National Nuclear Security Administration: Agency Report to Congress on Potential Efficiencies Does Not Include Key Information
Released: 2014-05-15T00:00:00

Letter

Background

As the largest civilian contracting agency in the federal government, DOE relies primarily on contractors to carry out its diverse missions and operate its laboratories and other facilities. About 90 percent of DOE’s budget is spent on contracts and large capital asset projects. DOE’s fiscal year 2015 discretionary budget request totaled almost $28 billion, with NNSA accounting for a substantial share—more than 40 percent. With three projects under way as of August 2012 that are expected to cost upwards of $17 billion, and with a history of significant cost growth and schedule delays, we designated NNSA’s contract and project management for contracts and projects with values of at least $750 million as high risk due to vulnerabilities to fraud, waste, abuse, and mismanagement.

NNSA, a separately organized agency within DOE, is responsible for the management and security of the nation’s nuclear weapons programs. NNSA articulates its strategy for managing the nuclear weapons infrastructure in its annually updated Stockpile Stewardship and Management Plan. The plan includes information on NNSA’s eight government-owned, contractor-operated sites that comprise its nuclear security enterprise—formerly known as the nuclear security complex. These include three national nuclear weapons design laboratories— Lawrence Livermore National Laboratory in California, Los Alamos National Laboratory in New Mexico, and Sandia National Laboratories in New Mexico and California; four nuclear weapons production plants—the Pantex Plant in Texas, the Y-12 National Security Complex in Tennessee, the Kansas City Plant in Missouri, and tritium operations at DOE’s Savannah River Site in South Carolina; and the Nevada National Security Site, formerly known as the Nevada Test Site. These sites carry out, among other things, the Stockpile Stewardship Program, which helps ensure a U.S. nuclear deterrent without full-scale nuclear testing. Activities under this program include dismantlement and disposition of nuclear weapons, as well as long-range planning to modernize NNSA’s nuclear security enterprise.

The National Defense Authorization Act for Fiscal Year 2012 required NNSA to submit a report to congressional defense committees (1) assessing the role of the nuclear security complex in supporting key activities and (2) identifying any opportunities for efficiencies and cost savings in the complex. More specifically, section 3123 of the act required the report to include the following: an assessment of the role of the nuclear security complex sites in supporting a safe, secure, and reliable nuclear deterrent; reductions in the nuclear stockpile; and the nuclear nonproliferation efforts of the nation; an identification of opportunities for efficiencies within the nuclear security complex and an assessment of how those efficiencies could contribute to cost savings and strengthening safety and security; an assessment of duplicative functions within the nuclear security complex and a description of which duplicative functions remain necessary and why; an analysis of the potential for shared use or development of high explosives research and development capacity, supercomputing platforms, and infrastructure maintained for the Work for Others program, if the Administrator determines it appropriate; and a description of the long-term strategic plan for the nuclear security complex.

Report Describes Activities of the Nuclear Security Enterprise but Does Not Assess the Sites’ Role

The act required that NNSA’s report to congressional defense committees include an assessment of the role of the nuclear security complex sites in supporting a safe, secure, and reliable nuclear deterrent; reductions in the nuclear stockpile; and the nuclear nonproliferation efforts of the nation. NNSA’s report, however, does not include such an assessment. Instead, the NNSA report describes activities of the nuclear security enterprise such as (1) certifying annually that the nuclear weapons stockpile is safe, secure, and reliable; (2) extending the life of existing weapons; (3) dismantling some nuclear weapons to reduce their quantity; and (4) developing and deploying technologies, approaches, and monitoring tools to ensure compliance with international agreements. In addition, NNSA’s report states that the 2014 Stockpile Stewardship and Management Plan, issued in June 2013, provides supplemental information on the role of the nuclear security enterprise. NNSA officials told us that that they did not think the act required them to submit an updated assessment of the nuclear security enterprise and stated that carrying out such an assessment would have taken more time to complete than the 14 months provided under the act. NNSA officials also said that a 2008 report that assessed the role of the nuclear security enterprise sites is still valid.

