Department of Energy: Improved Guidance, Oversight, and Planning Are Needed to Better Identify Cost-Saving Alternatives for Managing Low-Level Radioactive Waste
Released: 2005-10-31T00:00:00

Letter

Background

Under the LLRW Policy Act of 1980, as amended, the federal government is responsible for the disposal of LLRW owned or generated by DOE. DOE defines LLRW as all radioactive waste that does not fall within other classifications, such as spent (used) nuclear fuel and other high-level waste. Mixed waste is LLRW with hazardous components, such as lead and mercury. LLRW can include material of varying levels of radioactivity, from barely contaminated soil and debris to LLRW with enough radioactivity to require remote handling. LLRW can include items such as contaminated equipment, protective clothing, rags, and packing materials and is managed at multiple sites under a variety of contractors. (See app. I for a list of DOE sites that disposed of the majority of LLRW in fiscal years 2004 and 2005.)

DOE sites typically dispose of LLRW at (1) on-site facilities, if suitable capacity is available, (2) DOE’s regional disposal facilities at the Hanford Site or the Nevada Test Site, or (3) a commercial facility. The selection of the disposal facility is based partly on the facility’s waste acceptance criteria. These criteria specify the allowable types and amounts of radioactive materials, and types of containers acceptable at the disposal facility.

In 2000, we reported that DOE had not developed full life-cycle costs for its disposal facilities or established guidance to ensure that its contractors base their disposal decisions on departmentwide considerations of cost- effectiveness, among other things. We also reported in 2001 that cost analyses concerning the use of DOE’s on-site disposal facilities should be periodically updated to take into account changing economic conditions. Subsequently, the House Committee on Appropriations directed DOE to prepare an objective analysis of the life-cycle costs of LLRW disposal for various federal and commercial disposal options. The committee was concerned that DOE needed to include in its life-cycle cost analysis certain cost elements, such as packaging, transportation, disposal, and postclosure maintenance and surveillance.

In response, in its 2002 report to Congress on life-cycle cost analysis of LLRW disposal, DOE listed among its next steps for EM sites to consider the cradle-to-grave costs as they make LLRW management decisions. On July 18, 2002, EM issued guidance directing each site office to develop the mechanisms necessary to ensure that contractors’ LLRW disposal decisions include the best estimate of full cradle-to-grave costs and analysis of alternatives. Several other documents on life-cycle cost analyses are also available. For example, DOE has a cost-estimating guide, developed in the mid-1990s, that provides a chapter dedicated to life-cycle cost analysis, including definitions, processes, limitations, common errors made in life-cycle cost analysis, methods, examples, and diagrams. In addition, although not directly applicable to LLRW management, guidance and manuals prepared by other federal agencies for other DOE programs may be useful to the sites in explaining life-cycle cost analysis methods. For example, the National Institute of Standards and Technology has published two documents on life-cycle cost analysis that are applicable to DOE’s Federal Energy Management Program.

DOE Sites Do Not Consistently Use Life- Cycle Cost Analysis in Managing LLRW

DOE sites prepare various types of cost analyses in making LLRW management decisions, but these analyses do not consistently use complete, current, or well-documented life-cycle cost analysis to ensure that the lowest-cost LLRW management alternatives are identified. As a result, the decisions the sites make may not take into account the most cost-effective alternative. These inconsistencies have occurred, in large part, because DOE’s guidance lacks necessary detail and its oversight of contractor practices is weak.

Site Cost Analyses Are Not Always Complete, Current, or Well Documented

Complete life-cycle cost analysis is cradle to grave and includes all costs associated with the management and disposal of LLRW. As DOE’s 2002 report to Congress explained, the costs preceding disposal vary greatly and can be significantly greater than the actual cost of disposal. As a result, DOE concluded it is essential to consider pre-disposal costs as well as disposal costs. Table 1 shows the cost elements of a complete life-cycle cost analysis, according to DOE’s 2002 report.

