Department of Energy: Contract and Project Management Concerns at the National Nuclear Security Administration and Office Of Environmental Management
Published: 2009-03-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Energy (DOE) manages over 100 construction projects with estimated costs over $90 billion and 97 nuclear waste cleanup projects with estimated costs over $230 billion. DOE has about 14,000 employees to oversee the work of more than 93,000 contractor employees. Due to DOE's history of inadequate oversight and management of contractors, GAO continues to include DOE contract and project management on its list of government programs at high risk for fraud, waste, abuse, and mismanagement. This testimony discusses (1) recent GAO work on contract and project management within two of DOE's largest program offices--the National Nuclear Security Administration (NNSA) and the Office of Environmental Management (EM), (2) preliminary results of ongoing GAO work on project management at NNSA's Mixed Oxide Fuel Fabrication Facility (MFFF) project at the Savannah River Site in South Carolina, and (3) actions needed by NNSA and EM to improve contract and project management. GAO's reports over the past 3 years have contained nearly 60 recommendations collectively calling for DOE to ensure that project management requirements are consistently followed, to improve oversight of contractors, and to strengthen accountability. While DOE has generally agreed with these recommendations and some actions have been taken, the majority are still open and awaiting action by DOE.
section_title: What GAO Found
paragraphs: Since 2006, GAO has issued 12 reports examining DOE's contract and project management. Two of these reports examined the performance of DOE's largest construction projects--nearly all of which are managed by NNSA or EM--and EM's largest nuclear waste cleanup projects. These reports documented that the cost increases and schedule delays that have occurred for most of these projects have been the result of inconsistent application of project management tools and techniques on the part of both DOE and its contractors. Specifically, GAO reported in March 2007 that 8 of the 10 major NNSA and EM construction projects that GAO reviewed had exceeded the initial cost estimates for completing these projects--in total, DOE added nearly $14 billion to these initial estimates. GAO also reported that 9 of the 10 major construction projects were behind schedule--in total, DOE added more than 45 years to the initial schedule estimates. In particular, the Waste Treatment Plant project at the Hanford Site had exceeded its original cost estimate by almost $8 billion and experienced schedule delays of over 8 years. GAO also reported in September 2008 that 9 of the 10 major EM cleanup projects GAO reviewed had experienced cost increases and schedule delays--in total, DOE estimated that it needed an additional $25 billion to $42 billion to complete these cleanup projects over the initial cost estimates and an additional 68 to 111 more years than initially estimated. In addition, GAO has issued a number of other reports over the past 3 years on specific projects which found similar management problems with NNSA and EM. Preliminary results from GAO's ongoing review of NNSA's MFFF project indicate project management concerns continue. The facility, which is designed to convert 34 metric tons of surplus weapons-grade plutonium into fuel for use in commercial nuclear reactors, is estimated to cost about $4.8 billion and begin operations in 2016. One of the key management systems NNSA uses to measure and report on the project's progress--the project's earned value management system--depends on a reliable schedule that specifies, for example, when the project's work activities will occur, how long they will take, and how they relate to one another. GAO has previously identified nine key practices necessary for developing a reliable schedule. However, the project's schedule, in addition to other problems, does not adhere to a key practice that is fundamental to having a sufficiently reliable schedule--specifically, MFFF project staff have not conducted a risk analysis on their current schedule using statistical techniques. DOE officials responded that they plan on conducting a risk analysis of the schedule for the MFFF project during the summer of 2009. Consequently, NNSA cannot adequately state its level of confidence in meeting the MFFF project's completion date, and NNSA's schedule for the project therefore may not be reliable. GAO's work on this project is continuing, and GAO intends to work with NNSA to resolve these issues.

