Fusion Energy: Actions Needed to Finalize Cost and Schedule Estimates for U.S. Contributions to an International Experimental Reactor
Published: 2014-06-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: ITER is an international research facility being built in France to demonstrate the feasibility of fusion energy. Fusion occurs when the nuclei of two light atoms collide and fuse together at high temperatures, which results in the release of large amounts of energy. The United States has committed to providing about 9 percent of ITER's construction costs through contributions of hardware, personnel, and cash, and DOE is responsible for managing those contributions, as well as the overall U.S. fusion program. In fiscal year 2014, the U.S. ITER Project received $199.5 million, or about 40 percent of the overall U.S. fusion program budget.
GAO was asked to review DOE's cost and schedule estimates for the U.S. ITER Project. This report examines (1) how and why the estimated costs and schedule of the U.S. ITER Project have changed since 2006, (2) the reliability of DOE's current cost and schedule estimates, and (3) actions DOE has taken to reduce U.S. ITER Project costs and plan for their impact on the overall U.S. fusion program. GAO reviewed documents; assessed DOE's current estimates against best practices; and obtained the perspectives of 10 experts in fusion energy and project management.
section_title: What GAO Found
paragraphs: Since the International Thermonuclear Experimental Reactor (ITER) Agreement was signed in 2006, the Department of Energy's (DOE) estimated cost for the U.S. portion of ITER has grown by almost $3 billion, and its estimated completion date has slipped by 20 years (see fig.). DOE has identified several reasons for the changes, such as increases in hardware cost estimates as designs and requirements have been more fully developed over time.
DOE's current cost and schedule estimates for the U.S. ITER Project reflect most characteristics of reliable estimates, but the estimates cannot be used to set a performance baseline because they are linked to factors that DOE can only partially influence. A performance baseline would commit DOE to delivering the U.S. ITER Project at a specific cost and date and provide a way to measure the project's progress. According to DOE documents and officials, the agency has been unable to finalize its cost and schedule estimates in part because the international project schedule the estimates are linked to is not reliable. DOE has taken some steps to help push for a more reliable international project schedule, such as providing position papers and suggested actions to the ITER Organization. However, DOE has not taken additional actions such as preparing formal proposals that could help resolve these issues. Unless such formal actions are taken to resolve the reliability concerns of the international project schedule, DOE will remain hampered in its efforts to create and set a performance baseline for the U.S. ITER Project.
DOE has taken several actions that have reduced U.S. ITER Project costs by about $388 million as of February 2014, but DOE has not adequately planned for the potential impact of those costs on the overall U.S. fusion program. The House and Senate Appropriations Committees have directed DOE to complete a strategic plan for the U.S. fusion program. GAO has previously reported that strategic planning is a leading practice that can help clarify priorities, and DOE has begun work on such a plan but has not committed to a specific completion date. Without a strategic plan for the U.S. fusion program, DOE does not have information to create an understanding among stakeholders about its plans for balancing the competing demands the program faces with the limited available resources or to help improve Congress' ability to weigh the trade-offs of different funding decisions for the U.S. ITER Project and overall U.S. fusion program.
section_title: What GAO Recommends
paragraphs: GAO recommends, among other things, that DOE formally propose the actions needed to set a reliable international project schedule and set a date to complete the U.S. fusion program's strategic plan. DOE agreed with GAO's recommendations.

section_title: Letter
paragraphs: In 2006, the United States signed an agreement with the European Union  and five other countries to help build and operate the International  Thermonuclear Experimental Reactor (ITER), a first-of-its-kind research  facility currently being built in Cadarache, France, to demonstrate the  feasibility of fusion energy. Fusion occurs when the nuclei of two light  atoms—typically hydrogen isotopes—collide and fuse together when  heated at high temperatures and placed under tremendous pressure. The  result is the release of a large amount of energy that, it is hoped,  someday may be captured to produce electricity. Fusion has the potential  to be an abundant source of energy to help meet future energy needs,  and it also offers many other benefits. Among those benefits would be no  emissions of greenhouse gases, no risk of the type of severe accidents  that could occur at existing nuclear power plants, and no long-lived  radioactive waste. Over the last 50 years, scientists around the world  have made progress in understanding how to create the conditions for  fusion, but many outstanding scientific and technical questions must still  be addressed before fusion can be used as an energy source. As a  result, the United States and the six other parties to the ITER Agreement  identified ITER as a critical experiment that, if successful, could finally  produce more power from fusion reactions than is needed to start the  fusion reaction—the first step toward producing electricity from fusion  energy and developing the first demonstration fusion power plant. By  participating in ITER, the United States will share the cost of building this  complex and expensive fusion device, benefit from the scientific and  technological expertise of the six other ITER members, and have full  access to ITER research results. However, since the ITER Agreement  was signed in 2006, the expected total cost of building ITER has grown  by billions of dollars from its original estimate of about $5 billion, and its  construction schedule has slipped by years, as have the cost and  schedule estimates for the U.S. portion of the construction project.
The ITER Agreement established the management framework for ITER.  Under the agreement, the international ITER Organization is responsible  for managing the overall project, including specifying final hardware  designs and performance parameters; managing the international project  schedule; and assembling, installing, and commissioning the ITER   The ITER Organization is led by a Director-General, who  facilities. serves as its Chief Executive Officer and is responsible for the execution  of the organization’s activities. The ITER Organization is governed by the  ITER Council, which is composed of high-level government officials from  each of the seven ITER members.each of the seven ITER members is responsible for procuring and  delivering an assigned set of hardware components and making cash and  personnel contributions to the ITER Organization. Each member also is  responsible for managing the cost and schedule of its assigned   During ITER’s construction phase,  contributions within the milestones set by the international project  schedule. The United States has committed to providing about 9 percent  of the cost of building ITER, and those construction contributions are  managed by the Department of Energy (DOE) through the U.S. ITER  Project Office at Oak Ridge National Laboratory in Oak Ridge,  Tennessee, in partnership with Princeton Plasma Physics Laboratory and  Savannah River National Laboratory. DOE’s Office of Fusion Energy  Sciences, which is responsible for managing the overall U.S. fusion  program within the Office of Science, provides program-level oversight of  the U.S. ITER Project. Through March 2014, DOE had spent about $692  million on the project. In fiscal year 2014, the U.S. ITER Project received  $199.5 million, which represented about 40 percent of that year’s overall  U.S. fusion program budget and continued a pattern of substantial  funding increases for the project that began in fiscal year 2011 after  several years of fluctuating funding levels.
In 2007, when the U.S. ITER Project was just beginning, we reported on  the importance of DOE assessing the full costs of U.S. participation in  ITER and setting a definitive cost estimate for the project. We noted at  the time that DOE had made a commitment to provide hardware  components to ITER without a definitive cost and schedule estimate and  a complete project design and, as a result, DOE’s preliminary cost  estimate of $1.122 billion for U.S. contributions to ITER’s construction  might be subject to significant change. We also noted the risk that  management challenges facing the ITER Organization could result in  ITER construction delays and further increase costs for the United States.  Today, significant questions remain about how much the U.S. ITER  Project will cost, when it will be completed, and how DOE plans to  manage the impact of U.S. ITER Project costs on the overall U.S. fusion  program in a constrained federal budget environment. The House and  Senate Appropriations Committees, in particular, have expressed concern  that DOE will fund the U.S. ITER Project at the expense of the rest of the  U.S. fusion program, and they have directed DOE to provide detailed cost  and schedule estimates for the project.
In this context, you asked us to review DOE’s cost and schedule  estimates for U.S. contributions to ITER’s construction. This report  examines (1) how and why the estimated cost and schedule for the U.S.  ITER Project have changed since 2006; (2) the reliability of DOE’s current  cost and schedule estimates for the U.S. ITER Project and the factors, if  any, that have affected their reliability; and (3) the actions DOE has taken,  if any, to reduce U.S. ITER Project costs and plan for their potential  impact on the overall U.S. fusion program.