DOE LLRW generator sites we visited did not always include all life-cycle costs—including the postclosure costs of long-term maintenance and surveillance of the disposal site—and did not always consider alternative actions when deciding on how to manage and dispose of LLRW. For example, despite DOE’s guidance to include all disposal costs in its life- cycle cost analyses, DOE contractors at two sites—Rocky Flats, Colorado, and Paducah, Kentucky—did not consistently consider postclosure costs in the analyses supporting their LLRW disposal decisions for fiscal year 2004. In contrast, the contractor at Fernald, Ohio, prepared a life-cycle cost analysis that included estimated postclosure costs for both the Nevada Test Site and for Envirocare of Utah, a commercial disposal facility. Nevada Test Site officials told us they do not include these future costs in their disposal fees because they operate on an annual appropriated funds basis. Nevada Test Site officials estimated that if they were to include postclosure costs in their fee, these costs would add an additional $2.38 per cubic foot of waste to the fee. Envirocare of Utah, on the other hand, includes the estimated postclosure costs in its disposal fees, as required by the state of Utah.

Costs for certain LLRW activities vary widely among disposal sites and should be considered in preparing life-cycle cost analysis. For example, EM’s 2002 report to Congress found that costs for one predisposal cost element—waste characterization—can be higher for wastes shipped to the Nevada Test Site and the Hanford Site for disposal than for wastes sent to Envirocare of Utah. Waste characterization costs for the two DOE sites ranged from $130 to $2,400 per cubic meter, while these same costs ranged from $30 to $880 per cubic meter at Envirocare of Utah. The major factors contributing to this cost differential are (1) required procedures for accepting, handling, and disposing of LLRW with higher levels of radioactivity at the Nevada Test Site and Hanford and (2) the higher cost to the generator of characterizing wastes that are shipped in containers to the Nevada Test Site and Hanford Site for disposal. Although waste characterization is an important element in life-cycle cost analysis, the Rocky Flats contractor did not include the costs of these activities in its cost analysis.

In addition, waste generators do not always include potential lower-cost alternatives when making LLRW decisions. For example, in fiscal year 2004, the Paducah contractor shipped 600 cubic meters of LLRW in trucks to Envirocare of Utah. Although in its preliminary analysis, the site contractor believed that using rail could save 25 percent in transportation costs, contractor officials indicated they did not validate these preliminary assumptions or complete a formal cost analysis of the rail option.

DOE contractors’ cost analyses are not always current. Despite DOE’s 2002 recommendation that cost estimates should be revisited periodically, one DOE waste generator disposed of large volumes of LLRW in fiscal year 2004 on the basis of cost studies completed several years earlier. Specifically, the contractor at Fernald acknowledged shipping over 100,000 cubic meters of LLRW to Envirocare of Utah in fiscal year 2004, using a cost analysis completed in 1994. This analysis, while considering all life- cycle cost elements, had not been updated during this 10-year period to account for any changes that might have occurred in cost elements, such as changes in disposal rates, costs for packaging, treatment, or transportation. For example, disposal rates charged by Envirocare of Utah can change from year to year, based on price discounts offered for larger LLRW disposal volumes.

We also found that three of the five DOE sites that had expanded on-site facilities since 2002 did not complete an analysis comparing the life-cycle costs of on-site and off-site disposal alternatives. A 2001 congressional conference report requires DOE to perform such an analysis “before proceeding with any new on-site disposal cell.” DOE asserts that the report language does not apply to ongoing facility development or expansion. Officials at two sites indicated they did not believe they needed to complete such a life-cycle cost analysis because the expansion of their on-site disposal facility was already accounted for in the initial facility design, completed before 2002. The third site completed a life-cycle cost analysis of LLRW waste streams for its on-site facility. However, site officials did not complete a life-cycle cost analysis of off-site disposal because they assumed that the costs of off-site transportation and disposal would be significant enough to preclude the off-site option. Although the remaining two sites completed life-cycle cost studies comparing on-site and off-site disposal costs, these studies were not submitted to the congressional appropriations committees.