section_title: Letter
paragraphs: I am pleased to be here today to discuss GAO’s work on contract and  project management at the Department of Energy (DOE). As you are  aware, we issue a high-risk status report at the start of each new Congress  to help in setting congressional oversight agendas and to promote a more  effective, credible, and results-oriented government. GAO designated  DOE’s contract management as a high-risk area in 1990—the first year the  high-risk list was published. DOE, the largest civilian contracting agency in  the federal government, relies primarily on contractors to carry out its  diverse missions and operate its laboratories and other facilities—about 90  percent of its annual budget is spent on contracts. DOE has about 14,000  employees to oversee work performed under contract by more than 93,000  contractor employees. DOE’s record of inadequate management and  oversight of its contractors resulted in our initial high-risk designation for  contract management and, as noted in our January 2009 high-risk report,   DOE’s contract management, including both contract administration and  project management, continues to be at high risk for fraud, waste, abuse,  and mismanagement.
The two largest program offices within DOE—the National Nuclear  Security Administration (NNSA) and the Office of Environmental  Management (EM)—continue to experience significant problems  completing projects on time and on budget. Together, these two offices  account for about $14 billion annually—roughly 60 percent of DOE’s  annual budget. Strong congressional oversight will continue to be  important as NNSA embarks on a major initiative costing tens of billions of  dollars to modernize the nation’s aging nuclear weapons infrastructure  and EM continues to spend billions of dollars to build facilities to treat and  dispose of millions of gallons of radioactive waste. Further scrutiny is  warranted because EM is the recipient of approximately $6 billion in  additional funding under the recently enacted American Recovery and  Reinvestment Act.
In the nearly 3 years since we testified before this Subcommittee on the  Hanford Site’s waste treatment plant, one of DOE’s most technically  complex and largest construction projects, we have issued 12 reports—9  at the request of this Subcommittee—examining DOE’s largest  construction and cleanup projects. These projects are projected to cost, in  total, roughly $127 billion and take decades to complete. Nearly all of  these projects are managed by NNSA or EM. These reports detail a litany  of contract and management problems that have led to, in many cases,  massive cost increases and significant schedule delays.
My testimony today discusses (1) our work over the past 3 years on NNSA  and EM contract and project management of large projects, (2) the  preliminary results of our ongoing review of the cost and schedule  performance and the status of licensing on a major NNSA construction  project—the nearly $5 billion Mixed Oxide Fuel Fabrication Facility  (MFFF) at the Savannah River Site in South Carolina, and (3) actions  needed by NNSA and EM to improve contract and project management.   Today’s statement is based on published GAO products and ongoing work  for this Subcommittee. In conducting our work on the MFFF project, we  met with NNSA and contractor officials, visited the MFFF construction  site in South Carolina, reviewed relevant project documents such as  project execution plans and performance reports, examined the reliability  of the project’s earned value management data, and examined the  reliability of the project’s schedule. We conducted the performance audit  work that supports this statement in accordance with generally accepted  government auditing standards. Those standards require that we plan and  perform the audit to obtain sufficient, appropriate evidence to produce 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 statements today.
subsections: section_title: GAO’s Recent Work Shows That NNSA’s and EM’s Projects Continue to Be at High Risk for Fraud, Waste, Abuse, and Mismanagement
paragraphs: Over the past 3 years, we have reported on significant problems with  NNSA’s and EM’s ability to manage major projects within cost and  schedule targets. Two of these reports examined the performance of  DOE’s largest construction projects—nearly all of these projects are  managed by NNSA or EM—and EM’s largest nuclear waste cleanup  projects.  The estimated cost of completing these construction projects is  about $27 billion, and the estimated cost of completing these cleanup  projects is about $100 billion.  In summary, these reports documented that  the cost increases and schedule delays that have occurred for most of  these projects have been the result of inconsistent application of project  management tools and techniques on the part of both DOE and its  contractors. These reports identified issues, including inadequate systems  for measuring contractor performance, approval of construction activities  before final designs were sufficiently complete, ineffective project  reviews, and ineffective development and integration of the technologies  used in these projects.
