Modernizing the Nuclear Security Enterprise: NNSA's Budget Estimates Increased but May Not Align with All Anticipated Costs
Released: 2016-03-04T00:00:00

Letter

Background

Congress funds NNSA’s modernization efforts through various programs and activities within the Weapons Activities appropriations account that generally address the following four areas:

The stockpile area includes weapons refurbishments through LEPs and other major weapons alterations and modifications; surveillance efforts to evaluate the condition, safety, and reliability of stockpiled weapons; maintenance efforts to perform certain minor weapons alterations or to replace components that have limited lifetimes; and core activities to support these efforts, such as maintaining base capabilities to produce uranium and plutonium components. NNSA allocates funds to activities that directly support the stockpile area through Directed Stockpile Work within the Weapons Activities appropriation account.

The infrastructure area includes government-owned, leased, and permitted physical infrastructure and facilities supporting weapons activities. NNSA’s 2016 nuclear security budget materials include information on two major types of infrastructure activities: (1) Infrastructure and Safety and (2) Readiness in Technical Base and Facilities, which includes two major construction projects. First, the Uranium Processing Facility is a construction project to replace enriched uranium capabilities currently located in the aging Building 9212 at the Y-12 National Security Complex. This project is part of a larger strategy to maintain NNSA’s enriched uranium capability by relocating enriched uranium operations performed in Building 9212 into other existing buildings by 2025 and by constructing a series of smaller buildings. Second, the Chemistry and Metallurgy Research Replacement construction project at Los Alamos National Laboratory, which is part of NNSA’s broader plutonium infrastructure strategy, is composed of subprojects to move analytical chemistry and materials characterization capabilities into two existing facilities. NNSA’s broader plutonium infrastructure strategy also includes the construction of at least two additional modular structures that the Fiscal Year 2016 Stockpile Stewardship and Management Plan reports will achieve operating capacity by 2027. The Uranium Processing Facility and the Chemistry and Metallurgy Research Replacement construction projects are both part of NNSA’s major modernization efforts.

The research, development, testing, and evaluation area is composed of programs that are technically challenging, multiyear, multifunctional efforts to develop and maintain critical science and engineering capabilities. These capabilities enable the annual assessment of the safety and reliability of the stockpile, improve understanding of the physics and materials science associated with nuclear weapons, and support the development of code-based models that replace underground testing.

The other weapons activities area includes budget estimates associated with nuclear weapon security and transportation, as well as legacy contractor pensions, among other things.

The four areas are interconnected. For example, experiments funded under the research, development, testing, and evaluation program area can contribute to the design and production of refurbished weapons, which is funded under the stockpile program area. The infrastructure program area offers critical support to both the stockpile and the research, development, testing, and evaluation program areas by providing a suitable environment for their various activities, such as producing weapons components and performing research and experimentation activities.

The U.S. nuclear weapons stockpile is composed of seven different weapons types, including air-delivered bombs, ballistic missile warheads, and cruise missile warheads (see table 1).

Overall Budget Estimates and Plans for Modernization Differed Little from the Previous Year’s, but Certain Programs Changed to a Greater Degree

NNSA’s 2016 budget estimates for modernization total $297.6 billion over 25 years, which is a slight increase from the 2015 estimates of $293.4 billion; however, for certain program areas or individual programs, budget estimates changed more significantly. The overall increase was moderated by a shift of two counterterrorism programs to another area of NNSA’s budget. Program areas increased by as much as 13.2 percent or decreased by as much as 18.1 percent. Within the stockpile program area, which experienced the biggest increase, budget estimates for some LEPs and an alteration increased significantly because of changes in production schedules and scope, among other things.

Overall Budget Estimates for Modernization Increased Slightly from Those in 2015 Plans but with Some Significant Realignments and Changes within Program Areas

According to the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA’s estimates for the next 25 years total $297.6 billion for modernization activities—an increase of approximately $4.2 billion, or 1.4 percent (in nominal, or current dollar, values), from the $293.4 billion NNSA reported in the 2015 plan. These budget estimates, which are for activities in the Weapons Activities area, are provided in the four areas discussed above: stockpile; infrastructure; research, development, testing, and evaluation; and other weapons activities. The overall increase was moderated by the shift of two counterterrorism programs from the Weapons Activities budget into NNSA’s separate Defense Nuclear Nonproliferation budget. The two counterterrorism programs that were moved out of the Weapons Activities budget together totaled approximately $8 billion. According to NNSA’s 2016 budget justification, this realignment is intended to provide greater clarity regarding the total funding and level of activity in the counterterrorism area. The realignment of these programs, along with other smaller decreases in the other weapons activities category, together accounted for an 18.1 percent decrease in the other weapons activities category during the 25-year period covered by the plan. Without the realignment of the two counterterrorism programs, the increase in NNSA’s overall Weapons Activities budget in the 2016 plan would have been considerably larger, totaling approximately $12.3 billion, or 4.2 percent, over the 2015 Weapons Activities budget. Table 2 details the changes in NNSA’s 25-year budget estimates from 2015 to 2016 for the four main areas in which modernization efforts are funded under Weapons Activities.

