, while the 2015 plan  estimated the total cost at $1.2 billion, for an increase of  approximately $0.8 billion.
The cruise missile warhead LEP (renamed the W80-4 LEP) now has a  first production unit planned for 2025—2 years earlier than the first  production unit in the 2015 plan. This shift in schedule is intended to  align with revised Air Force plans for the carrier missile. The Fiscal  Year 2016 Stockpile Stewardship and Management Plan estimated  the total cost for the LEP at $8.2 billion over 25 years, while the 2015  plan estimated the total cost at $6.8 billion, for an increase of  approximately $1.5 billion.
The Fiscal Year 2016 Stockpile Stewardship and Management Plan  included a budget estimate for the B61-13 LEP that did not appear in  the 2015 plan. This LEP, which NNSA officials stated is intended to  replace the B61-12 LEP, is currently planned to begin in 2038, with an  estimated cost of approximately $1.2 billion from 2038 through 2040.
Budget estimates for the three interoperable warhead LEPs—the IW- 1, 2, and 3—together accounted for an increase of $5.6 billion over 25  years when compared with the Fiscal Year 2015 Stockpile  Stewardship and Management Plan budget estimates. According to  the plan, this increase resulted from updated estimates developed  through an expanded methodology that incorporated additional  stakeholder input into the process that NNSA used to arrive at the  estimates, and which resulted in a better understanding of schedule  and cost uncertainty. NNSA officials stated that they continue to use  stakeholder input to update and assess the cost estimate  methodology.
The budget estimates for the B61-12 and W76-1 LEPs together  accounted for a decrease of almost $1 billion when compared with  2015 estimates. NNSA officials stated that this decrease is the result  of the LEPs’ costs winding down as the programs come to an end.
Table 3 shows the changes in budget estimates for the weapons  refurbishment activities under way during the 25-year period covered by  the Fiscal Year 2016 Stockpile Stewardship and Management Plan.
Milestone dates for most major modernization projects generally  remained the same in the 2016 plan compared with the previous year.  The 2010 Nuclear Posture Review included discussion of a number of  planned major modernization efforts for NNSA, while other efforts have  been identified in later versions of the Stockpile Stewardship and  Management Plan and in the 2011 update to the DOD-DOE joint report.  Table 4 shows key milestone dates for LEPs and major construction  efforts as they have changed since 2010.
Estimates for the two major construction projects we reviewed—the  Uranium Processing Facility and the Chemistry and Metallurgy Research  Replacement construction project—did not change or saw a reduction in  estimates along with a recategorization of costs. These projects, included  in the infrastructure category in NNSA’s budget materials, support  NNSA’s uranium and plutonium strategies, respectively. The Uranium  Processing Facility project budget line in the Fiscal Year 2016 Stockpile  Stewardship and Management Plan stayed the same as reported in the  2015 plan, with a total estimated budget of $5.2 billion from 2015 through  the project’s planned completion in 2025.
The 2016 budget estimates for the Chemistry and Metallurgy Research  Replacement construction project decreased, and in comparison to the  2015 budget materials, these estimates also shifted from one budget  category to another. The Fiscal Year 2015 Stockpile Stewardship and  Management Plan included a line for budget estimates for this project;  however, the estimates were zero for each year except for 2012. The  2015 plan included budget estimates that totaled $3.1 billion in the  program readiness subcategory under the infrastructure category, which  NNSA officials stated were ultimately intended for the Chemistry and  Metallurgy Research Replacement construction project. In the Fiscal Year  2016 Stockpile Stewardship and Management Plan, NNSA shifted $1.7  billion in planned spending out of program readiness and into the  construction project’s line item, also under the infrastructure category.  This shift appears to be an increase in the total amount for major  construction activities in the 2016 budget materials. However, as noted  above, the overall total for infrastructure declined slightly, in part because  NNSA officials said that they determined that the remainder of the $3.1  billion from program readiness is not required to support the project.  Nevertheless, the $1.7 billion reported in the Fiscal Year 2016 Stockpile  Stewardship and Management Plan is $214 million lower than the total  estimates that NNSA reported in its 2016 congressional budget  justification, which included a more detailed construction project data  sheet for the project. An NNSA official confirmed that this amount should  have been included in the plan and its omission was the result of a data  entry error. Consequently, the amount for the project in the construction  line item should be approximately $1.9 billion.
