Nuclear Weapons: Actions Needed to Identify Total Costs of Weapons Complex Infrastructure and Research and Production Capabilities
Published: 2010-06-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The National Nuclear Security Administration (NNSA) manages and secures the nation's nuclear weapons stockpile, with annual appropriations of about $6.4 billion. NNSA oversees eight contractor-operated sites that execute its programs. Two programs make up almost one-third of this budget: Readiness in Technical Base and Facilities (RTBF) Operations of Facilities, which operates and maintains weapons facilities and infrastructure, and Stockpile Services, which provides research and development (R&D) and production capabilities. Consistent with cost accounting standards, each site has established practices to account for these activities. The Administration has recently committed to stockpile reductions. GAO was asked to determine the extent to which NNSA's budget justifications for (1) RTBF Operations of Facilities and (2) Stockpile Services are based on the total costs of providing these capabilities. GAO was also asked to discuss the implications, if any, of a smaller stockpile on these costs. To carry out its work, GAO analyzed NNSA's and its contractors' data using a data collection instrument; reviewed policies, plans, and budgets; and interviewed officials.
section_title: What GAO Found
paragraphs: NNSA cannot accurately identify the total costs to operate and maintain weapons facilities and infrastructure because of differences in sites' cost accounting practices. These differences are allowable under current NNSA guidance as long as sites comply with cost accounting standards and disclose their practices to NNSA. The differences among cost accounting practices include the facilities and activities sites support with RTBF Operations of Facilities funds and how sites use other funding sources to support weapons facilities and infrastructure. GAO's analysis of sites' responses to a data collection instrument showed that the total cost to operate and maintain weapons facilities and infrastructure likely significantly exceeds the budget request for the RTBF Operations of Facilities program submitted to Congress for fiscal year 2009. NNSA has an effort under way that, if fully implemented, would provide more detail on the total costs to operate and maintain weapons facilities and infrastructure. NNSA does not fully identify or estimate the total costs of the products and capabilities supported through Stockpile Services R&D and production activities. Instead, NNSA primarily identifies the functional activities--such as engineering operations, quality control, and program management--and their costs supported through Stockpile Services and bases its future-year budget requests on the extent to which prior-year budgets were sufficient to execute these functions. In 2009, GAO issued a cost guide that identified using a product-oriented management tool, rather than a functionally oriented one, as a best practice for cost estimating. Using cost guide criteria, GAO's analysis found tracking costs by functions provides little information on the costs of the individual capabilities supported through Stockpile Services. NNSA has an effort under way that, if fully implemented, would provide more detail on the total costs of the products and capabilities supported through Stockpile Services. Reducing stockpile size is unlikely to significantly affect NNSA's RTBF Operations of Facilities and Stockpile Services costs because a sizable portion of these costs is fixed to maintain base nuclear weapons capabilities. The Administration has planned to increase budget requests for NNSA's nuclear weapons program by $4.25 billion between fiscal years 2011 and 2015. This planned increase is intended, in part, to invest in and modernize facilities and infrastructure and to ensure that base capabilities are supported such that a smaller nuclear deterrent continues to be safe, secure, and reliable. While base capability costs appear to be relatively insensitive to reductions in the stockpile, without complete and reliable information about these costs, NNSA lacks information that could help justify planned budget increases or target cost savings opportunities.

section_title: Letter
paragraphs: Nuclear weapons have been and continue to be an essential part of the  nation’s defense strategy. The end of the Cold War resulted in a dramatic  shift in how the nation maintains such weapons. Instead of designing,  testing, and producing new nuclear weapons, the strategy has shifted to  maintaining the existing nuclear weapons stockpile indefinitely and  extending the operational lives of these weapons through refurbishment,  without nuclear testing. The Department of Energy’s (DOE) National  Nuclear Security Administration (NNSA) is responsible for the  management and security of the nation’s nuclear weapons programs.  NNSA’s annual appropriation for nuclear weapons has totaled  approximately $6.4 billion in recent years. To execute the activities to  maintain and refurbish the nation’s existing nuclear weapons stockpile,  NNSA oversees eight separate sites—collectively known as the nuclear  security enterprise—that are managed and operated by private  contractors. Among other things, these contractors operate and maintain  the government-owned facilities and infrastructure deemed necessary to  support the nuclear weapons stockpile and to support the capabilities to  conduct scientific, technical, engineering, and production activities that  ensure the continued safety and reliability of the stockpile.
In October 2008, NNSA put forward a plan to modernize the nuclear  security enterprise infrastructure––with the intent to make it smaller and  more responsive, efficient, and secure––while continuing to meet national  security requirements. NNSA’s plan, if fully implemented, would  consolidate certain operations within the nuclear security enterprise and  replace its aging infrastructure with new nuclear and nonnuclear facilities  sized to support a smaller stockpile. The size of this smaller stockpile is  the outcome of recently completed negotiations between Russia and the  United States on a New Strategic Arms Reduction Treaty, which was  signed on April 8, 2010, and, if ratified, will commit the two countries to  significant and verifiable arms reductions. The President’s fiscal year 2011  budget request (1) supports increased funding to replace key nuclear  security enterprise facilities and to invest in infrastructure and (2)  anticipates requesting an additional $4.25 billion between fiscal years 2011  and 2015 over the fiscal year 2010 enacted level. This policy framework— to enable arms reductions by ensuring that the remaining stockpile and the  infrastructure on which it depends are safe, secure, and reliable—is also  underscored in the newly released Nuclear Posture Review.
The current nuclear weapons stockpile consists of seven different  warhead and bomb types delivered by four types of weapon systems,  including the following:    B61 and B83 gravity bombs delivered by dual-capable aircraft and long-   W80 warheads for cruise missiles deliverable by long-range bombers;    W76 and W88 warheads for submarine-launched ballistic missiles; and    W78 and W87 warheads for intercontinental ballistic missiles.
In recent years, NNSA has taken steps to create system-based budgets  associated with each of these seven warhead and bomb types. These  system-based budgets represent the planned work activities NNSA  identifies as specific to each warhead or bomb type. In fiscal year 2009, the  seven system-based budgets totaled $542.8 million, or 8.5 percent of  NNSA’s overall nuclear weapons budget. However, the vast majority of the  nuclear weapons budget is not system-based but rather represents funding  to support all other activities needed to operate and maintain the nuclear  security enterprise, including the intellectual and technical capabilities of  the nuclear workforce.
Two of the largest non-system-based components of NNSA’s nuclear  weapons budget are: (1) Readiness in Technical Base and Facilities (RTBF)  Operations of Facilities, the goal of which is to operate and maintain  facilities and infrastructure in a safe, secure, and reliable condition such  that they are operationally ready to execute nuclear weapons work, and (2)  Stockpile Services, the goal of which is to provide a foundation for  operations, which includes the research, development, and production  support capabilities for multiple nuclear weapon programs. In fiscal year  2009, Congress appropriated $6.41 billion for NNSA’s weapons activities,  which an explanatory statement accompanying the annual appropriations  act reported as including $1.163 billion for RTBF Operations of Facilities  and $866.4 million for Stockpile Services. Together, these two components  total over $2 billion, or almost one-third of NNSA’s total nuclear weapons  activities appropriation for that year.
Consistent with Federal Accounting Standards Advisory Board guidance  on identifying the full (total) cost of federal programs and activities, your  subcommittee has emphasized that NNSA should establish budgets that  reflect total program costs and that these budgets should be more  transparent to congressional oversight, particularly as efforts proceed to  modernize the nuclear security enterprise. In this context you asked us to  (1) determine the extent to which NNSA’s RTBF Operations of Facilities  congressional budget justification that supplements the Budget of the  United States Government (the President’s Budget) for fiscal year 2009 is  based on the total cost of operating and maintaining weapons facilities and  infrastructure; (2) determine the extent to which NNSA’s fiscal year 2009  congressional budget justification for Stockpile Services identifies the  total costs of providing foundational research and production support  capabilities; and (3) discuss the implications, if any, of a smaller stockpile  on RTBF Operations of Facilities and Stockpile Services costs.
