Nuclear Weapons: NNSA Should Clarify Long-Term Uranium Enrichment Mission Needs and Improve Technology Cost Estimates
Released: 2018-02-16T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: NNSA has several mission needs for enriched uranium, including providing LEU to fuel a nuclear reactor that produces tritium—a key isotope used in nuclear weapons. NNSA has a pressing defense need for unobligated LEU to fuel this reactor, meaning the uranium, technology and equipment used to produce the LEU, must be U.S. in origin. Because the United States lost its only source of unobligated LEU production in 2013, the supply is finite.

A House Armed Services Committee report included a provision for GAO to assess NNSA's plans to manage tritium and enriched uranium. This report examines (1) the actions NNSA is taking to extend its existing LEU inventories to address near-term tritium needs; (2) the extent to which NNSA's plan to analyze long-term options for supplying enriched uranium is consistent with DOE directives; and (3) NNSA's preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates. GAO analyzed NNSA plans on costs, schedules, and risks; compared them with its guide on best practices in cost estimating; and interviewed NNSA and other officials.

section_title: What GAO Found
paragraphs: The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy (DOE), is taking or plans to take four actions to extend inventories of low-enriched uranium (LEU) that is unobligated, or carries no promises or peaceful use to foreign trade partners until about 2038 to 2041. Two of the actions involve preserving supplies of LEU, and the other two involve diluting highly enriched uranium (HEU) with lower enriched forms of uranium to produce LEU. GAO reviewed these actions and found the actual costs and schedules for those taken to date generally align with estimates. NNSA and GAO have identified risks associated with two of these actions. One of these risks has been resolved; NNSA is taking steps to mitigate another, while others, such as uncertainty of future appropriations, are unresolved.

NNSA's preliminary plan for analyzing options to supply unobligated enriched uranium in the long term is inconsistent with DOE directives for the acquisition of capital assets, which state that the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. The scope of the mission need statement that NNSA has developed can be interpreted to meet two different mission needs: (1) a need for enriched uranium for multiple national security needs, including tritium, and (2) a specific need for enriched uranium to produce tritium. The DOE directives also state that mission need should be independent of and not defined by a particular solution. However, NNSA is showing preference toward a particular solution—building a new uranium enrichment capability—and the agency has not included other technology options for analysis. Without (1) revising the scope of the mission need statement to clarify the mission need it seeks to achieve and (2) adjusting the range of options it considers in the analysis of alternatives process, NNSA may not consider all options to satisfy its mission need.

Although the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium enrichment technology options—the large and small centrifuge—that the agency considers to be the most feasible. However, these estimates are limited in scope and do not fully meet best practices for reliable cost estimates. Based on GAO's review of NNSA documents, NNSA appears to favor an incremental approach to reestablishing an enrichment capability that could ultimately meet all national security needs for enriched uranium. The estimates' scope is limited, however, in that they reflect only the costs of the first increment—producing LEU for tritium—and do not reflect the full costs of building a uranium enrichment facility that could meet the range of enriched uranium needs. GAO's cost guide—which provides cost estimating best practices—states that the scope of preliminary cost estimates should reflect full life-cycle costs. Also, NNSA's estimates for the two options minimally or partially met best practice characteristics for reliable cost estimates even when assessed for the more limited mission scope. For example, the estimates excluded certain costs and did not describe the calculations used. NNSA officials said that the cost estimates are preliminary and will be revised. By developing reliable cost estimates that are aligned with the revised mission need statement and consistent with best practices, NNSA will reasonably ensure that it has reliable information to make a decision about which option to select.

section_title: What GAO Recommends
paragraphs: GAO is making two recommendations, including that NNSA revise the scope of its mission need statement and ensure that the scope of its cost estimates are aligned with the revised statement while developing estimates consistent with best practices. NNSA described actions planned and in process to address both recommendations.

section_title: Letter
paragraphs: The National Nuclear Security Administration (NNSA), a separately  organized agency within the Department of Energy (DOE), is responsible  for the management and security of the nation’s nuclear weapons, as well  as nonproliferation programs and the Naval Nuclear Propulsion program,  which supports reactor design and production for the U.S. nuclear- powered naval fleet. Uranium, at various levels of enrichment, is  important for the achievement of all of these missions. Specifically,  NNSA has identified several national security and other needs for  enriched uranium, including: (1) producing tritium which is a necessary  component of nuclear weapons, through an existing process in a  Tennessee Valley Authority (TVA) reactor that uses low enriched  uranium (LEU) as fuel; (2) supplying highly enriched uranium (HEU) to  meet the U.S. Navy’s needs for its nuclear powered aircraft carriers and  submarines; and (3) providing “high assay” LEU for medical isotope  production and research reactor fuel. According to DOE, only unobligated  uranium can be used to achieve NNSA’s national security missions. All  uranium is considered unobligated when neither the uranium nor the  technology or equipment used to enrich it carries an “obligation” to a  foreign country. These obligations are established under international  agreements that describe the conditions for civilian nuclear cooperation  between the United States and foreign partners. Uranium or uranium- related technology subject to peaceful-use obligations under such  agreements cannot be used for military purposes by the United States.  The United States lost its sole supplier of unobligated enrichment  services when the last operating enrichment plant using U.S. technology  ceased enriching uranium in May 2013. As a result, NNSA’s supply of  unobligated LEU is finite and becoming increasingly scarce. In May 2014,  NNSA projected that its inventory of unobligated LEU fuel for tritium  production would last through 2027.

In 2014 and 2015, Congress required NNSA to submit analyses of its  options to meet tritium and enriched uranium needs for national security  purposes. In October 2015, NNSA released its Tritium and Enriched  Uranium Management Plan Through 2060, which presented several  actions—along with their projected costs, schedules, and risks—to extend  its existing inventories of enriched uranium to address its near-term need  for tritium. In addition, NNSA identified technical and other options to  ensure an adequate long term supply of tritium and enriched uranium in  support of national security and other needs.

The House Armed Services Committee report accompanying H.R. 4909,  a bill for the National Defense Authorization Act for Fiscal Year 2017  included a provision for GAO to assess NNSA’s October 2015 plan and  subsequent actions to manage tritium and enriched uranium. This report examines: (1) the actions NNSA is taking to extend its existing inventories  of enriched uranium to address near term tritium needs and the costs,  schedules, and risks of those actions; (2) the extent to which NNSA’s plan  to analyze options for supplying enriched uranium in the long term is  consistent with DOE directives; and (3) NNSA’s preliminary cost  estimates for long-term uranium enrichment technology options and the  extent to which they meet best practices for reliable estimates.

To address all three objectives, we analyzed NNSA planning  documents—as well as other key agency strategies and implementation  plans—and interviewed officials from NNSA and DOE, the Department of  Defense (DOD), the Department of State (State), TVA, and private  companies that play a role in the production of enriched uranium. We also  visited DOE’s Oak Ridge National Laboratory (ORNL), where work  continues on uranium enrichment technology; NNSA’s Y-12 National  Security Complex in Tennessee, which is involved in the management of  enriched uranium; and the American Centrifuge demonstration plant in  Ohio, where an advanced uranium enrichment technology was in  development until 2016, to understand the technical and policy issues  that affect the current LEU inventory and that may affect the future supply  of unobligated LEU.

To examine the actions that NNSA is taking to extend its existing  inventories of enriched uranium to address its near-term tritium needs  and the costs, schedules, and risks of those actions, we reviewed agency  documents pertaining to these actions. We also obtained and analyzed  NNSA information on actual costs and schedules for each action, where  available, and compared that information against estimated costs and  schedules. We identified risks associated with each action by reviewing  NNSA documentation and interviewing NNSA and TVA officials and a  representative of a private company involved in the actions.

To examine the extent to which NNSA’s plan to analyze options for  supplying enriched uranium in the long term is consistent with DOE  directives, we reviewed NNSA and ORNL documentation and interviewed  federal officials from NNSA and the State Department as well as ORNL  and NNSA contractor representatives regarding efforts NNSA has taken  to identify potential options and preliminarily assess their feasibility. We  evaluated NNSA’s plan against DOE directives, such as DOE Order  413.3B Program and Project Management for the Acquisition of Capital  Assets and associated guidance, such as G 413.3-4A Technology  Readiness Assessment Guide, and G 413.3-17 Mission Need Statement  Guide.

To examine NNSA’s preliminary cost estimates for long-term uranium  enrichment technology options and the extent to which they meet best  practices for reliable estimates, we reviewed NNSA and contractor  planning, analysis, and cost documents. We compared the information in  those documents to GAO’s Cost Estimating and Assessment Guide (cost  guide), which is a compilation of best practices for federal cost estimating  organizations and industry to use, develop, and maintain reliable cost  estimates throughout the life of an acquisition program. According to the  cost guide, reliable cost estimates feature four characteristics— comprehensive, well-documented, accurate, and credible. These best  practices apply to cost estimates throughout a project’s life cycle,  including early, rough-order-of-magnitude estimates developed at or  before project initiation. We interviewed an NNSA official and a  representative from the contractor who prepared the preliminary cost  estimates about their methodologies and the results that were used to  support the preliminary cost estimates. We assessed the information we  gathered against best practices and shared our preliminary analysis with  NNSA officials to obtain their perspectives and identify reasons for any  observed shortfalls compared with cost-estimating best practices. We  reviewed their comments and any additional information they provided  and incorporated them to finalize our assessment. See appendix I for  additional information on our objectives, scope, and methodology.

We conducted this performance audit from August 2016 to February 2018  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
subsections: section_title: Nuclear Fuel Production and Uranium Enrichment Technologies
paragraphs: Uranium is a naturally occurring radioactive element that is enriched to  fuel nuclear power plants and that can also be used to meet certain  national security purposes. Natural uranium is comprised of  approximately 99.3 percent of the uranium-238 isotope and 0.7 percent of  the uranium-235 isotope—which undergoes fission to release energy.  Uranium enrichment is the process of increasing the concentration of  uranium-235 in a quantity of natural uranium to make LEU to fuel nuclear  power plants, or to make HEU, which is used in nuclear weapons and as  fuel by the U.S. Navy. Generally, to produce enriched uranium, uranium is  extracted or mined from underground deposits, converted from a solid to  a gas, enriched to increase its concentration of uranium-235, and then  fabricated into fuel elements, such as rods for commercial nuclear  reactors, appropriate for their ultimate use. These steps make up the  nuclear fuel cycle (see fig. 1). After the fuel has been irradiated in a  nuclear power reactor, it is considered “spent” nuclear fuel. Spent fuel can  be chemically reprocessed, and the enriched uranium recycled for reuse.  The United States used to reprocess spent nuclear fuel but has not done  so since the mid-1970s, primarily to discourage other countries from  pursuing reprocessing because of concerns over nuclear proliferation, as  we have previously reported. Currently, in the United States, spent fuel is  stored as waste.

LEU can also be produced by downblending HEU to LEU. This involves  mixing HEU with a “diluent” or other forms of uranium—such as natural  uranium—to reduce the concentration of the uranium-235 isotope in the  uranium and produce an overall lower level of enrichment.

Until 2013, uranium was enriched in the United States both for national  security and commercial purposes. Beginning in the 1940s, DOE and its  predecessor agencies provided uranium enrichment services—first for  national security purposes and later for the emerging commercial nuclear  power industry—using government-owned gaseous diffusion plants. In  1992, the U.S. government established the United States Enrichment  Corporation (USEC) as a government corporation to take over operations  of DOE’s enrichment facilities and to provide uranium enrichment  services for the U.S. government and utilities that operate nuclear power  plants. In 1998, the corporation was privatized under the USEC  Privatization Act. From 1998 until 2013, DOE relied exclusively on USEC  to obtain enrichment services for the production of LEU needed to  produce tritium. In May 2013, USEC ceased enrichment at its last  commercially active enrichment plant in Paducah, Kentucky, which it had  leased from DOE since the time of USEC’s establishment. USEC has  been the only company to enrich uranium with U.S. technology.