The Fiscal Year 2016 Stockpile Stewardship and Management Plan  includes a goal to stop the growth of the agency’s deferred maintenance  backlog. The plan notes that there has been limited availability for  capital and maintenance funding in recent years, but NNSA officials  stated that they are working to ensure that there is no increase in  deferred maintenance relative to the level at the end of 2015. In August  2015, we found that NNSA’s infrastructure budget estimates were not  adequate to address its deferred maintenance backlog and that the  backlog would continue to grow. We recommended that in instances  where budget estimates do not achieve DOE benchmarks for  maintenance and recapitalization investment over the 5-year budget  estimates, NNSA identify in the budget materials the amount of the  shortfall and the effects, if any, on the deferred maintenance backlog. We  also recommended that until improved data about the importance of  facilities and infrastructure to mission are available, NNSA clarify in the  budget materials for the Future-Years Nuclear Security Program the  amount of the deferred maintenance backlog that is associated with  facilities that have little to no effect on programmatic operations and is  therefore low priority to be addressed. NNSA concurred with our  recommendations. Specifically, NNSA agreed to include more information  on maintenance, recapitalization, and deferred maintenance on excess  facilities and stated that it will address them in the 2017 budget request or  budget support materials as appropriate. Similarly, NNSA officials agreed  that until improved data about the importance of facilities and  infrastructure to the mission are available, they plan to clarify in the  budget materials for the Future-Years Nuclear Security Program the  amount of the deferred maintenance backlog that is associated with  facilities that have little to no effect on programmatic operations and is  therefore low priority to be addressed.
section_title: Budget Estimates Do Not Reflect All Elements of Modernization Plans, although the Full Cost Difference May Be Difficult to Assess
paragraphs: The estimates in NNSA’s 2016 nuclear security budget materials may not  align with plans for some major modernization efforts for several reasons.  In particular, the Fiscal Year 2016 Stockpile Stewardship and  Management Plan includes several major modernization efforts that may  require more funding in some years than the plan reflects, raising  questions about the alignment of NNSA’s modernization plans with  potential future budgets. In addition, for some nuclear weapon  refurbishment programs, the low end of NNSA’s internally developed cost  ranges exceeds the estimates included in the budget materials. Further,  some costs, such as those for certain infrastructure upgrades, are not  included in NNSA’s budget estimates, and dependency on other NNSA  programs could lead to increases in program costs. NNSA officials  provided various reasons for the discrepancies, which they said could be  addressed in future planning.
subsections: section_title: Major Modernization Efforts Beyond the Future- Years Nuclear Security Program May Cost More Than Budget Estimates Reflect
paragraphs: The Fiscal Year 2016 Stockpile Stewardship and Management Plan’s  estimates for Weapons Activities are $4.4 billion higher than the out-year  projections for funding levels in the President’s budget provided in the  DOD-DOE joint report. Specifically, for the years 2021 through 2025—the  5 years after the 2016 Future-Years Nuclear Security Program—the  Fiscal Year 2016 Stockpile Stewardship and Management Plan’s  Weapons Activities budget estimates total $56.6 billion. However, these  budget estimates exceed a set of out-year projections for nuclear  modernization and sustainment activities over the same time period.  Specifically, the DOD-DOE joint report included additional information on  out-year projections in the 2016 President’s budget for Weapons  Activities through 2025. These out-year projections total $52.2 billion from  2021 to 2025, or $4.4 billion less than DOE’s budget estimates over the  same time period (see table 5).