To address these objectives, we analyzed NNSA’s congressional budget  justifications for fiscal years 2009, 2010, and 2011, as well as accounting  records related to NNSA’s execution of its RTBF Operations of Facilities  and Stockpile Services programs for fiscal year 2009. We also analyzed  documentation on NNSA’s programs and activities, including national  work breakdown structures—management tools NNSA uses to identify the  work activities that completely define a project or program—for RTBF  Operations of Facilities and Stockpile Services. We compared NNSA’s  work breakdown structures with our best practices for work breakdown  structures as published in the GAO Cost Estimating and Assessment  Guide: Best Practices for Developing and Managing Capital Program  Costs. Further, we analyzed budget, cost, and program documentation  from all eight NNSA sites. We also collected data from NNSA’s sites on  their nuclear weapons facilities and the sources of funding sites use to  fully support operations and maintenance of these facilities. These data  were collected using a data collection instrument that was pretested with  NNSA and several of its sites. We performed a reliability assessment of  these data and determined they were sufficiently reliable for the purposes  of this report. In addition, we analyzed NNSA’s nuclear security enterprise  modernization plans and associated cost estimates. Finally, we conducted  interviews with DOE, NNSA, and site officials and toured facilities at six of  NNSA’s eight sites. More details on our scope and methodology can be  found in appendix I.
We conducted this performance audit from April 2009 to June 2010 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: Established by Congress in 2000 as a separately organized agency within  DOE, NNSA has the primary mission of providing the United States with  safe, secure, and reliable nuclear weapons and maintaining core  competencies in nuclear weapons science, technology, and engineering.  To support this highly technical mission, NNSA relies on capabilities in  several thousand facilities located at eight nuclear security enterprise sites  that support weapons activities. These sites are owned by the government  but managed and operated by private contractors, and each has specific  research and development (R&D) and/or production responsibilities  within the nuclear security enterprise. (See fig. 1.)
In addition to implementing NNSA’s nuclear weapons programs, some  sites also support additional missions such as U.S. Navy nuclear  propulsion, nuclear nonproliferation activities, and work for other federal  agencies such as the Departments of Defense and Homeland Security.  NNSA’s Office of Defense Programs is responsible for NNSA’s weapons  activities and oversees the sites’ management and operating (M&O)  contractors to execute R&D and production work. NNSA reimburses its  M&O contractors under cost-reimbursement-type contracts for the costs  incurred in carrying out the department’s missions, and M&O contractors  have the opportunity to periodically earn additional award fees and  contract extensions based on annual performance assessments.
Congress funds NNSA’s nuclear weapons mission through an  appropriation titled Weapons Activities. Weapons Activities is organized  by NNSA into 14 operating programs with more than 40 budget lines  across four activity areas. In fiscal year 2009, Congress appropriated  approximately $6.4 billion for Weapons Activities, broken down by NNSA  into the four areas described in table 1.
RTBF is the single largest program within NNSA’s Weapons Activities  appropriation, with nearly $1.7 billion for fiscal year 2009, and  encompasses 90 percent of NNSA’s funds designated in congressional  spending directives for the Infrastructure area. A significant RTBF  mission, executed through its Operations of Facilities subprogram, is to  operate and maintain NNSA-owned programmatic capabilities in a state of  readiness, ensuring that each capability—defined to include facilities,  infrastructure, and supporting workforce—is operationally ready to  execute programmatic tasks identified in ST&E and Stockpile Support.  Congressional spending directives designated nearly $1.2 billion of the  RTBF program funds in the Weapons Activities account, or about 70  percent, for RTBF Operations of Facilities at NNSA’s eight sites. (See  app. II for additional discussion.)
In 2006, NNSA and its sites sought to improve linkages between  programmatic tasks and the facilities and infrastructure that support the  nuclear weapons program. To do so, NNSA established three categories  for its facilities and infrastructure that indicate the extent to which they  are critical to the achievement of Stockpile Support and ST&E milestones:    Mission Critical facilities and infrastructure—such as for nuclear weapons  production, R&D, and storage—are used to perform activities to meet  highest-level Stockpile Support and/or ST&E milestones, and without these  facilities and infrastructure, operations would be disrupted or placed at risk.
Mission Dependent, Not Critical facilities and infrastructure—such as for  waste management, nonnuclear storage, and machine shops—play a  supporting role in meeting Stockpile Support and/or ST&E milestones, and  loss of these facilities and infrastructure would only disrupt operations so  long as operations could not resume within 5 business days.
Not Mission Dependent facilities and infrastructure—such as cafeterias,  parking structures, and excess facilities—do not have direct linkage to  Stockpile Support or ST&E milestones but support secondary missions or  quality-of-workplace initiatives.
Together, Mission Critical and Mission Dependent, Not Critical facilities  and infrastructure are deemed “mission essential.” In fiscal year 2009,  NNSA categorized its over 4,500 facilities and infrastructure in these three  categories. Across the entire nuclear security enterprise, over 200  facilities and infrastructure were deemed Mission Critical and over 1,400  were deemed Mission Dependent, Not Critical.
Directed Stockpile Work is the second largest program within NNSA’s  Weapons Activities appropriation, with nearly $1.6 billion in fiscal year  2009. The Directed Stockpile Work program is executed through four  subprograms:    Stockpile Services, the largest of these subprograms, with $866.4 million in  fiscal year 2009, builds on weapons activities facilities and infrastructure  to provide the foundational capabilities to conduct R&D and production  work applicable to multiple warhead and bomb types. According to NNSA,  the capabilities supported with Stockpile Services funds enable the  achievement of other Directed Stockpile Work missions.
Weapons Dismantlement and Disposition, with $190.2 million in fiscal year  2009, supports efforts to reduce the inventory of retired nuclear weapons  and their components.
The Life Extension Program, with $205 million in fiscal year 2009,  represents one of NNSA’s two subprograms focused on specific warhead  and bomb types. The Life Extension Program funds efforts to refurbish  and extend the expected stockpile lifetime of legacy warheads and bombs  for 20 to 30 years.
Stockpile Systems funding supports ongoing sustainment activities for the  active nuclear weapons stockpile, such as the exchange of components  with limited lives and weapon-specific assessments. In fiscal year 2009,  Congress directed $328.5 million for these activities, which NNSA  prioritized among specific weapon and bomb types.
NNSA reimburses its M&O contractors for the costs incurred in carrying  out NNSA’s missions. These include costs that can be directly identified  with a specific NNSA program (known as direct costs)—for example, the  costs for dismantling a retired weapon—and costs of activities that  indirectly support a program (known as indirect costs), such as  administrative activities. To ensure that NNSA programs are appropriately  charged for incurred costs, M&O contractors’ accounting systems assign  the direct costs associated with each program and collect similar types of  indirect costs into pools and allocate them among the programs.  Consistent with Cost Accounting Standards (CAS), M&O contractors must  classify their costs as either direct or indirect, and once costs are  classified, must consistently charge their costs. M&O contractors are  required to disclose their cost accounting practices in formal disclosure  statements, which are updated annually and approved by NNSA officials.  M&O contractors’ cost accounting practices cannot be readily compared  with one another because contractors’ methods for accumulating and  allocating indirect costs vary—that is, a cost classified as an indirect cost  at one site may be classified as a direct cost at another.
NNSA has developed national work breakdown structures for RTBF  Operations of Facilities and for Stockpile Services, management tools that  define the scope of work associated with the two subprograms. (See app.  II and app. III for these fiscal year 2009 work breakdown structures.) In  March 2009, we issued a cost estimating guide, a compilation of cost  estimating best practices from across industry and government. Among  other things, these best practices discuss establishing product-oriented  work breakdown structures, where a product is defined as an output and  100 percent of the work associated with achieving that output. Product- oriented work breakdown structures allow a program to track cost and  schedule by defined deliverables, promote accountability by identifying  work products that are independent of one another, and provide a basis  for identifying resources and tasks for developing a program cost estimate.  The ability to generate reliable cost estimates is a critical function, and a  program’s cost estimate is often used to establish budgets.