Gas centrifuge technology, rather than gaseous diffusion technology, is  currently used around the world to enrich uranium. Gas centrifuges work  by spinning uranium hexafluoride in a gas form inside a centrifuge rotor at  an extremely high speed. The rotation creates a strong centrifugal force,  which separates the lighter uranium-235 molecules from the heavier  uranium-238 molecules. The enrichment achieved by a single gas  centrifuge is not sufficient to achieve the desired assay, so a series of  centrifuges are connected together in a configuration called a cascade. In  the United States, URENCO—a European enrichment consortium— operates a gas centrifuge enrichment plant in New Mexico.

The obligations governing the use of foreign uranium enrichment  technology and nuclear material in the United States are established  under international agreements between the United States and foreign  partners. These agreements generally impose certain terms and  conditions on transfers of nuclear material and equipment, including,  among other things, requiring peaceful use of the material and  equipment. The agreements’ peaceful-use provisions generally state that  material, equipment, and components subject to the agreements will not  be used for any nuclear explosive device, for research on or development  of any nuclear explosive device, or for any military purposes.

section_title: National Security and Other Uses for Enriched Uranium
paragraphs: This section discusses national security and other uses for enriched  uranium, such as tritium production, highly enriched uranium, and high- assay low enriched uranium.

Tritium is a key isotope used in nuclear weapons. NNSA needs an  assured source of tritium to maintain the capabilities of the nuclear  stockpile and has called tritium a “pressing” defense need. However,  tritium has a relatively short half-life of 12.3 years and decays at a rate of  about 5.5 percent per year. It must be periodically replenished to  maintain the designed capability of the weapons. Some tritium may be  recycled from dismantled weapons, but the inventory must also be  replenished through the production of new tritium.

At present, NNSA produces tritium through the use of one of TVA’s  electricity-producing nuclear reactors fueled with unobligated LEU. Small  quantities of tritium are the normal by-products of electricity-producing  nuclear power plants, such as those owned and operated by TVA. To  produce more tritium than usual and later collect it, specially designed  targets—called tritium-producing burnable absorber rods (TPBAR)—are  loaded with the unobligated LEU and irradiated in TVA’s Watts Bar 1  reactor. Irradiated TPBARs are unloaded during normal fuel reloading  and shipped to NNSA’s Tritium Extraction Facility at the Savannah River  Site in South Carolina. There the tritium is extracted and prepared for use  in nuclear warheads and bombs (see fig. 2 for NNSA’s tritium production  process).

Prior to the use of TVA’s reactor, the United States used other  government-owned reactors to produce tritium (see sidebar). In 1999,  TVA signed an interagency agreement with DOE to produce tritium at its  Watts Bar and Sequoyah commercial nuclear reactors. Since 2003,  TVA has been producing tritium for NNSA at its Watts Bar 1 reactor. TVA  does not have plans to use the Sequoyah reactors for tritium production  in the near term, according to a TVA document.

History of U.S. Tritium Production   From 1954 until 1988, the United States  produced the majority of its tritium using  nuclear reactors at the Savannah River Site in  South Carolina. Smaller amounts of tritium  were also produced using nuclear reactors at  the Department of Energy’s (DOE) Hanford  Site in Washington. When the site’s last  operating reactor—known as K Reactor—was  shut down due to safety concerns in 1988, the  United States lost its capability to produce  tritium for the nuclear weapons stockpile.

The amount of tritium that NNSA needs changes based on national  security requirements. In fiscal year 2015, NNSA conducted a review of  the tritium inventory and anticipated future demand. At that time, NNSA  determined that to meet future tritium demand a second TVA reactor  would be required to irradiate TPBARs and produce additional tritium.  Using a second TVA reactor would increase the amount of unobligated  LEU needed for tritium production using this process, according to NNSA  documents.

NNSA also supplies HEU for national security and other missions. NNSA  provides HEU to fuel reactors for the U.S. Navy’s aircraft carriers and  submarines. NNSA recovers HEU from excess dismantled nuclear  weapons. According to NNSA’s October 2015 plan, HEU from these  sources will meet naval reactors’ demand through 2060. After this time,  NNSA will need additional sources of HEU for naval nuclear reactors. To  satisfy non-defense demands, NNSA also supplies HEU to, among other  things, fuel research reactors for medical isotope production and other  research applications.

In 1998, the Secretary of Energy announced  that DOE would turn to commercial light water  reactors as the sole means of meeting the  future demand for tritium. From 1988 to 1998,  DOE was able to meet its tritium requirements  by harvesting and recycling it from dismantled  nuclear warheads, as the United States  decreased the size of its nuclear arsenal.  However, because of tritium’s short half-life,  DOE could not meet its long-term tritium  needs in this manner indefinitely. Since 2003,  the Tennessee Valley Authority (TVA) has  been producing tritium for National Nuclear  Security Administration (NNSA) at its Watts  Bar 1 commercial nuclear power reactor.

NNSA’s nonproliferation mission requires “high assay” LEU—meaning  LEU enriched in the uranium-235 isotope to below 20 percent but above  the standard 3 to 5 percent used in most commercial reactors—for  research and isotope production reactor fuel. Since there are no  commercial uranium enrichment facilities licensed to produce high-assay  LEU, it must be produced by downblending HEU. According to NNSA  documents, the HEU inventory allocated for research and isotope  production reactors using high-assay LEU is projected to be exhausted by  around 2030. After this time, a new supply of high-assay LEU for  research and isotope production reactors will need to be identified.

section_title: DOE Project Management
paragraphs: NNSA has initiated a process to determine a long-term solution for  obtaining enriched uranium and tritium. DOE’s Order 413.3B, Program  and Project Management for the Acquisition of Capital Assets, governs  how NNSA acquires capital assets with total project costs greater than  $50 million, which could include a new uranium enrichment capability or  other new capability to produce tritium. The stated goal of the order is to  deliver fully capable projects within the planned cost, schedule, and  performance baseline.

Order 413.3B also establishes DOE’s critical decision (CD) process.  This process divides the capital asset acquisition into five project phases  that progress from a broad statement of mission need, to requirements  that guide project execution, through design and construction, and  concludes with an operational facility. Each phase ends with a major  approval milestone—or “critical decision”—that marks the successful  completion of that phase.

A key activity during CD-0, the preconceptual design phase is the  preparation of a mission need statement. A mission need statement  identifies the capability gap between the current state of a program’s  mission and the mission plan. DOE’s Order 413.3B provides direction for  preparing a mission need statement, including that it be independent of a  particular solution, and that it should not be defined by equipment, facility,  technological solution, or physical end-item. This approach is to allow the  agency the flexibility to explore a variety of approaches and not  prematurely limit potential solutions.

Under Order 413.3B, an analysis and selection of alternatives—which  builds off the mission need—should be conducted during the CD-1 phase,  the conceptual design phase. In addition to the requirements of Order 413.3B, DOE has guidance for identifying, analyzing, and selecting  alternatives that is found throughout the seven guides associated with the  order. Conducting the analysis of alternatives is a key first step to help  ensure that the selected alternative best meets the agency’s mission  need and that this alternative is chosen on the basis of selection criteria,  such as safety, cost, or schedule. Figure 3 illustrates when DOE conducts  the analysis of alternatives as part of its project management process for  capital asset projects.

In October 2016, NNSA approved a mission need statement for long-term  capability to supply unobligated enriched uranium for tritium production  and presented a preliminary set of options to meet that need. In  December 2016, DOE approved CD-0 to begin the acquisition of such a  capability. Consistent with direction in DOE Order 413.3B, NNSA has  begun conducting an analysis of alternatives that is to identify the option  that would best meet the mission need for a domestic uranium  enrichment capability. In August 2017, DOE and NNSA officials stated  that the analysis of alternatives will be completed by the end of 2019.

Also, under DOE Order 413.3B, DOE’s technology readiness levels (TRL)  are incorporated into the CD process. TRLs are used by federal agencies  and industry to assess the maturity of evolving technologies. TRLs are  measured along a scale of 1 to 9, beginning with TRL 1 (or basic  principles observed and reported) and ending with TRL 9 (or actual  system operated over the full range of expected mission conditions). DOE  guidance states that a TRL of 4—system or component validation at  laboratory scale—is recommended for CD-1 (conceptual design process).  Projects are encouraged to achieve a TRL of 7—full scale demonstration  of a prototypical system in a relevant environment—prior to CD-3 (final  design phase).

section_title: Best Practices for Project Cost Estimating
paragraphs: In March 2009, we issued our cost guide to provide assistance to federal  agencies with preparing cost estimates, among other things. Drawing  from federal cost estimating organizations and industry, the cost guide  describes best practices for ensuring development of high-quality—that  is, reliable—cost estimates. A reliable cost estimate helps ensure that  management is given the information it needs to make informed  decisions. The cost guide identifies four characteristics of a reliable cost  estimate: (1) comprehensive, (2) well documented, (3) accurate, and (4)  credible. DOE’s Order 413.3B states, among other things, that its cost  estimates shall be developed, maintained, and documented in a manner  consistent with methods and best practices identified in our cost guide,  DOE guidance, and applicable acquisition regulations and Office of  Management and Budget guidance.

Our cost guide can be used to evaluate the reliability of rough-order-of- magnitude estimates. Rough-order-of-magnitude estimates are typically  used to support “what-if” analyses and are helpful in examining initial  differences in alternatives to identify which are most feasible. However,  the nature of a rough-order-of-magnitude estimate means that it is not as  robust as a detailed, budget-quality, life-cycle estimate and, according to  the guide, its results should not be considered or used with the same  level of confidence. Further, the cost guide states that because this  estimate is developed from limited data and in a short time, it should  never be considered a budget-quality cost estimate.

section_title: NNSA Is Taking or Plans to Take Four Actions to Extend Existing Inventories of Enriched Uranium to Address its Near-term Tritium Needs
paragraphs: NNSA is taking or plans to take four actions to extend its existing  inventories of unobligated enriched uranium to address its near-term  need for tritium and has generally identified the costs, schedules, and  risks for these actions. These actions would together extend the supply of  unobligated LEU from 2027 until approximately 2038 to 2041, according  to NNSA documents. NNSA first identified the actions to extend its  unobligated LEU supply based on an analysis completed by the DOE  Uranium Inventory Working Group, which was convened by NNSA in  September 2014 to analyze the department’s uranium inventory and  identify material and options to provide unobligated LEU for tritium  production reactors. These actions were later presented in NNSA’s  October 2015 plan.

Of the four actions NNSA is taking or plans to take, two actions involve  nuclear material accounting practices that help preserve supplies of  unobligated LEU, and two of the actions involve downblending HEU.  NNSA has generally identified the costs and schedules for these actions.

Specifically, NNSA estimated in its October 2015 plan that the total cost  of the four actions would be approximately $1.1 billion from fiscal years  2016 through 2025 and would provide additional quantities of unobligated  LEU for TVA to meet NNSA’s tritium needs through 2038 to 2041. Based  on our review, the actual costs and schedules through October 2017  generally align with the estimates in NNSA’s October 2015 plan. NNSA  and GAO have identified some risks associated with two of these actions.  One of these risks has been resolved; NNSA is taking steps to mitigate  another; while other risks, such as the uncertainty of future  appropriations, are unresolved.

The following are the four actions, and their costs, schedules, and risks.
subsections: section_title: Book Storage of TVA LEU
paragraphs: Book storage is an industry-wide nuclear material accounting practice,  where a nuclear material supplier—such as a uranium enrichment plant  or nuclear fuel fabricator—can record in its accounts, or books, the  amount of enriched uranium in its inventory belonging to a customer,  such as a nuclear power plant operator, and hold that material for future  delivery to the customer. TVA has entered into contracts with two nuclear  fuel suppliers to conduct book storage to preserve unobligated LEU for  TVA on behalf of NNSA. This practice effectively parks the unobligated  LEU into a separate account so that the material is not inadvertently  loaded into a non-tritium producing reactor. Book storage helps TVA  preserve limited quantities of unobligated LEU for the future; it will  eventually be used for tritium production at the Watts Bar reactor.  According to agency officials, a key benefit of using book storage for LEU  is that TVA does not have to physically store the material. According to  these officials, book storage is significantly less expensive than paying to  set up a physical storage facility.