Regarding DOE’s largest construction projects, we reported in March 2007  that 8 of the 10 major NNSA or EM construction projects we reviewed had  exceeded the initial cost estimates for completing these projects—in total,  DOE added nearly $14 billion to these initial estimates. We also reported  that 9 of the 10 projects were behind schedule—in total, DOE added more  than 45 years to the initial schedule estimates.  These projects included:  the MFFF, the Pit Disassembly and Conversion Facility, the Tritium  Extraction Facility, and the Salt Waste Processing Facility at the Savannah  River Site; the Waste Treatment and Immobilization Plant at the Hanford Site; the Highly Enriched Uranium Materials Facility at the Y-12 National  Security Complex in Tennessee; the National Ignition Facility at the Lawrence Livermore National  Laboratory in California; and the Depleted Uranium Hexafluoride 6 Conversion Facilities at DOE sites in  Kentucky and Ohio.
Cost increases ranged from $122 million for the Tritium Extraction Facility  to $7.9 billion for the Waste Treatment and Immobilization Plant, and  schedule delays ranged from almost 2 years for the Highly Enriched  Uranium Materials Facility to over 11 years for the Pit Disassembly and  Conversion Facility, with seven projects having schedule delays of 2 years  or more. Although external factors, such as additional security and safety  requirements, contributed to cost growth and delays, we found that cost  growth and schedule slippage in many of the DOE projects we reviewed  occurred principally because of ineffective project management oversight  on the part of DOE and poor project management on the part of DOE’s  contractors. We also found that, while DOE requires final project designs  to be sufficiently complete before beginning construction, it has not  systematically ensured that the critical technologies reflected in these  designs have been demonstrated to work as intended prior to the start of  construction.
For example, we found that NNSA’s National Ignition Facility project had  over $1 billion in cost overruns and years of schedule delays, in large part  because of poor management of the development and integration of the  technologies used in the project’s designs. The requirements for the  National Ignition Facility—the use of 192 high-power laser beams focused  on a single target in a “clean room” environment—had not been attempted  before on such a large scale. According to the NNSA project director, early  incorrect assumptions about the original facility design and the amount of  work necessary to integrate the technologies and assemble the technical  components contributed to about half of the project’s cost increases and  schedule delays.
In addition, we found that EM’s Salt Waste Processing Facility project at  the Savannah River Site had cost overruns and project delays, in part due  to inadequate communication between officials on site and at DOE  headquarters. This project, which is designed to treat radioactive waste  from activities at the Savannah River Site, was originally scheduled to  begin operating in 2009 but has been delayed twice and is not now  projected to begin operations until as late as November 2013. We found  that the Defense Nuclear Facilities Safety Board had expressed concerns  in June 2004, 5 months after the preliminary design was started, that the  facility design might not ensure nuclear wastes would be adequately  contained in the event of earthquakes. However, project managers did not  address these concerns for 17 months and continued to move forward  with the existing project design. According to the DOE project director,  better and more timely discussions between site officials and headquarters  to decide on the actions needed to adequately address these safety and  security requirements might have hastened resolution of the problem, and  up to 1 year of design rework might have been avoided. Project delays  added $180 million to the total project cost. EM officials now require a  more rigorous safety analysis earlier in the decision-making process.
In regard to EM’s largest cleanup projects, in September 2008, we reported  that 9 of the 10 major EM cleanup projects had experienced cost increases  and schedule delays—in total DOE estimated that it needed an additional  $25 billion to $42 billion to complete these cleanup projects over the initial  cost estimates and an additional 68 to 111 more years than initially  estimated. These projects included:  the solid waste stabilization and disposition project at the Idaho National  Laboratory in Idaho;  the nuclear facility decontamination and decommissioning project at the  Oak Ridge Reservation in Tennessee; the nuclear material stabilization and disposition project and the  radioactive liquid tank stabilization and disposition project at the  Savannah River Site in South Carolina; the soil and water remediation project at the Los Alamos National  Laboratory in New Mexico; and the nuclear material stabilization and disposition project, the solid waste  stabilization and disposition project, the soil and water remediation  project, and the radioactive liquid tank stabilization and disposition  project at the Hanford Site in Washington.