DOE contractors’ cost analyses are not always well documented. In some cases, we could not determine how contractors incorporated cost analyses into their disposal decisions because documentation was incomplete. According to DOE and contractor site officials at Rocky Flats, disposal decisions were at times based on noncost factors, such as schedule or safety. For example, a 2003 cost study determined that using trucks to transport building debris to a nearby rail loading area less than 1 mile away would be more cost-effective than extending a rail line to the building. However, contractor officials told us they decided to build a rail extension to the building being demolished because the extra traffic at the site caused by trucks hauling the LLRW to the rail line could endanger the health and safety of the workers. This decision, however, was not documented. Contractor officials at Rocky Flats agreed that such LLRW management decisions were not consistently documented to show the rationale for how cost was balanced against other factors.

At other sites, cost analyses were informal and not documented. For example, contractor officials responsible for LLRW disposal at Paducah told us that they made some disposal decisions informally because they believed their knowledge of the factors involved made it unnecessary to complete a formal analysis. In addition, Oak Ridge contractor officials coordinating the removal of LLRW from the site told us they did not complete a formal analysis of disposal options for each waste stream because their contract did not require such an analysis.

DOE’s 2002 Guidance Lacks Necessary Detail

DOE sites have not consistently used life-cycle cost analysis, in part because EM’s 2002 guidance memo on life-cycle cost analysis lacks the necessary detail for how and when to use it. Consequently, each site was responsible for deciding how to incorporate cost into its LLRW management decisions. For example, although EM’s guidance directed sites “to develop mechanisms necessary to establish that its LLRW disposal decisions include the best estimate of full ‘cradle to grave’ costs and analysis of alternatives,” the guidance did not do the following things: Lay out a systematic, consistent method for (1) analyzing all cost elements or (2) comparing key alternatives within these cost elements to determine the lowest cost. Consequently, as we found, analyses often did not include cost elements that might have altered a disposal decision.

Specify when or under what circumstances sites should prepare cost analyses. As we found, some sites did not update their analyses to show that their original LLRW management decisions were still supported by current economic conditions; Refer sites to relevant DOE orders, manuals, or other reference materials that could provide consistent direction on life-cycle cost analysis. Such references could include, for example, the DOE order for real property asset management, the DOE manual on preparing life- cycle cost estimates, Office of Management and Budget guidance for completing a cost-effective analysis, and the National Institute of Standards and Technology guidance for completing life-cycle cost analysis, or portions of these documents.

Lay out how final LLRW management decisions should be documented.

For example, the guidance does not explain how sites should weigh disposal costs against noncost factors such as safety and health. As we found, without adequate documentation at some of the sites we visited, it was difficult for site contractors to justify the decisions they had made.

DOE Has Not Taken Steps to Oversee Contractors’ Use of Life-Cycle Cost Analysis, Relying Instead on Incentive-Based Contracts to Ensure Cost-Effective LLRW Decisions

DOE site offices were ineffective in overseeing contractors’ use of life- cycle cost analysis, which also contributed to ineffective implementation of the guidance. At the sites we visited, neither DOE nor the contractors had taken identifiable steps to implement the guidance on life-cycle cost analysis.

First, DOE has not incorporated life-cycle cost guidance into contracts. Most of the incentive-based contracts at the sites we visited require contractors to comply with DOE Order 430.1A on life-cycle asset management, which requires the use of life-cycle cost analysis. However, neither that order, nor its successor, DOE Order 430.1B, provide sufficient detail on life-cycle cost analysis definitions, methods, examples, or diagrams that would be useful in preparing such analyses. In contrast, DOE’s cost-estimating guide provides a chapter dedicated to life-cycle cost analysis. This chapter includes definitions, processes, limitations, a list of common errors made in life-cycle cost analysis, methods, examples, and diagrams. However, the estimating guide is not explicitly cited in DOE Order 430.1A or 430.1B, or in the site contracts. As a result, the contractor official responsible for controlling LLRW costs at Rocky Flats, for example, could not tell us whether the contractor used DOE’s cost-estimating guide, particularly the chapter on life-cycle cost analysis in LLRW management decisions, because he was not familiar with the guide.

