Modernizing the Nuclear Security Enterprise: Observations on the Organization and Management of the National Nuclear Security Administration
Released: 2012-06-27T00:00:00

Letter

Background

DOE is responsible for a diverse set of missions, including nuclear security, energy research, and environmental cleanup. These missions are managed by various organizations within DOE and largely carried out by contractors at DOE sites. According to federal budget data, NNSA is the largest organization in DOE, overseeing nuclear weapons, nuclear nonproliferation, and naval reactors missions at its sites. With a $10.5 billion budget in fiscal year 2011—nearly 40 percent of DOE’s total budget—NNSA is responsible for, among other things, providing the United States with safe, secure, and reliable nuclear weapons in the absence of underground nuclear testing and maintaining core competencies in nuclear weapons science, technology, and engineering. Ensuring that the nuclear weapons stockpile remains safe and reliable in the absence of underground nuclear testing is extraordinarily complicated and requires state-of-the-art experimental and computing facilities, as well as the skills of top scientists in the field. Over the past decade, the United States has invested billions of dollars in sustaining the cold war-era stockpile and upgrading the laboratories and, in 2011, the administration announced plans to request $88 billion from Congress over the next decade to operate and modernize the nuclear security enterprise and ensure that base scientific, technical, and engineering capabilities are sufficiently supported, and the nuclear deterrent in the United States can continue to be safe, secure, and reliable.

Under DOE’s long-standing model of having unique management and operating (M&O) contractors at each site, management of its sites has historically been decentralized and, thus, fragmented. Since the Manhattan Project produced the first atomic bomb during World War II, NNSA, DOE, and their predecessor agencies have depended on the expertise of private firms, universities, and others to carry out research and development work and efficiently operate the facilities necessary for the nation’s nuclear defense. DOE’s relationship with these entities has been formalized over the years through its M&O contracts—agreements that give DOE’s contractors unique responsibility to carry out major portions of DOE’s missions and apply their scientific, technical, and management expertise.

Currently, DOE spends 90 percent of its annual budget on M&O contracts, making it the largest non-Department of Defense contracting agency in the government. The M&O contractors at DOE’s NNSA sites have operated under DOE’s direction and oversight but largely independently of one another. Various headquarters and field-based organizations within DOE and NNSA develop policies, and NNSA site offices, collocated with NNSA’s sites, conduct day-to-day oversight of the M&O contractors and evaluate the contractors’ performance in carrying out the sites’ missions.

DOE and NNSA Struggled to Determine How NNSA Should Operate as a Separately Organized Agency

NNSA focused considerable attention on reorganizing its internal operations; however, it and DOE have struggled with establishing how NNSA should operate as a separately organized agency within the department. Several factors contributed to this situation. First, DOE and NNSA did not have a useful model to follow for establishing a separately organized agency in DOE. The President’s Foreign Intelligence Advisory Board’s June 1999 report suggested several federal agencies, such as the National Oceanic and Atmospheric Administration in the Department of Commerce, which could be used as a model for NNSA. However, as we reported in January 2007, none of the agency officials we interviewed considered their agency to be separately organized or believed that their agency’s operational methods were transferable to NNSA. Second, DOE’s January 2000 implementation plan, which was required by the NNSA Act, did not define how NNSA would operate as a separately organized agency within DOE. Instead, reflecting the opposition of the then DOE senior leadership to the creation of NNSA, the implementation plan “dual-hatted” virtually every significant statutory position in NNSA with DOE officials (i.e., having DOE officials contemporaneously serve in NNSA and DOE positions), including the Director of NNSA’s Office of Defense Nuclear Counterintelligence and General Counsel. As we testified in April 2001, this practice caused considerable concern about NNSA’s ability to function with the independence envisioned in the NNSA Act. Dual-hatting was subsequently forbidden by an amendment to the NNSA Act.

A lack of formal agreement between DOE and NNSA in a number of key areas—budgeting, procurement, information technology, management and administration, and safeguards and security—resulted in organizational conflicts that inhibited effective operations. Even where formal procedures were developed, interpersonal disagreements hindered effective cooperation. For example, our January 2007 report described the conflict between NNSA and DOE counterintelligence offices. Specifically, NNSA and DOE counterintelligence officials disagreed over (1) the scope and direction of the counterintelligence program, (2) their ability to jointly direct staff in the headquarters counterintelligence program offices, (3) the allocation of counterintelligence resources, (4) counterintelligence policy making and (5) their roles and responsibilities in handling specific counterintelligence matters. Subsequently, Congress amended the NNSA Act to consolidate the counterintelligence programs of DOE and NNSA under the Department of Energy.

The Defense Science Board provides the Department of Defense with independent advice and recommendations on matters relating to the department’s scientific and technical enterprise See Defense Science Board Task Force, Nuclear Capabilities (Washington, D.C.: December 2006). organized status, maintains a costly set of distinctly separate overhead and indirect cost operations that often duplicate existing DOE functions. For example, NNSA retains separate functions in areas such as, among others, congressional affairs, general counsel, human resources, procurement and acquisition, and public affairs. According to this November 2011 report, these redundant operations are costly and can complicate communications and program execution. There have been continuing calls for removing NNSA from DOE and establishing it as a separate agency. We reported in January 2007 that former senior DOE and NNSA officials with whom we spoke generally did not favor removing NNSA from DOE; we concluded that such drastic change was unnecessary to produce an effective organization.