Cost increases ranged from $139 million for the Los Alamos soil and water  remediation project to more than $9 billion for the Hanford radioactive  liquid tank stabilization and disposition project. Schedule delays ranged  from 2 years for the Hanford nuclear material stabilization and disposition  project to 15 years for two additional projects at the Hanford Site—the  solid waste stabilization and disposition project and the soil and water  remediation project. We found that these changes arose primarily because  the initial baseline estimates for these projects made schedule  assumptions that were not linked to technical or budget realities. Also,  most of the 10 projects had cost increases and schedule delays because  the previous baselines (1) had not fully foreseen the type and extent of  cleanup needed, (2) assumed that construction projects needed to carry  out the cleanup work would be completed on time, or (3) had not  expected substantial additional work scope. We also found that DOE had  not effectively used management tools—including independent project  baseline reviews, performance information systems, guidance, and  performance goals—to help oversee major cleanup projects’ scope of  work, costs, and schedules.
For example, the initial schedule estimate for a solid waste disposition  project at DOE’s Idaho National Laboratory was influenced by an EM-wide  effort to accelerate the office’s cleanup work by creating new, earlier  completion dates for key cleanup projects and for closing entire sites to  reduce the public health and environmental risks posed by the waste at  these sites. To meet its 2012 accelerated completion date, the laboratory  assumed its waste treatment plant could process waste at a rate that was  more than 50 percent higher than the rate demonstrated at the time EM  established the baseline. Because the plant had only recently begun  operating, project staff lacked confidence that they could meet the  processing rate. Moreover, the independent team reviewing the baseline  reported that the rate was optimistically high. Nevertheless, EM proceeded  with the initial baseline and attempted to meet the optimistic rate by  providing the contractor with performance incentives, which proved  ineffective. When the waste treatment plant did not meet that processing  rate, EM revised its baseline, deferring 4 years of cleanup work, which  added about $450 million to the project.
In addition, we found that cost increases and schedule delays occurred  because EM project officials did not accurately anticipate site or safety  conditions. For example, an EM project at the Oak Ridge Reservation in  Tennessee to decontaminate and decommission approximately 500  facilities and remediate 160 sites experienced cost increases of $1.2 billion  and a 9-year delay in its completion date from 2008 to 2017. These  occurred because project officials did not accurately anticipate the site  conditions or the types of work activities necessary to safely conduct the  work, despite multiple estimates generated by the contractor, DOE, and  the Army Corps of Engineers. In this case, a 1940s-era building was far  more contaminated and deteriorated than first estimated. As a result, DOE  changed its cleanup plan and implemented a more extensive—and  therefore more expensive—approach to tearing down the building. In  addition, after a worker fell through a weakened floor, the contractor had  to reinforce the building’s structure so that contaminated equipment could  be removed safely.
In addition to the findings in these two reports, we have issued other  reports over the past 3 years that also found similar project management  problems with NNSA and EM. We issued eight other reports that found  poor scheduling practices, incomplete cost estimates, poor  communication between DOE headquarters and its field locations, and  other issues related to ineffective project management.
In January 2007, we reported that management problems within NNSA  persisted, in part, because NNSA and DOE had not fully agreed on how  NNSA should function within the department as a separately organized  agency. This lack of agreement resulted in organizational conflicts that  have inhibited effective operations. We also identified the following areas  where additional management improvements were needed: (1) regarding  project management, we found that NNSA had not developed a project  management policy, implemented a plan for improving its project  management efforts, or fully shared project management lessons learned  between its sites; (2) regarding program management, we found that  NNSA had not identified all of its program managers or trained them to a  certified level of competency; and (3) regarding financial management, we  found that NNSA had not established an independent analysis unit to  review program budget proposals, confirm cost estimates, and analyze  budget alternatives.
In May 2007, we reported that despite a number of efforts by DOE to  improve its approach to project management, the department’s overall  performance on projects had not substantially improved. DOE had set a  performance goal of having 90 percent of its ongoing projects being  managed within a 10 percent variance of cost and schedule baseline  targets. However, we found that since October 2002, when DOE began  reporting monthly project performance data, the department had achieved  its performance goals for construction projects only about one-third of the  time. Also, we found that since February 2004, EM’s cleanup projects met  cost and schedule performance goals only about one-fifth of the time.