This misalignment between the Fiscal Year 2016 Stockpile Stewardship  and Management Plan and the estimates described as out-year  projections in the President’s budget in the DOD-DOE joint report  corresponds to a challenging period for NNSA modernization efforts, as  the agency plans to simultaneously execute at least four LEPs along with  several major construction projects, including efforts to modernize  NNSA’s uranium and plutonium capabilities. The differences between  these two sets of numbers raise questions about the alignment of NNSA’s  modernization plans with potential future budgets. NNSA notes this issue  in the Fiscal Year 2016 Stockpile Stewardship and Management Plan and  states that it will need to be addressed as part of fiscal year 2017  programming. According to an NNSA official from the office that  coordinated production of the Fiscal Year 2016 Stockpile Stewardship  and Management Plan, the additional line of out-year projections in the  2016 President’s budget was included in the 2016 DOD-DOE joint report  at the request of the Office of Management and Budget. This official told  us that the out-year projections included in the DOD-DOE joint report  represent DOE’s evaluation of what modernization activities will cost for  these years based on current plans and available information. NNSA  officials also stated that the President’s budget information was included  in the 2016 DOD-DOE joint report to show that the administration has not  yet agreed to fund these activities beyond the Future-Years Nuclear  Security Program at the level reflected in NNSA’s budget estimates. In  addition, NNSA officials stated that there is a high level of uncertainty in  the budget estimates beyond the Future-Years Nuclear Security Program,  which makes planning beyond 5 years difficult.
section_title: Estimates for Some Major Modernization Efforts in NNSA’s Budget Materials Were Lower Than Its Program-Specific Estimates
paragraphs: On the basis of our analysis of NNSA’s internally developed cost ranges  for certain major weapon modernization efforts, we found that the low end  of these ranges sometimes exceeded the estimates that NNSA included  for those programs in its budget materials. We analyzed NNSA’s budget  estimates for nuclear weapon refurbishments over the 25 years covered  in the Fiscal Year 2016 Stockpile Stewardship and Management Plan— the W76-1, the B61-12, the B61-13, the W80-4, and the IW-1, 2, and 3  LEPs, as well as the W88 Alteration 370. The Directed Stockpile Work  category in the plan and in the 2016 Future-Years Nuclear Security  Program contain detailed budget information on weapon refurbishment  efforts that includes specific budget estimates for each effort as well as  high and low cost ranges that NNSA developed for them. For each  effort, we assessed the extent to which the budget estimates aligned with  its high-low cost estimates. Specifically, we examined instances where  the low end of the cost range estimates was greater than the budget  estimates.
We found that the annual budget estimates are generally consistent with  NNSA’s internal cost estimates; that is, in most years, the annual budget  estimates for each weapon refurbishment effort fall within the high and  low cost ranges that NNSA developed for each program. However, in  some years, NNSA’s budget estimates for some refurbishment efforts  may not align with modernization plans. Specifically, for some years, the  low end of cost ranges that NNSA developed for some LEPs exceeds the  budget estimates. This indicates potential misalignment between plans  and budget estimates for those programs in those years, or the possible  need for NNSA to increase budget estimates for those programs in the  future. For instance, see the following:
The B61-12 LEP’s budget estimates during the 5-year period covered  by the Future-Years Nuclear Security Program align with plans.
However, the low cost range estimate of $195 million for the final year  of production in 2025 exceeds the budget estimate of $64 million.  NNSA officials said that this difference is not a concern because this  misalignment occurs during the final year of the LEP effort and this  estimate may overstate costs for the end of B61-12 program.
The W88 Alteration 370’s low cost range estimate exceeds its budget  estimate for 2020. The budget materials report that the program’s  budget estimate that year is $218 million; however, the low point of  the cost range is $247 million. NNSA officials stated that this is not a  concern because there is flexibility to address possible misalignments  in future programming cycles. NNSA officials also stated that the total  estimates for this program are above the total of the midpoint cost  estimates for 2016 through 2020 and that funding for 2016 to 2019 is  fungible and could be carried over to cover any potential shortfall in  2020.
The W80-4 LEP’s low range cost estimate of $476 million exceeds its  budget estimates of $459 million for 2020. NNSA officials stated that  because the budget estimates for this LEP are above the low point of  its estimated cost range during other years, the misalignment in 2020  represents a small incongruity in an otherwise sound LEP profile.
The budget estimates for the IW-1 LEP are within the high and low  estimated cost ranges for most years. However, the IW-1’s low cost  range estimate of $175 million exceeds its budget estimate of $113  million in 2020, which is its first year of funding. NNSA officials said  that by shifting funding projected for 2021 to 2020, the IW-1 budget  estimates would still be within the cost ranges.