NNSA Has Made Considerable Improvements, but Deficiencies Persist, Especially in Management of Major Projects and Contracts

Since its creation, NNSA has made considerable progress resolving some of its long-standing management deficiencies. For example, we reported in June 2004 that NNSA had better delineated lines of authority and improved communication between NNSA headquarters and its site offices. Furthermore, our January 2007 report contained 21 recommendations to the Secretary of Energy and the Administrator of NNSA that were intended to correct deficiencies in five areas— organization, security, project management, program management, and financial management. DOE and NNSA have taken important steps to address most of these recommendations. For example, to improve security, we recommended that the Administrator of NNSA, among other things, implement a professional development program for security staff to ensure the completion of needed training, develop a framework to evaluate results from security reviews and guide security improvements, and establish formal mechanisms for sharing and implementing lessons learned across the weapons complex. NNSA’s establishment of an effective headquarters security organization has made significant progress implementing these recommendations by performing security reviews, developing security performance measures, and instituting a security lessons-learned center.

Nevertheless, NNSA continues to experience significant deficiencies, particularly in its management of major projects and contracts. As we testified in February 2012, a basic tenet of effective management is the ability to complete projects on time and within budget. However, for more than a decade, NNSA has continued to experience significant cost and schedule overruns on its major projects, principally because of ineffective oversight and poor contractor management. We have reported that NNSA’s efforts to extend the operational lives of nuclear weapons in the stockpile have experienced cost increases and schedule delays, such as a $300 million cost increase and 2-year delay in the refurbishment of the W87 nuclear warhead and a $70 million cost increase and 1-year delay in the refurbishment of the W76 nuclear warhead. Furthermore, we reported that the estimated cost to construct a modern Uranium Processing Facility at NNSA’s Y-12 National Security Complex experienced a nearly sevenfold cost increase from between $600 million and $1.1 billion in 2004 to between $4.2 billion and $6.5 billion in 2011. We also reported in March 2012 that NNSA’s project to construct a new plutonium research facility at Los Alamos National Laboratory—the Chemistry and Metallurgy Research Replacement Nuclear Facility— would cost between $3.7 billion and $5.8 billion—nearly a sixfold increase from NNSA’s original estimate. NNSA’s February 2012 decision to defer construction of this facility for at least 5 years will result in a total delay of between 8 and 12 years from its original plans.

NNSA’s planning, programming, and budgeting process has also experienced a setback, which raises questions about the process’s capability and flexibility. Specifically, NNSA’s modernization and operations plans are detailed and annually updated in the agency’s Stockpile Stewardship and Management Plan (SSMP), which provides details of nuclear security enterprise modernization and operations plans over the next two decades. In addition, as discussed above, the NNSA Act requires NNSA to annually submit to Congress an FYNSP—a budget document approved by the Office of Management and Budget that details NNSA’s planned expenditures for the next 5 years. Furthermore, Section 1043 of the National Defense Authorization Act for Fiscal Year 2012 requires the Department of Defense and NNSA to jointly produce an annual report that, among other things, provides a detailed 10-year estimate of modernization budget requirements. NNSA neither submitted an FYNSP based on “programmatic requirements” nor the Section 1043 annual report with its fiscal year 2013 budget submission. In addition, NNSA has yet to release an updated SSMP. According to the Secretary of Energy, the August 2011 Budget Control Act created “new fiscal realities” that have caused the agency to revise its long-range modernization and operations plans and budget. An NNSA official told us that the revised plans, which will include the FYNSP, Section 1043 annual report, and updated SSMP should be completed in July 2012. We are currently reviewing NNSA’s planning, programming, and budgeting process in response to a request from the Subcommittee on Energy and Water Development, Senate Committee on Appropriations, and we expect to issue a report on this work in the next few months.

In conclusion, producing a well-organized and effective agency out of what was widely considered a dysfunctional enterprise has been a considerable challenge. In some areas, NNSA can be viewed as a success. In particular, NNSA has successfully ensured that the nuclear weapons stockpile remains safe and reliable in the absence of underground nuclear testing, accomplishing this complicated task by using state-of-the-art facilities, as well as the skills of top scientists. As we testified in February 2012, maintaining government-owned facilities that were constructed more than 50 years ago and ensuring M&O contractors are sustaining critical human capital skills that are highly technical in nature and limited in supply are both difficult undertakings. Careful federal oversight over the tens of billions of dollars NNSA proposes to spend to modernize nuclear facilities will be necessary to ensure these funds are spent in as an effective and efficient manner as possible, especially given NNSA’s record of weak management of its major projects.

Over the past decade, we have made numerous recommendations to DOE and NNSA to improve their management and oversight practices. DOE and NNSA have acted on many of these recommendations and have made considerable progress. Nevertheless, enough significant management problems remain that prompt some to call for removing NNSA from DOE and either moving it to another department or establishing it as a separate agency. As we concluded in January 2007, however, we do not believe that such drastic changes are necessary, and we continue to hold this view today. Importantly, we are uncertain whether such significant organizational changes to increase NNSA’s independence would produce the desired effect of creating a modern, responsive, effective, and efficient nuclear security enterprise. In light of the substantial leadership commitment to reform made by senior DOE and NNSA officials, and the significant improvements that have already been made, we believe that NNSA remains capable of delivering the management improvements necessary to be an effective organization, and we will continue to monitor NNSA’s progress making these improvements.

Chairman Turner, Ranking Member Sanchez, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions you may have at this time.

GAO Contact and Staff Acknowledgments

If you or your staff members have any questions about this testimony, please contact me at (202) 512-3841 or aloisee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. GAO staff who made key contributions to this testimony are Allison Bawden, Ryan T. Coles, Jonathan Gill, and Kiki Theodoropoulos, Assistant Directors, and Patrick Bernard, Senior Analyst.

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