In June 2007, we reported that DOE’s preliminary estimate of the cost to  address the five waste sites where transuranic wastes are buried was  about $1.6 billion in 2006 dollars, but the estimate was likely to increase  for several reasons. For example, DOE’s estimate reflected the costs of  leaving most waste under earthen barriers—typically the least expensive  approach. If DOE was required to retrieve substantial portions of these  wastes, costs would increase dramatically. In addition, DOE’s estimate  excluded unknown costs, such as the cost of disposing of wastes off-site, if  necessary. For example, DOE’s lifecycle cost estimate to remove  transuranic wastes buried near the Columbia River at the Hanford Site  could triple once options and costs for disposal are fully evaluated.
Also, in June 2007, we reported that EM did not follow key departmental  project management requirements for its Bulk Vitrification Demonstration  Project, which aimed to demonstrate an alternative technology to treat  low-activity radioactive waste at the Hanford Site. Specifically, early in  the demonstration, EM did not conduct key internal and external reviews  that would have evaluated the project’s design, procurement, and  construction management approaches to identify potential problems and  address them before starting construction. In addition, EM did not fully  develop or update key project planning documents, such as a project  execution plan, an acquisition plan, and a validated estimate of project  costs. Without these management tools, EM initially overlooked a number  of technical and safety problems facing the demonstration project, such as  uncertainties about the quality of the glass formed using the bulk  vitrification technology and inadequate systems to shield and confine  radioactive material from workers and the environment. These problems  contributed to an increase in estimated project costs from $62 million to  $230 million, a 6-year delay, and an increase to the estimated life-cycle cost  of a future full-scale bulk vitrification facility from about $1.3 billion to $3  billion. The project was subsequently suspended, after an investment of  $100 million and several years of effort.
In July 2007, we reported that EM had performed little or no review of  contractor invoices or supporting documents for millions of dollars in  charges billed to DOE each month by the contractor for the construction  of the Waste Treatment Plant at the Hanford Site. Given the multibillion- dollar cost and schedule overruns already experienced with the project,  the need for close, ongoing review of invoiced transactions and support is  particularly compelling. We found that the contractor’s invoices provided  little detail as to the items purchased, contrary to federal acquisition  regulations and contract requirements. EM officials chose to rely primarily  on another agency (the Department of Defense’s Defense Contract Audit  Agency) to review and approve the contractor’s corporate-wide financial  systems, which EM officials believed allowed them to rely on the  contractor’s systems with little or no DOE oversight. In addition, EM relied  primarily on its contractor to review and validate subcontractor charges  without having a process in place to assess whether its contractor was  properly carrying out its subcontractor oversight responsibility. EM’s  heavy reliance on others, with little oversight of its own, exposed the  hundreds of millions of dollars it spent annually on the project to an  unnecessarily high risk of improper payments.  We also concluded that the   property control weaknesses we identified, coupled with the lack of DOE  oversight, created an environment in which property could be lost or  stolen.
In May 2008, we reported that NNSA’s project to manufacture pits—the  key component in a nuclear warhead that starts the nuclear chain  reaction— at the Los Alamos National Laboratory in New Mexico did not  include all associated costs in its estimates and did not establish a clear  schedule for manufacturing pits. NNSA established a goal in 2002 to  create the capability to manufacture 10 pits per year starting in 2007 and to  deliver a single war reserve pit—a pit that can be used in the U.S. nuclear  weapons stockpile—for the W88 nuclear warhead in 2007. NNSA  estimated that this effort would cost about $1.55 billion between fiscal  years 2001 and 2007. NNSA subsequently reported that it was  implementing the project under budget by spending $1.29 billion on the pit  manufacturing effort between fiscal years 2001 and 2007. However,  NNSA’s cost estimate did not include costs for a variety of activities that  directly and indirectly supported the pit manufacturing project. These  support activities, which included scientific experiments as well as facility  operations and maintenance, totaled over $1 billion. In addition, we found  that NNSA did not establish a clear, consistent schedule of the number of  war reserve pits it planned to produce. Specifically, although NNSA  produced eight W88 war reserve pits in 2007—exceeding the goal  established in 2002 of one W88 war reserve pit in 2007—other NNSA  documents (including budget requests to the Congress) called for a goal of  delivering 10 W88 war reserve pits per year starting in 2007.