Second, DOE field offices have not taken steps to implement guidance or to evaluate contractors’ use of life-cycle cost analysis. For example, contractor officials at Paducah were not aware of EM’s July 18, 2002, guidance memo on life-cycle cost analysis until we showed a copy to them at the time of our visit. In addition, in October 2002, DOE’s Rocky Flats Field Office sent a memo to its contractor, Kaiser-Hill Company, concerning this EM guidance. According to the memo, the department was already aware that the contractor used licensed commercial disposal facilities and that disposal decisions considered technical acceptability, schedule, and cost benefit; the field office therefore concluded that the mechanisms to establish cost-effective disposal decisions by Kaiser-Hill were already in place and thus satisfied the intent of the EM guidance. However, we found no indication at any of the sites we visited that DOE officials had specifically assessed the contractor’s use of life-cycle cost analysis in making LLRW management decisions.

When we brought our concerns to EM officials on the inconsistent use of life-cycle cost analysis at the sites, they responded that EM has relied on the use of incentive-based contracts to ensure contractors are making cost- effective LLRW management decisions, rather than encouraging the use of life-cycle cost analysis. Incentive-based contracts provide specific incentives for specified performance outcomes, often driven by site- specific goals and objectives in areas such as health, safety, schedule, cost, or other areas, as negotiated between DOE and the contractor. We recognize that incentive-based contracts might help DOE meet goals such as accelerated cleanup and that these contracts may, in some cases, reduce overall site costs. However, their use may not necessarily identify lowest- cost waste management alternatives, unless the contract provides this specific focus. Since the department relies on incentive-based contracts, it is critical that the contract’s total estimated cost be based on, among other things, life-cycle cost analyses of LLRW management alternatives and that the contract specify the proper use of life-cycle cost analysis.

Without the proper use of life-cycle cost analysis in establishing and overseeing incentive-based contracts, DOE cannot be assured that the contractor has identified the lowest life-cycle cost alternatives for LLRW management. For example, the Rocky Flats contractor, operating under an incentive-based contract, prepared various analyses of transportation alternatives from 2000 to 2003, but these analyses did not comprehensively address sitewide LLRW disposal needs because they were incomplete and not updated. Specifically, two DOE contractor draft studies in 1999 and 2000 indicated that adding rail as an alternative for shipping LLRW from Rocky Flats to off-site disposal facilities could save millions of dollars in transportation costs. Despite this cost-saving potential, the contractor decided in 2000 to rely exclusively on trucks for all Rocky Flats LLRW shipments. Subsequently, in 2002, the contractor analyzed transportation alternatives specifically for shipping certain contaminated LLRW soil off- site. Although the analysis concluded that using rail to transport this soil alone could save up to $216,000, the contractor continued using trucks exclusively in fiscal year 2003 and most of fiscal year 2004 to transport this waste to Envirocare of Utah. In 2003 the contractor determined that the total volume of this LLRW soil would be significantly higher than previously estimated, further increasing the cost-saving potential of using rail, but nevertheless did not update or formalize the analysis. Instead, the contractor decided to send the soil by rail only after determining that it would use rail for shipping debris from an altogether separate LLRW project at Rocky Flats. In September 2004, the site began to transport the LLRW soil by rail, after it had already sent over 4,200 truck shipments of soil to Utah in fiscal years 2003 and 2004. Use of rail instead of trucks to ship the LLRW soil might have saved the site over $4 million during fiscal year 2004. Comprehensive, complete, and current analyses of transportation alternatives for sitewide LLRW disposal needs might have better identified the lowest-cost transportation alternative, therefore providing an opportunity for reducing LLRW management costs for the site.

In April 2005, as part of our ongoing engagement, we briefed the Subcommittee on Energy and Water Development, House Committee on Appropriations, on the preliminary results of our work. We stated that DOE LLRW generators were not consistently using life-cycle cost analyses in their disposal decisions because of poor guidance and weak oversight. One month later, in its report to accompany the fiscal year 2006 energy and water appropriations bill, the full Appropriations Committee emphasized its intention to have DOE use life-cycle cost analysis in LLRW management decisions. Using our preliminary findings, the committee noted its concern with the department’s reliance on incentive-based contracts as a mechanism for ensuring cost-effective decision making rather than using life-cycle cost analyses, as directed.

