Chemical Weapons Disposal: Improvements Needed in Program Accountability and Financial Management
Released: 2000-05-08T00:00:00

Letter

Introduction

Since World War I, the United States has maintained a stockpile of chemical agents and munitions to deter the use of chemical weapons against its troops. From 1917 through the 1960s, obsolete or unserviceable chemical agents and munitions were disposed of by fire in an open pit, burial, and dumping in the ocean. However, because of public concern about the potential effects of these methods of disposal on public health and the environment, they were discontinued during the 1970s. In 1985, the Congress required the Department of Defense (DOD) to carry out the destruction of the U.S. stockpile of chemical agents and munitions and establish an organization within the Army to be responsible for the disposal program. Over time, the Congress also directed DOD to dispose of chemical warfare materiel not included in the stockpile and to research and develop technological alternatives for disposing of chemical agents and munitions. In April 1997, the U.S. Senate ratified the U.N.-sponsored Chemical Weapons Convention, effectively agreeing to dispose of the chemical stockpile weapons and chemical warfare materiel by April 29, 2007. If a country is unable to maintain the convention’s disposal schedule, the convention’s management organization may grant an extension of up to 5 years.

Elements of the Chemical Demilitarization Program

Since the 1980s, DOD’s chemical weapons disposal activities have evolved into the current program, known as the Chemical Demilitarization Program. It now consists of the Chemical Stockpile Disposal Project, the Chemical Stockpile Emergency Preparedness Project, the Nonstockpile Chemical Materiel Product, the Alternative Technologies and Approaches Project, and the Assembled Chemical Weapons Assessment Program.

Chemical Stockpile Disposal Project

In section 1412 of the Fiscal Year 1986 Department of Defense Authorization Act (P.L. 99-145), the Congress directed DOD to destroy the U.S. stockpile of lethal chemical agents and munitions that existed on the date of the legislation’s enactment. The original stockpile consisted of 31,496 tons of nerve and mustard agents contained in rockets, bombs, projectiles, spray tanks, and bulk containers. Some munitions contained nerve agents, which can disrupt the nervous system and lead to loss of muscular control and death. Others contained a series of mustard agents that blister the skin and can be lethal in large amounts. The stockpile is stored at eight sites in the continental United States and on Johnston Atoll in the Pacific Ocean, as shown in figure 1.

In 1988, the Army formally announced its Chemical Stockpile Disposal Project and stated that incineration on site at each of the existing stockpile locations was the preferred disposal method. The objectives of the program are to (1) destroy the stockpile of chemical weapons and (2) provide maximum protection to the environment, the public, and personnel involved in the storage, handling, and disposal of the stockpile. To destroy the weapons, the Army uses a “reverse-assembly” procedure that drains the chemical agent from the weapons and takes apart the weapons in the reverse order of assembly. Once disassembled, the chemical agents and weapons are incinerated in separate furnaces.

As of January 30, 2000, the Army had incineration-based disposal operations under way at two sites, had destroyed approximately 17.7 percent of the original chemical stockpile, and had started construction of disposal facilities for future disposal operations at five other sites. The two operational disposal facilities are at the following locations:

Johnston Atoll is located in the Pacific Ocean about 825 miles southwest of Hawaii. The Army completed construction of its baseline incineration disposal facility in July 1988 and started incineration operations in June 1990. It is the world’s first full-scale facility designed specifically for the disposal of chemical weapons and is the prototype plant for the destruction program. The stockpile at Johnston Atoll originally contained 2,031 tons of nerve and mustard agents and represented 6.4 percent of the original stockpile.

Deseret Chemical Depot is located about 22 miles south of Tooele, Utah. The Army completed construction of the disposal facility in August 1993 and started incineration operations in August 1996. The Army considers this disposal facility to be a first generation incineration facility, and as at the Johnston Atoll facility, it expects to apply lessons learned from its operations to other disposal sites. The Deseret stockpile originally contained 13,616 tons of nerve and mustard agents, representing 43.2 percent of the original stockpile.

Three other baseline incineration disposal facilities are under construction. In June 1997, the Army started construction of both the Umatilla facility, located about 7 miles from Hermiston, Oregon, and the Anniston facility, located about 50 miles east of Birmingham, Alabama. The Umatilla stockpile contains 3,717 tons of nerve and mustard agents, or 11.8 percent of the original stockpile. The Anniston stockpile contains 2,254 tons of nerve and mustard agents, or 7.2 percent of the original stockpile. These facilities are scheduled to begin destroying agents in late 2001 or early 2002. Construction of the Pine Bluff facility, located about 35 miles southeast of Little Rock, Arkansas, started in 1999. The Pine Bluff stockpile contains 3,850 tons of agents, or 12.2 percent of the original stockpile. The Army plans to begin destroying chemical agents at the Pine Bluff facility in late 2003.

Chemical Stockpile Emergency Preparedness Project

In 1988, DOD established the Chemical Stockpile Emergency Preparedness Project to help communities in 10 states near the stockpile storage sites enhance their emergency management and response capabilities in the unlikely event of a chemical stockpile accident. The project, a companion to the Chemical Stockpile Disposal Project, is necessary to help protect the civilian population, workers, and the environment until disposal of the chemical stockpile is complete. Since 1988, the Army and the Federal Emergency Management Agency (FEMA) have assisted the civilian communities in the vicinity of the eight chemical stockpile storage locations and the storage installations in enhancing their emergency response capabilities. In 1997, the Army and FEMA implemented a management structure under which FEMA assumed responsibility for off-post (civilian community) program activities, while the Army continued to manage on-post chemical emergency preparedness and to provide technical support for both on- and off-post activities. FEMA, with its long-standing knowledge and experience in preparing for and dealing with emergencies of all kinds, provides its expertise, guidance, training, and other support to the civilian community. The Agency also administers the grant funds provided to the states and counties where stockpile facilities are located in order to carry out the program’s off-post activities.

Nonstockpile Chemical Materiel Product

Recognizing that the stockpile program did not include all chemical warfare materiel, the Congress directed DOD to plan for the disposal of materiel not included in the stockpile. Consequently, DOD implemented the Nonstockpile Chemical Materiel Product to identify the locations, types, and quantities of chemical materiel not included in the stockpile; develop and implement disposal and transportation methods and procedures; and develop plans, schedules, and cost estimates to implement the program. This materiel, some of which dates as far back as World War I, consists of binary chemical warfare materiel, miscellaneous chemical warfare materiel, recovered chemical warfare materiel, former production facilities, and buried chemical warfare materiel. These items are described in table 1.

The locations of the nonstockpile chemical materiel, as of January 31, 2000, are shown in figure 2.

Since the early 1990s, the Army has undertaken research and development on several transportable systems that are designed to identify, access, and treat chemical agents in nonstockpile munitions and decontaminate the containers and munitions. All disposal methods are to comply with federal and the affected state’s environmental and safety regulations. Until recently, the Army emphasized the use of transportable treatment systems because of the relatively small quantities and the characteristics of nonstockpile chemical weapon materiel located at a potentially large number of sites through the country.

Alternative Technologies and Approaches Project

In November 1991, because of public concern about the safety of incineration, the Army requested the National Research Council to evaluate potential technological alternatives to the baseline incineration process. In the 1993 Defense Authorization Act (sec. 173), the Congress directed the Army to use the Council’s evaluation and report on potential technological alternatives to incineration. The Congress also directed the Army to consider safety, environmental protection, and cost-effectiveness when evaluating alternative technologies. Consequently, in August 1994, the Army initiated the Alternative Technologies and Approaches Project, a more aggressive research and development program, to investigate, develop, and support the testing of two technologies based on chemical neutralization of chemical agents at the bulk-only stockpile sites— Aberdeen, Maryland, and Newport, Indiana. The project focused on these two sites because they have only one type of chemical agent stored in large steel bulk containers. The Army is conducting this project in conjunction with the baseline incineration program.

In 1997, the project proceeded with full-scale pilot testing of the neutralization technologies at the following two stockpile sites:

Edgewood Chemical Activity is located at the Edgewood Area of the Aberdeen Proving Ground, north of Baltimore, Maryland. The Aberdeen stockpile consists of 1,625 tons (or 5.2 percent of the original stockpile) of mustard agent stored in 1,818 ton containers. These containers are designed for safe storage of bulk chemical agents and do not have fuzes, warheads, or other explosive devices. The disposal technology being tested at Aberdeen is neutralization followed by the biodegradation process. The environmental permit was obtained from the state in February 1999, enabling the start of site preparation activities and construction.