To conduct this work, we reviewed the ITER Agreement, relevant laws,  and DOE guidance. To determine how and why the estimated costs and  schedule for the U.S. ITER Project have changed since 2006, we  reviewed DOE and U.S. ITER Project Office documents. We assessed  the reliability of the data on the changes in the cost estimates by  interviewing DOE officials and U.S. ITER Project Office representatives  who had knowledge of the data and by other means, and we determined  that the data were sufficiently reliable for reporting on the reasons for the  changes in the cost estimates. To evaluate the reliability of DOE’s current  cost and schedule estimates and the factors, if any, that have affected  their reliability, we reviewed DOE’s most recent cost and schedule  estimates for the U.S. ITER Project—as developed by the U.S. ITER  Project Office in August 2013—and DOE’s internal peer review of those  estimates. We also reviewed DOE’s project management order and  related guidance, as well as an October 2013 report to the ITER Council  on the results of a management assessment of the ITER Organization.  We assessed the reliability of DOE’s current cost and schedule estimates  by analyzing those estimates against best practices identified in GAO’s  Cost Estimating and Assessment Guide and Schedule Assessment  Guide.ITER Project Office representatives who prepared the estimates,   Specifically, we reviewed documentation, interviewed the U.S.  reviewed relevant sources, and compared the information collected with  the best practices. For DOE’s current schedule estimate, we assessed  the characteristics of two selected subordinate schedules—the central  solenoid modules schedule and the tokamak cooling water system  schedule—that are used as inputs to the integrated U.S. ITER Project  master schedule. We were able to use the results of the two  subordinate schedules to provide insight into the integrated master  schedule since the same strengths and weaknesses of the subordinate  schedules would transfer to the master schedule. We determined that the  schedules were sufficiently reliable for our reporting purposes, and our  report notes the instances where reliability concerns affect the quality of  the schedules. To examine the actions DOE has taken, if any, to reduce  U.S. ITER Project costs and plan for their potential impact on the overall  U.S. fusion program, we reviewed DOE and U.S. ITER Project Office  documents on actions taken to reduce and plan for U.S. ITER Project  costs and reviewed our prior work on leading practices in federal strategic  planning for agency divisions, programs, or initiatives.interviewed 10 experts in fusion energy and the management of large  scientific research projects. We selected these experts through a  multistep process to ensure coverage and a range of perspectives from  industry, DOE’s national laboratories, and universities. We analyzed the  experts’ responses across a standard set of questions and summarized  the results. Appendix I presents a more detailed description of our  objectives, scope, and methodology, and appendix II lists the names and  affiliations of the 10 experts we interviewed.
We conducted this performance audit from June 2013 to June 2014 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: Fusion is the energy source that powers the sun and stars. Fusion occurs  when the nuclei of two light atoms collide with sufficient energy to  overcome their natural repulsive forces and fuse together. Scientists are  currently using deuterium and tritium—two hydrogen isotopes—for this  reaction. When the nuclei of the two atoms collide, the collision produces  helium and a large quantity of energy (see fig. 1). For the fusion reaction  to take place, the atoms must be heated to very high temperatures— about 100 million degrees centigrade, or 10 times the temperature of the  surface of the sun—and placed under tremendous pressure.
For more than 50 years, the United States has been trying to control  fusion to produce electricity. The United States is pursuing two paths to  achieve controlled fusion—magnetic and inertial. The goal for both  approaches is to generate more energy than is needed to begin and  sustain the fusion reaction. The world’s first controlled release of fusion  power was achieved in 1991, but no fusion device has succeeded in  generating more power than it consumes. Magnetic fusion uses magnetic  devices to confine a plasma, consisting of electrically charged atoms, and  sustain a fusion reaction. ITER will be a magnetic fusion device known  as a “tokamak.” To reduce the risk of investing in only one device,  DOE’s Office of Fusion Energy Sciences also funds scientific research on  alternative types of magnetic devices. Inertial fusion relies on intense  lasers or particle beams to heat and compress a small, frozen pellet of  deuterium and tritium—a few millimeters in size—that would yield a burst  of energy. The lasers or particle beams would continuously heat and  compress the pellets, which would simulate, on a very small scale, the  actions of a hydrogen bomb. The National Nuclear Security  Administration, a separately organized agency within DOE, is leading  efforts in inertial fusion because it can be used for defense needs, such  as validating the integrity and reliability of the U.S. nuclear weapons  stockpile.
ITER is considered to be the next step in magnetic fusion. It is an  experiment to study fusion reactions in conditions similar to those  expected in a future electricity-generating power plant. The goal is to be  the first fusion device in the world to produce a substantial amount of net  power—that is, produce more power than it consumes. Specifically, the  objective is to produce 10 times more power than is needed to start the  fusion reaction in pulses of 5 or more minutes. ITER also will test a  number of key technologies, including the heating, control, and remote  maintenance systems that will be needed for a fusion power station. ITER  has been planned to consist of four phases: (1) construction, (2)  operation, (3) deactivation, and (4) decommissioning. The construction  phase, which is the sole focus of the U.S. ITER Project, began in 2007  (see fig.2 for an aerial view of construction progress at the ITER site as of  June 2013). The international project schedule, as of April 2014,  anticipates that the ITER fusion device will be built by 2019 and achieve  its “first plasma” in 2020.next several years are expected to be devoted to a preliminary period of  operation in pure hydrogen during which physics testing will be done,  followed by operation in deuterium with a small amount of tritium to test  ITER’s wall shielding. This will then be followed by the start of full ITER  operations in an equal mixture of deuterium and tritium, at which point  ITER will be used to try to produce 10 times more power than it  consumes. As of April 2014, the international project schedule anticipates  the start of deuterium-tritium operations in 2027. ITER’s operation phase  is expected to last 20 years followed by a 5-year deactivation phase and  then a decommissioning phase. If ITER is successful, it will lead to power  plant design and testing.
section_title: The Estimated Cost and Schedule of the U.S. ITER Project Has Grown Substantially Since 2006
paragraphs: The estimated cost and schedule of the U.S. ITER Project has grown  substantially since the ITER Agreement was signed in 2006 (see fig. 5),  and DOE has identified several reasons for these changes. At the time  the ITER Agreement was signed, DOE planned on spending $1.122  billion on the U.S. ITER Project and expected to complete the project in  2013 based on preliminary estimates it approved in 2005. In 2008,  DOE formally increased its preliminary cost estimate to a cost range of  from $1.45 billion to $2.2 billion. This was the most recent time DOE  approved a cost estimate for the U.S. ITER Project. Also, in 2008, DOE  said it expected ITER to achieve first plasma in 2016 and expected the  U.S. ITER Project to be completed in 2017. DOE now estimates that the  U.S. ITER Project will cost $3.915 billion, that ITER will achieve first  plasma in 2023, and that the U.S. ITER Project will be completed in 2033.  These estimates were developed based on a set of key assumptions that  were not used by DOE in its 2008 estimates. The current estimates  include an assumption of annual funding for the U.S. ITER Project of  $225 million, starting in fiscal year 2015 and continuing until the project is  completed, with no adjustment for inflation; limited U.S. cash contributions  to the ITER Organization from 2014 to 2016; future U.S. contributions to  the ITER Organization for ITER’s operation, deactivation, and  decommissioning phases coming out of the $225 million annual funding  level; and a hardware delivery schedule not tied to the ITER  Organization’s schedule. DOE also instructed the U.S. ITER Project  Office to use its estimate of ITER achieving first plasma in 2023 rather  than the 2020 date in the ITER Organization’s schedule, and to use its  best estimate for ITER Organization construction costs rather than the  budget most recently approved by the ITER Council. Nonetheless,  these current estimates remain preliminary, according to DOE officials,  because DOE has not approved a performance baseline for the U.S.  ITER Project. A performance baseline captures a project’s key  performance, scope, cost, and schedule parameters, and represents a  commitment from DOE to Congress to deliver a project within those  parameters.
According to DOE documents, the current $3.915 billion cost estimate for  the U.S. ITER Project includes the following: $1.469 billion (38 percent) to complete the remaining work to  procure and deliver U.S. hardware components for ITER; $928 million (24 percent) in contingency to address potential schedule  delays or increases in costs for manufacturing components, including  $852 million in contingency for the remaining work to procure and  deliver U.S. hardware components, and $76 million in contingency for  U.S. cash contributions to the ITER Organization; $541 million (14 percent) to account for project costs through June $519 million (13 percent) for remaining cash contributions to the ITER  Organization to pay for scientists, engineers, and support personnel  working at the ITER Organization; the assembly and installation of the  components in France to build the reactor; quality assurance testing  of all ITER member-supplied components; and contingencies; and $458 million (12 percent) for escalation costs, such as changes in  currency exchange rates and commodity prices, which are driven by  the extended length of the project due to the funding assumptions  used to develop the cost estimate.