The terms of TVA’s book storage contracts, including the parties involved,  schedules, and values, are proprietary and business sensitive, according  to TVA officials. Based on our analysis, the actual fees paid by TVA under  its book storage contracts align with NNSA’s projected costs for book  storage in its October 2015 plan. NNSA is reimbursing TVA for the book  storage fees it is paying. According to NNSA, the obligations preserved  from using book storage for unobligated LEU through these contracts  extend the LEU fuel need date by 3 years. NNSA’s October 2015 plan did  not identify any specific risks for these existing book storage contracts.

section_title: Obligation Exchanges of LEU
paragraphs: Obligation exchanges are another industry-wide nuclear material  accounting practice, which involves the transfer of obligations on nuclear  material—such as LEU—between two entities without physically moving  the material. Similar to book storage, TVA may conduct obligation  exchanges on behalf of NNSA to increase the inventory of unobligated  LEU available for tritium production. According to NNSA’s October 2015  plan, TVA may conduct additional obligation exchanges in the future on  behalf of NNSA. According to NNSA and TVA officials, at least one future  obligation exchange is anticipated but has not been scheduled. According  to these officials, there are no specific costs associated with transferring  the obligations on LEU between entities. In addition, if additional  inventories of unobligated LEU are identified, NNSA officials told us they  will encourage TVA to conduct additional obligation exchanges to  preserve the material. NNSA’s October 2015 plan did not identify any  specific risks for obligation exchanges.

section_title: Repurposed Excess Uranium (REU) Downblending
paragraphs: NNSA’s first downblending action involves downblending 10.4 metric tons  of HEU that was previously declared excess to national security needs.  NNSA initiated the 3-year REU program in 2015 and, according to NNSA  officials, the last shipment of HEU for downblending is expected in  December 2018. According to these officials, close-out and final  operations of the contract will end in early 2019. The REU downblending  is being performed through a contract between NNSA and WesDyne,  which subcontracts with another company, Nuclear Fuel Services,  according to DOE documents we reviewed and officials we interviewed.

According to NNSA documents, NNSA is the sole customer for this  downblending effort. The estimated costs for the REU downblending  program are $373 million, according to NNSA’s October 2015 plan.  According to NNSA and contractor officials, the fixed price of the contract  is $333.8 million, and the invoiced costs for the REU downblending  program through October 2017 are $141.4 million, which aligns with the  terms of the contract. According to an NNSA official, NNSA is paying for  the REU program through a combination of funds provided through  annual appropriations and what the parties refer to as a “barter”  arrangement, according to NNSA officials and documents. Under this  arrangement, NNSA is compensating the downblending contractor by  transferring title of the derived LEU to WesDyne, which will be retained as  unobligated LEU and eventually sold to TVA for tritium production  purposes. The REU downblending program will generate approximately  five reactor reloads of unobligated fuel for TVA, and will likely be used in  the early to mid-2030s, according to NNSA documents.

Regarding the risks for the REU program, NNSA identified the uncertainty  of whether NNSA would be able to continue to conduct barters of derived  LEU to pay for downblending services. For example, the 2015 plan notes  that, while such transactions had worked well for previous downblending  campaigns, declining markets values for enriched uranium in recent years  had reduced industry’s interest in being compensated for services with a  portion of the derived LEU. In addition, NNSA officials identified a lawsuit  challenging the legality of barters as a risk. This suit was dismissed in  July 2016. As a result, this specific risk no longer affects the  Department,  and according to NNSA officials, the agency anticipates  being able to continue compensating Nuclear Fuel Services with derived  LEU for the duration of the REU program.

section_title: Downblending Offering for Tritium (DBOT)
paragraphs: NNSA’s second downblending action, which is planned to begin in 2019,  will involve HEU mainly composed of undesirable scrap, primarily in the  form of oxides, left over from uranium processing activities. NNSA  estimates that the planned DBOT program will generate approximately 10  reloads of unobligated fuel for TVA, likely to be used in the mid-2030s.  According to an NNSA document, the program is expected to run for a 6- year period from 2019 through 2025. However, the schedule for HEU  downblending under the DBOT action has not yet been finalized.  According to NNSA officials, as of January 2018 the agreement is still  being negotiated, but NNSA officials told us they anticipate that TVA will  manage Nuclear Fuel Services’ down-blending activities in support of the  DBOT program as well as the resulting unobligated LEU and its  associated flags. NNSA’s estimated costs for the DBOT downblending  program are $770 million, according to NNSA’s October 2015 plan.  NNSA plans to pay for the DBOT program solely with funds provided  through annual appropriations. NNSA does not currently plan to transfer  any LEU resulting from this downblending program as payment to the  contractor and will instead keep all the LEU for future tritium production.

The DBOT program has not been initiated, so we could not assess  whether the program’s actual costs and schedule align with the estimates  in NNSA’s October 2015 plan. However, NNSA officials said they have  confidence in the projected costs for the DBOT program since the estimates are based on previous downblending programs that NNSA has  conducted over the past decade.

NNSA identified two risks, and we identified one additional risk, facing the  DBOT program. First, NNSA’s October 2015 plan identified the  uncertainty of annual appropriations in the amount of $770 million to  support this program. In addition, NNSA’s October 2015 plan identified a  second risk associated with the availability of material for the DBOT  program. The DBOT material will consist largely of scrap oxide left over  from weapons production processes, some to be generated in future  years. Because the schedules for those processes may change, the  amounts of material available for DBOT and the dates when it will be  available are subject to some uncertainty. Furthermore, we identified an  additional risk to the DBOT program that is not addressed in NNSA’s  October 2015 plan. Specifically, NNSA did not indicate which nuclear fuel  cycle company would be used for the book storage of the LEU resulting  from the DBOT program, and there is no guarantee that a company would  be willing to engage in book storage for NNSA. A senior NNSA official  stated that this detail will be worked out once the DBOT contract is  finalized. NNSA and TVA officials noted that other fuel cycle facilities  have previously been uninterested in conducting book storage for NNSA,  so options may be limited. According to NNSA officials, if book storage  was unavailable in the future, NNSA could pay for the physical storage of  the LEU for the DBOT program. Since the costs of physically storing LEU  for the DBOT program are not included in NNSA’s cost estimates, this  could increase the overall costs of the program.

section_title: NNSA’s Preliminary Plan to Analyze Options to Supply Enriched Uranium in the Long Term is Inconsistent with DOE Directives
paragraphs: NNSA’s preliminary plan—as outlined in its domestic uranium enrichment  mission need statement—to analyze options for supplying enriched  uranium in the long term is inconsistent with DOE directives. This is  because the scope of the mission need statement can be interpreted to  fulfill multiple mission needs, which is inconsistent with DOE directives  that such a statement should be a clear and concise description of the  gap between current capabilities and the mission need. Under either  interpretation of the mission need statement, NNSA is not complying with  these directives because it is showing preference toward a particular  solution—building a new uranium enrichment capability—and the agency  has not included other options for analysis. In the mission need  statement, NNSA has preliminarily identified two uranium enrichment  technologies as the most feasible options for reestablishing a uranium  enrichment capability, but both face deployment challenges.
subsections: section_title: NNSA’s Domestic Uranium Mission Need Statement Can Be Interpreted to Fulfill Multiple Mission Needs, Making it Inconsistent with DOE Directives
paragraphs: NNSA’s preliminary plan—as outlined in its domestic uranium enrichment  mission need statement—for analyzing options to supply enriched  uranium in the long term is unclear because the scope of the mission  need statement can be interpreted to fulfill more than one mission need,  and this is inconsistent with DOE directives. Specifically, NNSA’s October  2016 mission need statement—developed by NNSA’s Office of Domestic  Uranium Enrichment—identified two mission needs: (1) a need for  enriched uranium for a range of national security and other missions,  including LEU for tritium production, HEU for the U.S. Navy, and high- assay LEU for research needs; and (2) a specific need for tritium.  Because the mission need is not clearly stated, it is not clear whether  NNSA intends to identify a future source of enriched uranium that could  meet a range of mission needs, or only meet the specific mission need for  tritium. According to DOE guidance for the mission need statement, the  mission need statement should be a clear and concise description of the  gap between current capabilities and the mission need. A senior NNSA  official acknowledged that the mission need statement was ambiguously  written because there are a range of mission needs for enriched uranium,  and the ultimate mission need that the analysis of alternatives process  will meet is unclear. Under either interpretation of the intent of the mission  need statement, the document does not fully comply with DOE directives.  According to DOE Order 413.3B, the mission need should be  independent of a particular solution and should not be defined by the  equipment, facility, technological solution, or physical end-item. This  approach allows the Office of Domestic Uranium Enrichment the flexibility  to explore a variety of solutions and not limit potential solutions.

Under the first interpretation of NNSA’s mission need statement (which  appears to be its preferred interpretation, according to NNSA documents),  NNSA needs a future source of enriched uranium for a range of  missions—initially LEU to produce tritium, but later also to produce high- assay LEU for research needs and HEU for the U.S. Navy. Specifically,  the document states that if the United States decided to reestablish a  domestic uranium enrichment capability, it “could meet several national  security missions.” Further, it states that “future demand for additional  enrichment assays and volumes should be considered in the selection of  the enrichment capacity to meet national security needs.” This suggests  that NNSA may be missing opportunities to consider options for providing  additional enriched uranium that do not entail reestablishing a uranium  enrichment plant.

For example, while the mission need statement discusses some policy  options that would provide NNSA with a new source of enriched uranium  without building a new enrichment capability, it excludes at least one  policy option that was originally identified in NNSA’s October 2015 plan— reprocessing DOE-owned spent nuclear fuel to recover HEU (which could  also be downblended to produce LEU). Reprocessing spent nuclear fuel  could provide a significant quantity of enriched uranium without the need  for a new enrichment capability. It is not clear why NNSA excluded this  option from the mission need statement at this early point in the  development of alternatives. See appendix II for a discussion of other  options NNSA includes in its mission need statement that could provide  NNSA with a new source of enriched uranium without building a new  enrichment capability.

Under the second, narrower interpretation of the mission need statement,  NNSA would need to obtain LEU solely to meet its mission need for  tritium. However, contrary to DOE directives that a mission need  statement be independent of a particular solution and not be defined by  equipment, facility, technological solution, or physical end-item, NNSA is  showing preference for a particular end-item—enriched uranium—to  continue the tritium production mission. The mission need statement  indicates a preference for using enriched uranium to continue the tritium  production mission, as it only identifies options to obtain additional  enriched uranium. This approach would exclude consideration of certain  technology options, such as one that may have the potential to produce  tritium without the need for enriched uranium. Specifically, during our  review, we identified a technology capable of producing tritium that does  not require enriched uranium and is being developed by Global Medical  Isotope Systems (GMIS). This technology was not included in NNSA’s  mission need statement as an option to help NNSA meet its tritium  production requirements. An NNSA office separate from the Office of  Domestic Uranium Enrichment—the Office of Nuclear Materials  Integration—has funded the GMIS technology in a demonstration effort to  determine whether it can produce tritium in sufficient quantities to support  NNSA’s needs.