While individual M&O contractors account for the activities included in  NNSA’s work breakdown structures according to their own accounting  practices and these practices vary, NNSA is required to provide reliable  and timely information on the full cost of its programs because this  information is crucial for effective management of government operations  and for oversight. Full costs include direct and indirect costs that  contribute to programs, regardless of funding sources. To meet this  requirement, NNSA needs complete and reliable information from its M&O  contractors so that it can determine the full (or total) costs of its  programs. We have previously reported on NNSA’s lack of managerial cost  accounting systems for its programs, particularly with respect to stockpile  life extension programs.
section_title: NNSA Cannot Accurately Identify the Total Costs to Operate and Maintain Weapons Activities Facilities and Infrastructure, and These Costs Likely Significantly Exceed the Budget Justified to Congress for the RTBF Operations of Facilities Program
paragraphs: NNSA cannot accurately identify the total costs to operate and maintain  weapons activities facilities and infrastructure because of differences in  sites’ cost accounting practices. NNSA does not require sites to report the  total cost to execute their RTBF Operations of Facilities work scope, but  the results of our analysis of sites’ responses to our data collection  instrument showed that the total cost to execute the RTBF Operations of  Facilities work scope likely significantly exceeds the budget for the RTBF  Operations of Facilities program justified to Congress. Efforts are under  way to revise NNSA’s work breakdown structure that includes RTBF  Operations of Facilities. According to NNSA officials, once the revised  work breakdown structure is fully implemented it will capture these total  costs, but NNSA will not begin collecting this information until 2011.
subsections: section_title: NNSA Cannot Accurately Identify the Total Costs to Operate and Maintain Weapons Activities Facilities and Infrastructure
paragraphs: Each of the eight sites in the nuclear security enterprise has established its  own practices for how to account for the activities necessary to operate  and maintain weapons activities facilities and infrastructure. While  individual M&O contractors are required to be CAS compliant,  differences in their cost accounting practices preclude NNSA from being  able to identify the total costs to operate and maintain the facilities and  infrastructure essential to achieving Stockpile Support and ST&E program  missions. These differences include determining (1) which weapons  activities facilities and infrastructure individual sites support with RTBF  Operations of Facilities funds, (2) which activities included in the RTBF  Operations of Facilities work breakdown structure each site supports  directly or indirectly, and (3) the additional funding sources sites use to  support certain activities included in the RTBF Operations of Facilities  work breakdown structure. (For a detailed discussion of the differences in  M&O contractors’ cost accounting practices, see app. II.) For example,    While NNSA has identified the Mission Critical facilities and  infrastructure at each of its sites, NNSA does not require M&O contractors  to pay for them with RTBF Operations of Facilities funds. In fiscal year  2009, Pantex fully funded the RTBF Operations of Facilities work scope at  all of its Mission Critical facilities with RTBF Operations of Facilities  funds. In contrast, LANL partially funded the RTBF Operations of  Facilities work scope at the majority, but not all, of its Mission Critical  facilities with RTBF Operations of Facilities funds.
Six of the eight sites in the nuclear security enterprise reported to us that  in fiscal year 2009 they allocated the costs of certain activities included in  the RTBF Operations of Facilities work scope into indirect cost pools,  including the costs of activities such as utilities purchasing and real  property maintenance. These indirect cost pools are often funded through  multiple funding sources.
All sites used funding in addition to RTBF Operations of Facilities funds to  pay for activities included in the RTBF Operations of Facilities work scope  in fiscal year 2009. In response to our data collection instrument, site  officials identified 11 sources of funding congressionally directed for other  Weapons Activities programs and subprograms that they expended, in  part, on activities they considered to be included in NNSA’s RTBF  Operations of Facilities work breakdown structure. In addition, some sites  have developed user fee or cost recovery models for multiprogram  facilities. These models are generally based on charges to programmatic  users based on rates applied to, for example, the square footage of a  facility users occupy or the volume of waste they produce. User fees or  cost recovery may be charged as direct costs to Weapons Activities  programs as well as to other programs and projects, or they may be  charged through an indirect cost pool.
As a result of these differences, NNSA cannot reliably identify the total  costs to operate and maintain these facilities and infrastructure across the  nuclear security enterprise. Rather, NNSA officials can only accurately  identify the direct costs to the RTBF Operations of Facilities program, and  in some instances, the direct costs to other Weapons Activities programs.  Senior NNSA officials in the RTBF Program Office acknowledged that  NNSA does not know the sites’ baseline costs to fully execute RTBF  Operations of Facilities work scope, and NNSA does not require M&O  contractors to track their sites’ total operations and maintenance costs for  weapons activities facilities and infrastructure. Instead, NNSA officials  told us they rely on individual contractors to know this information for  their sites as a basis for formulating budget requests; however, some  contractors did not identify a total cost for their sites’ weapons activities  facilities and infrastructure. For example, when we asked, M&O  contractors from two sites—Y-12 and LANL—did not provide the total cost  to operate and maintain weapons activities facilities and infrastructure at  their sites. LANL did not provide this information because site officials  could not determine the extent to which costs charged against indirect  cost pools were associated with activities included in the RTBF  Operations of Facilities work scope. Y-12 did not provide this information  because, according to officials, while their management system is capable  of identifying this information, it cannot do so readily with accuracy.
section_title: Total Costs to Operate and Maintain Weapons Activities Facilities and Infrastructure Likely Significantly Exceed the RTBF Operations of Facilities Budget NNSA Justified to Congress
paragraphs: The total costs to operate and maintain weapons activities facilities and  infrastructure likely significantly exceed the amount NNSA justified to  Congress in the President’s Weapons Activities budget request for RTBF  Operations of Facilities and that Congress directed to NNSA’s sites in  fiscal year 2009. While NNSA requires M&O contractors to report  information on their direct costs to the RTBF Operations of Facilities  program, NNSA does not require M&O contractors to report on the total  sitewide operation and maintenance costs for their weapons activities  facilities and infrastructure. NNSA officials acknowledged that a more  accurate figure for total costs to support the enterprisewide work scope  for RTBF Operations of Facilities would include these other funding  sources M&O contractors use to operate and maintain weapons activities  facilities and infrastructure.
As reported above, when we asked, not all M&O contractors determined  the total cost to operate and maintain weapons activities facilities and  infrastructure at their sites. However, for the six contractors that did so,  the cost to fully operate and maintain weapons activities facilities and  infrastructure greatly exceeded the amount of funding for RTBF  Operations of Facilities in fiscal year 2009. Congressionally directed RTBF  Operations of Facilities funding for these six sites in fiscal year 2009  totaled approximately $558.6 million, but their estimated fiscal 2009  expenditures for this work scope drawn from all funding sources totaled  approximately $1.1 billion. Officials from the two M&O contractors that  did not provide the total costs to operate and maintain weapons activities  facilities and infrastructure at their sites also told us that their  expenditures for this purpose in fiscal year 2009 exceeded their  congressionally directed RTBF Operations of Facilities funds, as funding  from other programs also contributed. NNSA’s congressional budget  justification for RTBF Operations of Facilities is not based on total cost  information, and it does not fully support the scope of work it describes.
section_title: NNSA Is Revising Its Work Breakdown Structure to Capture the Total Costs to Operate and Maintain Weapons Activities Facilities and Infrastructure
paragraphs: NNSA officials and M&O contractors told us that RTBF program  representatives from all of the sites are working closely together and with  NNSA to develop an updated national RTBF work breakdown structure  that will be integrated into a larger national work breakdown structure for  all of the activities overseen by the Office of Defense Programs. The  revised Defense Programs work breakdown structure, once implemented,  is to more closely align activities, including RTBF activities, at the sites  with the nuclear weapons R&D and production capabilities they support.  Moreover, according to NNSA officials, NNSA envisions the sites using the  revised work breakdown structure for budget formulation, budget  execution, and cost collection, unlike the current RTBF work breakdown  structure, which is used only for program management during a single  fiscal year. NNSA has asked that the sites begin submitting their RTBF  program budget requests using the revised Defense Programs work  breakdown structure format. NNSA and site officials agreed that the  revised work breakdown structure should help better explain how RTBF  supports the core missions of the weapons complex and the base  capabilities needed to support those missions. NNSA officials expect the  first phase of revisions to the Defense Programs work breakdown  structure to be completed around the end of 2010. Starting in 2011, NNSA  officials said they plan to begin efforts to further enhance the revised work  breakdown structure by including total cost information for operating and  maintaining weapons activities facilities and infrastructure to support  future budget formulation activities. While this total cost information will  not be wholly captured within the portion of the revised Defense Programs  work breakdown structure associated with RTBF Operations of Facilities,  according to NNSA officials total cost information will be captured in the  revised work breakdown structure as a whole. Differences in how sites  pay for RTBF Operations of Facilities activities—and weapons activities  facilities and infrastructure—will persist under the revised work  breakdown structure. However, NNSA officials said once the revised  Defense Programs work breakdown structure is fully implemented, NNSA  will have a tool to collect consistent cost information from contractors’  disparate cost accounting systems.