Newport Chemical Depot is located 2 miles south of Newport and 32 miles north of Terre Haute in western Indiana. The Newport stockpile consists of 1,269 tons (or 4 percent of the original stockpile) of nerve agent stored in 1,690 ton containers. The technology being tested at Newport was neutralization followed by a supercritical water oxidation process. The environmental permit was obtained from the state in December 1999, enabling the start of construction activities.

Assembled Chemical Weapons Assessment Program

In the National Defense Authorization Act for Fiscal Year 1997, the Congress directed DOD to assess alternative technologies to the baseline incineration process for the disposal of assembled chemical munitions. In addition, section 8065 of the Department of Defense Appropriations Act, 1997, provided $40 million to conduct the Assembled Chemical Weapons Assessment Program, a pilot program to identify and demonstrate two or more alternatives to the incineration process for the destruction of assembled chemical munitions. The appropriations act required the Under Secretary of Defense for Acquisition and Technology to designate a program manager who was not, nor had been, in direct or immediate control of the baseline incineration program to carry out the pilot program. The act also prohibited DOD from obligating any funds for constructing incineration facilities at Blue Grass, Kentucky, and Pueblo, Colorado, until 180 days after the Secretary of Defense reports on alternative disposal methods for assembled chemical weapons. The Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 requires that if a technology other than incineration is selected for these sites, the Under Secretary of Defense must certify in writing to the Congress that the alternative is (1) as safe and cost-effective for disposing of assembled chemical munitions as is incineration, (2) capable of completing the destruction of such munitions on or before the later date of either when the destruction would be completed if incineration were used or the convention’s deadline, and (3) capable of satisfying federal and state environmental and safety laws.

Because of the legislative prohibition on obligating any funds for constructing incineration facilities and the states’ unwillingness to accept incineration as a disposal method, the Army tentatively chose the Blue Grass and Pueblo depots to test alternative technologies for destroying the assembled chemical weapons.

The Blue Grass Army Depot, located in central Kentucky, has a stockpile of weapons containing 523 tons of nerve and mustard agents, or 1.7 percent of the original stockpile.

The Pueblo Chemical Depot, located about 14 miles east of Pueblo, Colorado, has a stockpile of weapons containing about 2,611 tons of mustard agent, or 8.3 percent of the original stockpile.

The program involves a three-phased approach that includes the development of technology evaluation criteria, technology assessment, and demonstration of not less than two technologies. The public has thus far participated in all phases of the program. During criteria development in mid-1997, the program office developed three sets of criteria to select proposals of technologies worthy of further evaluation, demonstration, and implementation. From September 1997 through June 1998, the program office selected six technologies as worthy of demonstration from 12 proposals. However, because of funding constraints, the program office selected only three of the six technologies for further testing. This selection was based on the program office’s evaluation of the demonstration plans and determination of each technology’s value to the government. In May 1998, the program office determined that neutralization followed by supercritical water oxidation was a viable solution for destroying assembled chemical weapons containing either nerve or mustard agents. It determined that neutralization followed by biodegradation was a viable solution for destroying assembled weapons containing mustard agents.

The conference report for the National Defense Authorization Act for Fiscal Year 2000 stated that the conferees had been advised that DOD intended to conduct evaluations of the three technologies previously selected for the demonstration program, but which had not been tested because of funding constraints. In addition, the conference report noted that DOD had decided to spend $40 million for this purpose. In the conference report for the Department of Defense Appropriations Act for Fiscal Year 2000, the conferees directed DOD to make available $40 million to conduct demonstration testing of the three additional alternative technologies. Program officials are now using these funds to demonstrate these technologies. As of February 28, 2000, no decision had been made on which of the alternative technologies or the baseline incineration process would be used to destroy the chemical stockpile in Kentucky or Colorado.

To increase public awareness and acceptance, the program office established, with the assistance of the Keystone Center, the Dialogue on Assembled Chemical Weapons Assessment. The Dialogue includes representatives of the affected communities, national citizens’ groups, state regulatory agencies, Native American tribes, the Environmental Protection Agency, and the Departments of Defense and the Army and participates in the Army’s decision-making process for the program.

Management Structure of the Chemical Demilitarization Program

DOD and Army managers at several different levels share management roles and responsibilities for elements of the Chemical Demilitarization Program.

The Assistant Secretary of the Army (Acquisition, Logistics and Technology) oversees the chemical stockpile, nonstockpile, and alternative technologies and approaches projects. The Program Manager for Chemical Demilitarization manages the daily operations of these projects. The office of the program manager is organized into distinct project areas: the Project Manager for Chemical Stockpile Disposal, the Product Manager for Nonstockpile Chemical Materiel, and the Project Manager for Alternative Technologies and Approaches.

The Assistant Secretary of the Army (Installations and Environment) and FEMA share management responsibilities for the Chemical Stockpile Emergency Preparedness Project. The U.S. Army Soldier and Biological Chemical Command manages on-post Army activities for the Assistant Secretary of the Army, while FEMA manages the off-post portion of the program in the civilian communities.

The Under Secretary of Defense (Acquisition and Technology) oversees the Assembled Chemical Weapons Assessment Program. The Program Manager for Assembled Chemical Weapons Assessment manages daily operations.

The management structure for the program is discussed in more detail in chapter 4.

International Efforts to Eliminate Chemical Agents and Weapons

In 1993, the United States, Russia, and more than 150 nations signed the U.N.-sponsored Convention on the Prohibition of the Development, Production, Stockpiling and the Use of Chemical Weapons and on Their Destruction, commonly referred to as the Chemical Weapons Convention. In October 1996, the 65th nation ratified the Chemical Weapons Convention, making the convention effective on April 29, 1997. On April 24, 1997, the Senate ratified the convention, committing the United States to dispose of its unitary chemical weapons, binary chemical warfare materiel, recovered chemical warfare materiel, and former chemical weapons production facilities by April 29, 2007. The Army classifies unitary chemical weapons as chemical stockpile weapons and classifies binary chemical warfare materiel, recovered chemical warfare materiel, former chemical weapons production facilities, and miscellaneous chemical warfare materiel as nonstockpile chemical materiel. If a country is unable to meet the convention’s disposal schedule, the convention’s Organization for the Prohibition of Chemical Weapons may grant an extension, although in no case may the deadline be extended past April 29, 2012.

Our Prior Concerns With the Chemical Demilitarization Program

Since its beginning, the Chemical Demilitarization Program has been beset by controversy over disposal methods, delays of 2 to 3 years more than the Army anticipated in obtaining needed federal and state environmental permits and other approvals, and increasing costs. In prior reports, we expressed concern about the Army’s lack of progress and the rising cost of the program. For example, in 1991 we reported that continued problems in the program indicated that increased costs and additional time to destroy the chemical stockpile should be expected and recommended that the Army determine whether faster and less costly technologies were available to destroy the stockpile. In a 1994 report on the nonstockpile program, we concluded that the Army’s plans for disposing of nonstockpile chemical warfare materiel were not final and that its costs were likely to change. In 1997, we reported that the program cost and schedule were largely driven by the degree to which DOD and the affected states and communities agreed with the proposed method to dispose of the chemical weapons and materiel. In July 1999, we reported that, although sizable unliquidated obligations were reported for the program from prior years, program funds did not appear to be available for other uses. In addition, we reported that these unliquidated obligations were caused by a number of factors, such as delays in obtaining environmental permits and technical delays. See related GAO products at the end of this report.

Our objectives, scope, and methodology are described in appendix I.

Most Chemical Weapons and Materiel Could Be Destroyed Before the Convention’s 2007 Deadline

The Army has destroyed approximately 17.7 percent of the original chemical weapons stockpile and could destroy 90 percent of its stockpile of chemical agents and munitions and most of its nonstockpile chemical warfare materiel before the Chemical Weapons Convention’s 2007 deadline, given its recent progress and projected plans. The Army has disposal operations under way at two stockpile sites and has started construction of disposal facilities for future destruction operations at five other sites—these seven sites store 90 percent of the chemical stockpile. However, because of the additional time required to develop and select disposal methods that are acceptable to the state regulatory agencies and local communities in Kentucky and Colorado, which store the remaining 10 percent of the original stockpile, the Army will not meet the 2007 deadline at these sites. In addition, the disposal of some nonstockpile items may exceed the 2007 deadline because of delays in the testing of and obtaining permits for key disposal systems for recovered chemical warfare materiel and because of possible delays in the demolition of a former chemical weapons production facility. Given past program experience, these types of delays are likely to occur and will add to program costs. The Army estimates that the program will cost $14.9 billion; it has spent approximately $6.2 billion and estimates that the program will cost another $8.7 billion. To identify opportunities to reduce the cost of the program, officials have developed and implemented several cost-reduction initiatives associated with contracting for the stockpile disposal facilities and increasing the public awareness and acceptance of the program.