In June 2008, we reported that EM had made limited progress in its  cleanup efforts at the Hanford Site, specifically in transferring waste from  its 149 single-shell tanks to its larger and more robust double-shell tanks.  We also reported that DOE’s cost estimate for retrieving tank waste was  significantly understated and that DOE’s 2003 estimate of $4.3 billion  increased to $7.6 billion.  Under the current Tri-Party Agreement—an  agreement between DOE, the state of Washington, and the Environmental  Protection Agency laying out milestones for the cleanup efforts at  Hanford—DOE agreed to empty all 149 single-shell tanks at the site by  September 2018 and close them by 2024. To date, only seven tanks have  been emptied, and at its present rate of progress—currently only one tank  is emptied per year—DOE will not achieve the milestones it committed to  in the Tri-Party Agreement. DOE has since acknowledged that (1) the start  of waste treatment operations will be delayed by at least 8 years (from  2011 to 2019) and (2) the completion of waste treatment operations may  be delayed by at least 29 years (from 2018 to 2047).
In July 2008, we reported that EM’s cost estimate for processing 23 metric  tons of highly enriched uranium and plutonium at a facility at the  Savannah River Site known as H-Canyon did not include all associated  costs. Although EM estimated that it would cost approximately $4.3  billion to $4.6 billion to process these materials through 2019, this estimate  did not include several costs EM expects will be associated with canyon  operations. According to EM and NNSA officials, more highly enriched  uranium and plutonium may be identified as suitable for processing using  H-Canyon, which could delay its shutdown and increase its operational  costs. In addition, the estimate did not include the cost of storing and  treating the waste generated by H-Canyon operations through 2019— approximately $253 million, according to EM.  We also reported that  completion of some safety and environmental analyses have been delayed  by as much as 2 years, and any further delays could affect canyon  operations.
section_title: Preliminary Results From Ongoing GAO Work on NNSA’s Mixed Oxide Fuel Fabrication Facility Indicate Continuing Project Management Concerns
paragraphs: We are currently reviewing the cost and schedule performance and the  status of licensing the MFFF construction project at the Savannah River  Site, a nearly $5 billion facility that is designed to convert 34 metric tons of  surplus weapons-grade plutonium into fuel for use in commercial nuclear  reactors.  In accordance with DOE’s project management requirements,  NNSA is using an earned value management system to measure and report  the progress of the MFFF construction project. One critical component of  an effective earned value management system is the development of a  reliable schedule. For example, a schedule should specify when the  project’s set of work activities will occur, how long they will take, and how  they relate to one another. The schedule not only provides a roadmap for  the systematic execution of a program but also provides the means by  which to gauge progress, identify and address potential problems, and  promote accountability.
GAO has identified nine practices associated with effective schedule  estimating: (1) capturing key activities, (2) sequencing key activities, (3)  establishing the duration of key activities, (4) assigning resources to key  activities, (5) integrating key activities horizontally and vertically, (6)  establishing the critical path for key activities, (7) identifying “float time”  between key activities, (8) performing a schedule risk analysis, and (9)  distributing reserves to high-risk activities. Most of these practices are  also identified by DOE in a recent guidance document on establishing  performance baselines.