DOE documents and officials identified several key reasons for the  growth of the cost and schedule estimates for the U.S. ITER Project. DOE  officials identified a number of reasons that led to the change in the  project’s initial 2005 cost estimate of $1.122 billion to its 2008 cost range  of from $1.45 billion to $2.2 billion. These included (1) higher estimates  for the cost of U.S. hardware components as their designs and  requirements were more fully developed; (2) updated estimates for  external factors such as currency exchange rates and commodity prices;  (3) changes to U.S. hardware component requirements and the  international project schedule due to a 2007 design review of the overall  ITER project; and (4) additions for contingency and recognized risks.  According to DOE documents and officials, the primary reasons the U.S.
ITER Project’s cost estimate grew from the upper range of $2.2 billion in  2008 to the current $3.915 billion estimate included the following:
Higher estimates for U.S. hardware components as designs and  requirements have been more fully developed over time: The design  and requirements for U.S. hardware components have evolved over  time, and the cost estimates for these components have changed as a  result, according to DOE documents and officials. Specifically, the  current U.S. ITER Project cost estimate includes about $770 million  more than the 2008 figures due to greater understanding of what U.S.  hardware components are likely to cost. According to DOE officials,  expected hardware costs now reflect more fully developed designs,  better industry estimates of the cost of producing those designs, and  greater understanding of project risks, among other things. DOE  documents noted that, as of February 2014, about two-thirds of U.S.  hardware components by value were in final design or beyond,  although there were some smaller components that were still in earlier  stages of design. According to DOE officials, because of the progress in developing hardware component designs, the project  team has a greater understanding of what those components are  likely to cost and has reflected that understanding in the current  $3.915 billion cost estimate.
Higher contingency amounts added to address risks: The U.S. ITER  Project Office has increased the amount of contingency in the current  cost estimate to address the risks from the project’s significantly  longer schedule and to increase confidence in the estimate, according  to DOE documents and officials. Specifically, the current estimate  includes about $681 million more in contingency than was in the U.S.  ITER Project cost estimate in 2008. According to DOE officials, the  amount of contingency is based on detailed risk analyses as well as a  management assessment of key assumptions. DOE officials told us  that, to develop contingency amounts for the current estimate, the  U.S. ITER Project Office identified and evaluated program-level risks,  such as changes in currency exchange rates and growth in ITER  Organization cash contribution requirements. They also considered  project-level risks, such as the U.S. ITER Project’s dependence on  other ITER members or the ITER Organization for inputs needed to  complete U.S. hardware components and potential procurement and  manufacturing difficulties. Further, they added contingency amounts if  U.S. ITER Project Office management representatives thought initial  contingency amounts were too low for the risks associated with the  project’s longer schedule or based on their past experience with large  science projects.
Schedule delays: U.S. schedule delays due to international project  schedule delays and U.S. funding constraints accounted for about  $544 million of the increase in the U.S. ITER Project’s cost estimate  since DOE last approved the estimate in 2008, according to DOE  documents and officials. First, international project schedule delays  have lengthened the U.S. ITER Project schedule and have also led to  increases in the cost estimate. For example, in 2007, an international  review identified extensive changes that were needed in ITER’s  design, and that significantly delayed the ITER Organization from  defining requirements for U.S. hardware components. This in turn  created delays in the U.S. ITER Project schedule for procuring and  delivering those components, which led to higher cost estimates for  those components. Second, U.S. funding constraints resulting from  the project’s most recent $225 million per year funding plan and  lower-than-requested funding levels in some years have lengthened  the U.S. ITER Project schedule, according to DOE documents and  officials. This in turn has made it necessary for the U.S. ITER Project  Office to build additional amounts into the project’s cost estimate to  account for higher escalation costs and the longer period of time the  U.S. ITER Project workforce will be needed. For example, DOE  officials told us that the project’s most recent $225 million per year  funding plan reflected discussions between DOE, the Department of  State (State), the Office of Management and Budget (OMB), and the  Office of Science and Technology Policy (OSTP) to provide enough  funding to meet U.S. obligations to ITER and reduce the amount of  the U.S. fusion program budget and the overall DOE budget that had  to be devoted to the U.S. ITER Project on an annual basis.  However, this lengthened the U.S. ITER Project’s schedule and  created procurement inefficiencies, resulting in increases in the  project’s overall cost estimate.
Higher cash contributions to the ITER Organization due to growth in  ITER construction costs: The U.S. ITER Project Office built an  additional $348 million into the current cost estimate to reflect the  increase in U.S. cash contributions it expects to have to make to the  ITER Organization, according to DOE documents and officials. DOE  officials explained this increase includes $169 million for the U.S.  share of a previously approved increase in the ITER Organization’s  construction budget, as well as $179 million for the U.S. share of a  potential future billion euro increase in the ITER Organization  construction budget and the anticipated cost increases for the ITER  Organization staff based on a 2023 first plasma date.
The United States has taken on additional hardware responsibilities:  DOE agreed to take on additional hardware responsibilities,  accounting for $39 million of the increase in the U.S. ITER Project  cost estimates since 2008, according to DOE documents and  officials. DOE officials told us that there is a cost cap for each of  these additional hardware responsibilities, and that the ITER  Organization will be responsible for paying any amounts that exceed  the caps. As a result, they view taking on these additional hardware  responsibilities as a way to reduce uncertainty about future U.S. ITER  Project costs because DOE will not have to spend more than the  amounts specified in the cost caps for each item.
section_title: Despite Reflecting Most Characteristics of Reliable Cost and Schedule Estimates, DOE’s Estimates Cannot Be Used to Set a Baseline in Part Because They Are Linked to an Unreliable International Schedule
paragraphs: DOE’s current cost estimate for the U.S. ITER Project reflects most of the  characteristics of a reliable cost estimate, and its schedule estimates  reflect all characteristics of a reliable schedule. However, DOE’s  estimates cannot be used to set a performance baseline that would  commit DOE to delivering the project at a specific cost and date primarily  because of some factors that DOE can only partially influence. The  factors DOE can only partially influence include an unreliable international  project schedule to which the U.S. schedule is linked and an uncertain  U.S. funding plan. DOE has taken some action to address the factors that  have prevented it from setting a performance baseline and finalizing its  estimates, but significant challenges remain.
subsections: section_title: DOE’s Current Cost Estimate for the U.S. ITER Project Reflects Most Characteristics of a Reliable Estimate, and Its Schedule Estimates Reflect All These Characteristics
paragraphs: DOE’s current cost estimate for the U.S. ITER Project reflects most of the  characteristics of high-quality, reliable cost estimates as established by  best practices documented in the GAO Cost Estimating and Assessment  Guide. In addition, DOE’s current schedule estimates fully reflect the  characteristics of high-quality, reliable schedule estimates as established  by best practices documented in the GAO Schedule Assessment Guide.According to the guides, four characteristics make up reliable cost  estimates—they are comprehensive, well-documented, accurate, and  credible (see table 2). Similarly, four characteristics make up reliable  schedule estimates—they are comprehensive, well-constructed, credible,  and controlled. Cost and schedule estimates are considered reliable if  each of the four characteristics is substantially or fully met. If any of the  characteristics is not met, minimally met, or partially met, then the  estimates do not fully reflect the characteristics of a high-quality estimate  and cannot be considered reliable.
DOE’s current cost estimate for the U.S. ITER Project—as developed by  the U.S. ITER Project Office in August 2013—substantially met best  practices for comprehensive, well-documented, and accurate estimates,  but only partially met best practices for credible estimates. For example,  DOE’s cost estimate substantially met best practices for documenting all  assumptions that will influence costs (comprehensive), describing step by  step how the estimate was developed (well-documented), and adjusting  properly for inflation (accurate). However, the U.S. ITER Project Office did  not conduct a complete sensitivity analysis on the cost estimate, and an  independent cost estimate has not been conducted (credible). The U.S.  ITER Project Office did identify four key assumptions from the estimate  for sensitivity testing. However, the analysis did not include some cost  elements that represent high percentages of the overall estimate,  including some of the most expensive hardware components being built  by the United States. For example, the sensitivity analysis did not include  the tokamak cooling water system, which is the most expensive U.S.  hardware component. Without a comprehensive sensitivity analysis that  identifies how the cost estimate is affected by changes to its assumptions,  DOE will not fully understand how certain risks can affect the cost  estimate and potentially result in decisions based on incomplete  information. In addition, DOE did not conduct an independent cost  estimate to determine whether other estimating methods produce similar  results. DOE policy does not require an independent cost estimate until it  approves a performance baseline, which the agency does not expect to  occur until late 2015. However, including an independent estimate is a  best practice associated with credible cost estimates. Independent cost  estimates are less likely to reflect organizational bias. They also  incorporate adequate risk, which generally results in more conservative  estimates due to higher estimated costs. Without such an independent  cost estimate, DOE faces a greater risk of underfunding the project, which  can lead to overall cost growth and schedule slippage. (See app. IV for  the individual ratings of each cost estimating practice.)