The GMIS technology is currently at a low TRL, and the tritium production  estimates have not been independently verified, but a senior NNSA  official and GMIS representatives told us that it produced “appreciable  amounts of tritium” during the demonstration. However, another senior  NNSA official stated that it would be more appropriate to consider the  GMIS technology in a process being conducted by another NNSA office— the Tritium Sustainment Office—which is currently examining potential  options to meet tritium needs in 2055 and beyond, when TVA’s Watts Bar  reactors may no longer be operating. This official, however, told us that  the program office has no plans to update its last technology evaluation  from 2014, which did not include consideration of the GMIS technology.  If the purpose of NNSA’s mission need statement is to meet tritium  requirements, then NNSA may be missing the opportunity to assess a  technology that could meet the mission need without the need for  enriched uranium. Without revising the scope of the mission need  statement to clarify which mission need it seeks to achieve and adjusting,  as appropriate, the range of preliminary options being considered in the  analysis of alternatives, NNSA may not consider all options that could  satisfy its ultimate mission need.

section_title: NNSA Has Identified Two Uranium Enrichment Technologies as Most Feasible for Reestablishing a Uranium Enrichment Capability, but Both Face Challenges
paragraphs: The mission need statement identifies six potential enrichment technology  options for reestablishing an unobligated uranium enrichment capability.  The technology selected could be used first to produce LEU to support  the tritium production mission, and potentially later used to produce high- assay LEU for research needs and HEU for the U.S. Navy, according to  NNSA documents. According to NNSA’s mission need statement, these  six technologies were identified by a team of federal, national laboratory,  and contractor experts in uranium enrichment technologies in December  2014, later presented in the October 2015 plan, and then included in the  mission need statement.

Among the six technologies, four—restart of the Paducah Gaseous  Diffusion Plant, electromagnetic isotope separation, atomic vapor laser  isotope separation, and separation of isotopes by laser excitation—are  unlikely to be feasible, according to NNSA documents (app. III provides  additional information on these four enrichment technologies). Some of  these technologies have produced enriched uranium in the past, but  extraordinary technical or financial barriers, past research failures, or  peaceful-use restrictions would likely preclude further consideration by  NNSA, according to NNSA documents.

According to NNSA documents, NNSA has preliminarily identified the two  remaining uranium enrichment technologies as the most feasible options  to supply unobligated LEU for tritium production: the AC100 (“large”)  centrifuge and a “small” centrifuge design. However, both of these options  face challenges to deployment.

Of the identified options, the AC100, or large centrifuge, is the technology  that is furthest along in development. Centrus Energy Corp.—the private  company known as USEC Inc. prior to its bankruptcy in 2014—developed  a large (about 40 feet tall) advanced centrifuge for uranium enrichment.  From June 2012 through September 2015, DOE invested approximately  $397 million to financially support a research, development, and  demonstration program for the large centrifuge technology at Centrus’  demonstration facility—the American Centrifuge Plant—in Ohio (See fig.  4). However, in September 2015, DOE announced that it would not  continue funding the demonstration plant in Ohio past the end of that  month. According to a September 2015 DOE memorandum, the  department had obtained the testing data it needed and determined that  there was “minimal incremental value” in continuing demonstration  operations. Centrus was unable to continue operation of the  demonstration plant without further government support and, in February  2016, announced its intent to demobilize it. Appendix IV provides  additional information on the development of Centrus’ AC100 large  centrifuge technology.

According to NNSA’s October 2015 report, at the conclusion of DOE’s  support, Centrus had successfully demonstrated that the large centrifuge  technology had achieved a TRL of 7 to 8—or the generally successful demonstration of a test facility. DOE has continued funding, at a lower  level, Centrus’ further development of the large centrifuge technology at a  test facility in Oak Ridge, Tennessee, through September 2018. The  October 2016 mission need statement estimated that it would take 2 to 5  years to complete development of the technology. According to a senior  DOE official, though DOE has discontinued the majority of its funding, the  department has taken two actions to preserve the large centrifuge  technology—preserving the intellectual property for this technology and  hiring some former Centrus employees—to ensure that the technology  can be deployed if it is selected in the analysis of alternatives.

However, we identified several challenges that could complicate future  efforts to deploy the large centrifuge technology—challenges related to  the preservation of intellectual property, royalty costs for commercial  deployment, and the weakening of Centrus’ U.S. supplier and knowledge  base.

Intellectual property. A senior DOE official stated that there were two  issues with DOE’s Office of Nuclear Energy original preservation of the  information. First, preservation of the schematics began before certain  technical issues with the demonstration plant were discovered, and  consequently, Centrus’ proposed resolution of those issues was not  included in the documentation, according to DOE and NNSA officials.  Second, a DOE official and Centrus representatives stated that DOE’s  contract with Centrus did not specify how the schematics were to be  preserved. Rather than preserving the schematics in an electronic  engineering format, Centrus preserved them in a different format that will  require them to be reconstructed in an engineering program, according to  the DOE official. NNSA officials acknowledged there were issues with the  2014 preservation effort and stated that negotiations were under way to  contract with Centrus for a second preservation effort that would include  updated schematics in the correct format and the documentation on the  proposed resolution of the technical issues.

Royalty costs. Although DOE owns the intellectual property, by  agreement, Centrus is owed royalties if the large centrifuge technology is  deployed for commercial purposes. According to a June 2002 agreement  between DOE and USEC, these royalties would be capped at $665  million. In a January 2017 request for information from industry, NNSA  expressed interest in obtaining enriched uranium through a federal  government-private industry partnership. In January 2017, NNSA officials  said that they were not sure how royalties might affect such a partnership.  It is possible that if a private industry partner was only interested in  producing enriched uranium for the government alongside a commercial  operation, the royalties could discourage such a partnership, or that some  of the costs might be passed on to the government. However, the  royalties may be less than the cost of developing a new enrichment  capability, so such an arrangement may also attract partners interested in  entering the market but not in developing new technology.

Supplier base. Centrus representatives told us that Centrus assembled  an extensive domestic supplier base during the demonstration program to  show that enrichment services could be unobligated. According to  Centrus representatives and a Centrus document, the company had  sourced components for the demonstration plant from over 900 different  suppliers and manufacturers in 28 states, and that following its closure,  many of these companies would go out of business or lose the capability  to produce the necessary parts. As a result, if the large centrifuge option  is selected, a domestic supplier base will have to be rebuilt, according to  Centrus representatives. NNSA officials acknowledged that—as NNSA  conducts the analysis of alternatives process—Centrus’ supplier and  manufacturing base will continue to diminish.

Knowledge base. Centrus representatives have raised concerns that the  closure of the American Centrifuge Plant and associated layoffs of  qualified workers may make it difficult to re-hire experienced centrifuge  workers in the future. According to a cost estimate review prepared by a  contractor for NNSA, the American Centrifuge Plant employed 370 full- time equivalent workers during the demonstration program. However, as  of January 2017, it employed approximately 117 staff, according to a  Centrus document. NNSA officials acknowledged that the loss of skilled  workers is a concern and stated that, as a mitigating measure, ORNL has  hired knowledgeable former Centrus personnel for further centrifuge  research projects at ORNL.

The second most feasible option to supply unobligated LEU for tritium  production is the design for a small centrifuge technology. NNSA is  funding an experiment to develop a centrifuge design that it anticipates  will be smaller (from 6 to 14 feet tall), simpler, and potentially less  expensive to build and maintain than the large centrifuge, according to an  NNSA document. The experiment began at ORNL in 2016 and is based  on prior ORNL experience with centrifuges. According to NNSA and  ORNL documents, the small centrifuge experiment will take 3.5 years to  achieve a TRL of 3 to 4—successful validation at laboratory scale—and  cost approximately $42 million for this validation effort. During our visit to  ORNL in December 2016, laboratory representatives told us that  prototypes had not yet been constructed and showed us their preliminary  design work and initial construction of their facility. As of December 2017,  the first prototype of three or four planned sizes had been built and  tested, according to NNSA officials and ORNL representatives. Following  completion of the experiment, the mission need statement estimates that  it could take another 4 to 7 years to bring the technology to a TRL of 9  (ready to deploy).

Like the large centrifuge technology, the small centrifuge technology  faces challenges that could complicate its deployment. For example,  according to NNSA officials and ORNL representatives, the small  centrifuge experiment is on an aggressive testing schedule to  demonstrate results and potential scalability to meet NNSA’s planned  2019 deadline to select a preferred alternative in the analysis of  alternatives process. Further, according to NNSA officials and ORNL  representatives, if the small centrifuge design is selected, ORNL would  not build and operate the plant because it is focused on research and  development. Instead, NNSA would have to identify and contract with  another entity to license, transfer, and deploy the technology, according  to NNSA officials and ORNL representatives. NNSA officials also stated  that there will be challenges in establishing a U.S. manufacturing base of  suppliers for the small centrifuge and associated equipment.

section_title: NNSA’s Preliminary Cost Estimates for the Most Feasible Uranium Enrichment Technologies Are Limited in Scope and Do Not Fully Meet Best Practices
paragraphs: Though the scope of the mission need statement is unclear, NNSA has  prepared preliminary cost estimates for the two uranium technologies it  considers most feasible: the large and small centrifuge. These estimates  are limited in scope and the estimate for the large centrifuge was  premised on assumptions that were no longer valid. In addition, even  when assessed for a more limited scope—producing LEU for tritium—the  cost estimates do not fully meet best practices for reliable estimates  applicable to all cost estimates.
subsections: section_title: NNSA’s Preliminary Cost Estimates for the Uranium Enrichment Technologies it Considers Most Feasible Are Limited in Scope, and One Is Premised on Invalid Assumptions
paragraphs: Though the scope of the mission need statement is unclear, NNSA’s  preliminary cost estimates for the two uranium technologies it considers  most feasible—the large and small centrifuge—are limited in scope, and  the estimate for the large centrifuge was premised on assumptions that  were no longer valid. Specifically, the limited scope of the cost estimates  mean that they do not reflect the full costs of building a uranium  enrichment facility that could eventually provide the capacity to enrich  enough uranium to meet multiple needs, not just tritium. As previously  noted, NNSA identified two mission needs: (1) a need for enriched  uranium for a range of national security and other missions, including  LEU for tritium production, HEU for the U.S. Navy, and high-assay LEU  for research needs; and (2) a specific need for tritium.

According to DOE and NNSA documents and NNSA officials, NNSA  appears to favor an incremental approach to reestablishing a domestic  uranium enrichment capability. This incremental approach would start  with the selection of an enrichment technology in an enrichment plant  capable of meeting tritium production requirements but could be  expanded to meet the other governmental enriched uranium needs over  time, according to our review of NNSA documents. Best practices for  cost estimating state that programs following such an approach should  clearly define the characteristics of each increment of capability so that a  rigorous life cycle cost estimate can be developed. In addition, we have  recommended that agencies conducting incremental acquisitions  consider establishing each increment of increased capability with its own  cost and schedule baseline. However, the scope of NNSA’s cost  estimates for the large and small centrifuges are limited only to an  enrichment plant capable of meeting the tritium production requirements, according to DOE and NNSA documents. The cost estimates do not  estimate the incremental costs of the additional enrichment capacity  necessary to meet additional enriched uranium needs such as HEU.  NNSA officials stated that the cost estimates were preliminary in nature  and that they anticipate developing more in-depth cost estimates as  NNSA progresses further in the analysis of alternatives process. By  limiting the scope of the cost estimates to one mission need—LEU for  tritium—and not addressing the additional costs to meet other enriched  uranium mission needs, NNSA’s cost estimates may be underestimating  the life cycle costs of the technology options under evaluation—which  could lead the agency to select a less cost-effective technology option.

We also found that NNSA relied on a Centrus-provided scenario for the  large centrifuge cost estimate that was premised on assumptions that  were no longer valid, rather than using a scenario that more accurately  reflected conditions at the demonstration plant at the time of the analysis.  We found that the large centrifuge cost estimate had not been  substantially updated since fall 2014. According to DOE documents,  NNSA officials, and Centrus representatives, the estimate was originally  prepared by Centrus in the fall of 2014, and NNSA and its contractor  made minimal updates to this estimate in January 2015 and again in fall  2016. However, this meant that NNSA officials used a scenario that  assumed conditions that were no longer accurate as of October 2016, the  date of the mission need statement.