According to the committee, while contractors should pursue cost- effective cleanup activities at their sites, it is up to the federal management responsible for those contractors to provide guidance and make decisions that benefit the whole DOE complex. As such, the committee directed the Secretary of Energy to report to the committee within 30 days of enactment of the 2006 Energy and Water Development Appropriations Act, on the specific steps the department will take to ensure that contractors use life- cycle cost analysis in considering LLRW options, and that DOE maintains a viable oversight function to oversee the implementation of such guidance. The committee further recommended that a third of EM’s budget for managing the cleanup program, or $82,924,000, be withheld until after the Secretary of Energy delivers a report to the committee.

DOE Faces Challenges in Developing a National LLRW Disposition Strategy

To better coordinate disposal efforts among sites and program offices, increase efficiencies, and minimize life-cycle costs, DOE has begun developing a national LLRW disposition strategy. Although DOE expects to begin implementing this strategy by March 2006, specific schedules have not yet been established for when the strategy will be fully in place, and it faces several significant challenges. These include developing a database that can be used to manage LLRW complexwide and overcoming organizational obstacles created by the department’s varied missions.

DOE Expects to Begin Implementing a Departmentwide Strategic Plan for Disposing of LLRW in 2006

DOE has recognized that its current approach---having each site responsible for developing mechanisms necessary to control costs—may result in cost inefficiencies and could limit its ability to meet departmentwide strategic objectives, such as accelerated waste cleanup and site closure. To overcome these problems, EM has begun developing a National Disposition Strategy, which it plans to implement in 2006. EM plans to use the strategy to evaluate predisposal, storage, treatment, and disposal options across the department. The focus of the strategy will be on DOE LLRW that is shipped off-site for disposal and on waste for which DOE currently has no treatment or disposal options. EM hopes to make specific recommendations regarding waste without treatment or disposal options, develop a LLRW database, and reduce predisposal costs. To implement a successful strategy, EM expects to integrate sites’ waste disposition plans by (1) identifying and quantifying LLRW by waste category and site, (2) developing potential treatment and disposal options, and (3) identifying federal and commercial site capabilities for disposal of LLRW. DOE has not yet established specific schedules for when the strategy will be fully in place.

EM plans to develop this national disposition strategy in two phases. In Phase I, EM will examine those DOE sites that now have significant quantities of EM LLRW, including Oak Ridge, Savannah River, Idaho National Laboratory, Hanford (including the Office of River Protection), Fernald, Portsmouth (in Ohio), and Paducah (in Kentucky). DOE will also take into account LLRW requiring disposal from fiscal year 2005 to about fiscal year 2035. In Phase II, EM will examine the LLRW managed by other DOE program offices, such as NNSA and the Office of Science. Efforts in Phase II will require considerable coordination among different DOE program offices.

DOE Lacks Departmentwide Data on Its LLRW Inventory

To develop and implement its national strategy for LLRW disposition, DOE needs basic data—both current and forecasted—from individual sites on their disposition plans. However, EM does not have complete data, either for its own sites or for non-EM sites with LLRW. Although DOE continues to report progress in disposing of LLRW, the LLRW volumes it reports as needing disposal are not complete. EM’s databases do not include all LLRW expected to be generated in the future as part of ongoing environmental cleanup or waste produced by non-EM generators. This information may be time-consuming and costly to obtain from the different program offices. For example, when we sought information on current and forecasted LLRW volumes from the Office of Science, NNSA, and the Office of Nuclear Energy, Science, and Technology (Nuclear Energy), only the Office of Science provided the requested information. NNSA and Nuclear Energy did not provide this information because, according to officials from each of these program offices, the information was not readily available.

Regarding cost information, EM’s 2002 report to Congress recommended that DOE sites consider all life-cycle costs in evaluating alternatives for LLRW management, but it cautioned that DOE’s data collection and reporting processes needed to be improved to make any departmentwide cost analyses useful. EM officials stated that they will consider LLRW costs in their National Disposition Strategy. Currently, according to EM, DOE does not have uniform requirements for defining, monitoring, and reporting waste disposal costs, and sites may differ significantly in their protocols for collecting cost information. However, EM agrees that if DOE is to use life- cycle cost analysis to improve the bases for sites’ disposal decisions, standardized protocols for collecting and reporting the data would have to be established.