DOE’s current schedule estimates for the two most expensive U.S.  hardware items—the central solenoid modules and the tokamak cooling  water system—fully met best practices for comprehensive schedules and  substantially met best practices for well-constructed, credible, and  controlled schedules. For example, DOE’s schedule estimate fully met  best practices for capturing and establishing the duration of all activities  (comprehensive), and substantially met best practices for sequencing all  activities (well-constructed), conducting a schedule risk analysis  (credible), and updating the schedule with actual progress (controlled).  However, the schedule estimate partially met best practices for horizontal  and vertical traceability, maintaining a baseline schedule, and ensuring  reasonable total float, which is the amount of time an activity can be  delayed before the dates of the program’s completion milestones are  affected. U.S. ITER Project Office representatives acknowledged these  issues with the schedule and attributed them to problems with the  international project schedule. For example, according to project  representatives, DOE’s schedule does not align with the international  project schedule (i.e.: is not vertically traceable) because the international  project schedule does not account for delays in ITER Organization  delivery milestones, including a 30-month delay in ITER construction site  preparations. Without up-to-date reliable international milestones, DOE  cannot develop realistic U.S. milestones that align with the international  project schedule and set a baseline that can provide a reliable, specific  cost and completion date for the project. (See app. V for the individual  ratings of each scheduling best practice).
section_title: DOE’s Cost and Schedule Estimates Cannot Be Used to Set a Baseline Due to Factors That DOE Can Only Partially Influence
paragraphs: DOE considers its current cost and schedule estimates for the U.S. ITER  Project to be preliminary, and these estimates cannot be used to set a  performance baseline that would represent a commitment from DOE to  Congress to deliver the project at a specific cost and date. DOE policy  says that cost and schedule estimates are considered final only after a  performance baseline has been approved for a project, and DOE has not  approved a performance baseline for the U.S. ITER Project. According to  DOE’s project management order, a performance baseline sets a bar  against which a project’s progress can be measured. DOE’s target date  for setting a performance baseline finalizing its cost and schedule  estimates for the U.S. ITER Project has continually slipped from an  original expected date of fiscal year 2007 to the current target of late in  fiscal year 2015. That is when DOE expects the international project  schedule to be updated, according to DOE documents and officials.
According to DOE documents and officials, DOE’s current estimates for  the U.S. ITER Project cannot be used to set a performance baseline  because of three factors, two of which DOE can only partially influence as  follows:
First, the overall international project schedule that DOE uses as a  basis for the U.S. schedule is not reliable. In July 2010, the ITER  Council approved an official schedule for the overall ITER project.  However, an October 2013 management assessment of the ITER  Organization determined that the international project schedule  established in 2010 was not reliable. The assessment attributed the  unreliable schedule, in part, to management deficiencies within the  ITER Organization. For example, the assessment found that the ITER  Organization’s senior management had insisted that the international  project schedule not be changed even when staff had developed what  they thought were more realistic schedules, and that staff had not  been allowed to openly challenge the schedule. According to DOE  officials, the ITER Organization plans to spend the next year  reassessing the international project schedule and taking actions to  address the identified management deficiencies, and it hopes to  complete its schedule reassessment by June 2015.
Second, DOE has not proposed a final, stable funding plan for the  U.S. ITER Project. DOE’s most recent plan had been to provide a flat  $225 million per year for the project, and that figure was the basis for  its current cost and schedule estimates. However, DOE officials told  us that this funding plan could potentially change depending on the  outcome of the ITER Organization’s reassessment of the international  project schedule. In March 2014, DOE requested $150 million for the  U.S. ITER Project in fiscal year 2015, $75 million less than the $225  million per year funding plan. According to DOE documents, the $150  million request would allow the U.S. ITER Project to meet its fiscal  year 2015 commitments to ITER but would not be enough for the  project to meet the milestones set in the official international project  schedule. Officials noted that if Congress provided less than DOE’s  requested funding, the U.S. ITER Project schedule will slip further. Six  of the 10 fusion energy and project management experts we  interviewed said that identifying sufficient funding to execute the U.S.  ITER Project poses a significant management challenge for DOE.
The third factor that has kept DOE from setting a performance baseline  finalizing its estimates is within the agency’s direct control. Specifically, an  August 2013 internal peer review found that the methodologies used to  develop DOE’s current cost and schedule estimates were appropriate, but  that the estimates do not sufficiently consider all project risks and  uncertainties.Office did not identify and quantify all risks, that its view of potential risk  mitigation was too optimistic, and that the range of possible cost  outcomes due to each individual risk factor was too narrow. Further, the  review identified potential cost increases related to changing technical   For example, the review found that the U.S. ITER Project  requirements, uncertainty about the ITER Organization’s performance,  and the dependence on other ITER members for production of items that  are used in U.S. hardware components. To better account for these risks  and uncertainties, the review added additional amounts to DOE’s current  cost estimate of $3.915 billion and found that the U.S. ITER Project was  more likely to cost from $4 billion to $6.5 billion. The reviewers  recommended, among other things, that the U.S. ITER Project Office  update its risk estimates to be more comprehensive and reevaluate its  risk mitigation assessments before DOE approves a performance  baseline for the U.S. ITER Project.
In the absence of a performance baseline, DOE has developed a 2-year  plan for the U.S. ITER Project that sets near-term cost and schedule  targets to guide the project’s performance in fiscal years 2013 and  2014. represent DOE’s commitment to a specific cost and schedule for the U.S.  ITER Project as a performance baseline would. Most of the fusion energy  and project management experts we interviewed emphasized the  importance of DOE approving a performance baseline for the U.S. ITER  Project, with some experts noting that a performance baseline would  provide a goal for all project stakeholders to work toward and might ease  concerns about the uncertainty of the funding levels needed to complete  the project. Several experts also told us that, until DOE approves a  performance baseline for the U.S. ITER Project, there will continue to be  uncertainty about the project’s direction.
DOE officials told us that the interim 2-year plan also allows the agency to formally  monitor project progress.
section_title: DOE Has Taken Some Actions to Address the Factors Preventing It from Setting a Baseline, but Challenges Remain
paragraphs: DOE has taken some actions to address the factors preventing it from  setting a performance baseline that would allow the agency to finalize its  cost and schedule estimates for the U.S. ITER Project. However, project  management and schedule deficiencies in the ITER Organization and  uncertainty in the U.S. ITER Project funding plan continue to pose  management challenges for the agency and delay its efforts to set a  performance baseline.
According to DOE officials, DOE has taken several actions to try to get  the ITER Organization to address international project management and  scheduling deficiencies. For example, DOE officials told us that their  aggressive participation in early ITER Agreement negotiations led to the  adoption of a biannual management assessment requirement. This has  focused attention on international management deficiencies, resulting in  several recommendations for improving the project. Further, DOE officials  told us they have used ITER Council Management Advisory Committee  meetings to introduce, communicate, and advance project management  principles, such as competitive procurement actions, in an effort to  improve ITER Organization project management. Additionally, DOE has  developed position papers describing the agency’s concerns with  ineffective ITER Organization scheduling and management and  suggesting actions the ITER Organization could take to develop a reliable  international project schedule and improve international management. For  example, in a position paper on scheduling issues, DOE recommended  the ITER Council direct the ITER Organization to focus on developing a  short-term schedule, and defer long-term schedule development until  lessons are learned from the short-term effort. DOE has provided the  position papers to other ITER members and achieved some unofficial  support, but the agency has not submitted a formal proposal on the  suggested actions to the ITER Council, which could vote on and  ultimately require the implementation of these actions. According to DOE  officials, DOE has not submitted formal proposals because previous ITER  Council Chairs delayed substantive discussions of issues such as  schedule slippages and conducted meetings with a primary goal of  obtaining consensus among ITER members. However, DOE officials said  the ITER Council and other ITER members are aware of DOE’s position,  and they hope the new ITER Council Chair, who took over in January  2014, will change the way the ITER Council operates. DOE officials also  said the ITER Council approved at the November 2013 ITER Council  meeting the initiative for the ITER Organization to develop a short-term  annual work plan for 2014, the results of which will inform long-term  schedule development, and that all milestones had been met by all seven  ITER members for the first three months.