NNSA officials said that a new analysis of the role of the nuclear security enterprise sites may be warranted in the future if circumstances change sufficiently. Officials acknowledged that, since 2008, characteristics of some large capital asset projects have changed in the face of increasing costs, fiscal constraints, and technical difficulties, including plans to construct a Chemistry and Metallurgy Research Replacement Nuclear Facility at Los Alamos National Laboratory, and plans to construct a Pit Disassembly and Conversion Facility at Savannah River. Notwithstanding such changes across the nuclear security enterprise, NNSA officials said that the fundamental role that each site plays in supporting the nuclear security enterprise is consistent with the assessment included in the 2008 report. We did not evaluate NNSA’s 2008 report, but given the report is more than 5 years old, it raises questions about the assessment still being relevant. Moreover, we note that NNSA’s report to Congress did not cite the 2008 report as support and, as discussed previously, NNSA did not provide an assessment of the role of the nuclear security complex sites in supporting key NNSA activities, as required by the act.

In March 2014, NNSA decided to evaluate alternative plutonium disposition technologies that it believes can achieve a safe and secure solution more quickly and cost effectively. Office of Management and Budget, Fiscal Year 2015 Budget of the United States (Washington, D.C.: Mar. 4, 2014).

Plan, issued in June 2013, constitutes its 25-year strategic plan for the nuclear security enterprise.

Report Identifies Opportunities for Efficiencies but Does Not Include Other Required Information

NNSA’s report to Congress identifies opportunities for efficiencies and assesses duplicative functions. It does not, however, (1) assess how identified efficiencies could contribute to cost savings and strengthen safety and security, as required by the National Defense Authorization Act for Fiscal Year 2012, (2) or analyze the potential for shared use of facilities, which was a task the act stated should be included if the Administrator determines it to be appropriate.

NNSA’s Report Identifies Efficiency Opportunities and Assesses Duplicative Functions

NNSA’s report identifies seven efficiency opportunities. The opportunities included in the report are a summary of efficiency opportunities included in the 2014 Stockpile Stewardship and Management Plan, issued in June 2013, as well as some infrastructure and research and development initiatives. Specifically, NNSA’s report discusses efficiency opportunities that may result from (1) establishing the Office of Acquisition and Project Management in 2011; (2) establishing the Office of Infrastructure and Operations in fiscal year 2013; (3) consolidating the management and operating contracts for Y-12 National Security Complex and the Pantex Plant; (4) efficiencies in the nuclear weapons research and development portfolio, such as refurbishing facilities to reduce downtime between experiments; (5) improving the planning process for High Energy Density activities; (6) reducing the size of the Kansas City Plant; and (7) achieving projected benefits from the new Uranium Processing Facility.

NNSA’s report also includes an assessment of duplicative functions— which determined that most duplication has been eliminated over the past 25 years, and the duplicative activities that remain are essential to operations. For example, the report states that the nuclear security enterprise does maintain duplicative weapons design, certification, and surveillance functions but that it is an intended redundancy. Los Alamos National Laboratory and Lawrence Livermore National Laboratory both act as design agents for scientific matters pertaining to the weapon physics package. But, according to the report, the intellectual diversity that results from competing physics design laboratories is important to fulfill the requirement of stockpile stewardship.

NNSA’s Report Does Not Assess How Identified Efficiencies Could Contribute to Cost Savings or Strengthen Safety and Security, as Required

As discussed above, NNSA’s report identifies seven efficiency opportunities. The act, however, required NNSA to submit a report to congressional defense committees that included not only an identification of efficiency opportunities, but also an assessment of how those efficiencies could contribute to cost savings and strengthen safety and security.