DOE recognizes these problems and has begun to develop some information it needs to support the evolving disposition strategy. Specifically, DOE is determining (1) what data it needs; (2) whether it can use the data in existing databases or has to develop a new database; and (3) how these data should be organized in a database.

DOE’s Organization and Multiple Missions Pose Challenges to Developing a National Strategy

EM’s ability to develop an integrated strategy for managing LLRW is further complicated by the fact that DOE has multiple program and site offices with different missions, and these offices oversee a variety of site contractors who manage waste with many different characteristics.

DOE’s experience with the use of a supercompactor at its Oak Ridge site illustrates the difficulty EM faces in developing a waste disposition strategy that covers multiple program offices. At this site, EM and NNSA program offices have their own contractors that are responsible for various activities, including managing or disposing of LLRW. In 1997, DOE awarded BNFL a 6-year fixed-price contract to decontaminate and decommission three buildings once used to enrich uranium at the Oak Ridge gaseous diffusion plant. These buildings comprised more than 4.8 million square feet and housed more than 328 million pounds of material. To dispose of this waste, BNFL had constructed a supercompactor, the largest of its type in the nuclear industry. Using this supercompactor, the contractor was able to reduce the volume of several thousand tons of LLRW by 75 percent and save an estimated $100 million in LLRW management and disposal costs. Despite the supercompactor’s potential for reducing LLRW volumes and lowering costs for the other program offices at the Oak Ridge site, the contractor, with the approval of the DOE site office, decided in 2004 to dismantle the supercompactor and ship it as LLRW to Envirocare of Utah for disposal.

According to NNSA officials at the Y-12 Plant, also located at the Oak Ridge site, they have contaminated buildings that need to be dismantled and disposed of, but neither DOE nor the contractor consulted with NNSA officials about the potential use of the supercompactor for NNSA’s ongoing compacting needs. Similarly, contractor officials at EM’s Paducah Site in Kentucky, which is about 300 miles away, stated that they might have benefited from the use of the supercompactor but were not given the opportunity to consider alternatives to its disposal. For example, Paducah had about 37,000 tons of remaining scrap metal, as of June 26, 2005, that its current on-site compactor is incapable of crushing, according to a contractor official at the Paducah site.

A DOE official at the Oak Ridge site stated that it would probably not be cost-effective to ship debris to the supercompactor from other sites, and the supercompactor could not cost-effectively be relocated. However, neither DOE nor contractor officials provided any documentation of cost analysis to support this statement. Although the dismantling, shipping, and disposal of the supercompactor may have been the correct decision, DOE did not conduct a departmentwide assessment of volume reduction needs and capabilities, and the costs or potential obstacles associated with maintaining or moving the supercompactor under various LLRW management alternatives. Consequently, DOE may have missed a potential cost-saving opportunity. Oak Ridge officials told us that they are currently developing an integrated disposition plan to better coordinate LLRW management activities specifically for the Oak Ridge site. According to DOE, other integrated activities underway at Oak Ridge include, among other things, a pilot program between EM and the Office of Science to dispose of LLRW that needs no further storage or processing.

Litigation and State Actions Can Affect DOE’s Waste Management Options

As a result of lawsuits and state regulatory and legislative actions in two states—Washington and Nevada—DOE cannot currently rely on either of its federal disposal facilities—Hanford or the Nevada Test Site—to dispose of mixed LLRW. Consequently, DOE is incurring increased costs for storage and treatment. Texas may provide DOE with new disposal options, but not sooner than December 2007. Specifically: In July 2004, Washington state asked a U.S. district court to prohibit DOE from sending LLRW from other DOE sites to Hanford for disposal. DOE voluntarily suspended LLRW shipments pending the court’s decision. In May 2005, the court ruled in favor of the state, issuing a preliminary injunction prohibiting DOE from sending LLRW from other sites to Hanford for disposal. In addition, in November 2004, Washington state voters passed an initiative, now incorporated in Washington state law, that would prohibit DOE from accepting out-of- state waste until existing waste at Hanford is cleaned up. The scope and constitutionality of the initiative are currently being litigated in federal district court. DOE officials told us that its inability to ship mixed LLRW to Hanford from other states is increasing costs and may delay cleanup and closure plans at several sites. For example, at Rocky Flats, approximately 1,000 cubic meters of mixed LLRW, intended for disposal at Hanford, instead had to be shipped off-site for commercial treatment, temporary storage, and eventual disposal at Envirocare of Utah to avoid delaying site cleanup; the Rocky Flats contractor estimates incremental storage, handling, treatment, and disposal costs of this LLRW may exceed $8 million.