This scenario, for example, assumed that the demonstration plant would  be left intact for 5 years—in a cold standby state—followed by a restart of  operations. However, in February 2016, Centrus had already publicly  announced that it would begin decontamination and decommissioning the  demonstration plant in spring 2016. An alternate scenario—complete  demobilization of the demonstration plant followed by a restart of  operations after 10 years—may have more closely reflected conditions at  the time. According to a December 2014 estimate provided by Centrus to  DOE and NNSA, this scenario presented the most risk, as it meant that  the site, staff, and supplier base would all have to be reconstituted after a  significant break—which could be very difficult. According to this estimate,  the cost of the alternate scenario would likely be $2.6 billion greater.  NNSA officials stated that they had used the scenario that they thought  best fit the conditions at the time, and Centrus officials agreed that cold  standby was an appropriate scenario to use. However, by using the cold  standby scenario rather than the demobilization scenario, NNSA appears  to have underestimated the costs to build an enrichment facility by  several billion dollars. A senior NNSA official noted that, for the large  centrifuge, they intend to create a new estimate that does not rely on  Centrus.

section_title: NNSA’s Preliminary Cost Estimates for the Uranium Enrichment Technologies it Considers Most Feasible Do Not Fully Meet Best Practices for Reliable Estimates
paragraphs: Even when assessed for a more limited scope—producing LEU for  tritium—NNSA’s preliminary cost estimates for the two uranium  enrichment technology options that the agency considers to be the most  feasible—the large and small centrifuge technologies—do not fully meet  best practices for reliable cost estimates, including those for early stages  of acquisition. Our cost guide—which presents best practices for cost  estimates—states that high-quality, or reliable, cost estimates—including  preliminary and rough-order-of-magnitude estimates—must meet four  characteristics: they must be comprehensive, well-documented, accurate,  and credible. DOE Order 413.3B states that cost estimates must be  developed, maintained, and documented in a manner consistent with the  methods and best practices identified in, among other things, our cost  guide. Reliable cost estimates are crucial tools for decision makers,  according to best practices. According to the cost guide best practices,  cost 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 cannot be considered to be  reliable. Office of Management and Budget guidance notes the  importance of reliable cost estimates at the early stages of project  initiation, stating that early emphasis on cost estimating during the  planning phase is critical to successful life cycle management—in short,  determining whether benefits outweigh costs.

NNSA’s mission need statement presented rough-order-of-magnitude  cost estimates of $7.5 to $14 billion to build a national security enrichment  plant using the large centrifuge technology, and an estimate of $3.8 to  $8.3 billion to build such a plant using the small centrifuge technology.  We found that the large centrifuge cost estimate only partially met the  characteristics of being comprehensive and credible, and minimally met  the characteristics of being well-documented and accurate. The small  centrifuge cost estimate only partially met the characteristic of being  comprehensive, and minimally met the characteristics of being well- documented, accurate, and credible. Because the large and small  centrifuge cost estimates do not fully meet the best practices  characteristics of reliable cost estimates, we concluded that they are not  reliable. We shared our assessments with NNSA officials and a  representative from an NNSA contractor and discussed the findings. We  reviewed their comments and any additional information they provided  and incorporated them to finalize our assessments. NNSA officials  explained that the cost estimates are preliminary and are intended only to  be rough-order-of-magnitude estimates since the process is only in the  early stages and will be revised as the analysis of alternatives process  moves forward. NNSA officials stated that they are aware of the  limitations of the preliminary large and small centrifuge cost estimates. By  developing reliable cost estimates consistent with best practices, NNSA  will reasonably ensure that it has reliable information to make an informed  decision about its options. The following is a summary of our  assessments.

Comprehensive. Best practices state that—to be considered  comprehensive—a cost estimate should include both government and  contractor costs of the project over its full life cycle, from “cradle to  grave.” This includes costs from the inception of the project through  design, development, deployment, and operation and maintenance, to  retirement of the project. A life cycle cost estimate can support  budgetary decisions, key decision points, milestone reviews, and  investment decisions. DOE Order 413.3B does not specifically require  a life cycle cost estimate at CD-0. Nonetheless, according to best  practices, having a complete life cycle cost estimate helps ensure that  all costs are fully accounted for and that resources are efficiently  allocated to support the project.

We found that the cost estimate to build a large centrifuge facility  partially met the comprehensive characteristic because it included a  high-level description of the work to be performed, and presented a  brief summary description of the schedule, number of machines, and  activities. However, the estimate was not a life cycle cost estimate  because it excluded certain costs, such as retirement and close-out  costs. In addition, other than noting a government oversight fee, the  documentation does not specify whether the estimated costs are  government or contractor costs. The estimate contains a 17 percent  add-on, which an NNSA contractor told us accounts for DOE and  contractor oversight costs, but the estimate does not specify how  those costs are allocated.

We found that the cost estimate to build a small centrifuge facility also  partially met the comprehensive characteristic. We found that the  estimate included costs for manufacturing, design, testing of the  centrifuges, and 11 years of operations but, similar to the large centrifuge  facility estimate, did not include retirement and close-out costs.

Well-documented. Best practices state that data are the foundation  of every cost estimate and that the quality of the data affects an  estimate’s overall credibility. Thus, the supporting documentation for  an estimate should capture in writing the source data used, an  assessment of the reliability of the data, and how the data were  normalized to make them consistent with and comparable to other  data used in the estimate. The documentation should describe in  sufficient detail the calculations performed and the estimating  methodology used to derive each project element’s cost such that any  cost analyst could understand what was done and replicate it. Without  good documentation, management may not be convinced that the  estimate is credible; supporting data will not be available for creating a  historical database; questions about the approach or data used to  create the estimate cannot be answered; lessons learned and a  history for tracking why costs changed cannot be recorded; and the  scope of the analysis cannot be thoroughly defined.

We found that the cost estimate to build a large centrifuge facility  minimally met this characteristic. NNSA’s contractor adjusted  estimates previously provided by Centrus for inflation and added an  estimate for DOE’s oversight and fees. The documentation does not  provide any of the supporting cost data or include descriptions of  adjustments or normalization made to the data. We found that the  estimate’s supporting documentation does not provide a description of  the specific calculations and presents methodologies in only broad  terms. The documentation does not describe the steps taken to  develop the estimates and does not provide enough information or  supporting data to enable an analyst unfamiliar with the program to  replicate the cost estimates. We were unable to trace the calculations  to assess the accuracy and suitability of the methodology.

Similarly, we found the cost estimate to build a small centrifuge facility  minimally met this characteristic. We found that the supporting  documentation does not include information about the supporting data  underlying the cost estimate. The sources of the data are not  documented, and no information is included about how the data were  normalized to make them comparable to other data used in the  estimate. We found that it would be difficult to recreate this estimate  because no supporting data or electronic cost models were  documented.

Accurate. According to best practices, a cost estimate should provide  results that are unbiased; that is, the estimate should not be overly  conservative or optimistic. An estimate is accurate when, among other  things, it is based on an assessment of most likely costs, adjusted  properly for inflation, and contains few, if any, mathematical mistakes.  Best practices state that unless an estimate is based on an  assessment of the most likely costs and reflects the degree of  uncertainty given all of the risks considered, management will not be  able to make good decisions. Not adequately addressing risk,  especially risk that is outside the estimator’s control or that were never  conceived to be possible, can result in point estimates that give  decision makers no information about their likelihood of success or  give them meaningless confidence intervals.

We found the cost estimate to build a large centrifuge facility  minimally met this characteristic. We could not determine whether the  estimate is unbiased because no risk and uncertainty analysis had  been performed. Portions of the work breakdown structure’s elements  are based on historical costs, but neither the historical data were  provided, nor was there a thorough description of how those historical  costs were adjusted or used. The contractor applied a 2 percent  inflation factor but did not document the source of this factor; a  representative of NNSA’s contractor stated that another DOE office  recommended using that factor. We found no mathematical mistakes  in the overall calculations, but the model was not available to evaluate  the methodologies used.

For the small centrifuge, we found the cost estimate minimally met  this characteristic. We found that no risk or uncertainty analysis had  been performed. The estimate uses a 2.4 percent inflation factor, but  there is no documentation about the origin of this factor. An  independent cost review performed by DOE’s Office of Project  Management Oversight and Assessments stated that this inflation  factor was overly optimistic and recommended the use of a 4 percent  factor. We did not detect any mathematical errors in the overall  calculations, but the model was not available to evaluate the  methodologies.

Credible. The credible characteristic reflects the extent to which a  cost estimate can be trusted, according to our cost guide. For  example, to be considered credible, the cost estimate should include  a sensitivity analysis that examines how changes to key assumptions,  parameters, and inputs affect the estimate. This analysis helps ensure  that a range of possible costs are identified, as well as risks and their  effects that may affect those costs. In addition, major cost elements  should be cross-checked by the estimator to validate the results, and  an independent cost estimate should be conducted by an outside  group. The absence of a sensitivity analysis increases the chance that  decisions will be made without a clear understanding of the impacts  on costs, and the estimate will lose credibility.

The cost estimate to build a large centrifuge facility partially meets this  characteristic. NNSA presents several case studies rather than  conducting a sensitivity analysis. These case studies only differ in one  key assumption—schedule—but do not differ in any other major  assumptions. The cost estimate documentation identified some major  cost elements as cost drivers, but no cross-check information had  been documented. DOE performed cross-checks in an independent  cost review.

The cost estimate to build a small centrifuge facility minimally meets  this characteristic. There is no evidence in the supporting  documentation that a sensitivity analysis was completed. Some  programmatic risks were identified in the documentation. No cross- check information had been documented. DOE performed an  independent cost review which adjusted the project management cost  to make it consistent with the large centrifuge project management  cost estimate.

Regarding the large centrifuge, an NNSA official said that the agency had  requested the supporting documentation that formed the basis of the  estimate Centrus prepared in 2014, but that Centrus did not provide the  information, stating that it was proprietary. However, according to Centrus  representatives, Centrus offered to provide updated cost estimates and  supporting data—provided that they were appropriately protected—but  NNSA declined the offer. According to an NNSA official, the agency has  not made a renewed effort to obtain this information because Centrus is  still a publicly-traded company that would like to commercialize the large  centrifuge technology.

Regarding the small centrifuge, an NNSA official told us that the agency  did not have sufficient data to create a reliable preliminary cost estimate  because the small centrifuge experiment is still in the preliminary design  and development stages. In the absence of such data, ORNL based its  estimate on its decades-long expertise and experience with centrifuges,  as well as on the cost structure of the large centrifuge, according to  NNSA documents. NNSA and DOE officials stated that they expect to  have data by mid-2019 that would support a reliable cost estimate for  inclusion in the analysis of alternatives process, which is expected to  conclude in 2019. The officials said that they are still developing the  technology and intend to create a new cost estimate.

section_title: Conclusions
paragraphs: Tritium is a key isotope used in U.S. nuclear weapons, and the United  States requires an ongoing supply of tritium to sustain the nuclear  stockpile. Since 2013, the United States has not had a supplier of  unobligated LEU, which under the current approach is necessary to  power the TVA reactor that produces tritium. NNSA recognizes that its  unobligated LEU inventory is finite and declining and has taken actions to  extend existing supplies of unobligated LEU in the near term. These  actions have effectively bought the agency some time while it initiates an  analysis of alternatives process to develop a long-term solution.

However, the scope of the mission need statement underpinning the  analysis of alternatives is unclear because it can be interpreted to fulfill  more than one mission, which is inconsistent with DOE directives that  such a statement should be a clear and concise description of the gap  between current capabilities and the mission need. The mission need  statement is also inconsistent with the directives’ requirement that the  mission need should be independent of a particular solution and not be  defined by a technological solution or physical end-item. In addition, the  mission need statement indicates a preference for using enriched  uranium to continue the tritium production mission and excludes  consideration of certain technology options, such as one that may have  the potential to produce tritium without the need for enriched uranium.  Without revising the scope of the mission need statement to clarify which  mission need it seeks to achieve and adjusting, as appropriate, the range  of options being considered in the analysis of alternatives, NNSA may not  consider all options that could satisfy its ultimate mission need.