Ninety Percent of the Chemical Stockpile Could Be Destroyed Before the Convention’s 2007 Deadline

In prior reports, we have expressed concern about the Army’s lack of progress in destroying the stockpile of chemical agents and munitions. Despite these early delays, the Army is now making progress toward establishing the capabilities needed to destroy the stockpile. Absent unanticipated delays, the Army could destroy about 90 percent of the stockpile before the convention’s 2007 deadline. However, because of the additional time required to research, develop, test, and verify new disposal methods that may be environmentally acceptable to the state regulatory agencies and local communities in Kentucky and Colorado, destruction activities at these locations, which store the remaining 10 percent of the stockpile, are not likely to start before the 2007 deadline.

The Army Has Made Progress in the Destruction of the Chemical Stockpile

Since the Army formally announced its stockpile disposal project in 1988, it has disposal operations under way at two sites and has started construction of disposal facilities for future operations at five other sites. It is now operating stockpile disposal facilities at Johnston Atoll and Tooele, Utah, which together stored 49.7 percent of the total original stockpile. Of this amount, 5,572 tons (17.7 percent of the original stockpile) of chemical agents have been destroyed, and another 10,075 tons (32 percent of the original stockpile) are scheduled for disposal at the two sites. In addition, the Army has started to build chemical weapons disposal facilities at Aberdeen, Maryland; Anniston, Alabama; Newport, Indiana; Pine Bluff, Arkansas; and Umatilla, Oregon. As shown in figure 3, these sites stored 40.4 percent of the total original stockpile.

Significant actions in the implementation of disposal operations for 90 percent of the stockpile have been completed. Such actions include the selection of a disposal method and the granting of environmental permits by state and local governments. The disposal method for the remaining 10 percent of the stockpile stored in Kentucky and Colorado has not yet been selected because the 1997 Defense Appropriations Act requires an examination of alternative disposal methods under the Assembled Chemical Weapons Assessment Program.

Disposal Operations at Seven of Nine Stockpile Sites Could Be Completed Before the 2007 Deadline

The Army’s most recent schedule shows that disposal operations are expected to be completed at seven of the nine stockpile sites with at least 5 months to spare, most sites have at least 18 months to spare, before the 2007 deadline. However, the schedules for completion at the Maryland and Indiana sites, which are pilot testing alternative disposal technologies, are more uncertain because of the need to further test the alternatives proposed for these locations. For the remaining two sites in Kentucky and Colorado, disposal methods have not yet been selected because the 1997 Defense Appropriations Act requires an examination of alternative disposal methods under the Assembled Chemical Weapons Assessment Program. Figure 4 depicts the Army’s current disposal schedules for these sites.

As part of the Alternative Technologies and Approaches Project, Aberdeen, Maryland, and Newport, Indiana, have pilot projects to investigate, develop, and support the testing of disposal technologies based on chemical neutralization processes. The Army has started site preparation and construction activities for the full-scale pilot facilities at both locations, but the schedules for testing the technologies at these sites are based primarily on research, modeling, and input from engineers and scientists and not on full-scale operations. It is premature to assume that operations at these sites will successfully demonstrate the technologies without some initial delays associated with the design and operation of the pilot plant. Until the pilot tests are completed, the schedules for these sites remain uncertain, and the sites may not have as long a period before the 2007 deadline as shown in figure 4.

On February 2, 2000, officials from the Assembled Chemical Weapons Assessment Program provided schedules showing that disposal operations at Blue Grass, Kentucky, and Pueblo, Colorado, will not start until after the 2007 deadline because of the time required to validate and certify the alternative technologies and obtain environmental permits. However, program officials are optimistic that operations could be completed within the possible 5-year extension to the deadline. Two other reviews of the program also concluded that the two sites would not meet the 2007 deadline. In August 1999, a National Research Council brief by the Chairman of the Assembled Chemical Weapons Committee concluded that disposal operations using an alternative technology in Kentucky and Colorado would not be completed by December 2007. In September 1999, an Arthur Andersen, Limited Liability Partnership, consulting report prepared for the office of the Deputy Assistant Secretary of the Army for Chemical Demilitarization concluded that the estimated completion dates for these sites ranged between May 2011 and December 2015, well beyond the 2007 deadline.

The protocol for selecting an alternative technology for the destruction of assembled chemical munitions stored in Kentucky or Colorado has not yet been determined and remains under study. If a technology other than incineration is selected for these sites, the 1999 Defense Authorization Act requires the Under Secretary of Defense for Acquisition and Technology to certify in writing to the Congress that the alternative is (1) as safe and cost-effective for disposing of assembled chemical munitions as incineration, (2) capable of the destruction of such munitions on or before the later date of the completion of destruction if incineration were used or the convention’s deadline, and (3) capable of satisfying federal and state environmental and safety laws. DOD and Army officials were assessing these three conditions and identifying the criteria for making the certification. At the same time, the Congress directed that DOD make available, and DOD actually committed, funds in fiscal year 2000 to award contracts to evaluate and demonstrate three additional technologies for the Assembled Chemical Weapons Assessment Program. Program officials were also determining whether the Under Secretary of Defense could issue the required certification before demonstrating the three additional technologies.

It is unlikely that an alternative technology can be validated, certified, and implemented in Colorado and Kentucky in time to meet the convention’s 2007 deadline. In addition, insufficient time remains for the Departments of Defense and the Army to meet the 2007 deadline at these two sites using the baseline incineration process. According to the Army’s 1998 annual report on the program, to meet the destruction schedule required by the convention, authority to proceed with the baseline incineration process in Colorado and Kentucky was required before June 30, 1999. Even so, DOD and Army officials were discussing whether to grant such authority for both Colorado and Kentucky. These officials were preparing two notices of intent announcing the preparation of separate environmental impact statements for the disposal of the stockpile in Colorado. One environmental impact statement will focus on whether to pilot test alternative technologies in Colorado or at two other sites. The other environmental impact statement is to be specific to Colorado and will focus on which disposal method—the baseline incineration process, a modified incineration process, or an alternative technology—should be used in Colorado. Some program officials believe it may still be possible to meet the 2007 deadline by using a modified incineration process to destroy the stockpile in Colorado. However, according to state officials, the Army would have great difficulty in obtaining environmental permits for any type of chemical agent incineration in Colorado or Kentucky. Each state has requirements for obtaining environmental permits that could prevent or slow the implementation of incineration in the two states.

Significant Obstacles Could Prevent the Nonstockpile Product From Meeting the Convention’s 2007 Deadline

The Army has made progress in destroying most caterories of its nonstockpile chemical materiel as required by the Chemical Weapons Convention. However, the disposal operations for some recovered chemical warfare materiel may exceed the convention’s 2007 deadline because the Army needs more time to develop and prove the proposed disposal methods will be safe and effective and will be accepted by state and local communities. Further, the demolition of a section of a former chemical weapons production facility in Indiana may exceed the 2007 deadline because the chemical stockpile stored there must be destroyed before demolition of the facility can begin. Any slippage in the stockpile disposal schedule, which is considered optimistic by some involved in the program, will cause demolition operations of the facility to extend past the deadline.

The Army Has Made Progress in the Disposal of Nonstockpile Chemical Materiel

The Army has destroyed a large portion of its nonstockpile chemical warfare materiel. Table 2 summarizes the status of the Army’s efforts to destroy binary chemical warfare materiel, miscellaneous chemical warfare materiel, recovered chemical warfare materiel, and former chemical weapons production facilities.

Change in the Proposed Disposal Method Could Delay Disposal of Some Recovered Chemical Warfare Materiel

The disposal of some recovered chemical warfare materiel could exceed the convention’s 2007 deadline because of technical issues and cost increases associated with key disposal methods. In addition, the Army has experienced delays in obtaining state permits and approvals to test and implement these methods. Because of these factors, program officials are considering alternative disposal methods to replace the problematic systems.