In Nevada, as of August 2005, DOE was still awaiting approval from state regulators for a permit to dispose of, at the Nevada Test Site, mixed LLRW from other sites. After DOE filed its permit application in December 2000, Nevada objected to DOE’s planned method of disposal. DOE is working with the state regulators to achieve a mutually agreeable resolution, and state officials indicate this issue could be resolved by the end of 2005. Until DOE receives this permit, DOE cannot dispose of mixed LLRW generated at other sites at the Nevada Test Site.

In 2004, the Nevada Attorney General objected to DOE’s plan to ship certain LLRW from DOE’s Fernald, Ohio, site for disposal at the Nevada Test Site, asserting in a letter to DOE that the plan violated federal law and regulations. Pending a resolution of these issues, DOE signed a $7.5 million contract in April 2005 with a commercial facility in Texas to temporarily store 6,800 cubic meters of this LLRW for up to 2 years.

Texas may provide DOE with additional storage options. In February 2005, the state approved a license amendment for Waste Control Specialists to enlarge its LLRW storage facility. In addition, the state has begun a technical review of WCS’s application for a LLRW disposal facility license, which could be issued by December 2007.

Conclusions

Given the large volumes of LLRW generated by DOE activities, it is imperative that DOE recognize the importance of life-cycle cost analysis in identifying the most cost-effective alternatives for managing LLRW and then weighing the cost of these alternatives against noncost factors, such as safety and schedule. However, EM’s July 2002 guidance on life-cycle cost analysis did not include information on how or when such an analysis should be completed. Moreover, the department has not performed oversight to ensure that contractors are completing life-cycle cost analyses. EM has elected not to encourage the use of life-cycle cost analysis in making LLRW management decisions, relying instead on incentive-based contracts to ensure contractors are making cost-effective decisions. However, we believe that this contract mechanism does not necessarily ensure that contractors identify the lowest-cost LLRW management options. Without complete, well-documented life-cycle cost analysis, EM may be overlooking cost-saving opportunities that could have resulted from pursuing alternative disposal options. Furthermore, this lack of transparency diminishes confidence in DOE’s ability to ensure that contractors have considered life-cycle costs, regardless of whether the lowest-cost alternative is selected.

Although DOE has been disposing of LLRW for decades, it still lacks an integrated national strategy for doing so. Such a departmentwide strategy is crucial for ensuring that LLRW management needs throughout DOE are identified and addressed in a cost-effective manner that also meets other departmental goals, such as timely site cleanup. Specifically, an integrated approach could help consolidate similar types of LLRW to obtain economies of scale and lower per-unit disposal costs across the complex. DOE will need to develop basic information on LLRW volumes departmentwide and by program office, and to overcome the challenges posed by DOE’s complex organization and multiple missions, and recent state actions.

Recommendations for Executive Action

To promote cost-effective LLRW management, we are recommending that the Secretary of Energy take the following four actions: Prepare comprehensive guidance on life-cycle cost analysis that, at a minimum, specifies (1) a systematic, consistent method of analyzing all cost elements or of comparing key alternatives within these cost elements to determine the lowest cost; (2) when and under what circumstances sites should prepare cost analyses; (3) relevant DOE orders, manuals, or other reference materials that should be consulted to provide consistent direction on how and when to perform the analysis; and (4) how final LLRW management decisions should be documented to demonstrate that life-cycle cost factors were adequately weighed against noncost factors, such as safety, health, or schedule.

Incorporate the revised life-cycle cost guidance into new or existing site contracts or into the departmental orders cited in those contracts.

Direct DOE to oversee contractors to ensure that site contractor officials properly use life-cycle cost analyses in evaluating LLRW management alternatives.