section_title: NNSA Does Not Fully Identify or Estimate the Total Costs of the Products and Capabilities Supported through Stockpile Services R&D and Production Activities
paragraphs: While in total NNSA’s Stockpile Services work breakdown structure for  fiscal year 2009 reflects $866.4 million in work scope as justified to  Congress, the work breakdown structure does not fully identify or provide  the estimated costs of the products or capabilities supported through the  Stockpile Services program. Rather, the work breakdown structure is  organized largely around work functions and only partially by specific  products or capabilities. (See app. III for a more detailed Stockpile  Services work breakdown structure.) NNSA officials told us that the  largely functionally oriented work breakdown structure for Stockpile  Services in total captures all the work activities associated with providing  foundational programmatic capabilities for R&D and production capacity  across the nuclear security enterprise. In addition, they said the work  breakdown structure for Stockpile Services is a useful management tool  for executing work functions across products and deliverables. However,  the organization of much of the work breakdown structure precludes the  ready identification of base capabilities and their costs. For example, the  activities included in the Stockpile Services work scope range widely–– from basic infrastructure support to the manufacturing of actual weapons  components––often without specifically identifying the products or  capabilities they are supporting. The exception is Plutonium Sustainment,  the one group that is product-based and that better aligns work activities  with the product or capability it is ultimately supporting. The five work  activity groups in the Stockpile Services work breakdown structure are as  follows (see app. III for more detailed descriptions of these activities):    Production Support ($293.1 million in fiscal year 2009) includes non- weapon-type specific or multi-weapon-type activities that a site performs  to support its own production mission, whatever that mission might be.  Examples of these activities include engineering and manufacturing  operations; quality supervision and control; and tool, gauge, and  equipment services.
Management, Technology, and Production (MTP) ($195.3 million in fiscal  year 2009) includes activities that (1) sustain and improve stockpile  management, (2) develop and deliver weapon use control technologies,  and (3) result in production of weapons components for use in multiple  warhead and bomb types. In contrast to Production Support activities  that are focused on individual sites’ production missions, MTP includes  those activities that benefit the nuclear security enterprise as a whole.
R&D Certification and Safety ($187.6 million in fiscal year 2009) provides  the underlying capabilities to mature basic research conducted in ST&E  programs and serves as a technology development bridge between  research and weaponized technologies. Activities support design work to  develop certain multisystem limited life weapon components; the  specialized facilities, equipment, and personnel to maintain a base  capability to perform hydrodynamic tests and subcritical experiments; and  the preparation of various types of studies.
R&D Support ($35.1 million in fiscal year 2009) consists largely of  administrative and infrastructure support activities for sites’ R&D  missions. These activities include program management for and  coordination of Stockpile Services’ many different outputs, R&D quality  control, computing hardware for personnel, and financial database  maintenance.
Plutonium Sustainment ($155.3 million in fiscal year 2009) captures work  activities associated with pit manufacturing and related R&D, as well as  associated indirect and overhead costs. These funds not only support the  base capabilities for pit manufacturing, but also contribute to the  operation and maintenance of the facilities and infrastructure necessary to  conduct these activities and the actual manufacturing of a limited number  of pits each year.
According to SNL officil, etween $2.7  million nd $12.2 million in fil yer 2009  Prodction Support fndid for ctivitie  tht cold e conidered RTBF Opertion of  Fcilitie work cope relted to operting nd  intining SNL’s netron genertor fcilitie  nd infrastrctre. designed and manufactured at SNL. Activities associated with neutron  generator R&D and production are distributed across several parts of  the Stockpile Services work breakdown structure and are not  combined by NNSA either to provide a total accounting of the activities  necessary to sustain the neutron generator capability or to determine  the total costs of these activities. Furthermore, common support  costs—such as program management—are not allocated to the neutron  generator capability. Our cost guide states that common support costs  should be included in the work breakdown structures of their  associated products or capabilities.
In fil yer 2009, NNSA nd it M&O  contrctor pent $45.9 million in MTP  prodction fnd to provide the cabilitie,  teter, engineering rerce, nd dgement tool to fcilitte enterpriewide  interprettion of d nd informtion  regrding the condition of tem,  substem, nd component in the  tockpile. Thi work support assssment of  rhed reliability, as well as ongoing  labortory safety, ecrity, nd use control  evuation. Surveillnce cabilitie inclde  imting nd teting the effect of vition,  hock, ccelertion, temperre, nd  rdition environment on wepon nd their  component. The illustrtion elow how   ker table, used for teting the effect of  vition on wepon component. surveillance testing is used to assess the condition of systems,  subsystems, and components in the stockpile. According to an NNSA  official, surveillance costs in Stockpile Services for fiscal year 2009  could be as high as $100 million to $130 million, depending on the  extent to which costs are included for activities that support both  surveillance and other capabilities. For example, certain tools may be  used for surveillance and for other production missions. The $45.9  million identified as the costs for surveillance do not include the costs  to maintain or upgrade those tools. Rather, NNSA tracks the costs for  tooling as a function across all products and capabilities. In its fiscal  year 2011 congressional budget justification for both R&D Certification  and Safety and MTP, NNSA discusses funding to support the  surveillance testing capabilities. The budget justification provides no  explanation for why funding in both activity groups is requested and  does not identify the total amount requested for Stockpile Services  surveillance activities.
NNSA’s ongoing effort to revise the Defense Programs work breakdown  structure includes revising the portion associated with Stockpile Services.  Its primary purpose is to provide better evidence to support assertions  made in congressional budget justifications. Our analysis shows the  revised work breakdown structure, once fully implemented, will better  identify products and capabilities supported through Stockpile Services  and provide improved total cost information. NNSA is planning to “tag”  individual activities in the revised Defense Programs work breakdown  structure, including Stockpile Services activities, to identify the products  and capabilities with which those activities are associated, where possible.  This will allow officials to aggregate activities (and their costs) by product  or capability as necessary within the Defense Programs work breakdown  structure. NNSA officials also said that current plans include tagging  indirect or overhead costs. According to NNSA officials, fully realizing the  revised Defense Programs work breakdown structure will give federal  program managers a tool to collect consistent cost information from  disparate contractor cost accounting systems on the products supported  through Stockpile Services.
section_title: RTBF Operations of Facilities and Stockpile Services Costs Are Unlikely to Be Significantly Affected by Reductions in Stockpile Size, and NNSA Lacks Cost Information to Help Justify Planned Budget Increases
paragraphs: Reducing the stockpile size, as has recently been negotiated in the New  Strategic Arms Reduction Treaty, if ratified, and reinforced by the 2010  Nuclear Posture Review, is unlikely to significantly affect NNSA’s RTBF  Operations of Facilities and Stockpile Services costs, which represent  about one-third of NNSA’s total nuclear weapons program budget. A  sizable portion of these costs are fixed and represent the costs of  maintaining the base capabilities necessary to ensure that the nuclear  weapons stockpile continues to be safe, secure, and reliable without  underground nuclear testing. NNSA and its sites are working to reduce  fixed costs and to bring these costs into line with base capabilities by  modernizing and downsizing facilities and infrastructure and by  eliminating excess production and experimental capacity. However, NNSA  lacks information on the costs of these base capabilities that could  adequately justify planned budget increases, particularly with respect to  infrastructure investment.
subsections: section_title: Base Capability Costs Are Unlikely to Be Significantly Affected by Reductions in Stockpile Size
paragraphs: NNSA and site officials identify the scope of work captured in the RTBF  Operations of Facilities and Stockpile Services work breakdown structures  as providing the base capabilities necessary to conduct the ST&E and  system-specific work that ensures the continued safety, security, and  reliability of the nuclear weapons stockpile without underground nuclear  testing. According to NNSA and site officials, most of the base capabilities  these programs provide would be necessary to maintain even if the size of  the stockpile were significantly reduced. Furthermore, NNSA and site  officials identify the majority of the costs associated with these base  capabilities as fixed and thus relatively insensitive to stockpile size. NNSA  recently analyzed its fiscal year 2008 costs to determine the extent to which  these costs represented the fixed or variable costs of sustaining the nuclear  security enterprise. NNSA’s resulting analysis showed that 100 percent of  RTBF cost is fixed for certain capabilities, including high explosives and  weapons assembly/disassembly facilities and infrastructure. In addition, the  analysis showed that between 85 and 90 percent of cost was fixed for  nonnuclear components and plutonium and uranium work. Many of these  costs are included in the RTBF Operations of Facilities and Stockpile  Services work scopes.