Until recently, the Army was developing four types of integrated transportable destruction systems for nonstockpile materiel. These systems and their status are briefly described in table 3. Each system was expected to use a neutralization process, through which the chemical agent would be mixed with chemicals that would convert the agent into waste compounds. This waste would be much less hazardous than the chemical agent and would be sent to commercial treatment, storage, and disposal facilities that specialize in the treatment of hazardous industrial waste.

Nonstockpile officials stated that the research and development of the four treatment systems described in table 3 have reached the point where the Army must decide whether it wants to complete development and make the systems available for deployment in the field. In the case of the two munitions management devices, the Army has experienced technical problems and cost overruns. In addition, it experienced delays in obtaining state permits and approvals to test the prototype for the munitions management device (version 1). The required permits to test the system had not been approved as of February 2, 2000.

Because of the problems and delays, nonstockpile product officials were considering alternative disposal methods to replace the two munitions management devices. For example, they were deliberating over the possibility of destroying recovered chemical warfare materiel stored in Oregon and Colorado in stockpile disposal facilities and disposing of the recovered materiel stored in Maryland and Arkansas in neutralization-based disposal facilities specially designed for nonstockpile materiel. However, officials still need more time to prove that the alternatives will safely and effectively destroy recovered chemical materiel. Environmental issues similar to those affecting the testing of the prototype munitions management devices are also likely to affect the Army’s ability to obtain the environmental approvals and permits for the alternatives. Consequently, until the alternatives for disposing of the recovered chemical warfare materiel are proven and accepted by the state and local communities, this portion of the nonstockpile product is at risk of exceeding the 2007 deadline.

Destruction of Former Production Facility in Indiana May Not Meet the Convention’s 2007 Deadline

A portion of a former production facility at Newport, Indiana, classified as a nonstockpile requirement, may not be destroyed before the convention’s 2007 deadline because the chemical stockpile agent stored there must be destroyed before destruction of the facility can begin. The weapons were scheduled to be destroyed by December 2004. Although nonstockpile program officials were confident that their schedule provides sufficient time to complete demolition of the facility before the 2007 deadline, slippages in the disposal of the chemical stockpile could extend nonstockpile operations past the deadline. As previously discussed, the Newport, Indiana, stockpile schedule is at risk because the Army needs more time to demonstrate whether the proposed alternative technology— developed by the Alternative Technologies and Approaches Project but not yet proven in full-scale operations—will safely and effectively destroy the stockpile. In addition, state officials believe the disposal schedule is too ambitious because it is based on processing 600 containers filed with nerve agent during pilot testing, more than they believe is realistic in the time allowed. State officials said the Army’s schedule for the pilot test phase might not allow sufficient time for program participants to fully evaluate the new technology before full-scale operations are scheduled to start.

Program Costs Will Likely Exceed $14.9 Billion Estimate

The Chemical Demilitarization Program has a long-standing history of experiencing significant cost growth. The Army estimates that the program will cost $14.9 billion; it has spent approximately $6.2 billion. However, the $14.9 billion cost estimate does not include the costs associated with the schedule slippages likely in Kentucky and Colorado and in the Nonstockpile Chemical Materiel Product. Army officials said that they were revising their cost estimates. However, the Army will likely need more time to develop a reliable baseline to estimate the cost for the closure and remediation of the chemical stockpile disposal facilities, adjacent areas, and miscellaneous materiel contaminated during disposal operations. At the same time, program officials have initiated some actions to contain costs.

The Army Estimates the Program Will Cost $14.9 Billion

As shown in table 4, the Army estimates that the program will cost $14.9 billion; the Congress has appropriated nearly $6.2 billion through fiscal year 1999. Since 1985, the Army’s cost estimate for the Chemical Stockpile Disposal Project, the largest portion of the program, has increased significantly from the initial $1.7 billion estimate to nearly $10 billion. The major reasons for the cost increases in the stockpile project include (1) overly optimistic program assumptions and estimates by program officials, (2) enhancements to respond to concerns for maximizing the safety of the public and environment, (3) technical problems resulting in lower than expected disposal rates, and (4) additional legislative and program requirements. In 1997, we reported that until the disposal methods for nonstockpile materiel were developed and proven and accepted by state and local communities, the Army would not be able to predict the cost of the nonstockpile product with any degree of accuracy.

The working life cycle cost estimate for the Chemical Demilitarization Program shown in table 4 does not include the costs associated with schedule slippages likely in the disposal of the chemical stockpile stored in Kentucky and Colorado and the nonstockpile materiel. The cost estimates are based on the assumption that the disposal of the chemical stockpile and nonstockpile materiel would be completed before the 2007 deadline, which we believe is unlikely. Historically, schedule delays increase direct costs such as labor, emergency preparedness, and management of the program. In addition, until disposal methods for the stockpile stored in Kentucky and Colorado have been selected, proven to be safe and cost-effective, and accepted by the affected states and localities, the Army will be unable to accurately estimate disposal costs for these sites. Similarly, the cost of destroying recovered chemical warfare materiel will be uncertain until the product manager has demonstrated disposal methods for nonstockpile items and the methods have received permits and have been accepted by the affected states and localities. The cost estimate shown in table 4 for the Nonstockpile Chemical Materiel Product does not included possible costs after the 2007 deadline.

The Army also needs additional time to develop a reliable baseline to estimate the costs for the closure and remediation of the chemical stockpile disposal facilities, adjacent areas, and miscellaneous materiel contaminated during disposal operations. According to program officials, these costs may increase because of uncertainties regarding remediation requirements and standards for these facilities and other materiel, such as personal protection suits worn by the workers and miscellaneous equipment, contaminated during disposal operations. Individual states will establish the environmental requirements for remediating these facilities and nearby areas. Consequently, the environmental requirements and standards to use in estimating the cost to remediate these facilities have not yet been fully determined. Furthermore, because no stockpile disposal facility has yet to be remediated, the Army lacks real time experience on which to estimate these costs.

The Army Has Management Initiatives Under Way to Control Cost Growth

In response to the National Defense Authorization Act for Fiscal Year 1996, the program office for chemical demilitarization has developed and implemented several cost-reduction initiatives. Because the majority of Chemical Stockpile Disposal Project costs are in the contracts for the construction and operation of the disposal facilities, the program office implemented a management approach that includes in-depth reviews of the contracts. According to program officials, these reviews may provide the office with a better understanding of the contractor’s approach to planning, enhance performance analyses and forecasting, and produce cost savings during negotiations with contractors. Additionally, the chemical demilitarization office expects cost savings to accrue through implementation of programmatic lessons learned, where opportunities to reduce costs are routinely investigated and applied as the program moves forward.

To increase public awareness and trust, the program office for chemical demilitarization has hosted periodic environmental forums on the Chemical Demilitarization Program. These forums have allowed the public to exchange information with officials from various organizations associated with the program and were intended to increase public awareness and gain acceptance of the program and thereby reduce costs associated with extended environmental permit schedules and litigation actions. Similarly, to increase public awareness and acceptance, the program office for assembled chemical weapons assessment has convened, with the assistance of the Keystone Center, the Dialogue on Assembled Chemical Weapons Assessment. The Dialogue includes representatives of the affected communities, national citizens groups, state regulatory agencies, Native American tribes, the Environmental Protection Agency, and the Departments of the Defense and the Army and has participated in the Army’s decision-making process for the program.

Conclusions

The Army could destroy 90 percent of its stockpile of chemical agents and munitions and most of its nonstockpile chemical warfare materiel before the Chemical Weapons Convention’s 2007 deadline, given its recent progress and projected plans. However, because of the additional time required to develop and select disposal methods that are acceptable to the state regulatory agencies and local communities in Kentucky and Colorado, the Army will not meet the 2007 deadline at these sites. These sites store 10 percent of the original stockpile. In addition, the disposal of some nonstockpile items may exceed the 2007 deadline because of technical problems with key disposal systems for recovered chemical warfare materiel and because of possible delays in demolition of a former chemical weapons production facility in Indiana. Given past program experience, these types of delays are likely to occur and will add to program costs.