Even so, challenges remain that will continue to hamper DOE’s ability to  develop a baseline for the U.S. ITER Project. Eight out of the 10 fusion  energy and project management experts we interviewed said DOE does  not have enough information from the ITER Organization and other ITER  members to effectively plan the U.S. ITER Project, and 7 of the 10  experts said the international structure and management issues  contribute to DOE’s management challenges. In this context, DOE’s  efforts may have helped improve ITER Organization project management  and helped jump-start efforts to develop a reliable international project  schedule, but a reliable international project schedule is not expected until  June 2015, as previously noted. Further, the previous international project  schedule developed by the ITER Organization and approved by the ITER  Council in 2010 has not proved reliable, and management issues that  were identified in previous years continue to pose challenges at the  international level. For example, the October 2013 management  assessment of the ITER Organization found that the ITER Council had  not acted on many recommendations for project management  improvements from a previous management assessment in 2009 and that  the problems identified in that assessment continue. The most recent  management assessment attributed the inaction to the ITER Council’s  reliance on consensus decision making, which caused it to avoid or delay  difficult decisions. The 2013 assessment stated that the ITER members  needed to openly discuss and then make decisions on difficult issues at  ITER Council meetings, even if there is no consensus, and all members  should be held accountable for results. The management assessment  contained 11 recommendations that were designed to be taken together.  The assessment further said that the international project would not  achieve significant improvement if the ITER Council only adopted a few  recommendations, as has been the case with recommendations in  previous management assessments. DOE officials told us that the ITER  Council had approved proposals to address the recommendations from  the October 2013 management assessment and that the ITER Council  Chair was actively monitoring the implementation of the  recommendations.
To address the uncertainty of the U.S. funding plan for the U.S. ITER  Project, DOE has evaluated a range of funding scenarios for executing  the project. As previously noted, DOE most recently developed a $225  million per year flat funding plan with State, OMB, and OSTP, but DOE  officials acknowledged that the plan constrained funding for the project to  allow DOE to meet U.S. obligations to ITER and reduce the amount of the  U.S. fusion program and overall DOE budgets devoted to the project  annually. DOE officials told us the flat funding plan created a long and  inefficient schedule and has created gaps between the design and  fabrication stages of some systems, which has led to cost growth. DOE  officials said that they will not be able to meet the most recent  international project schedule under this funding plan, and delivery of  some U.S. components will likely be late under the plan. DOE officials  told us they plan to develop a final, stable funding plan for the U.S. ITER  Project, but that plan can only be developed if the international project  schedule is reliable.
To ensure that all risks and uncertainties are sufficiently incorporated into  its estimates, DOE officials told us the U.S. ITER Project Office held a  series of risk workshops. According to DOE officials, as of March 2014,  the U.S. ITER Project Office had held risk workshops on U.S. hardware  components and associated risks, as well as a workshop on external  risks. U.S. ITER Project Office representatives told us that they are  currently analyzing the results of the workshops and that the workshops  will ultimately lead to updated risk estimates and an update to the current  cost estimate of $3.915 billion for the U.S. ITER Project.
section_title: DOE Has Taken Actions to Reduce U.S. ITER Project Costs but Has Not Adequately Planned for Their Impact on the U.S. Fusion Program
paragraphs: DOE has taken several actions to reduce the cost of the U.S. ITER  Project. Some fusion energy and project management experts we  interviewed suggested additional strategies DOE could pursue that might  further reduce U.S. ITER Project costs or improve project management.  DOE has not adequately planned for the potential impact of U.S. ITER  Project costs on the overall U.S. fusion program because it has not  completed a strategic plan that would clarify the program’s priorities given  those costs.
subsections: section_title: DOE Has Taken Several Actions to Reduce U.S. ITER Project Costs
paragraphs: According to DOE documents and officials, DOE has taken several  actions to reduce the cost of the U.S. ITER Project by about $388 million  as of February 2014, including the following:
Value engineering: The U.S. ITER Project Office has identified ways  to design U.S. hardware components that lower costs but maintain the  component’s essential functions. According to DOE officials, this  strategy—known as “value engineering”—has been an integral part of  the U.S. design effort. For example, the U.S. ITER Project Office  has been able to reduce the cost of the central solenoid magnet  system by more than $18 million by eliminating, simplifying, or  reducing the number of some parts. It also has reduced the cost of the  vacuum auxiliary systems by almost $34 million by, among other  things, revising test equipment items and quantities and reducing the  number of system connections and pumps. According to DOE  officials, these and other value engineering efforts have resulted in  about $225 million in savings as of February 2014. DOE documents  indicated that about half of the savings come from value engineering  the design of the tokamak cooling water system.
Centralized and consolidated procurement for certain items: The U.S.
ITER Project Office has agreed to have the ITER Organization  centrally procure piping for the tokamak cooling water and vacuum  systems for which the United States is responsible. It has also  reached agreement with other ITER members to consolidate  procurement of certain common parts rather than having each ITER  member procure those parts for their assigned hardware components.  For example, the U.S. ITER Project Office has agreed to have the  European Union procure all cable trays needed for U.S. hardware  components. According to DOE officials, centralized and consolidated  procurement for certain items has saved the U.S. ITER Project about  $120 million as of February 2014.
Scope transfers and reallocations: The U.S. ITER Project Office has  reached agreements to transfer some U.S. hardware responsibilities  to the ITER Organization and to reallocate some hardware  responsibilities among ITER members to improve procurement  efficiency and reduce U.S. costs. For example, project officials told us  that they reached an agreement to shift the U.S. responsibility for  procurement of one system to other ITER members, with the United  States taking on more engineering work for that system in return.  DOE officials estimated that this resulted in $20 million in savings.  According to DOE officials, scope transfers and reallocations have  saved about $43 million as of February 2014.
Other strategies: According to DOE documents and officials, the U.S.
ITER Project Office has used several other strategies to reduce U.S.  ITER Project costs. These strategies have included implementing  lessons learned and leading practices from other large projects;  working with the ITER Organization on cost reduction initiatives to  improve ITER Organization processes and requirements; and  minimizing costs associated with project execution by, for example,  providing incentives in contract provisions. DOE officials said that it  was too soon to quantify the cost savings resulting from these actions.
According to DOE documents and officials, these cost savings are  reflected in the current $3.915 billion cost estimate for the U.S. ITER  Project. DOE officials told us that cost containment will continue to be a  high priority for the project. They told us that the most significant  opportunity to further reduce U.S. ITER Project costs would be the  adoption of an optimal funding plan for the project. Officials explained that  $458 million of the current $3.915 billion cost estimate is included to cover  escalation costs, and an optimal funding plan could potentially reduce  those and other costs by allowing the U.S. ITER Project to be completed  in a shorter period of time.
section_title: Some Experts Suggested Strategies to Further Reduce U.S. ITER Project Costs or Improve Management
paragraphs: Some of the 10 fusion energy and project management experts that we  interviewed identified strategies DOE could pursue to further reduce the  cost of the U.S. ITER Project. The following two strategies were  suggested by several of these experts:
Six experts suggested that DOE could reduce U.S. ITER Project costs  by adopting an optimal funding plan for the project. The optimal  funding plan being suggested would involve different dollar figures  year to year rather than DOE’s most recent strategy of funding the  U.S. ITER Project at a flat $225 million per year starting in fiscal year  2015. Some experts noted that a funding plan that scaled up in the  near-term and then scaled down in later years could potentially  reduce overall U.S. ITER Project costs by hundreds of millions of  dollars. Specifically, three experts said that an optimal funding plan  could shorten the current U.S. ITER Project schedule, and that doing  so would reduce overall project costs. Two experts noted that one  issue with this strategy would be that the U.S. ITER Project would  need to receive more funding in some years, and that could lead to  funding cuts for other DOE projects and programs. To address that  issue, one expert suggested DOE not propose an optimal funding  plan for the U.S. ITER Project until the agency determines that there  is a reliable international project schedule and that the ITER  Organization has made significant progress improving its  management of the overall ITER project. Another expert suggested  that DOE first communicate its plans for managing the impact on the  overall U.S. fusion program of higher U.S. ITER Project funding in  certain years before proposing an optimal funding plan. When we  discussed this strategy with DOE program officials, they agreed that  an optimal funding plan for the project could shorten the U.S. ITER  Project schedule and potentially reduce costs significantly. However,  they emphasized that the most recent $225 million annual funding  plan was an attempt to balance the funding needs of the U.S. ITER  Project and the rest of the U.S. fusion program.