While we were unable to independently verify NNSA’s analysis, during the  course of our review we did observe the relatively fixed nature of the  infrastructure and activities necessary to maintain base capabilities. For  example, an NNSA official estimated that the base capability cost for pit  manufacturing is about $120 million in Stockpile Services funds annually,  in comparison with overall Plutonium Sustainment funding for fiscal year  2009 of $155.3 million. Plutonium Sustainment funding also included  production-related R&D costs, as well as incremental costs for actual  component manufacturing. In addition, officials from several sites  highlighted equipment that may be operated for only a limited portion of  each year but that still must be maintained and operated when needed.  Officials at Y-12 noted that the fixed costs to maintain certain of these  capabilities currently exceed the value of their output; however, to ensure  that Stockpile Support and ST&E missions are achieved, these capabilities  must be maintained.
While base capability costs for the nuclear security enterprise are unlikely  to significantly decline as a result of stockpile reductions, a primary  purpose of NNSA’s effort to modernize the nuclear security enterprise is to  reduce the overall level of fixed costs at and among sites by consolidating  infrastructure and reducing capacity to base levels without compromising  national security. According to an NNSA official, 10 years from now one- third of NNSA’s total existing facilities and infrastructure will be in excess  of programmatic need. Furthermore, NNSA’s modernization plans call for  consolidating experimental capabilities among sites within the complex  and for reducing excess production capacity. We previously reported on  efforts at several sites, including LANL and LLNL, to reduce or eliminate  storage of significant quantities of weapons-grade special nuclear material  in site facilities. We also recently reported on progress to replace KCP  infrastructure with a new, modern facility that NNSA expects to result in  significantly reduced operations and maintenance costs for that site.  Other efforts include construction of the new Highly Enriched Uranium  Materials Facility at Y-12, which will enable closure of several older  storage facilities at the Y-12 site. In addition, facility disposition at multiple  sites, including LANL, LLNL, NTS, Pantex, and Y-12, will reduce both  ongoing maintenance costs and deferred maintenance backlogs.  Consolidation of equipment at NTS will reduce maintenance.
section_title: NNSA Lacks Information on Program Costs That Could Help Justify Planned Budget Increases
paragraphs: While base capability costs appear to be relatively insensitive to changes  in the stockpile, complete and reliable information about the costs of  these capabilities is necessary for sound program management and to help  inform future planning. This is particularly important in the current  political and budgetary environment, in which stockpile reductions are  anticipated, and the Administration has planned to increase budget  requests for Weapons Activities by $4.25 billion over the fiscal year 2010  enacted level between fiscal years 2011 and 2015. This planned budget  increase is envisioned in part to ensure adequate support to maintain and  improve base capabilities, including infrastructure recapitalization and  replacement. In such an environment, NNSA is likely to face increased  scrutiny of its planning, programming, and budget execution to determine  the effect of funding increases on the overall health of base capabilities.
In the past, Congress, we, and NNSA have examined different ways of  generating information on the costs of the nuclear weapons program that  would be useful to NNSA management and congressional decision makers  for planning purposes. In 2000 we recommended that NNSA develop a  method to relate its program structure to DOE’s cost accounting  considerations so that fixed and variable costs of the program’s activities  could be determined and made available when the program makes its  annual budget submission. In fiscal year 2005, NNSA reorganized its  budget structure in response to congressional appropriations committees,  which instructed NNSA to begin budgeting by warhead and bomb type— another way to understand program costs. The current budget structure  does identify some type-specific information. However, NNSA and site  officials have continued to caution against allocating RTBF and Stockpile  Services costs to specific warhead or bomb types, stating that allocating  fixed costs does not really provide any additional information than is  already available and could prove to be misleading; in the event of  stockpile reductions, fixed costs would simply be reallocated across  remaining warhead and bomb types and fail to produce the significant cost  savings that might be anticipated.
Statement of Federal Financial Accounting Standards (SFFAS) No. 4,  Managerial Cost Accounting Standards, states a general standard for  federal agencies to provide reliable and timely information on the full cost  of federal programs. The principal purpose of SFFAS No. 4 is to determine  the cost of delivering a program or output to allow an organization to  assess the reasonableness of this cost or to establish a baseline for  comparison. Congressional appropriations committees sought to define  individual warhead and bomb types as NNSA’s programs; however, since  2005 NNSA has defined its programs as a mix of individual warhead and  bomb types, production and R&D functions that support multiple warhead  and bomb types, facilities and infrastructure support, and other supporting  programs such as security. In part, NNSA has done so because DOE’s  accounting guidance does not require NNSA to allocate basic R&D costs  and certain infrastructure capacity costs. Also, by identifying RTBF and  Stockpile Services as programs, NNSA has identified in its budget  structure costs it has determined are fixed. Going forward, NNSA appears  to be moving toward a budget structure aimed at ensuring sufficient  funding to sustain base capabilities and to identify additional funding that  may be necessary to modernize capabilities or to achieve a level of  research or production capacity above the base level. NNSA currently  lacks the total cost information about its existing programs to ensure it  can accurately identify the costs of its base capabilities for future budget  justifications. Through its ongoing effort to revise its Defense Programs  work breakdown structure, which includes portions associated with RTBF  Operations of Facilities and Stockpile Services, NNSA has the opportunity  to capture this information. More specifically,    NNSA’s preliminary revisions to its national work breakdown structure for  RTBF Operations of Facilities reorients the work breakdown structure  around capabilities and products; highlights Mission Critical facilities  that support these capabilities; and identifies three types of costs to  support these capabilities: (1) operations, which represents the current  program; (2) risk reduction, which includes costs above base capability to  support facility and equipment upgrades; and (3) transformation, which  includes costs to replace facilities and infrastructure or otherwise  significantly invest in their modernization. These revisions are positive  developments that we believe will enable NNSA to improve its  understanding of facilities and infrastructure costs paid for with  congressionally directed RTBF Operations of Facilities funds and to  improve the transparency of its RTBF Operations of Facilities budget  justification. According to NNSA officials, once the revised work  breakdown structure for all of Defense Programs has been fully  implemented, it should allow NNSA to capture information on the total  costs to operate and maintain weapons activities facilities and  infrastructure, not just those costs paid for with congressionally directed  funds for RTBF Operations of Facilities. In the absence of total cost  information, according to a senior NNSA official, NNSA is challenged to  balance operations and maintenance costs with recapitalization projects  and with large facility replacement projects.