The Army Has Not Adequately Managed the Liquidation of Program Funds

The Army has experienced problems in recent years in managing its liquidations of program funds. Concerns over the financial management of the Chemical Demilitarization Program surfaced following a February 1999 review by the Office of the Under Secretary of the Defense (Comptroller), which suggested that significant portions of prior years’ obligations remained unliquidated and could be used for other purposes. In July 1999, we reported that sizable unliquidated obligations existed for the program from prior years. During this review, we examined the transactions for which most of these obligations were recorded, a type of interagency order known as a military interdepartmental purchase request. We found that the program had more than $3.1 billion in budget authority from fiscal years 1993-98 appropriations as of September 30, 1999, of which a reported $498 million (16.1 percent) was unliquidated. Some unliquidated obligations exist because of the lack of management attention and fragmented structure for tracking and managing liquidations; procedural delays in reporting liquidation transactions in the defense financial system, auditing and liquidating obligated funds on completed contracts, and deobligating excess funds; and delays in executing the program schedule.

Several recent factors have affected and will continue to affect the reduction of the unliquidated obligations. The Army can liquidate some of its obligations as soon as construction and procurement are under way at the chemical stockpile sites that recently obtained environmental permits. In addition, congressional reductions in the administration’s budget requests for fiscal years 1999 and 2000 will likely reduce the future buildup of unliquidated obligations. At the time of our review, the Army had begun to improve its management of appropriated funds and liquidations of obligations for the Chemical Demilitarization Program, but these improvements have not been consistently and systematically implemented across all program elements, and it is too early to tell their effect.

Prior Reviews Report Weaknesses in the Management of Program Funds

Concerns over the financial management of the program surfaced following a review by the Office of the Under Secretary of the Defense (Comptroller), which suggested that significant portions of prior years’ obligations remained unliquidated and could be used for other purposes. In July 1999, we reported that there were sizable unliquidated obligations reported for the program from prior years.

The financial management issue of the program surfaced in February 1999, following a quick program review summarized in internal memorandums prepared by an official in the Office of the Under Secretary of the Defense (Comptroller). The memorandums suggested that significant portions of prior years’ obligations remained unliquidated and could be reprogrammed to other uses. On July 26, 1999, the office issued a more comprehensive report, stating that 26 percent of the Chemical Demilitarization Program’s appropriations were unexpended. The report also notes that delays in executing the program resulted in the accumulation of funds that were out of phase with the specific time when the contracted work was actually performed, resulting in the accumulation of unliquidated obligations. Consequently, the funds were not available for other immediate defense priorities and programs. The report also identified procedural delays in reporting financial transactions in the defense financial system and programmatic delays in executing the program schedule because of permit, technical, and contractual issues that contributed to the program’s unliquidated obligations.

In July 1999, we reported that sizable unliquidated obligations existed for the Chemical Demilitarization Program from prior years, but the unused funds did not appear to be available for other uses. Our review of $382.1 million (62.6 percent) of the reported $610.5 million in unliquidated obligations for fiscal years 1992-98 showed that $150.6 million (39.4 percent of our sample) had already been spent but was not recorded in accounting records or included in financial reports prepared by the Defense Finance and Accounting Service (DFAS). Further, the remaining $231.5 million in unliquidated obligations in our sample was scheduled to be liquidated by November 2000. In addition, we reported that these obligations were unliquidated because of several factors, such as delays in obtaining environmental permits and technical delays. At the same time, we identified a number of factors, including states’ approvals of environmental permits to start construction of chemical stockpile disposal facilities and congressional deferments in the administration’s budget request for the program, that have affected or will affect the reduction of unliquidated obligations.

About 16.1 Percent of Prior Years’ Obligations Were Unliquidated

As of September 30, 1999, the Chemical Demilitarization Program had more than $3.1 billion in budget authority from fiscal years 1993-98, of which $38.9 million was no longer obligated for specific program areas. (See table 5.) Nearly this entire amount was obligated previously for program requirements that were completed for less cost than initially estimated and was deobligated and reclassified as program reserve. Most of these unobligated funds are no longer available because their authorized periods for obligation expired. At the same time, the program office had a reported $498 million (16.1 percent) in unliquidated obligations from fiscal years 1993-98.

In addition, the program office reported that it had $804 million in budget authority in fiscal year 1999 funds. Of this amount, $70.7 million was unobligated and $381.3 million in obligations was unliquidated. However, it is important to note that the budget authority for fiscal year 1999 is relatively recent and that some of the funds are still available for obligation and liquidation and may continue to be available for several years depending on the type of fund. The budget authority for 1999 research and development funds under the chemical demilitarization appropriation is available for obligation during fiscal year 2000, 1999 procurement funds are available for obligation for fiscal years 2000 and 2001, and 1999 military construction funds are available for obligation for fiscal years 2000 through 2003. The obligations incurred under each of these chemical demilitarization appropriation subdivisions may be liquidated up to 5 years following the end of the funds’ periods of availability for obligation before the fund account is closed.

Assessment Indicates That Most Unliquidated Obligations Were Accounted For

During this review, we focused our analysis on the unliquidated obligations for fiscal years 1993-98. On the basis of our analysis of 428 military interdepartmental purchase requests with $495.1 million in unliquidated obligations (or 99.4 percent of the total reported unliquidated obligations), we determined that $63.1 million (12.7 percent) in payments had been made but was not recorded in the accounting records or financial reports prepared by DFAS. (See table 6.) Of the remaining $432 million in unliquidated obligations, most was for work completed but not yet billed by the contractor or verified by the Defense Contract Audit Agency (DCAA), or for work being done but not yet completed. Included in this amount is $10.4 million that program officials could not explain the reasons for the unliquidated balances.

As shown in table 6, 240 purchase requests included a reported $62.6 million in unliquidated operations and maintenance obligations. Of this amount, $5.3 million had been liquidated, according to documents provided by the program office and its contractors, but not yet recorded as liquidated in DFAS accounting data and financial reports. Of the remaining $57.2 million in unliquidated obligations, program officials identified $32.3 million for work that had been completed, but they were awaiting other actions such as final billing by the contractor or audit by DCAA. Another $18.6 million of the $57.2 million is obligated for ongoing purchase requests, for which most of the obligations are scheduled to be liquidated between now and January 2001. Program officials were unable to explain the reasons for $6.3 million of the unliquidated obligations.

In addition, 97 purchase requests included a reported $339.5 million in unliquidated procurement obligations. Of this amount, $52.6 million had been liquidated, according to documents provided by the program office and its contractors, but not recorded as liquidated in DFAS financial data. Of the remaining $286.9 million in unliquidated obligations, program officials identified $2.7 million for work that had been completed, but they were awaiting other actions such as final billing by the contractor or audit by the DCAA. Another $283.5 million is obligated for ongoing purchase requests, for which most of the obligations are scheduled to be liquidated between now and the end of 2001. Program officials were unable to explain the reasons for almost $700,000 in unliquidated obligations.

Further, 76 purchase requests included a reported $19.7 million in unliquidated research and development obligations. Of this amount, $5.2 million had been liquidated, according to documents provided by the program office and its contractors, but not recorded as liquidated in DFAS financial data. Of the remaining $14.5 million in unliquidated obligations, program officials identified $1.3 million for work that had been completed, but they were awaiting other actions such as final billing or audit. Another $9.7 million of the $14.5 million was obligated for ongoing purchase requests, for which most of the obligations are scheduled to be liquidated before June 2000. Program officials were unable to explain the reasons for $3.5 million of the unliquidated obligations.

Last, we found $73.3 million in unliquidated military construction obligations managed by the U.S. Army Corps of Engineers. The Corps of Engineers uses integrated financial systems to manage and account for obligations and liquidations. Unlike the separately located, nonintegrated financial systems used by the program offices for chemical demilitarization and assembled chemical weapons assessment, the Corps of Engineers system contains real-time obligation and liquidation data. The $73.3 million in obligations will be liquidated as specialized government-furnished equipment is delivered and installed and the ongoing construction efforts are completed. The construction of the disposal facilities in Alabama and Oregon is scheduled to be completed in the first quarter of fiscal year 2001, and the disposal facility in Arkansas is expected to be completed in the first quarter of fiscal year 2002.

Reasons for Some Unliquidated Obligations

Some unliquidated obligations are due to the lack of management attention and the decentralized organizational structure for managing program activities and tracking liquidations; procedural delays in reporting liquidation transactions in DFAS accounting data and financial reports; procedural delays in auditing and liquidating obligated balances on completed contracts; and delays in executing the program schedule because of permit, technical, and contractual issues.