Three experts suggested that DOE could reduce U.S. ITER Project  costs by working with its international partners to develop a reliable  international project schedule and aligning U.S. ITER Project efforts  with that schedule. One expert noted that this would help make DOE’s  cost estimate for the U.S. ITER Project more certain. Another expert  told us that a reliable international project schedule was necessary for  DOE to set an optimal funding plan, which in turn could help minimize  U.S. ITER Project costs. The expert said that aligning the U.S. ITER  Project with a reliable international project schedule was necessary to  ensure that the United States was not producing its hardware  components too early or too late, either of which could result in cost  growth. When we discussed this strategy with DOE program officials,  they said that the United States has actively presented its views to its  international partners on what would be a realistic schedule for the  overall ITER project. Further, the officials told us that they do try to  align U.S. ITER Project efforts with the international project schedule  in spite of imperfect knowledge due to the current international project  schedule not being reliable.
Some of the 10 experts we interviewed also suggested strategies that  DOE could pursue to improve its management of the U.S. ITER Project.  The following two strategies were mentioned by several experts:
Six experts suggested DOE establish a separate office that would  report directly to top DOE management officials to provide oversight  of the U.S. ITER Project. Two of these experts said that having a  separate office would give the U.S. ITER Project greater visibility at  the highest levels of DOE. Another expert said a benefit would be to  enhance the project’s interaction with stakeholders, including  Congress and the U.S. fusion community. Further, two experts told us  that a separate office for the U.S. ITER Project would enhance DOE’s  ability to oversee the project’s complexity and complications given the  international structure the project operates within. When we discussed  this strategy with DOE program officials, they said that a separate  DOE office to oversee the U.S. ITER Project would not provide many  benefits and could have unintended consequences. Specifically, they  said that the project already has high visibility with top DOE  management officials and that creating a separate office could result  in a greater degree of funding competition between the U.S. ITER  Project and the rest of the U.S. fusion program.
Four of the 10 experts we interviewed said DOE should make more  information on the U.S. ITER Project available to stakeholders in the  U.S. fusion community. One expert said DOE should be more  forthcoming about what the agency expects the U.S. ITER Project to  cost and how they plan to pay for it. Two other experts suggested that  DOE should disclose its internal peer reviews of the U.S. ITER  Project. Several of the experts we interviewed also identified a  number of negative effects of DOE not being sufficiently transparent  about the U.S. ITER Project. These included the erosion of  stakeholder commitment to the project and a diminished ability for  stakeholders to effectively plan research efforts and make informed  funding decisions related to the impact of project costs on the overall  U.S. fusion program. When we discussed this strategy with DOE  program officials, they said they have shared a substantial amount of  information on the U.S. ITER Project with stakeholders and were  trying to share more. For example, they noted that DOE included a  detailed section on the U.S. ITER Project in its fiscal year 2015  budget request. In some cases, however, officials said they were  limited in the information they could share with stakeholders by the  international sensitivities of the overall ITER project, by procurement  sensitivities, and by the nature of the budget process.
section_title: DOE Has Not Adequately Planned for the Impacts of U.S. ITER Project Costs on the U.S. Fusion Program
paragraphs: DOE has not adequately planned for the potential impact of U.S. ITER  Project costs on the overall U.S. fusion program, although it has taken  some steps. For example, as previously mentioned, the project’s most  recent $225 million per year funding plan was an attempt by DOE and  other parts of the administration to meet U.S. obligations to ITER and  reduce the project’s impact on the U.S. fusion program and DOE’s overall  budget. However, according to agency officials, DOE has not completed a  strategic plan for the U.S. fusion program to clarify the program’s goals  and priorities and its proposed approach for meeting them in light of the  potential impact of U.S. ITER Project costs.
The House and Senate Appropriations Committees directed DOE to  submit a 10-year strategic plan for the U.S. fusion program in the  explanatory statements that accompanied both the fiscal year 2012 and  fiscal year 2014 energy and water development appropriation acts.  In  addition, DOE’s Fusion Energy Sciences Advisory Committee  recommended in 2013 that DOE develop a strategic plan for the U.S.
See Explanatory Statement, 160 Cong. Rec. H 878 (daily ed., Jan.15, 2014), to the  Energy and Water Development and Related Agencies Appropriations Act, 2014,  contained in Division D of the Consolidated Appropriations Act, 2014, Pub. L. No. 113-76;  and H.R. Rep. No. 112-331, at 855 (Dec.15, 2011) (Conf. Rep.). The fiscal year 2014  explanatory statement further directed that the strategic plan DOE submitted should  assume U.S. participation in ITER and assess its priorities for the domestic fusion  program based on three funding scenarios. fusion program using the advisory committee process and with broad  U.S. fusion community input. Further, 9 of the 10 fusion energy and  project management experts we interviewed agreed that it would be  useful for DOE to develop such a plan.
DOE officials told us they have not completed a strategic plan for the U.S.  fusion program to date, for three reasons. First, they said an effort in 2012  to obtain the Fusion Energy Sciences Advisory Committee’s input on U.S.  fusion program priorities had been unsuccessful because the committee  did not address program priorities under a constrained budget scenario  due to conflict of interest issues. Second, DOE officials said there had  been too much budget uncertainty in fiscal year 2013 regarding the U.S.  ITER Project and the overall U.S. fusion program to complete a plan.  They explained that the House and Senate Appropriations Committees  proposed different direction and funding levels for the U.S. fusion  program in fiscal year 2013, and these differences were not resolved until  the passage of the fiscal year 2014 appropriations act in January 2014.  Third, DOE officials said an effort in 2012 and 2013 to develop a high- level strategic document for the U.S. fusion program was unsuccessful  because OMB did not concur with the document developed by DOE. DOE  officials said they are in the early stages of developing a strategic plan in  response to the House and Senate appropriations committees’ direction  in the explanatory statement that accompanied the fiscal year 2014  appropriations act. These officials said they would ask the Fusion Energy  Sciences Advisory Committee in April 2014 to provide input on U.S.  fusion program priorities by October 2014. According to the officials, DOE  will consider the committee’s input in developing a strategic plan for the  U.S. fusion program, and it hopes to finalize a plan no later than the  January 2015 deadline set by the House and Senate Appropriations  Committees. However, DOE officials could not provide a specific date  when they expect to complete the strategic plan.
We have previously reported that strategic planning is a leading  management practice organizations can employ to define their mission  and goals; help clarify priorities; address management and other  challenges that threaten an agency’s ability to meet its long-term strategic  goals; align activities, core processes, and resources to accomplish those  goals; and foster informed communication between an agency and its  stakeholders. Without a strategic plan for the overall U.S. fusion  program that addresses DOE’s plans for managing the impacts of U.S.  ITER Project costs, the agency does not have information to  involve and help create a basic understanding among stakeholders— including Congress and the U.S. fusion community—about its plans  for balancing the competing demands that confront the program with  the limited resources available; better ensure that the U.S. ITER Project and other U.S. fusion  program activities are aligned to effectively and efficiently achieve the  program’s goals; and  improve Congress’s ability to weigh the potential trade-offs of different  funding decisions for the U.S. ITER Project and the overall U.S. fusion  program within a constrained budget environment.
section_title: Conclusions
paragraphs: DOE has taken some actions to address the factors that affect the  reliability of its cost and schedule estimates for the U.S. ITER Project.  However, more than 7 years and nearly $700 million after the ITER  Agreement was signed, significant uncertainty remains about how much  the U.S. ITER Project will cost, when it will be completed, and how DOE  plans to manage the impact of the project’s costs on the overall U.S.  fusion program. DOE’s current preliminary cost and schedule estimates  met most characteristics of high-quality, reliable cost and schedule  estimates, but the cost estimate was not fully credible. Specifically, the  U.S. ITER Project Office did not include the most expensive U.S.  hardware component in its sensitivity analysis and an independent cost  estimate has not been conducted, which could result in DOE making  decisions based on incomplete information and increase the risk of more  cost growth.