According to NNSA officials, the portion of the revised Defense Programs  work breakdown structure for Stockpile Services will include a  reorientation around capabilities and products, where possible. While  several NNSA officials said that improving cost estimating is not a primary  impetus for revising the Stockpile Services work breakdown structure  because all Stockpile Services costs are fixed, officials responsible for  revising the Defense Programs work breakdown structure told us that  doing so will help achieve transparent cost reporting from disparate  contractor cost accounting systems, regardless of the fixed nature of these  costs. Without identifying the total costs of Stockpile Services-supported  products and capabilities, NNSA will be challenged to explain the effects  of funding changes or justify the necessity for increased investment to  support or enhance base capabilities. It is important to recognize that  having a product- or capability-oriented work breakdown structure for  Stockpile Services that includes associated support costs should not  reduce NNSA’s or its M&O contractors’ flexibility to manage Stockpile  Services activities by function.
section_title: Conclusions
paragraphs: Within the global community, the Administration, and Congress, a bargain is  being struck on nuclear weapons policy. Internationally, if the treaty is  ratified, significant stockpile reductions have been negotiated between the  United States and Russia. Domestically, a new Nuclear Posture Review has  provided an updated policy framework for the nation’s nuclear deterrent. To  enable this arms reduction agenda, the Administration is requesting from  Congress billions of dollars in increased investment in the nuclear security  enterprise to ensure that base scientific, technical, and engineering  capabilities are sufficiently supported such that a smaller nuclear deterrent  continues to be safe, secure, and reliable. For its part, NNSA must  accurately identify these base capabilities and determine their costs in order  to adequately justify future presidential budget requests and show the  effects on its programs of potential budget increases. As it now stands,  NNSA may not be accurately identifying the costs of base capabilities  because (1) without guidance to M&O contractors for consistent reporting,  NNSA cannot identify the total costs to operate and maintain essential  weapons activities facilities and infrastructure, and (2) NNSA analyzes the  reported costs of R&D and production functions without fully identifying  these functions with the specific capabilities supported through Stockpile  Services. Without taking action to identify these costs, NNSA risks being  unable to identify the return on investment of planned budget increases on  the health of its base capabilities or to identify opportunities for cost saving.  NNSA has the opportunity to mitigate these risks by addressing them  through the ongoing revision of work breakdown structures and through  identifying means of collecting the total costs of its base capabilities from  M&O contractors, which will not necessitate any changes to the way that  Weapons Activities programs are budgeted or how funds are expended.  Without taking these actions, NNSA will not have the management  information it needs to better justify future budget requests by making its  justifications more transparent. Additionally, the availability of this  information will assist Congress with its oversight function.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Administrator of NNSA take the following five  actions.
To allow Congress to better oversee management of the nuclear security  enterprise and to improve NNSA’s management information with respect  to the base capabilities necessary to ensure nuclear weapons are safe,  secure, and reliable:  (1) develop guidance for M&O contractors for the consistent collection of  information on the total costs to operate and maintain weapons activities  facilities and infrastructure;  (2) require M&O contractors to report to NNSA annually on the total costs  to operate and maintain weapons activities facilities and infrastructure at  their sites;  (3) evaluate the total costs of operating and maintaining existing weapons  activities facilities and infrastructure as part of program planning  processes and budget formulation, especially in relation to recapitalization  and modernization of the nuclear security enterprise; and  (4) once the Stockpile Services work breakdown structure reflects a  product or capability basis, use this work breakdown structure to develop  product/capability cost estimates that adequately justify the congressional  budget request for Stockpile Services.
In light of significant proposed increases to NNSA’s nuclear weapons  program budget in fiscal year 2011 and beyond, we also recommend that  the Administrator of NNSA:  (5) include in future years’ congressional budget justifications (a) detailed  justifications for how these proposed funding increases will affect  program execution and (b) information about how the funding increases  affected programs.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to NNSA for its review and comment.  NNSA agreed with the report and its recommendations. NNSA’s comments  on our draft report are presented in appendix IV. NNSA and several of its  sites also provided technical comments, which we incorporated into the  report as appropriate. In particular, we worked with NNSA officials to  ensure the technical accuracy of the discussion of NNSA’s efforts to revise  the Defense Programs national work breakdown structure. Because this  effort is ongoing, we and NNSA wanted to ensure that information  included in this report is as current and complete as possible.
We are sending copies of this report to the appropriate congressional  committees, Secretary of Energy, Administrator of NNSA, and other  interested parties. In addition, the report will be available at no charge on  the GAO Web site at http://www.gao.gov.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: At the request of the Chairman and Ranking Member, Subcommittee on  Strategic Forces, Committee on Armed Services, House of  Representatives, we were asked to (1) determine the extent to which the  National Nuclear Security Administration’s (NNSA) Readiness in  Technical Base and Facilities (RTBF) Operations of Facilities  congressional budget justification that supplements the Budget of the  United States Government (i.e., the President’s Budget) for fiscal year  2009 is based on the total cost of operating and maintaining weapons  facilities and infrastructure; (2) determine the extent to which NNSA’s  fiscal year 2009 congressional budget justification for Stockpile Services  identifies the total costs of providing foundational research and  production support capabilities; and (3) discuss the implications, if any, of  a smaller stockpile on RTBF Operations of Facilities and Stockpile  Services costs.
In conducting our review and to accomplish all of these objectives, we  reviewed and analyzed relevant documents concerning NNSA’s weapons  programs and activities, such as NNSA’s congressional budget  justifications for fiscal years 2009, 2010, and 2011 and the fiscal year 2009  national work breakdown structures for RTBF Operations of Facilities and  Stockpile Services (see apps. II and III). We analyzed NNSA’s work  breakdown structures and compared them with GAO’s best practices, as  published in the GAO Cost Estimating and Assessment Guide: Best  Practices for Developing and Managing Capital Program Costs. To help  assess the merits and requirements of indirect cost allocations to warhead  and bomb types, we examined the Statement of Federal Financial  Accounting Standards No. 4, promulgated by the Federal Accounting  Standards Advisory Board, and Cost Accounting Standards, promulgated  by the U.S. Cost Accounting Standards Board. In addition, we interviewed  key officials from the Department of Energy’s Office of the Chief Financial  Officer and Office of Engineering and Construction Management, and  NNSA’s Office of Defense Programs, Office of Management and  Administration, Office of Field Financial Management, and site offices.  Furthermore, we collected and analyzed budget, cost, and program  documents and interviewed key officials from all eight NNSA sites. We  visited six of the eight sites, including Lawrence Livermore (LLNL), Los  Alamos (LANL), and Sandia National Laboratories (SNL); Nevada Test Site  (NTS); Pantex Plant (Pantex); and Y-12 National Security Complex (Y-12),  where in total we toured more than 30 weapons activities facilities. All of  these facilities were Mission Critical—directly employed to meet highest- level NNSA weapons program milestones. We selected these facilities  based upon the following criteria: (1) their uniqueness within the nuclear  security enterprise, (2) the importance of the capabilities provided by the  facilities, and (3) the complexity of their operations. We went to these  sites to understand their roles in weapons program activities and the  nuclear weapons budget, and to see the facilities, equipment, and  infrastructure within the nuclear security enterprise.
To determine the extent to which NNSA’s RTBF Operations of Facilities  congressional budget justification for fiscal year 2009 is based on the total  cost of operating and maintaining weapons facilities and infrastructure,  we also collected data from NNSA’s eight sites on their facilities and the  sources of funding they use to fully support the operations and  maintenance of weapons activities facilities and infrastructure. These data  were collected through the use of a data collection instrument we  developed and transmitted electronically to officials identified at all eight  sites in the form of a Word Electronic Questionnaire. The data collection  instrument was used to obtain RTBF program information and fiscal year  2009 expenditure data. The practical difficulties of employing any data  collection instrument may introduce unwanted discrepancies. For  example, differences in how a particular question is interpreted, the  sources of information available to respondents, or the individual  characteristics of the people who respond can introduce unwanted  variability into the results. We included steps in both the data collection  and data analysis stages to minimize such discrepancies. For example, we  took the following steps:  In developing this data collection instrument, we consulted with  stakeholders within GAO and with NNSA officials to properly phrase our  questions and to format the instrument; we also pretested the instrument  with NNSA officials in the Office of Defense Programs and the NNSA  Service Center, and with NTS, Pantex, and SNL management and  operating (M&O) contractors, on a line-by-line basis to ensure the  questions were clear, complete, and accurate, and made appropriate  modifications and clarifications to increase data validity and reliability.
Upon receiving responses from the sites to the data collection instrument,  we analyzed data on costs, budget, work scope, direct funding sources,  and indirect cost pools on a consistent basis for all sites; we followed up  with sites as needed to ensure their responses were accurate and  complete; and finally, we performed a reliability assessment of these data  and determined they were sufficiently reliable for the purposes of our  report.