Actively promote and monitor the development of a timely, national LLRW management strategy that is based on departmentwide data on LLRW needing disposal, and ensure that the implementation of the strategy is fully carried out.

Agency Comments and Our Evaluation

We provided DOE with a draft of this report for review and comment. Overall, DOE generally agreed with our conclusions and thanked us for the recommendations, but disagreed with or wanted to clarify certain statements in the draft report and provided technical comments, which we incorporated as appropriate. Specifically, DOE agreed that its sites are not consistently using life-cycle cost analysis in making LLRW management decisions. It also agreed that its current guidance and oversight in the area of life-cycle cost analysis for LLRW management decisions should be strengthened and noted that it is currently reevaluating its guidance documents and their implementation. In addition, DOE expressed appreciation for our support of an effective National Disposition Strategy for LLRW management, and expects this strategy to be available by March 2006.

DOE also provided comments on several specific statements in our report. First, DOE disagreed with our statement on the lack of an effective, integrated approach for LLRW management at Oak Ridge and offered examples of integration, which we have incorporated into our report.

Nonetheless, we found that not all LLRW activities at Oak Ridge were integrated into a sitewide LLRW management strategy. For example, NNSA officials told us their future need to decontaminate and decommission numerous buildings on the site had not yet been included in any sitewide LLRW management strategy.

Second, in its technical comments, DOE stated that our discussion of the supercompactor at Oak Ridge was misleading and did not agree that cost savings would have been realized if the supercompactor had been retained and redeployed to another site. We believe that our discussion of the supercompactor is accurate. It was intended to illustrate the difficulty EM faces in developing a waste disposition strategy that covers multiple program offices. In its technical comments, DOE told us that the contractor at Oak Ridge completed a cost analysis and decided that the supercompactor should not be reused. Nevertheless, neither DOE nor contractor officials provided us with any documentation of a cost analysis to support the dismantling and disposition of the supercompactor. DOE also told us that the contractor who owned the supercompactor and Oak Ridge management “openly solicited” other contractors in the complex about potentially reusing the supercompactor but did not find any interest. However, NNSA officials at Oak Ridge told us that neither DOE nor the contractor consulted with them about the potential use of the supercompactor, and the contractor at Paducah told us that it might have benefited from the supercompactor but was not given the opportunity to consider alternatives to its disposal.

Finally, DOE also stated that the lack of consistency that we found in implementing cost guidance and preparing formal documentation should not be interpreted to mean that the department’s waste disposal systems are necessarily inefficient or overly expensive, and asserted that flexibility is needed in the level of detailed cost analysis required. However, we did not conclude that the lack of consistent implementation and the lack of documentation was indicative of an inefficient or overly costly LLRW management system. Rather, we stated that we could not determine how contractors incorporated costs analyses into their disposal decisions because documentation did not exist or was incomplete. Conclusions cannot be drawn about the cost-effectiveness of LLRW management decisions if contractors do not adequately document their decisions for not using life-cycle cost analysis and DOE does not require them to do so. While we would agree that flexibility may be important in determining the level of cost analyses required, we believe this flexibility should be accompanied by proper documentation to support the level of analysis completed and the degree to which life-cycle cost principles were followed.

DOE’s comments on our draft report are presented in appendix II.

We are sending copies of the report to the Secretary of Energy, the Director of the Office of Management and Budget, and appropriate congressional committees. We will make copies available to others on request. In addition, the report will also be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please call me at (202) 512-3841. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Other staff contributing to this report are listed in Appendix III.

Disposed Waste Volume by Major DOE Generator Sites, Fiscal Year 2004 through Second Quarter, Fiscal Year 2005

Knolls Atomic Power Laboratory/Nuclear Fuel Services Brookhaven National Lab/ Brookhaven Science Associates Oak Ridge National Laboratory/ University of Tennessee/Battelle West Valley/West Valley Nuclear Services Remaining generator sites (27)

Comments from the Department of Energy

GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Daniel Feehan, Doreen Feldman, Thomas Kingham, Mehrzad Nadji, Omari Norman, Christopher Pacheco, Judy Pagano, Carol Herrnstadt Shulman, and Peter Zwanzig made key contributions to this report.