Management Delays

Contributing to unliquidated balances have been delays due to the lack of management attention and decentralized organizational structure for managing program activities and tracking liquidations.

Lack of Management Attention

The lack of attention to tracking and managing liquidations has contributed to the accumulation of unliquidated obligations. According to DOD and Army officials, the program office for chemical demilitarization has historically prioritized the management and timely obligation of appropriations and given much less attention to tracking and managing liquidations and deobligating excess funds. Despite beginning to track and liquidate obligations more aggressively, program officials still could not readily provide us the obligation and liquidation status for some purchase requests or determine whether the unliquidated obligations were for completed or ongoing efforts. Instead, program officials generally had to obtain liquidation data from performing entities, such as other government agencies and outside contractors, and in many cases testimonial data was the best data they could provide. Some officials said they did not systematically receive financial reports with liquidation data. Additionally, they gave little priority to deobligating unliquidated balances associated with completed or closed contracts. This lack of attention is partially reflected in the inability of program officials to explain the status of $10.4 million in unliquidated obligations across all funding categories except for military construction.

Decentralized Organizational Structure

Different organizations are responsible for various elements of the Chemical Demilitarization Program. For example, the U.S. Army Corps of Engineers is responsible for managing military construction funds and most of the program’s procurement funds. FEMA and the U.S. Army Soldier and Biological Chemical Command share responsibility for managing funds appropriated for the Chemical Stockpile Emergency Preparedness Project. FEMA is responsible for off-post emergency preparedness activities and the Soldier and Biological Chemical Command is responsible for on-post activities. In addition, the Program Manager for Assembled Chemical Weapons Assessment manages the Assembled Chemical Weapons Assessment Program funding, and the Program Manager for Chemical Demilitarization manages the execution of funds appropriated for the chemical stockpile, nonstockpile, and alternative technologies and approaches projects. Within the program office for chemical demilitarization, project managers are responsible for the execution of funds provided to their respective projects. Within this decentralized organizational structure, these program elements manage their obligations and liquidations as separate operating entities, and in some cases, there was confusion as to which program element or organization was accountable for tracking and managing the unliquidated obligations.

Procedural Delays

Procedural delays have accounted for the accumulation of some of the unliquidated obligations. Some liquidation transactions were not reported in accounting records and financial reports prepared by DFAS in a timely way, and program officials have been reluctant to deobligate unliquidated excess funds on completed contracts until DCAA validates labor rates and other contract costs.

Accounting and Procedural Delays

According to program officials, processing and reporting liquidation data have taken 90 to 120 days before the data were included in accounting records and financial reports prepared by DFAS. For example, contractors have taken several weeks to validate and process liquidations by their subcontractors and report them to the program office, which has its own processes and procedures to complete before reporting to DFAS. Furthermore, DFAS requires time to input and report its liquidation data to its financial system. We recently reported that DOD’s payment and accounting processes are complex, generally involving separate functions carried out by individual offices using different systems. These processes can contribute significantly to delays in reporting the liquidation of obligations to responsible program officials.

Contract Closure Delays

According to Army officials, DCAA has taken several months to review and approve costs associated with completed contracts. Program officials have generally waited until DCAA validated labor rates and other contract costs. These audits may adjust labor rates or other costs, requiring additional payments from the remaining obligated funds.

Program Delays

Contributing to the unliquidated balances have been delays in executing the program schedule because of environmental permit, technical, and contractual issues.

Environmental Permit Delays

Program officials found that the time required to actually gain environmental permit approvals, particularly in Oregon, Alabama, and Arkansas, exceeded estimates. The additional time was mainly attributable to a variety of both internally and externally driven requirements. For example, satisfying safety and environmental design changes resulting from programmatic lessons learned, new state and federal regulatory requirements, and new interpretations of existing regulatory requirements in some cases significantly extended the projected schedules. Although funds were obligated to support the three sites based on initial permit issuance projections, the program office could not liquidate some obligations until after construction began, which was contingent on the issuance of the environmental permits.

Technical Delays

According to program officials, lessons learned from ongoing disposal operations at Johnston Atoll and Utah resulted in technical and design changes for future facilities that required additional time and resources. While these changes were being incorporated, liquidation of obligated funds proved to be slower than program officials expected.

Contractual Delays

According to program officials, the award of several construction and procurement contracts has been delayed due to protests by losing bidders. For example, the award of the construction contract for the disposal facility in Arkansas was delayed a year due in part to a bid protest. Accordingly, obligations for this contract could not be liquidated until resolution of the protest.

Recent Factors Reducing Unliquidated Obligations

Recently, approvals of environmental permits by state regulatory agencies at five chemical stockpile disposal sites resulted in initiation of construction activities and procurement actions and greater disbursement of obligated funds. Additionally, actions by the Congress and the Office of the Under Secretary of the Defense (Comptroller) to reduce the funding requested for the program decreased the amount of funds available for obligation and better aligned funding with the program’s execution. This action decreases the likelihood that these funds will be obligated far in advance of when they are needed.

The Army’s recent receipt of the required environmental permits and approvals by the state regulatory agencies at five chemical stockpile disposal sites has resulted in initiation of construction activities and procurement actions and greater pay-out of obligated funds. The environmental permits for the construction of the disposal facilities in Oregon and Alabama were approved in 1997. The execution of these construction projects has allowed and will continue to allow the program office to liquidate construction and procurement obligations for these locations. In addition, the environmental permits were approved in 1999 for the construction of disposal facilities in Arkansas, Indiana, and Maryland, which should allow the program office to liquidate construction and procurement obligations for these locations.

Congressional actions to reduce the funding requested for the program have decreased and are expected to continue to decrease the program’s unliquidated balances. In the DOD and military construction appropriations acts for fiscal year 1999, the Congress appropriated $78 million less than the administration requested for operations and maintenance, procurement, and research and development activities and appropriated $50.5 million less than requested for military construction projects. Similarly, in the fiscal year 2000 DOD and military construction appropriations acts, the Congress appropriated $140 million less than the administration requested for operations and maintenance, procurement, and research and development activities and appropriated $93 million less than requested for military construction projects. These actions reduced the amount of funds available for obligation and better aligned funding with the program’s execution, decreasing the likelihood that these funds will be obligated far in advance of when they are needed.

In their review of the Army’s fiscal year 2001 budget request for the Chemical Demilitarization Program, the Office of the Under Secretary of the Defense (Comptroller) recommended, and the Deputy Secretary of Defense approved, reductions to the Army’s budget request for fiscal year 2001 to better align funding in the year it would be executed. For example, because of the delays in the Alternative Technologies and Approaches Project, DOD reduced the Army’s budget request for construction funds by $25 million for the Maryland site. It concluded that the contractor would be unable to execute construction work scheduled for fiscal year 2001. Similarly, DOD reduced fiscal year 2001 funding for equipment installation at Newport, Indiana, by $7.2 million because of the delays in the Alternative Technologies and Approaches Project. Further, DOD reduced the Army’s request for the Assembled Chemical Weapons Assessment Program by $42 million because of expected delays in executing the program during fiscal year 2001.

Financial Improvements Have Not Been Consistently and Systematically Implemented Across All Program Elements

Although the Army has started to improve its management of obligations and liquidations of obligated funds for the Chemical Demilitarization Program, these improvements have not been consistently and systematically implemented across all program elements. These inconsistencies are due in part to the decentralized financial management structure of the program.

In July 1999, the Program Manager for Chemical Demilitarization mandated monthly reporting of obligations, disbursements, and planned and actual cost information by the managers for chemical stockpile, nonstockpile, and the alternative technologies and approaches projects. The manager also reminded all project managers of the importance of effective funds management, including the management of cost as well as schedule and technical performance. Consequently, officials started examining the unliquidated obligations and deobligating those determined as no longer needed. In addition, they started working with their contractors and other defense agencies to expedite the reporting of financial transactions and developing methods for capturing and reporting obligations, liquidations, and accrual data.