In addition, we reviewed NNSA documents such as the RTBF Operations  of Facilities national work breakdown structure, the RTBF Mission  Dependency Guidance, and sites’ documents such as their RTBF Site  Execution Plans and RTBF Quarterly Reports, and interviewed NNSA and  site officials. We also requested general information and general fiscal year  2009 funding information from sites on several specific weapons activities  facilities to use as examples in this report. We worked with GAO  methodologists to develop criteria for selecting the facility examples such  as facilities at sites we visited, facilities at both laboratories and plants,  facilities with diverse funding expenditures, and facilities conducting both  R&D and production missions.
To determine the extent to which NNSA’s fiscal year 2009 congressional  budget justification for Stockpile Services identifies the total costs of  providing foundational research and production support capabilities, we  also examined and analyzed NNSA’s Stockpile Services national work  breakdown and NNSA’s expenditure data for fiscal year 2009, observed  neutron generator and plutonium pit manufacturing facilities supported  with Stockpile Services funds, and interviewed NNSA and site officials. In  addition, we requested information from NNSA on specific Stockpile  Services activities to use as examples in our report. We selected activities  based on their financial significance in the Stockpile Services work  breakdown structure.
To discuss the implications, if any, of a smaller stockpile on RTBF  Operations of Facilities and Stockpile Services costs, we also reviewed  documents such as NNSA’s Final Complex Transformation Supplemental  Programmatic Environmental Impact Statement and NNSA’s  Infrastructure and Modernization Report to obtain estimates of the nuclear  security enterprise’s fixed costs. In addition, we interviewed NNSA and  site officials.
We conducted the work between April 2009 and June 2010 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
section_title: Appendix II: Readiness in Technical Base and Facilities Operations of Facilities
subsections: section_title: RTBF Operations of Facilities Funding and Work Breakdown Structure
paragraphs: Congressional spending directives designate funds within NNSA’s  Weapons Activities appropriation for the RTBF Operations of Facilities  subprogram at each of NNSA’s eight sites. In addition, a small amount is  also directed for Institutional Site Support, which is at NNSA’s discretion  to prioritize for expenditure (see table 2).
Table 3 provides NNSA’s RTBF work breakdown structure applicable to  all sites for fiscal year 2009 and showing three levels of detail. Sites may  create further levels of detail for their own management, budgeting, or  cost collection. Alternatively, sites may use their own work breakdown  structures that they ultimately cross-walk to NNSA’s work breakdown  structure to report to NNSA program managers on how congressionally  directed funds were expended.
section_title: Differences in Sites’ Cost Accounting Practices for RTBF Operations of Facilities
paragraphs: Each of the eight sites in the nuclear security enterprise has established its  own cost accounting practices for how to account for the activities  necessary to operate and maintain weapons activities facilities and  infrastructure. While individual M&O contractors may be Cost Accounting  Standards (CAS) compliant, differences in their cost accounting practices  preclude NNSA from being able to identify the total costs to operate and  maintain the facilities and infrastructure essential to achieving Stockpile  Support and science, technology, and engineering (ST&E) program  missions. These differences include determining (1) which weapons  activities facilities and infrastructure individual sites support with RTBF  Operations of Facilities funds, (2) which activities included in the RTBF  Operations of Facilities work breakdown structure each site supports  directly or indirectly, and (3) the additional funding sources sites use to  support certain activities included in the RTBF Operations of Facilities  work breakdown structure.
subsections: section_title: Facilities and Infrastructure Supported with RTBF Operations of Facilities Funds
paragraphs: Consistent with congressional funding direction, each site has discretion  to determine which of its facilities and infrastructure will be supported  with RTBF Operations of Facilities funds. While NNSA has identified the  mission essential facilities and infrastructure at each of its sites, NNSA  does not require M&O contractors to pay for essential facilities and  infrastructure with RTBF Operations of Facilities funds. For example,  LLNL officials told us their top priority for RTBF Operations of Facilities  funds is fully supporting safe and secure nuclear facilities operations. In  fiscal year 2009, only KCP fully funded all of its essential weapons  activities facilities with RTBF Operations of Facilities funds. Table 4  shows the extent to which weapons activities facilities and infrastructure  were fully, partially, or not supported with RTBF Operations of Facilities  funds in fiscal year 2009 across the nuclear security enterprise.
While NNSA can identify the activities its contractors classify as direct to  the RTBF Operations of Facilities program, NNSA cannot easily identify  those activities its contractors classify as indirect but that also are  included in the RTBF Operations of Facilities work breakdown structure.  Six of the eight sites in the nuclear security enterprise reported to us that  in fiscal year 2009 they allocated certain activities included in the RTBF  Operations of Facilities work scope into indirect cost pools. These indirect  cost pools are often funded through multiple funding sources. For  example,    NNSA includes utilities and general services, such as electric power  and steam supplied to weapons activities facilities, as an activity in its  RTBF Operations of Facilities work breakdown structure, but two  sites—LLNL and SNL—did not consider utilities costs to be direct to  the RTBF Operations of Facilities program in fiscal year 2009.
The RTBF Operations of Facilities work breakdown structure includes  real property maintenance—maintenance for facilities, facility  equipment, and programmatic equipment—when that real property  supports multiple, not individual, weapon programs. SNL officials told  us that their direct costs to the RTBF Operations of Facilities program  for real property maintenance include only the programmatic  equipment that provides mission capabilities inside weapons activities  facilities. Real property maintenance costs for facilities or facility  equipment are indirect. In contrast, LLNL officials told us that real  property maintenance costs for programmatic equipment, facility  equipment, and facilities themselves may be direct costs to the RTBF  Operations of Facilities program, depending on the facility and the  nature of the equipment. equipment and training staff to operate this equipment, in its RTBF  Operations of Facilities work breakdown structure, but there were  significant differences across the nuclear security enterprise in how  SPEC costs were actually funded during fiscal year 2009. Three sites— KCP, Pantex, and NTS—funded all SPEC costs directly with RTBF  Operations of Facilities funds. Another three sites—LLNL, LANL, and  SNL—classified SPEC costs as direct and partially paid for these costs  with RTBF Operations of Facilities funds. Y-12 did not fund SPEC with  RTBF Operations of Facilities funds at all, while SRS reported that it  did not spend any money on SPEC activities in fiscal year 2009.
Finally, all sites used funding in addition to RTBF Operations of Facilities  funds to pay for activities included in the RTBF Operations of Facilities  work scope in fiscal year 2009. Consistent with CAS, M&O contractors are  allowed to use these additional funding sources as long as their cost  accounting practices are disclosed; their costing practices for supporting  facilities and infrastructure are consistently applied; the programs  supporting facilities and infrastructure benefit from their use; and their  practices otherwise comply with applicable cost principles, CAS, and the  M&O contract. These additional sources of funding included (1) other  Weapons Activities programs that in some instances are congressionally  mandated, and (2) programs outside of Weapons Activities, including  Defense Nuclear Nonproliferation, Department of Energy (DOE), and  other federal agencies. NNSA officials cannot easily identify all of the  costs associated with RTBF Operations of Facilities work scope paid for  through these other funding sources. In response to our data collection  instrument, site officials identified 11 sources of funding congressionally  directed for other Weapons Activities programs and subprograms that   they expended, in part, on activities they considered to be included in  NNSA’s RTBF Operations of Facilities work breakdown structure.   For example,    As congressionally directed, LLNL expended funds designated for the  Inertial Confinement Fusion and High Yield and the Advanced Simulation  and Computing Campaigns to support RTBF Operations of Facilities  activities for facilities and infrastructure associated with these programs.
LANL expended congressionally directed funds for the Directed Stockpile  Work program to support activities included in the RTBF Operations of  Facilities work breakdown structure—including some facilities  management and support, real property maintenance, and SPEC costs.
SRS expended funds congressionally directed for the Tritium  Readiness Campaign to support all the activities included in the RTBF  Operations of Facilities work breakdown structure at its Tritium  Extraction Facility.
Y-12 expended funds congressionally directed for the Facilities  Infrastructure Recapitalization Program (FIRP) to support RTBF  Operations of Facilities activities covering real property maintenance,  excess facilities management and disposition, and construction  projects.