For the W76-1 LEP, we compared the budget estimates in the 2016  Future-Years Nuclear Security Program and the Fiscal Year 2016  Stockpile Stewardship and Management Plan with internal cost estimates  NNSA developed for the LEP. We found that the budget estimates for all  years within the Future-Years Nuclear Security Program, except for 2018,  are below NNSA’s internal cost estimates for that program, raising  questions about whether the budget for the LEP is aligned with  anticipated costs. According to NNSA officials, the W76-1 LEP is nearing  completion, and the model used to develop internal cost estimates for the  W76-1 is predicting the LEP’s end-of-program costs in a way that may not  reflect the rate at which the program winds down. For more information  on the LEPs and their budget estimates and cost ranges in the Fiscal  Year 2016 Stockpile Stewardship and Management Plan, see appendix II.
NNSA officials stated that the intent in providing budget estimates and  cost range estimates for each weapon refurbishment effort is to show  general agreement between the two sets of estimates. Notwithstanding  the differences we identified between budget estimates and low-end cost  range estimates for certain efforts in certain years, NNSA officials stated  that the budget estimates and the cost range estimates are in general  agreement for each LEP and alteration in terms of total costs and trend.  In addition, NNSA officials stated that there is some flexibility in the  funding for these efforts, and that the programs may carry over some  funds from one year to the next if needed to cover costs, depending on  the reason for the misalignment, among other things.
In our August 2015 report on NNSA’s nuclear security budget materials,  we found that not including information that identifies potential  misalignments in LEP budget estimates compared with the LEP internal  cost estimates can potentially pose risks to the achievement of program  objectives and goals, such as increase in program costs and schedule  delays. NNSA agreed with our recommendation from that report to  provide more transparency with regard to shortfalls in its budget  materials. Specifically, NNSA said that it would include, as appropriate,  statements in future Stockpile Stewardship and Management Plans on  the effect of funding an LEP effort at less than suggested by a planning  estimate cost range. NNSA officials also said that the agency plans to  incorporate this recommendation, among others, into its 2017 budget  materials.
section_title: Some Costs Are Not Included in Modernization Budget Estimates, and Dependency on Other Programs Could Lead to Increases in Estimates
paragraphs: We identified instances where certain modernization costs were not  included in budget estimates or may be underestimated. For example,  see the following:
The budget estimates for the W88 Alteration 370 with a conventional  high explosive replacement—or “refresh”—are understated, according  to NNSA officials. The budget estimates for the refresh reported in the  2016 budget materials are roughly $300 million less than the refresh  requires. Officials told us that the initial budget planning for the refresh  contained a cost of approximately $500 million. However, NNSA  found that this estimate was incorrect and increased it to  approximately $800 million. NNSA officials stated that this project is  still in the process of establishing a new, official baseline, which  officials expect to complete in 2016.
The 2016 budget materials may not contain all necessary costs for  NNSA’s efforts to maintain its enriched uranium capability, which  include relocating select operations performed in Building 9212 to  other existing buildings and constructing a series of smaller buildings.  Specifically, NNSA officials stated that the budget estimates in the  2016 budget materials for these efforts do not include the costs  associated with infrastructure upgrades (such as ceiling repairs and  heating, air conditioning, and other controls systems) in two existing  buildings at the Y-12 site. NNSA officials stated that the scope to  maintain operations in the existing facilities is being developed and  prioritized into a multiyear effort among multiple programs, separate  from the Uranium Processing Facility project. According to another  NNSA official, these costs were still under development, but the  official estimated that the upgrades may cost tens of millions of dollars  for each building.
The costs of the plutonium infrastructure strategy—in which NNSA is  currently preparing to move analytical chemistry and materials  characterization capabilities into existing facilities as part of the  Chemistry and Metallurgy Research Replacement construction project  while also considering constructing new modular buildings under a  separate project—are also uncertain and possibly underestimated.  This uncertainty is due to the fact that NNSA has not yet determined  the number of additional modular buildings that may be required,  although the Fiscal Year 2016 Stockpile Stewardship and  Management Plan calls for at least two. NNSA officials also stated  that estimated costs for these efforts have not yet been baselined and  that the cost of such a project cannot be estimated with any certainty  until it has proceeded further into the planning process and  established a baseline.