It is important for DOE to set a performance baseline for the U.S. ITER  Project in order to finalize its cost and schedule estimates, provide a bar  against which the project’s progress can be measured, and allow  Congress to make well-informed funding decisions about the project  within a constrained budget environment. However, DOE has not yet set  a performance baseline for the U.S. ITER Project in part because the  international project schedule is not reliable, a key factor that DOE can  only partially influence. To its credit, DOE has taken several actions to  push for a reliable international project schedule and improvements to  ITER Organization project management. Nonetheless, the agency could  do more to ensure the ITER Organization develops a reliable international  project schedule and that ITER Organization project management  deficiencies are addressed by making formal proposals to the ITER  Council that address these issues and remaining vigilant about the timely  implementation of the proposed improvements. Without a reliable  international project schedule, DOE neither can propose a final, stable  funding plan for the U.S. ITER Project, nor can it reasonably assure  Congress that the project’s cost will not continue to grow and the  schedule will not continue to slip.
DOE has taken some steps to reduce the cost of the U.S. ITER Project  and plan for the impact of the project’s cost on the overall U.S. fusion  program. However, even though there has been repeated direction from  the House and Senate Appropriations Committees going back more than  2 years and a recommendation from its own advisory committee to do so,  DOE has not yet completed a strategic plan for the overall U.S. fusion  program. Strategic planning is a leading practice that can help  organizations clarify priorities and address challenges that threaten their  ability to meet long-term strategic goals. Completing a strategic plan for  the overall U.S. fusion program would reduce uncertainty by addressing  DOE’s priorities for the program in light of U.S. ITER Project costs.  Moreover, involving stakeholders, such as the Fusion Energy Sciences  Advisory Committee, in the plan’s development would increase  stakeholder understanding of DOE’s plans for balancing the competing  demands that face the U.S. fusion program with the limited resources  available. DOE is beginning the initial work on such a plan, but a similar  effort that was started in 2012 did not result in a completed strategic plan  for the U.S. fusion program, and the agency has not provided a specific  date when it will complete its current effort. Without committing to a  specific date, DOE may not complete a strategic plan for the U.S. fusion  program in a timely manner and, without a completed strategic plan, DOE  may face challenges ensuring that it has effectively aligned U.S. fusion  program activities to achieve program goals. Further, Congress and the  U.S. fusion community are likely to remain uncertain about DOE’s plans  for balancing the competing funding demands of the U.S. ITER Project  and the rest of the U.S. fusion program.
section_title: Recommendations for Executive Action
paragraphs: To reduce uncertainty about the expected cost and schedule of the U.S.  ITER Project and its potential impact on the U.S. fusion program, the  Secretary of Energy should direct the Associate Director of the Office of  Fusion Energy Sciences to take the following four actions:
Direct the U.S. ITER Project Office to revise and update the project’s  cost estimate to meet all characteristics of high-quality, reliable cost  estimates. Specifically, the U.S. ITER Project Office should revise the  project’s cost estimate to ensure it is credible by including a  comprehensive sensitivity analysis that includes all significant cost  elements and conducting an independent cost estimate;
Develop and present at the next ITER Council meeting a formal  proposal describing the actions DOE believes need to be taken to set  a reliable international project schedule and improve ITER  Organization project management. Continue to formally advocate for  the timely implementation of those actions at each future ITER  Council meeting until the ITER Council approves an updated  international project schedule;
Once the ITER Organization completes its reassessment of the  international project schedule, use that schedule, if reliable, to  propose a final, stable funding plan for the U.S. ITER Project, approve  a performance baseline with finalized cost and schedule estimates,  and communicate this information to Congress; and
Set a specific date for completing, in a timely manner, a strategic plan  for the U.S. fusion program that addresses DOE’s priorities for the  overall U.S. fusion program in light of U.S. ITER Project costs, and  involve the Fusion Energy Sciences Advisory Committee in the  development of the plan.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft copy of this report to DOE for review and comment.  DOE provided written comments on the draft report on May 27, 2014,  which are reproduced in appendix VI, and also provided technical and  clarifying comments, which we incorporated as appropriate. DOE agreed  with each of the report’s recommendations and said it has taken steps or  plans to take additional steps to fully implement them.
We are sending copies of this report to the Secretary of Energy, the  appropriate congressional committees, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix VII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our review assessed: (1) how and why the estimated cost and schedule  for the U.S. International Thermonuclear Experimental Reactor (ITER)  Project have changed since 2006; (2) the reliability of the Department of  Energy’s (DOE) current cost and schedule estimates for the U.S. ITER  Project and the factors, if any, that have affected their reliability; and (3)  the actions DOE has taken, if any, to reduce U.S. ITER Project costs and  plan for their potential impact on the overall U.S. fusion program. To  address these objectives and better understand the U.S. ITER Project,  we reviewed the ITER Agreement, relevant laws, and DOE guidance and  met with DOE and Department of State officials, representatives from the  U.S. ITER Project Office, and fusion energy and project management  experts from industry, DOE’s national laboratories, and universities.
To determine how and why the estimated cost and schedule for the U.S.  ITER Project have changed since 2006, we reviewed DOE and U.S. ITER  Project Office documents. We assessed the reliability of the data on  changes in the cost estimates by checking for obvious errors in accuracy  and completeness; comparing the data with other sources of information;  and interviewing DOE officials and U.S. ITER Project Office  representatives who had knowledge of the data. We determined that DOE  and the U.S. ITER Project Office’s data on changes in the cost estimates  for the U.S. ITER Project were sufficiently reliable for reporting on the  reasons for the changes in the estimates. We also contacted the national  audit offices of each of the six other ITER members to identify any audit  reports they had issued on ITER, and we reviewed each report that was  identified.
To evaluate the reliability of DOE’s current cost and schedule estimates  and the factors, if any, that have affected their reliability, we reviewed  DOE’s most recent cost and schedule estimates for the U.S. ITER  Project—as developed by the U.S. ITER Project Office in August 2013— and DOE’s internal peer review of those estimates. We also reviewed  DOE’s project management order and related guidance, as well as an  October 2013 report to the ITER Council on the results of a management  assessment of the ITER Organization. We assessed the reliability of  DOE’s current cost and schedule estimates by analyzing the August 2013  estimates against the best practices identified in GAO’s Cost Estimating  and Assessment Guide (Cost Guide) and Schedule Assessment Guide  (Schedule Guide).
Specifically, we determined the reliability of the cost estimate by  reviewing documentation DOE submitted for the cost estimate,  interviewing U.S. ITER Project Office representatives who prepared the  estimate, reviewing relevant sources, and comparing the information  collected with the best practices identified in the Cost Guide to determine  whether the cost estimate was (1) comprehensive, (2) accurate, (3) well- documented, and (4) credible. assessed the extent to which the cost estimate met these best practices  by calculating the assessment rating of each criteria within the four  characteristics on a five-point scale: not met = 1, minimally met = 2,  partially met = 3, substantially met = 4, and fully met = 5. Then, we took  the average of the individual assessment ratings for the criteria to  determine the overall rating for each of the four characteristics. The  resulting average became the overall assessment as follows: not met = 0  to 1.4; minimally met = 1.5 to 2.4; partially met = 2.5 to 3.4; substantially  met = 3.5 to 4.4; and fully met = 4.5 to 5.0. After conducting our initial  analysis, we shared it with DOE officials and representatives from the  U.S. ITER Project Office who developed the cost estimate to provide an  opportunity for them to comment and identify reasons for observed  shortfalls in cost estimating best practices. We took their comments and  any additional information they provided and incorporated it into the  assessments to finalize the scores for each characteristic and best  practice.