NNSA Defene Progr mission  supported: High exploive rerch,  development, nd teting for the Science nd  Engineering Cmpign, Advnced Sim- tion nd Compting (compter modeling),  nd Directed Stockpile Work (detontor  surveillnce) facility equipment in its RTBF Operations of Facilities work breakdown  structure. However, most M&O sites only partially paid for capital  equipment costs in their weapons activities facilities with RTBF  Operations of Facilities funds in fiscal year 2009. Officials from  multiple sites, including Pantex and SNL, told us that some capital  equipment costs that could be paid for with RTBF Operations of  Facilities funds can also be paid for with funds directed for other  Weapons Activities programs, such as Stockpile Services, that use the  equipment.
The exception is KCP, which fully funded its capital equipment costs in fiscal year 2009  with RTBF Operations of Facilities funds. million in user fees to Weapons Activities programs—such as the pit  manufacturing program, and the Science and Engineering Campaigns—as  well as to other work sponsors that used space inside the laboratory’s  plutonium facility.
Congressional spending directives designate funds within NNSA’s  Weapons Activities appropriation for the Stockpile Services subprogram.  Within the subprogram, NNSA obligates funds to its eight sites for  expenditure. In fiscal year 2009, NNSA obligated $866.4 million to its sites  to execute Stockpile Services work scope (see fig. 2).
According to our cost guide, a work breakdown structure is the  cornerstone of every program because it defines in detail the work  necessary to accomplish a program’s objectives and promotes  accountability by identifying work products that are independent of one  another. This provides a basis for identifying resources and tasks for  developing a program cost estimate. The ability to generate reliable cost  estimates is a critical function, and a program’s cost estimate is often used  to establish budgets. NNSA’s sites may create further levels of detail  within the work breakdown structure for their own management,  budgeting, or cost collection. Our cost guide is a compilation of cost  estimating best practices from across industry and government. Among  other things, these best practices discuss establishing a product-oriented  work breakdown structure, which allows a program to track cost and  schedule by defined deliverables. This allows a program manager to more  precisely identify which components are causing cost or schedule  overruns and to more effectively mitigate the root causes of overruns. For  NNSA, a product may best be thought of more broadly as a capability,  since a significant portion of NNSA’s mission is research and development  (R&D). Thus, a product-oriented work breakdown structure for NNSA  could be focused on the capability to execute a class of experiments, to  produce a weapon component, or to conduct specified R&D. Our cost  guide emphasizes that a product-oriented work breakdown structure  should contain program management and other overhead activities to  make sure all work activities are included. In contrast, a functionally  based work breakdown structure—for example, one based on  manufacturing, engineering, or quality control—would not have the  detailed information to reflect cost, schedule, and technical performance  on specific deliverables. Table 5 provides NNSA’s work breakdown  structure applicable to all sites for fiscal year 2009 and showing four levels  of detail.
In fil yer 2009, $59.6 million in Prodc- tion Support fndas pent to provide  tooling nd tooling ervice ite where  prodction work occ. Tooling provide  prodction fcilitie with the tool, prt nd  ccessorie, mchinery, eqipment, nd  labor needed for prodction nd to mintin  prodction eqipment. Thi work o  involve preption of pecifiction nd  deign for tooling nd tet eqipment. The  illustrtion elow how uum clition  tem— piece of pecilized eqipment  used to clite/certify vuum gge—for  which tooling fnd support corrective nd  preventive mintennce. production mission, whatever that mission may be. More specifically,  these support activities—such as engineering and manufacturing  operations; quality supervision and control; tool, gage, and equipment  services (tooling); purchasing, shipping, and materials management;  and electronic information systems—enable the production of  weapons components and weapon assembly/disassembly, and help  support surveillance testing. To this end, NNSA officials characterized  Production Support as paying directly for the indirect activities at  individual sites that (1) are associated with providing manufacturing  support for production processes and (2) support more than one  warhead or bomb type.
Management, Technology, and Production (MTP). MTP is the second  largest activity group within Stockpile Services. According to NNSA,  MTP includes activities that (1) sustain and improve stockpile  management, (2) develop and deliver weapon use control  technologies, and (3) result in production of weapons components for  use in multiple warhead and bomb types. In contrast to Production  Support activities that are focused on individual sites’ production  missions, MTP includes those activities that benefit the nuclear  security enterprise as a whole. NNSA officials characterized MTP as  supporting a mix of direct and indirect activities. More specifically,  among other things, MTP management funds support weapons test  data archiving and other shared data systems; MTP technology funds  support studies and assessments relating to the safety and security of  nuclear weapons; and MTP production funds support the interpretation  of the results from surveillance tests, which are used to monitor and  evaluate the condition, safety, and reliability of weapons in the  stockpile. In addition, certain activities are captured within MTP that  would be classified by NNSA if associated with a specific warhead or  bomb type. According to NNSA officials, costs for these activities  represent a relatively small amount of MTP, which one official  estimated at approximately 10 percent of surveillance costs, or about  $4.6 million in fiscal year 2009.
In fil yer 2009, NNSA nd it M&O  contrctor pent $9. million in R&D  Certifiction nd Safety fnd supporting the  base cability to condct hydrodynmic nd  subcriticl te. Thee experiment improve  ndernding of weponteri.   Hydrodynmic te assss the performnce  nd reliability of  wepon using high  exploive to detonte mock wepon tht  contin surrogte rther thn fissile mteri,  to lyze the repone of the djcent  teri in the wepon. Subcriticl te use  exploive to assss the propertie of  pltoninder high pressure thtop  hort of cler detontion. The illustrtion  elow how the Cygnusual-m  rdiogrphic fcility, which provide X-ry  imging of subcriticl te. Cygnus locted  in the NTS’s U1 Tnnel Complex,  pproximtely 1,000 feet ndergrond.
R&D Certification and Safety. R&D Certification and Safety provides  the underlying capabilities to mature basic research conducted in  ST&E programs. In this sense, R&D Certification and Safety serves as a  technology development bridge between research and weaponized  technologies. Among other things, R&D Certification and Safety funds  support three major activities. First, funds are used to support design  work to develop certain limited life weapon components that are used  in multiple warhead and bomb types and that must be exchanged on a  regular basis because they expire. Second, funds support the  specialized facilities, equipment, and personnel to maintain a base  capability to perform hydrodynamic tests, which examine the  performance of nuclear weapons pits using surrogate materials to  replace fissionable materials, and subcritical experiments, which  examine the material properties of plutonium. Finally, funds support  the preparation of various types of studies, including those produced  annually to report to the President of the United States on the safety,  security, and reliability of the stockpile.
R&D Support. R&D Support is the smallest of the functional work  activity groups in Stockpile Services. R&D Support consists largely of  indirect activities that provide administrative and infrastructure  support for sites’ R&D missions. These activities include program  management for and coordination of Stockpile Services’ many different  outputs, R&D quality control, computing hardware for personnel, and  financial database maintenance.
Plutonium Sustainment. Plutonium Sustainment is the only fully  product-oriented activity group in Stockpile Services. While  incorporated as an activity group within Stockpile Services, Plutonium  Sustainment has its own work breakdown structure that is independent  from the other four Stockpile Services activity groups. The Plutonium  Sustainment work breakdown structure includes production support,  R&D support, and program management activities. According to an  NNSA official, this work breakdown structure, which captures work  activities associated with pit manufacturing and related R&D—as well  as associated indirect and overhead costs—is largely a legacy from  when Plutonium Sustainment was an ST&E program instead of part of  Stockpile Services. This is markedly different from the other four  groups, where production or R&D activities are organized separately  from their supporting overhead activities. The same NNSA officials said  that nearly all Plutonium Sustainment funds are spent at LANL, which  is home to the nation’s pit manufacturing capability. These funds not  only support the base capabilities for plutonium R&D and pit  manufacturing, but also contribute to the operation and maintenance of  the facilities and infrastructure necessary to conduct these activities as  well as the actual manufacturing of a limited number of pits each year.
section_title: Appendix IV: Comments from the National Nuclear Security Administration
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, the following staff members made  key contributions to this report: Jonathan Gill, Assistant Director; John  Bauckman; Allison Bawden; Muriel Brown; Abe Dymond; Eugene Gray;  Carol Henn; Alison O’Neill; Timothy Persons; Cheryl Peterson; Rebecca  Shea; Vasiliki Theodoropoulos; Jack Warner; and Franklyn Yao.