While these are positive steps, the program office has not fully implemented these improvements for the timely capturing and reporting of obligations, liquidations, and accruals and could not explain $10.4 million in unliquidated obligations. The program office did not have an independent, integrated system to track obligations, liquidations, and accrual data and has relied mostly upon data in accounting records or financial reports prepared by DFAS. For example, the Chemical Stockpile Emergency Preparedness Project and the Assembled Chemical Weapons Assessment Program were not included in the Chemical Demilitarization Program Manager’s monthly reporting requirement because the U.S. Army Soldier and Biological Chemical Command manages the funds for the two programs. Further, the managers for the chemical stockpile, nonstockpile, and alternative technologies and approaches projects have implemented different systems to comply with the program manager’s mandate for a monthly reporting of obligations, liquidations, and planned and actual cost information.

Conclusions

Although program officials have acted and are acting to improve the financial management of the program, problems remain. No systematic approach exists across all program elements to help ensure the consistent, effective execution and expenditure of funds appropriated for the program, and a relatively small amount of unliquidated obligations remain unexplained. Some unliquidated obligations exist because of the lack of management attention and decentralized structure for tracking liquidations. Other unliquidated obligations exist because of procedural delays in reporting financial transactions in the defense financial system, in auditing and liquidating obligated balances on completed contracts, and in deobligating excess funds, and delays in executing the program schedule. Several recent factors, including the recently approved environmental permits and congressional actions to reduce funding for the program, have decreased and will likely reduce the future buildup of unliquidated obligations. However, because the improvements in its financial management have not been consistently and systematically implemented, the Army cannot ensure that its unliquidated obligations will receive consistent attention to bring about a better alignment of funds with the execution of the program on an ongoing basis. In response to a draft of this report, the Army has recently initiated actions to address our concerns over the financial management of the program. Given the long-standing nature of these concerns, management oversight is essential to the effective implementation of the Army’s actions.

Recommendations

We recommend that the Secretary of Defense monitor the Army’s actions to develop a systematic approach for ensuring the timely, effective expenditure of funds appropriated for all elements of the Chemical Demilitarization Program and direct program officials to account for the $10.4 million in unliquidated obligations that officials could not give an explanation for, or explain why the funds had not been liquidated.

Agency Comments and Our Evaluation

In its written comments on our draft report, DOD agreed with our recommendations to develop a systematic approach for ensuring the timely, effective expenditure of funds appropriated for all elements of the Chemical Demilitarization Program and direct program officials to account for the $10.4 million in unliquidated obligations that they could not explain. However, DOD disagreed that the Secretary of Defense should direct the Secretary of the Army to implement the recommendations because the Program Manager for Chemical Demilitarization had already initiated implementation actions. We are encouraged by the Program Manager’s actions, which once completed should address the concerns raised in our draft report. Given these actions and the long-standing nature of our concerns, we modified our recommendations to call for the Secretary of the Defense to monitor the Army’s actions to ensure that it completes them fully and in a timely way and that appropriate results are obtained.

FEMA concurred with the recommended principle of a systematic approach for ensuring the timely, effective expenditure of funds and elaborated on its actions implementing the principle behind the recommendation. Because the recommendation to explain the $10.4 million in unliquidated obligations pertains to the Army, FEMA had no comment on that recommendation.

Program Management Has Been Hindered by Complex Structure and Ineffective Coordination

Effective management of the Chemical Demilitarization Program has been hindered by its complex management structure and ineffective coordination among program offices and with state and local officials. Several changes in the organization and structure of the program during 1997-99, including some changes to implement legislative requirements, divided the management roles, responsibilities, and accountability among several different levels within the Departments of Defense and the Army. In addition, accountability for program performance has been unclear, and coordination and communication among certain program elements and state and local officials have been inadequate. Further, officials of the Departments of Defense and the Army have not agreed on whether or when management roles, responsibilities, and accountability should be consolidated for destruction of the chemical stockpiles at Blue Grass, Kentucky, and Pueblo, Colorado. Consequently, state and local officials have raised concerns that no single office is accountable for achieving the desired results of the program’s various elements. In addition, the Congress has expressed concern about the management of the program.

Complex Management Structure

As the program has been expanded beyond its original single purpose of destroying the stockpile to encompass a broader range of missions, to include compliance with the Chemical Weapons Convention, the organization and structure of the Chemical Demilitarization Program have changed and become increasingly complex. At times, these changes have resulted in the fragmentation of the responsibilities for management and oversight of the program. For example, several different levels within the Departments of Defense and the Army now share oversight and management responsibilities.

Evolution of the Management Structure

As provided for in the original legislation establishing the Chemical Demilitarization Program, the Army, as executive agent for the program, established a Program Manager for Chemical Demilitarization who was responsible for management of the destruction of the stockpile. This Program Manager reported directly to the Assistant Secretary of the Army (Installations and Environment). Once the estimated cost of the program reached a certain dollar amount, as required by statute, the Army formally designated it to be a major defense acquisition program subject to congressional reporting requirements and Office of the Secretary of Defense review and approval of various milestones. So that this major defense acquisition program could be managed in the acquisition chain in accordance with the DOD Directive 5000 series, program responsibility was transferred to the Assistant Secretary of the Army (Acquisition, Logistics and Technology) from the Assistant Secretary of the Army (Installations and Environment). To support the enhanced oversight role of the Office of the Secretary of Defense, an office was established in the office of the Assistant to the Secretary of Defense (Nuclear, Chemical, and Biological Defense Programs) to provide oversight responsibility for the Chemical Demilitarization Program regarding policy guidance, budget authority, and annual reporting requirements. The Program Manager continued to report directly to the Assistant Secretary of the Army (Acquisition, Logistics and Technology) in his capacity as the Army Acquisition Executive and the Program Manager remained responsible for executing the existing elements of the program, except for the Chemical Stockpile Emergency Preparedness Project. Under a memorandum of understanding, the responsibility for the latter project resides with the Assistant Secretary of the Army (Installations and Environment) in conjunction with FEMA.

Current Structure Has Three Separate Lines of Authority

There are three different lines of authority within the Departments of Defense and the Army for elements of the Chemical Demilitarization Program (see fig. 5). This structure resulted from congressional and DOD actions affecting various elements of the program. For example, the Congress wanted greater emphasis on the management of efforts to research and develop alternative technologies for destroying assembled chemical weapons. To achieve that goal, it directed that these research and development efforts be conducted separately from the baseline incineration activities. DOD, as part of its downsizing theOffice of the Secretary of Defense, devolved management responsibilities to the Army. In addition, to improve the management of the Chemical Stockpile Emergency Preparedness Project, the Army and FEMA changed the management structure for the project.

The current organization has created a complex management structure and separated responsibilities. For example:

In the 1997 Defense Appropriations Act (sec. 8065), the Congress required the Under Secretary of Defense (Acquisition and Technology) to designate a program manager who was not, nor had been, in direct or immediate control of the baseline reverse assembly incineration demilitarization program to carry out a new pilot program. In response to the act, DOD established the office of the Program Manager for Assembled Chemical Weapons Assessment, independent of the Program Manager for Chemical Demilitarization, to implement the pilot program. The purpose of this legislation was to separate this pilot program from the baseline incineration activities. Achievement of that goal also meant that two program offices would share responsibilities associated with disposal activities in Kentucky and Colorado. As discussed later, ineffective coordination between these offices has hindered the program management.

A 1998 Defense Reform Initiative downsized the Office of the Secretary of Defense and resulted in the devolvement of the DOD office overseeing the Chemical Demilitarization Program from DOD to the Army. Consequently, the Office of the Deputy Assistant Secretary of the Army (Chemical Demilitarization) was formed in February 1998 from a consolidation of the existing DOD oversight office and the Army staff office that assisted the Army Assistant Secretary in performing his chemical weapons demilitarization functions. While this devolvement resulted in a consolidation of staff offices in the Army Secretariat, it still did not clear up the existing ambiguity in responsibilities, lines of authority, and accountability. For example, the responsibility of the Deputy Assistant Secretary of the Army (Chemical Demilitarization) is limited to oversight of the stockpile, nonstockpile, and alternative technologies and approaches projects. While this office reports directly to the Assistant Secretary of the Army (Acquisition, Logistics and Technology), it has no direct management control of the Program Manager for Chemical Demilitarization, who also reports directly to the Assistant Secretary. During our review, we received conflicting descriptions and inconsistent organizational charts concerning the relationship and responsibilities of the offices of the Deputy Assistant Secretary of the Army (Chemical Demilitarization) and the Program Manager for Chemical Demilitarization. This indicates some amount of confusion among those involved in the program regarding who is accountable. DOD, as part of the devolvement, planned to consolidate within the Army Secretariat management responsibility for the Assembled Chemical Weapons Assessment Program. For example, as noted in the transition plan for the reform initiative, program oversight for the Assembled Chemical Weapons Assessment Program was to be delegated to the Assistant Secretary of the Army (Acquisition, Logistics and Technology) and the Program Manager for Assembled Chemical Weapons Assessment was to report directly to the Assistant Secretary. The Under Secretary of Defense (Acquisition and Technology) was to evaluate and certify the effectiveness of the alternative technologies as required by legislation. However, in the Conference Report accompanying the 1999 Defense Authorization Act, the conferees agreed that the Program Manager for Assembled Chemical Weapons Assessment should continue to report directly to the Under Secretary of Defense (Acquisition and Technology) rather than the Assistant Secretary of the Army (Acquisition, Logistics and Technology).