NNSA’s report does not provide an assessment of how the efficiencies identified could contribute to cost savings and strengthen safety and security, as required by the act. For example, NNSA’s report cites the establishment of two new offices—the Office of Acquisition and Project Management in 2011 and the Office of Infrastructure and Operations in 2013—as efficiency opportunities, but it does not provide an assessment of how these offices have contributed or will contribute to cost savings. Similarly, the report cites efficiencies achieved in recent years related to experiments and simulations conducted in support of nuclear weapons research and development, but it does not include information about how these efficiencies might lead to cost savings. These and other efficiencies described in NNSA’s report also do not include an assessment of how the efficiencies will strengthen safety and security.

In addition, three of the efficiency initiatives included in NNSA’s report involve projects or strategies that, in prior reviews, we have found face challenges, which, if not addressed, may impact NNSA’s ability both to achieve cost savings and strengthen safety and security.

Consolidating the Y-12 and Pantex management and operations contracts to integrate finance systems and streamline management support services. We previously concluded that it is unclear how cost savings from this consolidation could be achieved and whether it would produce as much in savings as NNSA has anticipated. NNSA’s report does not address these previously raised concerns.

Constructing a new Uranium Processing Facility at the Y-12 National Security Complex: NNSA stated that the new facility would include engineered controls that will provide improved safety, security, and reliability of enriched uranium operations, among other things. But, NNSA’s report contains no other information regarding how the new facility will improve safety and security and, as NNSA itself has acknowledged, challenges inherent in this project are being addressed, and the features of the facility have undergone significant changes. We have previously reported, in 2012, project costs had increased almost 6 times NNSA’s initial estimates. Accordingly, as a result of the increased cost estimate for this project, how or whether it can lead to cost savings remains unclear.

Moving Kansas City operations to a smaller, nearby leased facility.

This move began in 2013 and is scheduled for completion in August 2014. In October 2009, however, we found the potential cost efficiencies gained from this leasing arrangement may have been overstated because the methodology used to estimate savings eliminated potentially less costly alternatives. NNSA’s report does not address these previously raised concerns or address how efficiencies gained from this move will lead to improved safety and security.

GAO, VA Health Care: Methodology for Estimating and Process for Tracking Savings Need Improvement, GAO-12-305 (Washington, D.C.: Feb. 27, 2012); Defense Management: Opportunities Exist to Improve Information Used in Monitoring Status of Efficiency Initiatives, GAO-13-105R (Washington, D.C.: Dec. 4, 2012); and Veterans Affairs: Limited Support for Reported Health Care Management Savings, GAO-06-359R (Washington, D.C.: Feb. 1, 2006). estimates, and a detailed process for tracking actual savings resulting from improvements. Consistent with our prior recommendations, we derived several key principles for preparing cost savings estimates from federal budgeting and cost estimating guidance. These principles include preparing an appropriate level of detailed documentation so that a reasonably informed person can easily recreate, update, or understand the cost savings estimate; identifying key assumptions used in preparing the estimate; assessing the reliability of data used to develop the estimate; and verifying or validating the accuracy of the calculations performed.

NNSA’s recent experience with previously identified cost savings targets underscores the importance of assessing whether cost savings can in fact be achieved. As discussed previously, the Office of Management and Budget directed NNSA to include cost savings to be achieved through management efficiencies and workforce prioritization savings in its 2014 future budget estimates so that the overall estimate could be reduced. NNSA incorporated these cost savings into its budget estimates before assessing how it could achieve the savings, thereby limiting the credibility of savings for budgetary purposes. In November 2013, NNSA determined that savings anticipated from workforce prioritization would not be feasible. NNSA officials told us, in March 2014, that they are assessing whether and how it might still achieve the management efficiency savings incorporated in its budget estimates, but that they have not yet determined when the assessment will be completed.