Further, the preliminary cost estimates developed by NNSA for the large  centrifuge and small centrifuge technology options were limited in  scope—sized for a capacity to enrich uranium only for tritium  production—and do not reflect the full costs of building a uranium  enrichment facility that could eventually meet a range of enriched uranium  mission needs. By ensuring that the scope of the cost estimates address  additional costs that align with other mission needs that the enrichment  capability may be intended to fulfill, NNSA can select a more effective  option. In addition, we found that the cost estimates produced for this  more limited scope do not fully meet the best practice characteristics of  reliable cost estimates. By developing reliable cost estimates consistent  with best practices, NNSA will ensure that it has quality information to  make an informed decision about which option to select.

section_title: Recommendations for Executive Action
paragraphs: We are making the following two recommendations to NNSA:  The NNSA Administrator should revise the scope of the mission need  statement to clarify which mission need it seeks to achieve and, as  appropriate, adjust the range of options considered in the analysis of  alternatives process. (Recommendation 1)

The NNSA Administrator should—following clarification of the scope of  the mission need statement—ensure that the agency’s cost estimates for  whichever options it considers going forward are aligned with the scope of  the mission need that the enrichment capability is intended to fulfill and  that they are developed consistent with best practices. (Recommendation  2)

section_title: Agency Comments and Our Evaluation
paragraphs: We provided drafts of this report to NNSA, State, DOD, and TVA for  review and comment. In written comments, which are summarized below  and reproduced in appendix V, NNSA neither agreed nor disagreed with  our recommendations. However, NNSA stated that it will take future  actions consistent with our recommendations. NNSA also provided  technical comments, which we considered and incorporated as  appropriate. The State Department provided technical comments, which  we incorporated as appropriate. The Department of Defense stated that it  did not have any written or technical comments and TVA did not provide  written or technical comments. We also provided a technical statement of  facts to the following entities: Centrus, ConverDyn, GMIS, and URENCO.  We received technical comments and incorporated them, as appropriate.

In its written comments, NNSA clarified that its mission need statement is  written to support a range of requirements, the most urgent of which is  LEU for tritium production. Further, NNSA stated that it will evaluate a  broader range of options to meet its mission need during the analysis of  alternatives process, which has begun and which NNSA has targeted for  completion by December 2019. Because the analysis and selection of  alternatives in the CD-1 phase builds off of the mission need statement,  we believe NNSA’s clarification of its mission need statement is positive  and will help result in an analysis of alternatives that does not limit  potential solutions.

NNSA also stated that it will produce higher fidelity cost estimates leading  up to the CD-1 phase, which we agree is consistent with our  recommendation. NNSA stated that the preliminary cost estimates it  developed do not include the full life cycle cost of building an enrichment  facility to meet the range of enriched uranium missions it has now clarified  as its mission need, but it stated that such estimates are neither required  nor cost beneficial at this early stage. As we noted, best practices—which  can be used to evaluate preliminary cost estimates—recommend having  complete life cycle cost estimates even at this early stage because they  help ensure that all costs are considered to support decision-making and  that resources are efficiently allocated to support the project. As NNSA  develops its higher fidelity estimates, following cost estimating best  practices—such as, by ensuring that the cost estimates for the  alternatives being evaluated align with the broad range of uranium  mission needs that those alternatives are intended to address, and that  full life cycle cost estimates are developed for each option—would better  position NNSA to select an option going forward.

We are sending copies of this report to the appropriate congressional  committees, Secretary of Energy, Secretary of State, Secretary of  Defense, Vice President for Government Relations of TVA, and other  interested parties. In addition, this report will be available at no charge on  the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-3841 or at bawdena@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 VI.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of our review were to assess (1) the actions the National  Nuclear Security Administration (NNSA) is taking to extend its existing  inventories of enriched uranium to address near-term tritium needs and  the costs, schedules, and risks of those actions; (2) the extent to which  NNSA’s plan to analyze options for supplying enriched uranium in the  long term is consistent with Department of Energy (DOE) directives; and  (3) NNSA’s preliminary cost estimates for long-term uranium enrichment  technology options and the extent to which they meet best practices for  reliable estimates.

To inform all three objectives, we analyzed NNSA planning documents,  such as NNSA’s October 2015 Tritium and Enriched Uranium  Management Plan Through 2060 and other documents from NNSA and  DOE pertaining to the management of enriched uranium and tritium. We  also interviewed officials from NNSA, DOE, the Department of Defense  (DOD), the Department of State (State), the Tennessee Valley Authority  (TVA) and representatives of companies participating in different stages  of the nuclear fuel cycle. We conducted site visits to the Oak Ridge  National Laboratory (ORNL), the Y-12 National Security Complex in Oak  Ridge, Tennessee, and the American Centrifuge Plant, in Piketon, Ohio,  to understand the technology and nonproliferation policy issues that affect  the current inventory and future supply of unobligated enriched uranium.

To describe the actions NNSA is taking or plans to take to extend its  existing inventories of enriched uranium to address near-term tritium  needs and the costs, schedules, and risks of those actions, we reviewed  and analyzed agency documents pertaining to NNSA’s estimates of the  costs, schedules, and risks for the actions. Namely, we analyzed NNSA’s  October 2015 Tritium and Enriched Uranium Management Plan Through  2060 and other NNSA strategies and implementation plans, including a  2014 Uranium Inventory Working Group assessment of near-term NNSA  actions to extend the supply of unobligated LEU. We interviewed NNSA  and TVA officials to validate the cost and schedule information for the  action NNSA is taking to extend its LEU inventory. To compare the  estimated costs to the actual costs for the actions NNSA is taking or plans  to take to extend the unobligated LEU fuel supply for tritium production,  we analyzed contracts between TVA and fuel cycle facilities for book  storage and associated documentation. We then spoke with  representatives from NNSA’s downblending contractor, and compared  that information to the costs that had been invoiced through July 2017. To  identify risks of the options that NNSA has identified, we reviewed NNSA  documents and interviewed NNSA officials.

To assess the extent to which NNSA’s plan to analyze options for  supplying enriched uranium in the long term is consistent with DOE  directives, we reviewed DOE and NNSA documents including: documents  associated with DOE’s critical decision process, such as the uranium  enrichment mission need statement, project requirements, and the CD-0  approval memo; DOE memos on the department’s uranium management  strategy; and an intellectual property transfer contract between DOE and  the United States Enrichment Corporation (USEC). We compared these  documents to DOE directives, including DOE Order 413.3B Program and  Project Management for the Acquisition of Capital Assets and 413. 3-4A  Technology Readiness Assessment Guide, and associated guidance,  such as DOE 413.3-17 Mission Need Statement Guide.

ORNL and its subcontractor manage the contracts to develop and  preserve the large centrifuge technology (AC100), and the contract to  develop the small centrifuge technology; therefore, we also reviewed  ORNL documents including a uranium enrichment production technology  study, project management plans for the large and small centrifuge  projects, and large centrifuge experiment test results.

We interviewed DOE officials and ORNL representatives regarding efforts  to assess the feasibility of other technology options identified in NNSA’s  October 2015 plan—large centrifuge, small centrifuge, Atomic Vapor  Laser Isotope Separation (AVLIS), Electromagnetic Isotope Separation  (EMIS), Separation of Isotopes by Laser Excitation (SILEX), and the  Paducah Gaseous Diffusion Plant. We also reviewed documents and  interviewed representatives from Centrus and Global Laser Enrichment  (GLE)—a joint venture that developed SILEX—regarding the  development of the large centrifuge, AVLIS, and SILEX technologies. In  addition, we reviewed industry responses to NNSA’s request for  information regarding proposals for meeting NNSA’s future enriched  uranium needs. We also interviewed NNSA and DOE officials, and  industry representatives, to learn about any recent alternative tritium  production technology developments. We conducted a site visit to an  isotope production facility in Henderson, Nevada, to observe a NNSA- funded demonstration project with Global Medical Isotope Systems that is  currently testing an alternative tritium production technology. To review  the feasibility of policy and other options that NNSA is evaluating, we  analyzed NNSA planning documents, and interviewed officials from  NNSA and State to determine the extent to which the costs, schedules,  and risks for these options were known.

To examine NNSA’s preliminary cost estimates for long-term uranium  enrichment technology options—the large and small centrifuges—and the  extent to which they meet best practices for reliable estimates we  compared these estimates to GAO’s Cost Estimating and Assessment  Guide (cost guide), which is a compilation of best practices that federal  cost estimating organizations and industry use to develop and maintain  reliable cost estimates throughout the life of an acquisition program.  According to the cost guide’s best practices, four characteristics make up  reliable cost estimates—they are comprehensive, well-documented,  accurate, and credible. To develop our assessments, we interviewed an  NNSA official and a representative of an NNSA contractor who prepared  the cost estimates about their methodologies and the findings that were  used to support the cost estimates presented in NNSA’s mission need  statement. We analyzed the cost estimating practices used by NNSA  against the four characteristics of reliable cost estimates. We performed a  summary analysis because NNSA’s cost estimates were at the rough- order-of-magnitude level. After conducting our initial analyses, we shared  them with NNSA officials to provide them an opportunity 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 them to finalize our assessment. While rough-order-of- magnitude estimates should never be considered high-quality estimates,  rough-order-of-magnitude estimates can be considered reliable by fully or  substantially meeting industry best practices. For example, we have  found that other rough-order-of-magnitude estimates substantially or fully  met various characteristics of a reliable cost estimate, such as cost  estimates prepared by the DOD and the U.S. Customs and Border  Protection within the Department of Homeland Security. Moreover,  DOE’s cost guidance states that, “regardless of purpose, classification, or  technique,” the agency’s cost estimates should demonstrate quality  sufficient for its intended use, be complete, and follow accepted  standards such as our cost guide. DOE’s cost guidance also describes good cost estimates as including a full life-cycle cost estimate, among  other things. These best practices should result in reliable and valid cost  estimates that management can use for making informed decisions.

We conducted this performance audit from August 2016 to February 2018  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: Other Options for Obtaining Enriched Uranium without Acquiring a New Uranium Enrichment Capability
paragraphs: The National Nuclear Security Administration (NNSA) has identified other  options for obtaining enriched uranium to evaluate in its analysis of  alternatives process, but these options pose significant challenges and  are likely to be eliminated during this process, according to NNSA and  Department of State (State) officials. These options may require changes  in policy and could have significant costs, risks, or technical challenges,  according to NNSA and State officials. These options include revising  domestic policy and international agreements to allow the use of foreign- obligated enriched uranium and technology for producing tritium;  obtaining low enriched uranium (LEU) through the Mutual Defense  Agreement between the United States and the United Kingdom;  downblending highly enriched uranium (HEU) from the defense programs  inventory; and reprocessing spent U.S. nuclear fuel. NNSA officials stated  that they do not plan to pursue these options at this time.
subsections: section_title: Revising Domestic Policy and International Agreements to Allow the Use of Foreign-Obligated Uranium and Technology for Producing Tritium
paragraphs: Over the years, questions have been raised as to whether using foreign- obligated material and technology to produce LEU, which produces tritium  that can be harvested for weapons, when irradiated in a power reactor,  constitutes a peaceful use. However, according to DOE, it has been the  agency’s long-standing practice to use only unobligated material for  tritium production. NNSA’s mission need statement includes the option to  revise domestic policy and seek to renegotiate international agreements  to allow foreign-obligated LEU—that is, LEU either sourced from foreign  countries or produced using non-U.S. equipment or technology—for  tritium production for nuclear weapons.