In addition to some costs not being included in budget estimates, the  estimates for some NNSA modernization efforts could increase in the  future because of their dependency on successful execution of other  NNSA programs. Specifically, NNSA managers for the LEPs stated that  some of these programs could incur future cost increases or schedule  delays because of other NNSA programs supporting the LEPs. For  instance, NNSA officials told us that the W80-4 LEP will require a new  insensitive high explosive to support the system. This is because the B61- 12 LEP is consuming the currently available stocks of insensitive high  explosive. As a result, NNSA is developing a new insensitive high  explosive to meet the needs of the W80-4 LEP. However, NNSA officials  told us that the performance of the new explosive currently being  produced is not comparable to the quality of existing explosive being  consumed by the B61-12 LEP. Consequently, these officials stated that  the costs of the W80-4 LEP could rise because of additional funding that  may be required to further develop the new explosive. The Fiscal Year  2016 Stockpile Stewardship and Management Plan notes that as design  options are down selected, the budget estimate for the W80-4 may shift in  response.
An NNSA official also stated that the IW-1 LEP budget estimates in the  2016 budget materials are predicated on NNSA successfully modernizing  its plutonium pit production capacity. The official stated that if there are  delays in the current plutonium infrastructure strategy, the IW-1 LEP will  bear costs that are greater than currently estimated to produce the  number of additional plutonium pits it needs to support the program. The  Fiscal Year 2016 Stockpile Stewardship and Management Plan notes that  estimates for programs in their earlier stages, such as the IW-1 LEP, are  subject to uncertainty. We previously found that NNSA has experienced  significant cost increases and schedule delays in its earlier strategies to  modernize its plutonium pit production support facilities at Los Alamos  National Laboratory. We have ongoing work examining the Chemistry  and Metallurgy Research Replacement construction project in more  detail.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOE and NNSA for their review and  comment. NNSA provided written comments, reproduced in appendix III,  in which it stated that it will continue to enhance information on potential  funding levels in future budget supporting materials.
NNSA also provided technical comments separately, which we  incorporated as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Energy, the Administrator of NNSA, and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made major contributions to  this report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to assess (1) the extent to which the National  Nuclear Security Administration’s (NNSA) budget estimates and plans for  modernization activities reflected in its fiscal year 2016 nuclear security  budget materials differ, if at all, from those in its fiscal year 2015 budget  materials and (2) the extent to which the fiscal year 2016 nuclear security  budget materials align with modernization plans as presented in the  Stockpile Stewardship and Management Plan.
We limited the scope of our review to NNSA’s Weapons Activities  appropriations account, because NNSA’s activities in the Stockpile  Stewardship and Management Plan are funded by this account. This  scope is consistent with that of our August 2015 review. We focused our  review on major modernization efforts—that is, the refurbishment of  nuclear weapons through life extension programs (LEP) and alterations  and major construction efforts to replace existing, aging facilities for  plutonium and uranium. The budget projections in the 2015 and 2016  Stockpile Stewardship and Management Plans each contain budget dollar  figures for 25 years, presented in current dollar values. Our report  presents all figures in current, or nominal, dollars, which include projected  inflation, unless otherwise noted. Further, all years noted in our report  refer to fiscal years, unless otherwise noted.
To determine the extent to which NNSA’s budget estimates and plans for  modernization activities differed from those in the 2015 nuclear security  budget materials, we compared the information in the 2016 materials with  the information in the 2015 materials. NNSA’s nuclear security budget  materials are composed of two key policy documents that are issued  annually: the agency’s budget justification, which contains estimates for  the 5-year Future-Years Nuclear Security Program, and the Stockpile  Stewardship and Management Plan, which provides budget estimates  over the next 25 years. Specifically, we (1) compared differences  between the 2016 and 2015 budget materials in the four broad  modernization areas—stockpile; infrastructure; research, development,  testing, and evaluation; and other weapons activities—and (2) compared  differences between the 2016 and 2015 budget materials for specific  weapons refurbishment  activities and major construction projects. We  interviewed knowledgeable officials from NNSA about changes we  identified between the 2016 and 2015 budget materials. We also  reviewed a third, integrated document on plans for the nuclear deterrent  that includes information on the Department of Defense (DOD) and  Department of Energy’s (DOE) modernization budget estimates. This  annual report that DOD and DOE are required to submit jointly to the  relevant Senate and House committees and subcommittees is referred to  as the section 1043 report; in our report, we refer to it as the DOD-DOE  joint report. We compared the information in the 2016 DOD-DOE joint  report with that in the Fiscal Year 2016 Stockpile Stewardship and  Management Plan.