GAO designed the Cost Guide to be used by federal agencies to assist them in  developing reliable cost estimates and also as an evaluation tool for existing cost  estimates. To develop the Cost Guide, GAO cost experts assessed measures applied by  cost-estimating organizations throughout the federal government and industry and  considered best-practices for the development of reliable cost-estimates. schedules—the central solenoid modules schedule and the tokamak  cooling water system schedule—that are used as inputs to the integrated  master schedule. We selected these two schedules because they are the  largest two hardware items, in terms of value, that the United States is  responsible for contributing to ITER. We determined whether the  schedules were (1) comprehensive, (2) well-constructed, (3) credible, and  (4) controlled by reviewing documentation DOE submitted for the U.S.  ITER Project schedule estimate, interviewing U.S. ITER Project Office  representatives who developed the estimate, reviewing relevant sources,  and comparing the information collected against the criteria for each of  these characteristics identified in the Schedule Guide. We also analyzed  schedule metrics as a part of that analysis to highlight potential areas of  strengths and weaknesses against each of our four characteristics of a  reliable schedule. In order to assess each schedule against the four  characteristics and their accompanying 10 best practices, we traced and  verified underlying support and determined whether the U.S. ITER Project  Office provided sufficient evidence to satisfy the criterion and assigned a  score based on the same five-point scale we used in our analysis of the  cost estimate. Then, we took the average of the individual assessment  ratings to determine the overall rating for each of the characteristics, also  using the same scale we used in our analysis of the cost estimate. After  conducting our initial analysis, we shared it with DOE officials and  representatives from the U.S. ITER Project Office who developed the  schedule estimate to provide an opportunity for them to comment and  identify reasons for observed shortfalls in schedule management best  practices. We took their comments and any additional information they  provided and incorporated it into the assessments to finalize the scores  for each characteristic and best practice. By examining the two  subordinate schedules against our guidance, we conducted a reliability  assessment on each of the schedules and incorporated our findings on  reliability limitations in the analysis of each subordinate schedule. We  were also able to use the results of the two subordinate schedules to  provide insight into the health of the integrated master schedule since the  same strengths and weaknesses of the subordinate schedules would  transfer to the master schedule. We determined that the schedules were  sufficiently reliable for our reporting purposes, and our report notes the  instances where reliability concerns affect the quality of the schedules.
To examine the actions DOE has taken, if any, to reduce U.S. ITER  Project costs and plan for their potential impact on the overall U.S. fusion  program, we reviewed DOE and U.S. ITER Project Office documents on  actions taken to reduce U.S. ITER Project costs, interviewed DOE  program officials about the status of their efforts to complete a strategic  plan for the U.S. fusion program, and reviewed meeting records of DOE’s  Fusion Energy Sciences Advisory Committee. We also reviewed our  prior work on leading practices in federal strategic planning for agency  divisions, programs, or initiatives, as well as the House and Senate  Appropriations Committees’ direction to DOE in the explanatory  statements for the fiscal year 2012 and fiscal year 2014 energy and water  development appropriation acts to submit a 10-year strategic plan for the  U.S. fusion program. Further, we summarized the results of  semistructured interviews with 10 experts in fusion energy and the  management of large scientific research projects. To select these experts,  we first identified 105 experts by reviewing the results of a literature  search; congressional hearings; National Academies of Science  publications; membership lists for the Fusion Energy Sciences Advisory  Committee, the ITER Council Management Advisory Committee, the  ITER Council Science and Technology Advisory Committee, and DOE’s  internal peer reviews of the U.S. ITER Project; and recommendations  from other fusion energy experts we interviewed. From this list, we then  used a multistep process to select 10 experts.range of perspectives, we selected fusion energy and large scientific  project management experts from industry, DOE’s national laboratories,  and universities. We conducted semistructured interviews with the 10  selected experts using a standard set of questions and analyzed their  responses, grouping them into overall themes. We summarized the  results of our analysis and then asked DOE program officials for their  views on actions suggested by multiple stakeholders to potentially reduce  U.S. ITER Project costs or improve U.S. ITER Project management. Not  all 10 of the experts answered all of our questions. The views expressed  by experts do not represent the views of GAO. Appendix II lists the  names and affiliations of the 10 experts we interviewed.
To ensure coverage and a  We conducted this performance audit from June 2013 to June 2014 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: List of Experts
paragraphs: Dr. Riccardo Betti, University of Rochester
Dr. Aesook Byon, Brookhaven National Laboratory (retired)
Dr. Richard W. Callis, General Atomics
Dr. Adam Cohen, Princeton Plasma Physics Laboratory
Dr. Ray Fonck, University of Wisconsin—Madison
Dr. Charles M. Greenfield, General Atomics
Dr. Martin Greenwald, Massachusetts Institute of Technology
Dr. Richard Hawryluk, Princeton Plasma Physics Laboratory
Dr. Robert Iotti, CH2M Hill (retired)
Dr. Dale Meade, Princeton Plasma Physics Laboratory (retired)
section_title: Appendix III: Status of U.S. Hardware Components for the International Thermonuclear Experimental Reactor (ITER) as of August 2013
paragraphs: Purpose  Confines, shapes, and controls the  plasma inside ITER’s vacuum vessel.
Provides the measurements necessary  to control, evaluate, and optimize  plasma performance and to further the  understanding of plasma physics.
Limits the effect of plasma current  disruptions to the tokamak vacuum  vessel and other components.
Brings additional heat to the plasma  and deposits heat in specific areas of  the plasma to minimize instabilities.
Brings additional heat to the plasma.
Pellet injection system   Provides efficient fueling and delivers  hydrogen, deuterium, or a  deuterium/tritium mixture as required  by plasma operations.
Exhausts certain parts of the ITER  machine.
Supplies the electricity needed to  operate the entire ITER plant, including  offices and the operational facilities.
Manages temperatures generated  during the operation of the tokamak.
Separates tokamak exhaust gases into  a stream containing only hydrogen  isotopes and a stream containing only  non-hydrogen gases.
Part of toroidal field magnet that  confines, shapes, and controls the  plasma inside the ITER vacuum  vessel.
Creates low density in ITER’s vacuum  vessel and connected vacuum  components.
2023  “Final design” is the last stage of design development prior to implementation. At the final design  stage, the project scope should be finalized and changes should be permitted only for compelling  reasons.
section_title: Appendix IV: GAO Assessment of DOE’s Current (August 2013) Cost Estimate for the U.S. International Thermonuclear Experimental Reactor (ITER) Project Compared with Best Practices
subsections: section_title: Characteristic Comprehensive
paragraphs: Best practice  The cost estimate includes all life-cycle costs.
The cost estimate completely defines the program, reflects the  current schedule, and is technically reasonable.
The cost estimate work breakdown structure is product-oriented,  traceable to the statement of work/objective, and at an appropriate  level of detail to ensure that cost elements are neither omitted nor  double-counted.
The estimate documents all cost-influencing ground rules and  assumptions.
The documentation should capture the source data used, the  reliability of the data, and how the data were normalized.
The documentation describes in sufficient detail the calculations  performed and the estimating methodology used to derive each  element’s cost.
The documentation describes step by step how the estimate was  developed so that a cost analyst unfamiliar with the program could  understand what was done and replicate it.
The documentation discusses the technical baseline description  and the data in the baseline is consistent with the estimate.
The documentation provides evidence that the cost estimate was  reviewed and accepted by management.
The cost estimate results are unbiased, not overly conservative or  optimistic and based on an assessment of most likely costs.
The estimate has been adjusted properly for inflation.
The estimate contains few, if any, minor mistakes.
The cost estimate is regularly updated to reflect significant changes  in the program so that it is always reflecting current status.
Variances between planned and actual costs are documented,  explained, and reviewed.
The estimate is based on a historical record of cost estimating and  actual experiences from other comparable programs.
The estimating technique for each cost element was used  appropriately.
The cost estimate includes a sensitivity analysis that identifies a  range of possible costs based on varying major assumptions,  parameters, and data inputs.
A risk and uncertainty analysis was conducted that quantified the  imperfectly understood risks and identified the effects of changing  key cost driver assumptions and factors.
Major cost elements were cross-checked to see whether results  were similar.
section_title: Characteristic
paragraphs: Best practice  An independent cost estimate was conducted by a group outside  the acquiring organization to determine whether other estimating  methods produce similar results.
section_title: Appendix V: GAO Assessment of DOE’s Current (August 2013) Schedule Estimates for the Two Largest Hardware Items of the U.S. International Thermonuclear Experimental Reactor (ITER) Project Compared with Best Practices
subsections: section_title: Overall assessment
paragraphs: Best practice    Capturing all activities.
Tokamak  cooling  water  system  Fully met  activities.
Establishing the durations of all  activities.
Sequencing all activities.
Confirming that the critical path  is valid.
Ensuring reasonable total float.     Partially met  Partially met    Verifying that the schedule is  traceable horizontally and  vertically.   analysis.   actual progress and logic.   schedule.
section_title: Appendix VI: Comments from the Department of Energy
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, other key contributors to this  report were Dan Haas, Assistant Director; David Marroni; Andrew Moore;  and Jacqueline Wade. Important contributions were also made by Cheryl  Arvidson, Brian Bothwell, Nikki Clowers, Elizabeth Curda, R. Scott  Fletcher, Cindy Gilbert, Jason Lee, Karen Richey, and Barbara  Timmerman.