Specifically, NNSA discussed three variations of the option of using  foreign-obligated LEU for tritium production for use in nuclear weapons:

Using obligated LEU from URENCO—a European enrichment  consortium operating an enrichment plant in New Mexico. The LEU  produced by URENCO is enriched using foreign technology and is  subject to a peaceful use provision in an international agreement  between the United States and Germany, the Netherlands, and the  United Kingdom.

Loading TVA reactor cores with a mix of unobligated and obligated  LEU fuel proportional to the extent that the reactor core is used for  tritium production for commercial electricity production.

Renegotiating international agreements to allow the use of foreign  technologies to produce LEU for tritium production.

According to NNSA and State Department officials, longstanding U.S.  policy will likely preclude the use of these options. A 1998 interagency  review—led by DOE—considered the nonproliferation issues associated  with establishing a new means for tritium production. The 1998 review  concluded that DOE should exclusively use LEU that is unobligated by  peaceful-use restrictions to preserve the “military/civilian dichotomy.”  Since that time, NNSA has adhered to this policy and used only  unobligated LEU for tritium production, as we reported in 2015. Various  U.S. interagency policy committees—which provide national security  policy analysis within the National Security Council—met several times  between 2014 and 2016 to reexamine the policy and consider whether to  allow obligated LEU to be used for tritium production for nuclear  weapons. However, the committees concluded that this is not permissible  either by the United States or partner countries under applicable  international agreements. Revising the policy and agreements would  have significant repercussions on U.S. nonproliferation policy as well as  on international agreements, according to NNSA and State officials. In  addition, according to the mission need statement, U.S. partners have  repeatedly requested assurances that materials supplied to the United  States not be used for tritium production.

In addition, NNSA and State officials stated that using only unobligated  LEU for national security purposes supports U.S. nonproliferation policy  goals by, for example, avoiding setting a precedent for other countries  that may seek to use U.S. obligated LEU for military purposes. State  officials stated that even using a mix of unobligated and obligated LEU  fuel would still essentially be asking a foreign partner for the use of its  material for tritium production for nuclear weapons. Revising policy to  allow for the use of obligated LEU in tritium production could “blur the  line” between using LEU for peaceful energy purposes and national  security purposes, according to these officials.

section_title: Mutual Defense Agreement
paragraphs: NNSA also considered obtaining LEU from the United Kingdom under our  mutual defense agreement with that country. The agreement provides for  the transfer of special nuclear material between the two countries. In  2014, the Senate Armed Services Committee directed DOE to evaluate  whether it would be possible to obtain LEU for the purposes of tritium  production from the United Kingdom under the mutual defense  agreement. According to State officials, the mutual defense agreement  does not preclude the United States from obtaining LEU directly from the  United Kingdom for the purposes of tritium production. However, this  option is not likely to be pursued by the federal government, according to NNSA officials. Aside from the mutual defense agreement, State officials  said that they are not aware of any other such agreements that would  potentially allow the United States to obtain tritium from another country.

section_title: Downblending of HEU from the Strategic Reserve
paragraphs: NNSA’s October 2015 plan identifies a Strategic Reserve of HEU  maintained by NNSA as a potential source of HEU for downblending to  obtain unobligated LEU for use in tritium production. The Strategic  Reserve consists of HEU metal and HEU in nuclear weapon components  that are held as a backup for weapons in the U.S. nuclear stockpile.  According to the October 2015 plan, this option could provide unobligated  LEU for tritium production for many years. However, the October 2015  plan states that changing the quantity of HEU held in the Strategic  Reserve inventory would require presidential approval.

NNSA officials indicated that the agency is assessing the costs and risks  of this option. According to these officials, pursuing this option would  involve significant costs and risks associated with lowering the material in  the Strategic Reserve, as well as accelerating the dismantlement of  nuclear weapons and the disassembly of their components. While this  option is currently being assessed for costs and risks, NNSA officials  noted that there is currently “no plan” to access material from the  Strategic Reserve.

Finally, the United States’ inventory of HEU is finite; the United States has  not had a domestic capability to produce HEU since 1992 and instead  meets national security needs using an inventory of HEU that was  enriched prior to 1992. Using this inventory for HEU downblending would  consume HEU that could be used to meet other national security  missions, such as providing HEU fuel for the U.S. Navy’s propulsion  reactors. Consequently, this option could accelerate the date when a new  enrichment capability for HEU production would be needed.

section_title: Reprocessing Spent U.S. Nuclear Fuel
paragraphs: In its October 2015 plan, NNSA identified an option of reprocessing spent  U.S. nuclear fuel to obtain unobligated HEU that could be downblended to  LEU and used for tritium production. However, this option was not  ultimately included in NNSA’s October 2016 mission need statement.  This material is spent reactor fuel from the U.S. Navy and other sources,  and represents a potentially significant source of unobligated LEU that  could be used for tritium production. DOE maintains a large inventory of  such fuel, which includes both aluminum-clad and non-aluminum clad  fuel, such as zirconium-clad fuel. Most of the aluminum-clad fuel is  stored at the Savannah River Site, in South Carolina, while most of the  zirconium-clad fuel is stored at the Idaho National Laboratory.

Options for recovering HEU from either type of spent fuel are limited. The  United States can only process and recover HEU from aluminum-clad  spent nuclear fuel using the Savannah River Site’s H-Canyon facility,  which is the only hardened nuclear chemical separations plant still in  operation in the United States. There is a small amount of aluminum- clad fuel at the Idaho National Laboratory that would need to be shipped  to the Savannah River Site. However, according to NNSA officials, it  would be expensive to transport the material from the Idaho National  Laboratory to the Savannah River Site, and the costs to operate H- Canyon to process the material would be high. Further, receipts of all  nuclear material at H-Canyon have been halted by Savannah River Site’s  management and operations contractor due to the facility’s degraded  conditions and seismic risks. Even if H-Canyon were to resume  operations, NNSA officials stated that processing aluminum-clad spent  fuel would yield relatively small quantities of LEU usable for tritium  production, as a considerable portion of the spent fuel is encumbered  under a 1994 Presidential declaration. Therefore, NNSA officials  reported that this is considered a long-term option due to the high costs  and risks involved.

DOE’s Office of Nuclear Energy is researching a process that could  recover HEU from the zirconium-clad spent naval reactor fuel. In May  2017, Idaho National Laboratory completed a study examining the  feasibility of processing a portion of its zirconium-clad spent fuel inventory  through a new process called “ZIRCEX.” The report concluded that  ZIRCEX showed promise; however, it also noted that pilot-scale testing  was needed to prove that it can be used effectively at production scale.  According to DOE officials, a pilot-scale demonstration is planned using  ZIRCEX, with limited testing planned in fiscal year 2018. DOE officials  told us the costs and schedules to implement a full-scale production plant  using ZIRCEX to recover HEU from zirconium clad spent fuel are not  known. Furthermore, additional processing and downblending would be  needed to produce unobligated LEU. DOE considers recovering  unobligated HEU for tritium production for use in nuclear weapons  through the ZIRCEX process a long-term possibility that could be re- evaluated as the technology matures.

section_title: Appendix III: Other Uranium Enrichment Technologies
paragraphs: In addition to the large and small centrifuges, four other enrichment  options were presented in the National Nuclear Security Administration’s  (NNSA) October 2015 plan and its October 2016 mission need statement.  However, these options are unlikely to be pursued, according to NNSA  documents. Some of these options have produced enriched uranium in  the past, but extraordinary technical or financial barriers, past research  failures, or peaceful use restrictions will likely preclude further  consideration by NNSA, according to agency documents. These options  include:

Restart of the Paducah Gaseous Diffusion Plant (GDP). Gaseous  diffusion was the first uranium enrichment technology used for both  national security and commercial enriched uranium needs in the  United States, and involves passing uranium hexafluoride in a  gaseous form through a series of filters that is then cooled into a solid.  The Paducah GDP produced low enriched uranium (LEU) from the  mid-1950s until 2013. It was originally operated by the Department of  Energy (DOE), but leased to the United States Enrichment  Corporation (USEC) beginning in 1993. Gaseous diffusion facilities  used very large amounts of electricity, making them costly to operate.  According to DOE, by May 2012, it became clear that USEC was no  longer in a financial position to continue enrichment activities at the  Paducah GDP, and—through a series of transactions—DOE  transferred enough material to keep it operating long enough to  produce an additional 15-year supply of LEU for future tritium  production. In May 2013, USEC ceased enrichment at the Paducah  GDP citing the high costs of maintaining and operating an aging  plant. In October 2014, the Paducah GDP was returned to DOE, and  DOE is currently deactivating the plant in preparation for  decontamination and decommissioning, while it continues to complete  environmental cleanup that began in the late 1980s.

In April 2015, when NNSA produced a technical evaluation of uranium  enrichment technology options, restarting the Paducah GDP was still  a hypothetical possibility. At that time, NNSA estimated that the  technology readiness level (TRL) for this option rated 7-8 on the TRL  scale. Restarting the Paducah GDP was advantageous, according to  NNSA, because of the facility’s high production rate. For example,  according to DOE officials, if it had been operated for a relatively brief  period of time after May 2013, a significant stockpile of unobligated  LEU could have been produced to support tritium production for a  number of years. Since 2015, the plant and equipment have  significantly deteriorated, and restart of the Paducah GDP is no longer  a feasible option, according to NNSA documents and Oak Ridge  National Laboratory (ORNL) representatives. Due to degradation of  the equipment, the expected rate of equipment failure, a lack of  replacement parts, the dispersion of trained and qualified personnel,  and ongoing decontamination and demolition activities, a major effort  would be required to reconstitute the plant, according to NNSA’s 2015  technical evaluation and the 2015 plan. NNSA’s 2015 evaluation  estimated that it would cost $425 million to $797 million to restart the  plant, and between $554 million to $1 billion annually to operate it. In  addition, even if the Paducah GDP were successfully restarted  without major failures, the plant could likely operate at full capacity for  only 1 to 3 years before incurring additional significant costs for  repairs, and obtaining replacement parts for critical process  equipment would be difficult. According to NNSA’s April 2015  evaluation, operating the Paducah GDP beyond 1 to 3 years would  require major investments in the plant’s facilities and infrastructure.

Electromagnetic Isotope Separation (EMIS). Electromagnetic  isotope separation was used in the United States to enrich uranium  for the Manhattan Project, but was abandoned in favor of the then- less-costly gaseous diffusion technology. Electromagnetic separation  used magnetic and electronic forces to manipulate and separate  charged isotopes. An updated EMIS machine has been developed by  ORNL that was successful at the laboratory scale, and which had a  TRL of 7, according to NNSA documents and ORNL representatives.  However, when scaled to production levels, NNSA estimated that an  enrichment facility using EMIS would require over 60,000 machines  and cost approximately $150 billion to construct. Due to the exorbitant  estimated costs, this option is unlikely to be pursued by NNSA,  according to agency documents.

Atomic Vapor Laser Isotope Separation (AVLIS). Lawrence  Livermore National Laboratory and later, USEC, developed the AVLIS  technology from 1973 through 1999. This technology relies on the  phenomenon that different isotopes of uranium absorb laser light at  different wavelengths. Because lasers can be finely tuned, the ability  to separate the uranium-235 isotope from the uranium-238 isotope is  potentially much greater than with gaseous diffusion or the gas  centrifuge process. However, despite the federal government  spending $1.7 billion on the technology, and USEC investing an  additional $100 million, it was not successful at the pilot scale stage  and USEC ended research and funding in 1999. According to NNSA’s  October 2015 plan, AVLIS’ TRL was estimated to be 5-6. If  development were restarted, AVLIS could reach a TRL of 9— ready to  deploy—in 5 to 15 years, according to NNSA’s October 2015 plan.  However, this would likely be too late to meet NNSA’s 2038 to 2041  need date for additional unobligated LEU, and there is no estimate for  the cost of such a plant, according to agency documents. According to  NNSA’s 2015 plan, there is no current effort to develop the AVLIS  technology.