To determine the extent to which NNSA’s budget materials align with its  modernization plans, we compared information on the budget estimates  in the 2016 budget materials with the information on modernization plans  in the materials as well as the DOD-DOE joint report, reviewed prior GAO  reports to provide context for the concerns we identified, and interviewed  NNSA officials to obtain further information on changes to modernization  plans and discussed any perceived misalignments with them.
For weapons refurbishment efforts under way during the 25 years  covered by the Fiscal Year 2016 Stockpile Stewardship and Management  Plan, we analyzed NNSA’s budget estimates for all those to be conducted  over the 25-year period by comparing them against NNSA’s internally  developed cost ranges for each LEP. According to DOE officials, for all  LEPs besides the W76-1, DOE uses two different approaches to estimate  the costs of LEPs. Under the first approach, according to officials, DOE  develops specific budget estimates by year through a “bottom-up”  process. DOE officials describe this as a detailed approach to developing  the LEP budget estimates, which, among other things, integrates  resource and schedule information from site participants. Under the  second approach, which DOE refers to as a “top-down” process, DOE  uses historical LEP cost data and complexity factors to project high and  low cost ranges for each LEP distributed over the life of the program  using an accepted cost distribution method. Officials noted that the values  in these cost ranges reflect idealized funding profiles and do not account  for the practical constraints of the programming and budgeting cycle. For  the W76-1 LEP, DOE has developed specific budget estimates by year.
Because the W76-1 LEP is the basis of DOE’s top-down model, DOE  does not develop high and low cost ranges for it. Instead, DOE published  the W76-1 LEP estimates in the Fiscal Year 2016 Stockpile Stewardship  and Management Plan as a comparison between the Future-Years  Nuclear Security Program request and a single LEP model line. For the  W76-1 LEP, we compared the budget estimates with the LEP model line.
For all LEPs besides the W76-1, we assessed the extent to which the  specific bottom-up budget estimates were aligned with the high-low cost  ranges developed through the top-down model. Specifically, we examined  where the specific budget estimates were under the low end of the cost  range predicted by the top-down model. We did this by reviewing charts  in the Fiscal Year 2016 Stockpile Stewardship and Management Plan and  the underlying data for those charts. In instances where the low cost  range exceeded the budget estimates, we followed up with NNSA officials  for additional information.
To assess the reliability of the data underlying NNSA’s budget estimates,  we reviewed the data to identify missing items, outliers, or obvious errors;  interviewed NNSA officials knowledgeable about the data; and compared  the figures in the congressional budget justification with those in the  Fiscal Year 2016 Stockpile Stewardship and Management Plan to assess  the extent to which they were consistent. We determined that the data  were sufficiently reliable for our purposes, which were to report the total  amount of budget estimates and those estimates dedicated to certain  programs and budgets and to compare them to last year’s estimates.
We conducted this performance audit from May 2015 to March 2016 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: Figures Showing Life Extension Program and Alteration Budget Estimates and Cost Ranges from the Fiscal Year 2016 Stockpile Stewardship and Management Plan
paragraphs: The National Nuclear Security Administration (NNSA) has developed  budget estimates for its nuclear weapons life extension programs (LEP)  and major alterations: the B61-12, the W76-1, the W80-4, the IW-1, the  IW-2, the IW-3, and the B61-13 LEPs, as well as for the W88 Alteration  370. The estimates include NNSA’s internally developed high and low  cost ranges for each program. The budget estimates appear as bars for  each year, while the high and low cost ranges are represented by lines  across the figures. The following figures present budget estimates for  each LEP and alteration. Similar figures also appear in the Fiscal Year  2016 Stockpile Stewardship and Management Plan.
B61-12: The B61 bomb is one of the oldest nuclear weapons in the  stockpile. The B61-12 LEP will consolidate and replace the B61-3, -4, -7,  and -10 bombs. According to the Fiscal Year 2016 Stockpile Stewardship  and Management Plan, this consolidation will enable a reduction in the  number of gravity bombs, which is consistent with the objectives of the  2010 Nuclear Posture Review. The first production unit of the B61-12 is  planned for 2020; the program is scheduled to end in 2026. In the Fiscal  Year 2016 Stockpile Stewardship and Management Plan, NNSA  estimates that the B61-12 LEP will require a total of $5.7 billion from 2016  to 2026. See figure 1 for an illustration of budget estimates against  projected cost ranges.