Although the MFFF project’s schedule was developed using many of these  practices, the schedule, in addition to other problems, does not employ a  key practice that is fundamental to having a sufficiently reliable  schedule—specifically, MFFF project staff have not conducted a risk  analysis on their current schedule using statistical techniques.  Consequently, NNSA cannot adequately state its level of confidence in  meeting the MFFF project’s completion date of October 2016, and NNSA’s  schedule for the project therefore may not be reliable. In addition, we  found that the schedule does not fully employ other key practices that are  also fundamental to having a sufficiently reliable schedule.  For example,  another key scheduling practice—the proper sequencing of key  activities—requires that project officials logically schedule key activities in  the order that they are to be carried out to establish a basis for guiding  work and measuring progress. However, based on the preliminary results  of our analysis, the MFFF project only partially satisfied this practice.  Specifically, we found that almost 1,500 of the over 24,000 activities listed  in the MFFF project’s schedule were not sequenced in a logical manner. As  a result, we have reduced confidence in the ability of the MFFF project’s  schedule to accurately reflect how the MFFF project will be executed (see  app. II for the preliminary results of our analysis of the MFFF project’s  schedule).
As recently as December 2008, the MFFF project’s earned value  management system indicated that the project was meeting its cost and  schedule goals. However, correcting weaknesses in the MFFF project’s  schedule is important because the project is currently spending  approximately $25 million a month and plans to spend an additional $3.6  billion before the project is completed in 2016. In our view, correction of  these schedule reliability concerns now could avert potentially expensive  schedule overruns in the future and will enable NNSA to more effectively  measure the performance status of the MFFF project. NNSA and  contractor officials told us that they recognize some of the problems we  identified with the MFFF project’s schedule and are planning to make  improvements. Specifically, project officials told us that they plan to  conduct a schedule risk analysis during the summer of 2009. Our work on  this project is continuing, and we intend to work with NNSA to resolve  these issues to the extent possible. In the meantime, we would urge  caution in using the results from the MFFF project’s earned value  management reports until these issues have been addressed.
In addition to our work on the MFFF project, we are also currently  conducting work on DOE cost estimating for this Subcommittee.  Specifically, we are examining cost estimating practices within NNSA, EM,  and DOE’s Office of Science by selecting a sample of large projects and  comparing their cost estimates with DOE policy and GAO-identified best  practices. We also plan to identify any impediments that DOE may face in  developing reliable, credible, and comprehensive cost assessments.  Finally, we are evaluating the cleanup strategy DOE is using to address the  56 million gallons of radioactive and hazardous waste at the Hanford Site  in Washington State. Specifically, we will be evaluating the legal, technical,  and risk issues affecting this multi-billion, decades-long project. We plan  to update the Subcommittee on the status of our work later this spring.
section_title: Action Underway and Needed to Reduce Project Vulnerability to Fraud, Waste, Abuse, and Mismanagement
paragraphs: In the nearly 3 years since we last testified before this Subcommittee, the  reports we have issued on projects across NNSA and EM have contained  nearly 60 recommendations. These recommendations collectively call for  DOE to ensure that project management requirements are consistently  followed, to improve oversight of contractors, and to strengthen  accountability for performance. Although DOE’s responses to these  recommendations have been largely positive, and some corrective actions  have been taken, most of the recommendations are still open, awaiting  action by the department.
DOE has also taken steps to better understand weaknesses underlying its  contract and project management. First, with input from headquarters  and field officials with contract and project management expertise, it  completed a root-cause analysis. In this analysis, DOE found a number of  problems, including:    Risks associated with projects are not objectively identified, assessed,  communicated, or managed through all phases of planning and execution.
Ineffective project oversight has resulted in failure to identify project  performance issues in a timely manner.
DOE is not effectively executing its ownership role on some large projects  with respect to overseeing and managing contracts and contractors.
On the basis of its root-cause analysis, DOE also completed a  comprehensive corrective action plan to address these weaknesses, with  both near-term and long-term goals and objectives.
Because of these actions, and other improvements made over the past  decade to establish a more structured and disciplined approach to  contract and project management, we believe that DOE as a whole has  substantially met three of the five criteria necessary for removal from our  high-risk list. Specifically, DOE has (1) demonstrated strong commitment  and leadership; (2) demonstrated progress in implementing corrective  measures; and (3) developed a corrective action plan that identifies root  causes, effective solutions, and a near-term plan for implementing the  solutions.