Separation of Isotopes by Laser Excitation (SILEX). Global Laser  Enrichment (GLE)—a joint venture between General Electric, Hitachi,  and Cameco—is developing this uranium enrichment technology that  also uses lasers to separate isotopes. The technology is proprietary  and was developed, in part, by an Australian company. In November  2016, DOE reached an agreement to sell its depleted uranium tails to  GLE for re-enrichment to natural uranium. According to a senior  SILEX official, GLE intends to build an enrichment plant by 2025  adjacent to the site of the former Paducah GDP to re-enrich these  tails. However, we previously found that the SILEX agreement  between the United States and Australia likely prohibits using LEU  produced using GLE’s process for the subsequent production of  tritium, and the executive branch has long interpreted it as such.

section_title: Appendix IV: Centrus’ Centrifuge Development
paragraphs: The AC100 centrifuge (large centrifuge) design was developed by USEC  Inc. (now Centrus), based off Department of Energy (DOE) centrifuge  research that was terminated in the 1980s. Standing about 40 feet tall,  its size means that it can produce more separative work units (SWU) per  centrifuge than other centrifuge designs—making it the most advanced  centrifuge design in the world, according to Centrus. In contrast to  European and Japanese centrifuge designs, which are relatively small (2  to 4 meters long) and have separative work capacities in the range of 5  SWU per year to 100 SWU per year, the AC100 demonstrated a SWU  production rate greater than 340 per year.

When it leased a DOE site at Piketon, Ohio, for its American Centrifuge  demonstration plant starting in 2004, USEC originally intended to build a  3.8 million SWU commercial uranium enrichment plant at that site with  enough land nearby to expand the facility to meet total U.S. low enriched  uranium (LEU) demand, including enough to meet national security  needs. The planned facility would have included over 14,400 centrifuges  in a facility covering over 2 million square feet. In 2010, and again in  2012, DOE and USEC signed cooperative agreements to share the cost  of supporting a research, development, and demonstration program for  the large centrifuge technology. DOE provided $280 million, or 80 percent  of the investment in the program, with the remaining $70 million, or 20  percent, provided by USEC. With this support, USEC began operating a  120-machine commercial demonstration cascade in October 2013.

In the wake of significant adverse uranium market impacts resulting from  the Fukushima Daiichi accident in Japan in 2011, and in light of difficulties  in securing DOE loan guarantees for deploying a commercial plant,  USEC declared bankruptcy in March 2014 and later emerged as Centrus.  In April 2014, following the conclusion of the cooperative agreement, the  Secretary of Energy stated that DOE’s Oak Ridge National Laboratory  would place Centrus under contract to operate the demonstration plant  and technology with a focus on meeting national security needs. In May  2014, Centrus entered into a contract with UT-Battelle—DOE’s contractor  for Oak Ridge National Laboratory—to run a program to preserve and  further advance the technology readiness of the AC100 technology. Also,  since 2002, Centrus has maintained a lease on a smaller test research  facility, K-1600, at Oak Ridge, Tennessee, from DOE. According to a  DOE document, centrifuges can be assembled and balanced at K-1600,  and the test facility allows verification of centrifuge operations beyond  what was possible at the demonstration plant. The K-1600 facility is  located near Centrus’ manufacturing hub, the American Centrifuge  Technology & Manufacturing Center, also in Oak Ridge, Tennessee.

Because the May 2014 contract was set to expire in September 2015,  Centrus and UT-Battelle began negotiating a new contract to support  operations at the demonstration plant, the Technology and Manufacturing  Center, and K-1600 in early 2015. UT-Battelle and Centrus agreed to an  extension of research operations at K-1600 and the Technology and  Manufacturing Center until September 2016 for $35 million annually. In  addition, the Centrus lease of K-1600 was renewed until the end of  calendar year 2017. However, the parties were unable to agree on further  funding for the demonstration plant. On September 11, 2015, DOE  announced that it would not fund the demonstration plant in Piketon,  Ohio, after September 30 of that year. Centrus—unable to operate the  demonstration plant without further government support—announced its  intention to demobilize the plant in February 2016. Decontamination and  decommissioning of the demonstration plant began in April 2016. As part  of this work, Centrus is removing all of the equipment—including the  centrifuges—from the demonstration plant, and will finish disposing of the  machines at a secure government facility in October 2017, according to  Centrus officials. However, according to DOE officials, DOE has  preserved a number of the centrifuges and associated components at the  Technology & Manufacturing Center. Centrus documents anticipate that  the decontamination and decommissioning work will be substantially  complete by the end of 2017. According to NNSA officials, Centrus has  given verbal notice to DOE that it intends to terminate its American  Centrifuge demonstration plant site lease in 2019.

An August 2015 DOE memo states that technical issues with the existing  centrifuges, peaceful-use restrictions on key components and DOE’s  acquisition timeline meant that there was limited value in continuing to  support the demonstration cascade after 2015. Specifically, during  operation of the demonstration cascade, two technical issues were  identified that made the existing centrifuges undesirable for future use.  Rehabilitation of the centrifuges would have been cost prohibitive,  according to NNSA officials. In addition, key components of the existing  machines were constructed using foreign-sourced materials, which were  subject to peaceful-use restrictions. According to an August 2015 DOE  memo, the second cooperative agreement with Centrus did not require  that Centrus use unobligated materials, and Centrus initially assumed it  would use those machines in a larger commercial plant and not for  national security. Centrus representatives and DOE officials told us that  the company had since identified U.S. suppliers or workarounds for these  components. However, to be used in a national security facility, these  components would need to be remanufactured using those suppliers,  since not all components in the demonstration cascade were unobligated.  Further, under NNSA’s timeline for a domestic uranium enrichment  capability, it could take until 2027 to begin construction of a uranium  enrichment plant. Thus, according to an August 2015 memo, DOE  concluded that it would not be economical to keep the demonstration  cascade operational, and that, after the passage of so much time, parts of  the centrifuges and the balance of the plant would also need to be  replaced during construction.

section_title: Appendix V: Comments from the Department of Energy / National Nuclear Security Administration

section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Shelby S. Oakley, Director;  William Hoehn, Assistant Director; Eric Bachhuber, Analyst in Charge;  Julia Coulter; and Katrina Pekar-Carpenter made key contributions to this  report. Also contributing to this report were Antoinette C. Capaccio, Jeff  Cherwonik, Jennifer Echard, Robert S. Fletcher, Ellen Fried, Cindy  Gilbert, Amanda K. Kolling, Jason Lee, Jennifer Leotta, Dan C. Royer,  Anne Stevens, and Kiki Theodoropoulos.

Fast facts: The National Nuclear Security Administration manages U.S.-origin enriched uranium for certain needs such as for the production of tritium, which is used in nuclear weapons. After losing its last source of U.S.-origin enriched uranium in 2013, NNSA projected that its supply would run out in 2027.

We found that NNSA has extended its supply through 2038 but it has not clearly defined longer term enriched uranium needs. We also found that NNSA's preliminary cost estimates for building a new enrichment capability are not reliable.

We recommended that NNSA clarify the scope of its mission need statement and create new cost estimates.

Question-summary annotations: questions: question: What plans does the NNSA have regarding LEU?
answer: The National Nuclear Security Administration (NNSA), a separately organized agency within the Department of Energy (DOE), is taking or plans to take four actions to extend inventories of low-enriched uranium (LEU) that is unobligated, or carries no promises or peaceful use to foreign trade partners until about 2038 to 2041.
child_questions: question: What do these actions involve?
answer: Two of the actions involve preserving supplies of LEU, and the other two involve diluting highly enriched uranium (HEU) with lower enriched forms of uranium to produce LEU.
child_questions: question: What did NNSA and GAO determine about these actions?
answer: GAO reviewed these actions and found the actual costs and schedules for those taken to date generally align with estimates. NNSA and GAO have identified risks associated with two of these actions.
child_questions: question: What steps are being taken to address these risks?
answer: One of these risks has been resolved; NNSA is taking steps to mitigate another, while others, such as uncertainty of future appropriations, are unresolved.

questions: question: What is the relationship between NNSA's uranium plan and DOE directives?
answer: NNSA's preliminary plan for analyzing options to supply unobligated enriched uranium in the long term is inconsistent with DOE directives for the acquisition of capital assets, which state that the mission need statement should be a clear and concise description of the gap between current capabilities and the mission need. The DOE directives also state that mission need should be independent of and not defined by a particular solution.
child_questions: question: In what way is NNSA showing preference to a particular solution?
answer: However, NNSA is showing preference toward a particular solution—building a new uranium enrichment capability—and the agency has not included other technology options for analysis.

question: What mission needs can be met by the NNSA's current plan?
answer: The scope of the mission need statement that NNSA has developed can be interpreted to meet two different mission needs: (1) a need for enriched uranium for multiple national security needs, including tritium, and (2) a specific need for enriched uranium to produce tritium.

question: What steps does NNSA need to take with regards to its mission need?
answer: Without (1) revising the scope of the mission need statement to clarify the mission need it seeks to achieve and (2) adjusting the range of options it considers in the analysis of alternatives process, NNSA may not consider all options to satisfy its mission need.

questions: question: What is the current status of NNSA's uranium projects?
answer: Although the scope of the mission need statement is unclear, NNSA has prepared preliminary cost estimates for the two uranium enrichment technology options—the large and small centrifuge—that the agency considers to be the most feasible.
child_questions: question: What are the shortcomings of these estimates?
answer: However, these estimates are limited in scope and do not fully meet best practices for reliable cost estimates.

question: What characterizes NNSA's uranium project approach?
answer: Based on GAO's review of NNSA documents, NNSA appears to favor an incremental approach to reestablishing an enrichment capability that could ultimately meet all national security needs for enriched uranium.
child_questions: question: What limitations exist with these estimates?
answer: The estimates' scope is limited, however, in that they reflect only the costs of the first increment—producing LEU for tritium—and do not reflect the full costs of building a uranium enrichment facility that could meet the range of enriched uranium needs. Specifically, how does NNSA's cost estimate differ from GAO's cost guide? Also, NNSA's estimates for the two options minimally or partially met best practice characteristics for reliable cost estimates even when assessed for the more limited mission scope. For example, the estimates excluded certain costs and did not describe the calculations used.
child_questions: question: Why were some of the costs excluded, according to NNSA officials?
answer: NNSA officials said that the cost estimates are preliminary and will be revised.

question: Why should NNSA work to develop reliable cost estimates?
answer: By developing reliable cost estimates that are aligned with the revised mission need statement and consistent with best practices, NNSA will reasonably ensure that it has reliable information to make a decision about which option to select.

questions: question: What is one NNSA mission need for enriched uranium?
answer: NNSA has several mission needs for enriched uranium, including providing LEU to fuel a nuclear reactor that produces tritium—a key isotope used in nuclear weapons.
child_questions: question: Why must the equipment used to produce the LEU be U.S. in origin?
answer: NNSA has a pressing defense need for unobligated LEU to fuel this reactor, meaning the uranium, technology and equipment used to produce the LEU, must be U.S. in origin.

question: How have recent events complicated this process?
answer: Because the United States lost its only source of unobligated LEU production in 2013, the supply is finite.

questions: question: Why did GAO assess NNSA's uranium plans?
answer: A House Armed Services Committee report included a provision for GAO to assess NNSA's plans to manage tritium and enriched uranium.
child_questions: question: What does the report examine?
answer: This report examines (1) the actions NNSA is taking to extend its existing LEU inventories to address near-term tritium needs; (2) the extent to which NNSA's plan to analyze long-term options for supplying enriched uranium is consistent with DOE directives; and (3) NNSA's preliminary cost estimates for long-term uranium enrichment technology options and the extent to which they meet best practices for reliable estimates.

question: How did GAO conduct its analysis?
answer: GAO analyzed NNSA plans on costs, schedules, and risks; compared them with its guide on best practices in cost estimating; and interviewed NNSA and other officials.