W76-1: The W76 warhead was first introduced into the stockpile in 1978  and is deployed with the Trident II D5 missile on the Ohio-class nuclear  ballistic missile submarines. The W76-1 LEP is intended to extend the  original warhead service life and address aging issues, among other  things. The first production unit was completed in September 2008, and  the program will end in calendar year 2020. In the Fiscal Year 2016  Stockpile Stewardship and Management Plan, NNSA estimates that  approximately $847 million will be required for this program from 2016 to  2021. See figure 2 for an illustration of budget estimates against projected  cost ranges.
W80-4: The W80-4 LEP is intended to provide a warhead for a future  long-range standoff missile that will replace the Air Force’s current air- launched cruise missile. The first production unit is planned for 2025, and  the program is scheduled to end in 2032. In the Fiscal Year 2016  Stockpile Stewardship and Management Plan, NNSA estimates that the  W80-4 LEP will require approximately $8.2 billion from 2016 to 2032. See  figure 3 for an illustration of budget estimates against projected cost  ranges.
W88 Alteration 370: Among other things, the W88 Alteration 370 will  replace the arming, fuzing, and firing subsystem for the W88 warhead,  which is deployed on the Navy’s Trident II D5 submarine-launched  ballistic missile system. In November 2014, the Nuclear Weapons Council  decided to replace the conventional high explosive main charge, which  led to an increase in costs for the alteration. The first production unit is  planned for 2020, and the program is scheduled to end in 2026. In the  Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA  estimates that the program will require a total of $2 billion from 2016 to  2026. See figure 4 for an illustration of budget estimates against projected  cost ranges.
IW-1: The IW-1, also known as the W78/88-1, is the first ballistic missile  warhead LEP in NNSA’s interoperable strategy to transition the stockpile  to three interoperable ballistic missile warheads and two air-delivered  warheads The first production unit is planned for 2030; the 2016 budget  materials do not report an end date for the LEP. In the Fiscal Year 2016  Stockpile Stewardship and Management Plan, NNSA estimates that the  program will require a total of $13.4 billion from 2020 to 2040. See figure  5 for an illustration of budget estimates against projected cost ranges.
IW-2: The IW-2 is an interoperable warhead intended to replace the  W87/88 warhead. The Nuclear Weapons Council has not yet developed a  more detailed implementation plan for this LEP. The first production unit  is planned for 2034; the Fiscal Year 2016 Stockpile Stewardship and  Management Plan does not contain a projected end date. In the Fiscal  Year 2016 Stockpile Stewardship and Management Plan, NNSA  estimates that the program will require a total of $12.1 billion from 2023 to  2040. See figure 6 for an illustration of budget estimates against projected  cost ranges.
IW-3: The IW-3 is intended to provide the third interoperable warhead for  NNSA’s future strategy for the stockpile. The first production unit is not  yet specified, and there is not yet a budgeted end date. In the Fiscal Year  2016 Stockpile Stewardship and Management Plan, NNSA estimates that  a total of $6.3 billion will be required for this program from 2030 to 2040.  See figure 7 for an illustration of budget estimates against projected cost  ranges.
B61-13: According to NNSA officials, the B61-13 LEP is intended to  replace the B61-12 bomb. The first production unit is not yet specified,  and there is not yet a budgeted end date. In the Fiscal Year 2016  Stockpile Stewardship and Management Plan, NNSA estimates that a  total of $1.2 billion will be required for this program from 2038 to 2040.  See figure 8 for an illustration of budget estimates against projected cost  ranges.
section_title: Appendix III: Comments from the National Nuclear Security Administration
section_title: Appendix IV: GAO Contact and Staff Acknowledgment
subsections: section_title: Staff Acknowledgment
paragraphs: In addition to the contact named above, William Hoehn (Assistant  Director), Antoinette Capaccio, Pamela Davidson, Philip Farah, Bridget  Grimes, Carol Henn, Aaron Karty, and Cynthia Norris made key  contributions to this report.