In 1997, the Secretary of the Army and the Director of FEMA entered into a memorandum of agreement that revised the management structure of the Chemical Stockpile Emergency Preparedness Project in an effort to streamline and improve the management of the program. Under the agreement, FEMA assumed full responsibility and authority for off-post project activities, and the U.S. Army Soldier and Biological Chemical Command assumed responsibility for the on-post portion of the project. As a result of the agreement, the Assistant Secretary of the Army (Installations and Environment) assumed oversight responsibilities for the project. In addition, the Chemical Stockpile Emergency Preparedness Project was removed from the offices of the Program Manager for Chemical Demilitarization and the Assistant Secretary of the Army (Acquisition, Logistics and Technology).

Unclear Accountability for Program Results and Inadequate Coordination and Communication

The Chemical Demilitarization Program has a complex structure that separates management roles, responsibilities, and accountability for achieving program results. In addition, effective management of the program has been hindered further by ineffective coordination among program offices and with state and local officials. Consequently, accountability for program performance is unclear, and state and local officials have expressed concern about conflicting information and the lack of a single office to be clearly accountable for the execution of the program. We also found instances where coordination and communication among project managers for the program were inadequate. In addition, the Congress has expressed concern about the management of the program.

State and Local Concerns Over Conflicting Information

In order to comply with congressional direction, program managers for chemical demilitarization and assembled chemical weapons assessment currently share responsibilities associated with disposal of the chemical stockpile at Blue Grass, Kentucky, and Pueblo, Colorado. For example, the Program Manager for Chemical Demilitarization is responsible for the destruction of the chemical stockpile, and at the same time, the Program Manager for Assembled Chemical Weapons Assessment is responsible for developing and testing alternative technologies for disposing of the assembled chemical weapons at these sites. However, the activities of these offices have not always been effectively coordinated. This has led to difficulties in presenting a clear, coordinated message to affected state and local officials regarding the overall program goals for these sites. According to several state and local officials, spokespersons for these two programs have made conflicting and inconsistent statements about the possible disposal methods for the chemical stockpile stored in Kentucky and Colorado. Consequently, this confusion has created the public perception of the program at these two sites that DOD lacks a single vision for destroying the chemical stockpile in a judicious manner.

The lack of coordination will pose even greater problems in the future in implementing the decisions selecting the most appropriate disposal method to use in Kentucky and Colorado. Specifically, if an alternative technology is selected for use at these sites, views differ on which program office should manage the disposal operations after the pilot project starts. Specifically:

Some program officials believe that the Program Manager for Chemical Demilitarization should assume responsibility for disposal operations after the method of destruction is selected for use in Kentucky and Colorado. As provided for in the original legislation establishing the Chemical Demilitarization Program, the Army established the office of the Program Manager for Chemical Demilitarization and made it responsible for management of the destruction of the stockpile. Officials believed that this office would be more skilled at managing the construction and operation of these disposal facilities based on its experience at other stockpile sites. Also, it would match the management structure being employed in Aberdeen, Maryland, and Newport, Indiana, where the Program Manager for Chemical Demilitarization has overall responsibility for implementing the pilot projects to test alternative technologies for disposing of chemical agents in bulk containers.

Other program officials believe that the Program Manager for Assembled Chemical Weapons Assessment should continue to manage the program through the completion of the pilot-scale testing of alternative technologies for the disposal of assembled chemical weapons stored in Kentucky and Colorado. In section 142 of the 1999 Defense Authorization Act, the Congress directed that the Program Manager continue to manage the development and testing, including the demonstration and pilot-scale testing, of alternative technologies for the destruction of assembled chemical weapons. The Congress further directed the Program Manager to act independently of the Program Manager for Chemical Demilitarization. Program officials believed this could continue the enhanced communications the program office achieved with these states and local communities through the Dialogue initiative discussed previously and retain the expertise the office obtained on alternative technologies for destroying assembled chemical weapons.

DOD and the Army have not resolved issues related to future management roles and responsibilities should a full-scale pilot project start for demonstrating an alternative technology at Kentucky and Colorado be implemented. In any case, closer cooperation will be required between these program offices in the future. The adoption of any alternative disposal method for pilot-scale testing will depend on a certification to the Congress that the alternative is as safe and cost-effective as the baseline incineration process for disposing of assembled chemical weapons and will meet the destruction deadline.

Inadequate Coordination and Communication Among Project Managers

In some instances, coordination and communication among project managers for the program were inadequate. For example, as previously discussed, the Program Manager for Chemical Demilitarization’s efforts to improve the office’s management of funds had not been consistently and systematically implemented across all program elements. In another case, officials of the stockpile and nonstockpile projects in Arkansas had not coordinated their efforts to obtain environmental permits and approvals for their disposal operations. This could have a significant effect on the start of one or both disposal operations because the state of Arkansas has limited resources to review and approve permit changes that will be needed to begin operations. Although concerned that nonstockpile activities could delay the state’s approval of permit changes, stockpile officials at the site did not know the status or schedule for nonstockpile activities. Additionally, some public outreach offices for the program did not have information related to emergency preparedness activities, such as information booklets and evacuation routes maps. According to outreach officials, they did not routinely provide emergency preparedness information to the public because those activities were managed by the U.S. Army Soldier and Biological Chemical Command and FEMA, not by the Program Manager for Chemical Demilitarization.

Congressional Concern About the Management of the Program

The Congress has expressed concern about the management of the Chemical Demilitarization Program. For example, in the 2000 Defense Appropriations Act, section 8159, the Congress directed the Secretary of Defense to report on the management of the Chemical Demilitarization Program, including an assessment of the Assembled Chemical Weapons Assessment Program. Some in the Congress have also expressed concern that, in recent budget submissions, DOD included the budget for the Chemical Demilitarization Program as part of the Army’s budget. In its report on the 2000 Defense Authorization Act, the House Armed Services Committee reaffirmed its belief that, as required by the original statute establishing the program, chemical demilitarization funds should be set forth in a DOD-wide budget account, not in the budget accounts for any military department. This was to emphasize that destruction of the chemical stockpile is a national issue that affects all of DOD, not just a single military service. It stated that the Committee intended to keep chemical demilitarization funding separate to prevent these funds from being subject to internal service budget priorities and to avoid artificially inflating the budgets of any military department.

Conclusions

Effective management of the Chemical Demilitarization Program has been hindered by its complex management structure and ineffective coordination among program offices and with state and local officials. This has been the case particularly at the Kentucky and Colorado sites, which were not expected to meet the convention’s 2007 deadline for destruction of their stockpiles. As the program’s mission has been expanded, some fragmentation in the management roles, responsibilities, and accountability among various program participants has resulted. While the Department of the Army is now responsible for most elements of the mission to destroy the stockpile, in accordance with congressional direction, responsibility for the Assembled Chemical Weapons Assessment Program remains with a separate program manager that reports directly to the office of the Secretary of Defense. Regarding the future management of this program, officials of the Departments of Defense and the Army have not agreed on the most appropriate management structure for accomplishing the destruction of the chemical stockpile stored in Kentucky and Colorado. Without resolution, these issues leave the effectiveness of the program at risk.

Recommendations

We recommend that the Secretary of Defense direct the Secretary of the Army to clarify the management roles and responsibilities of program participants, assign accountability for achieving program goals and results, and establish procedures to improve coordination among the program’s various elements and with state and local officials.

Agency Comments

Both DOD and FEMA concurred with the recommendation.