Two criteria remain for removal from our high-risk list: having the  capacity (people and resources) to resolve the problems and monitoring  and independently validating the effectiveness and sustainability of  corrective measures. Regarding capacity, DOE’s April 2008 root-cause  analysis report recognized as one of its top 10 issues a lack of an adequate  number of federal contracting and project personnel with the appropriate  skills (such as cost estimating, risk management, and technical expertise)  to plan, direct, and oversee project execution.
Monitoring and validating the effectiveness and sustainability of corrective  measures will take time to demonstrate. Our recent work has shown that  the Office of Science—DOE’s third-largest program office—has  demonstrated strong performance in meeting cost and schedule targets.  Specifically, we found that, of 42 Office of Science projects completed or  under way from fiscal years 2003 through 2007, more than two-thirds were  completed or being carried out within original cost and schedule targets.  The office’s ability to generally achieve projects’ original cost and  schedule targets is due in part to factors often considered fundamental to  effective project management: leadership commitment to meeting cost and  schedule targets; appropriate management and technical expertise; and  disciplined, rigorous implementation of project management policies. The  Office of Science’s frequent independent reviews, in particular, were cited  by DOE officials as a key reason for its project management performance.  Until NNSA and EM can demonstrate these principles and consistently  complete projects on time and within budget, it will be difficult to  demonstrate that any of the corrective actions taken have achieved their  desired effect—improved cost and schedule performance. Until that time,  both NNSA and EM will remain vulnerable to fraud, waste, abuse, and  mismanagement and therefore will remain on our high-risk list.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of our preliminary findings with respect to the MFFF  project’s schedule to NNSA for its review and comment. Overall, NNSA  and project officials agreed with many of our specific findings, including  the fact that project officials have not conducted a risk analysis of the  current project schedule using statistical techniques. However, NNSA  officials did not agree with our conclusion that, as a result of some of the  shortcomings we identified, the project’s schedule may not be reliable. In  addition, project officials told us that they planned to conduct a schedule  risk analysis on the current schedule during the summer of 2009.
Mr. Chairman, this concludes my prepared statement. I would be happy to  respond to any questions that you or Members of the Subcommittee may  have at this time.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For further information on this testimony, 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  statement. Ryan T. Coles, Daniel Feehan, and Janet Frisch, Assistant  Directors; Alison Bawden; Carole Blackwell; James Espinoza; Stephanie  Gaines; Eugene Gray; Jason Holliday; Chris Pacheco; Tom Perry; Leslie  Pollock; Steve Rossman; Peter Ruedel; and Carol Herrnstadt Shulman  made key contributions to this testimony.
section_title: Appendix I: Related GAO Products
paragraphs: High Risk Series: An Update. GAO-09-271. Washington, D.C.: January 22,  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 Material: DOE Needs to Take Action to Reduce Risks Before  Processing Additional Nuclear Material at the Savannah River Site’s H- Canyon. GAO-08-840. Washington, D.C.: July 25, 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.
Nuclear Weapons: NNSA Needs to Establish a Cost and Schedule Baseline  for Manufacturing a Critical Nuclear Weapons Component. GAO-08-593.  Washington, D.C.: May 23, 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.
Nuclear Waste: DOE Should Reassess Whether the Bulk Vitrification  Demonstration Project at Its Hanford Site Is Still Needed to Treat  Radioactive Waste. GAO-07-762. Washington, D.C.: June 12, 2007.
Nuclear Waste: Plans for Addressing Most Buried Transuranic Wastes  Are Not Final, and Preliminary Cost Estimates Will Likely Increase.  GAO-07-761. Washington, D.C.: June 22, 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.
National Nuclear Security Administration: Additional Actions Needed  to Improve Management of the Nation’s Nuclear Programs. GAO-07-36.  Washington, D.C.: January 19, 2007.