NNSA’s Report Does Not Analyze Potential Shared Use of Facilities

NNSA’s report does not provide an analysis of the potential for shared use of facilities. The National Defense Authorization Act for 2012 required NNSA, if the Administrator determined it appropriate, to provide an analysis of the potential for shared use or development of high explosives research and development capacity, supercomputing platforms, and infrastructure maintained for the Work for Others program. NNSA’s report does not discuss the Administrator’s determination regarding whether such an analysis is appropriate. Nonetheless, NNSA includes in its report a section entitled potential for shared use of selected facilities. The information contained in the report, however, focuses on existing, not potential, shared use opportunities. Specifically, NNSA’s report includes two examples of sites that operate Work for Others programs and three examples where they use facilities not owned by the nuclear security enterprise to execute its missions. The report states that NNSA leverages the costs saving and benefits of time-sharing and collaboration at these facilities, but it provides no additional information on the potential for new opportunities to supplement those efforts the agency has already put into practice.

Conclusions

Like other federal agencies, NNSA is being asked to find ways to operate more efficiently and reduce costs. Modernizing the nuclear security enterprise to ensure a safe, secure, and reliable nuclear deterrent will involve billions of dollars and take many years to accomplish. NNSA has identified several opportunities to achieve efficiencies across the nuclear security enterprise, but it is not clear whether cost savings will result because NNSA did not assess how these opportunities would create savings, how much could be saved, and in what time frame. Some of the opportunities NNSA proposes are associated with projects or activities for which NNSA has had difficulties accurately estimating costs and schedules or which are currently in flux. Without a sound methodology for assessing efficiency opportunities—a methodology that includes the basis of any assumptions included in the savings estimates, an assessment of the reliability of data used to develop the estimate, and verification or validation of the accuracy of savings calculations performed, as well as a process for tracking actual savings—NNSA cannot provide reasonable assurance that the efficiency opportunities it has identified will result in savings. Without such information, Congress does not have critical information to make the budgetary and policy choices that best balance long-term spending and nuclear security goals.

Recommendation for Executive Action

To ensure Congress receives reliable information regarding budgetary savings, we recommend that the Administrator of NNSA, when reporting on efficiency and savings opportunities in the future, develop a methodology that includes details on how savings from each operational improvement will be achieved; the basis of any assumptions included in the savings estimates; an assessment of the reliability of data used to develop the estimate; verification or validation of the accuracy of savings calculations performed; and a process for tracking actual savings resulting from operational improvements.

Agency Comments and Our Evaluation

We provided a draft of this report to NNSA for its review and comment. NNSA provided written comments, which are presented in appendix I. NNSA also provided technical comments on our draft report, which we incorporated as appropriate.

In its written comments, NNSA disagreed with our findings and our recommendation. Specifically, in its comments, NNSA stated that it was concerned that our report reflects an interpretation of the National Defense Authorization Act for Fiscal Year 2012 that differs from NNSA’s, resulting in potentially misleading conclusions. NNSA further stated that the report incorrectly concludes that the NNSA report to Congress did not provide an assessment of the roles of Nuclear Security Enterprise sites in performing certain missions as required and that the basis for our conclusion that the assessment was not provided is unclear. We disagree. The act required NNSA to provide a report to congressional defense committees “assessing the role of the nuclear security complex sites in supporting a safe, secure, and reliable nuclear deterrent; reductions in the nuclear stockpile; and the nuclear nonproliferation efforts of the United States.” As we noted in our report, NNSA described the activities of the nuclear security enterprise in its report to Congress, but it did not provide an assessment. A description is not an assessment.

In its comments, NNSA stated that the 2008 Complex Transformation Supplemental Programmatic Environmental Impact Statement that underlies its report to Congress, is still operative, and there have been no substantive transformations of the Nuclear Security Enterprise since. As we note in our report, however, NNSA did not cite this assessment in its report to congressional defense committees. Moreover, the 2008 Complex Transformation Supplemental Programmatic Environmental Impact Statement is more than 5 years old, which raises questions about its continued relevance. Notably, key elements of that document, such as the construction of the Chemistry and Metallurgy Research Replacement Nuclear Facility and the Uranium Processing Facility, have not been constructed and NNSA is reconsidering its approach on how to address these critical needs.

NNSA also states in its comments that we appear to have interpreted the act as requiring NNSA to causally and quantitatively link its cost efficiency initiatives to specific cost savings when the congressional language does not make any reference to linking the two. We disagree because the act does link efficiencies and cost savings. Specifically, the act states that the NNSA report must identify “opportunities for efficiencies within the nuclear security complex and an assessment of how those efficiencies could contribute to cost savings and strengthening safety and security.” As we stated in our report, NNSA’s report to congressional defense committees identifies opportunities for efficiencies. It does not, however, assess how identified efficiencies could contribute to cost savings and strengthen safety and security, as required by the act. For example, in its report NNSA cites efficiencies achieved in recent years related to experiments and simulations conducted in support of nuclear weapons research and development but does not include information about how these efficiencies might lead to cost savings.

Finally, NNSA did not concur with GAO’s recommendation that future reporting on efficiencies and cost savings should include a methodology for estimating the savings derived from potential efficiencies and track savings resulting from new efficiency efforts. NNSA stated that it would not have reliable information to accurately develop cost estimates directly linked to the efficiencies and that the congressional language does not make any reference to linking the two. NNSA states that it believes doing so would be speculative and result in unreliable information. We disagree. We have previously reported in evaluations of other agencies’ cost savings efforts that a sound methodology for estimating savings helps ensure that proposed savings can be achieved. Though such an effort may present analytical and other challenges, it is nonetheless important to do so. As we noted in our report, a methodology that includes the basis of any assumptions included in the savings estimates, assessing the data reliability of the estimate, validating savings calculations, and tracking actual savings achieved will help NNSA provide Congress the information it needs to make important budgetary and policy choices that best balance long-term spending and nuclear security goals. Thus, we continue to believe that NNSA should take action to fully address this recommendation.

We are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, the Administrator of NNSA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov..

If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov . Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other GAO staff who made key contributions to this report are Diane LoFaro, Assistant Director; Delwen Jones; Jeanette Soares; and Ginny Vanderlinde.

Appendix I: Comments from the National Nuclear Security Administration

Related GAO Reports

Modernizing the Nuclear Security Enterprise: NNSA’s Budget Estimates Do Not Fully Align with Plans. GAO-14-45. Washington, D.C.: December 11, 2013.

Modernizing the National Security Enterprise: Observations on NNSA’s Options for Meeting Its Plutonium Research Needs. GAO-13-533. Washington, D.C., September 11, 2013.

Nuclear Weapons: Factors Leading to Cost Increases with the Uranium Processing Facility. GAO-13-686R. Washington, D.C.: July 12, 2013.

Defense Management: Opportunities Exist to Improve Information Used in Monitoring Status of Efficiency Initiatives. GAO-13-105R. Washington, D.C.: December 4, 2012.

VA Health Care: Methodology for Estimating and Process for Tracking Savings Need Improvement. GAO-12-305. Washington, D.C.: February 27, 2012.

Modernizing the Nuclear Security Enterprise: The National Nuclear Security Administration’s Proposed Acquisition Strategy Needs Further Clarification and Assessment. GAO-11-848. Washington, D.C.: September 20, 2011.

Nuclear Weapons: National Nuclear Security Administration’s Plans for Its Uranium Processing Facility Should Better Reflect Funding Estimates and Technology Readiness. GAO-11-103. Washington, D.C.: November 19, 2010.

Nuclear Weapons: National Nuclear Security Administration Needs to Better Manage Risks Associated with Modernization of Its Kansas City Plant. GAO-10-115. Washington, D.C.: October 23, 2009.

Veterans Affairs: Limited Support for Reported Health Care Management Efficiency Savings. GAO-06-359R. Washington, D.C.: February 1, 2006.