In addition, budget estimates changed significantly for certain program areas and individual programs. Notably, the 2016 budget materials estimate that during the next 25 years, $117.2 billion will be needed for the stockpile area, which is an increase of $13.7 billion, or 13.2 percent, over the prior year’s budget materials. Part of this increase resulted from the addition of approximately $3 billion to support the Domestic Uranium Enrichment program, as well as increases in estimates for weapons refurbishment activities, particularly LEPs, as discussed later in this report. The 2016 budget materials indicate a decrease of approximately $1.8 billion for infrastructure activities during the next 25 years, compared with the 2015 estimates, in part because of reductions in recapitalization and site operation budget estimates. The 2016 budget materials increased proposed spending on research, development, testing, and evaluation activities by approximately $900 million during the same period. This increase resulted in part from an increase in estimates for the Inertial Confinement Fusion Ignition and High Yield program.

Budget estimates in the Fiscal Year 2015 Stockpile Stewardship and Management Plan cover 2015 to 2039, while those in the 2016 plan cover 2016 to 2040. We compared the two sets of estimates by summing up the current dollar values for each, which is how NNSA reports the estimates. The total from the 2016 plan is different from the 2015 plan’s total in that the former includes the year 2040 and excludes the year 2015. Because of the effect of inflation, this comparison could make the difference between the 2016 projection and the 2015 projection appear higher than it would be in the case of a comparison of the two series in real dollar values or in a comparison that looks strictly at the years that overlap from each plan.

Budget Estimates for Some Major Modernization Efforts Have Increased Significantly

In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, estimates for some major modernization projects increased significantly from those in 2015. Specifically, regarding the weapons refurbishment efforts—which are captured within the stockpile category in the budget— the 2016 budget materials indicate that during the next 25 years, $49.8 billion will be needed to support LEPs and other weapons alteration activities, which is an increase of $8.2 billion, or 19.6 percent, compared with the prior year’s estimate of $41.7 billion. This increase resulted partly from the change in the scope and schedule for some programs, as discussed below.

The W88 Alteration 370 effort expanded to include a conventional high explosive replacement while retaining the original schedule for a first production unit in 2020. To support this replacement, NNSA shifted planned spending for other programs—including $15.1 million originally planned for the W76-1 LEP—toward this effort. The Fiscal Year 2016 Stockpile Stewardship and Management Plan reported that the agency also shifted planned spending intended for surveillance of B61 and B83 bombs into the conventional high explosive replacement effort. The Fiscal Year 2016 Stockpile Stewardship and Management Plan estimated the total cost for the W88 Alteration 370 at $2 billion over the 25-year period covered by the plan, while the 2015 plan estimated the total cost at $1.2 billion, for an increase of approximately $0.8 billion.

The cruise missile warhead LEP (renamed the W80-4 LEP) now has a first production unit planned for 2025—2 years earlier than the first production unit in the 2015 plan. This shift in schedule is intended to align with revised Air Force plans for the carrier missile. The Fiscal Year 2016 Stockpile Stewardship and Management Plan estimated the total cost for the LEP at $8.2 billion over 25 years, while the 2015 plan estimated the total cost at $6.8 billion, for an increase of approximately $1.5 billion.

The Fiscal Year 2016 Stockpile Stewardship and Management Plan included a budget estimate for the B61-13 LEP that did not appear in the 2015 plan. This LEP, which NNSA officials stated is intended to replace the B61-12 LEP, is currently planned to begin in 2038, with an estimated cost of approximately $1.2 billion from 2038 through 2040.

Budget estimates for the three interoperable warhead LEPs—the IW- 1, 2, and 3—together accounted for an increase of $5.6 billion over 25 years when compared with the Fiscal Year 2015 Stockpile Stewardship and Management Plan budget estimates. According to the plan, this increase resulted from updated estimates developed through an expanded methodology that incorporated additional stakeholder input into the process that NNSA used to arrive at the estimates, and which resulted in a better understanding of schedule and cost uncertainty. NNSA officials stated that they continue to use stakeholder input to update and assess the cost estimate methodology.

The budget estimates for the B61-12 and W76-1 LEPs together accounted for a decrease of almost $1 billion when compared with 2015 estimates. NNSA officials stated that this decrease is the result of the LEPs’ costs winding down as the programs come to an end.

Table 3 shows the changes in budget estimates for the weapons refurbishment activities under way during the 25-year period covered by the Fiscal Year 2016 Stockpile Stewardship and Management Plan.

Milestone dates for most major modernization projects generally remained the same in the 2016 plan compared with the previous year. The 2010 Nuclear Posture Review included discussion of a number of planned major modernization efforts for NNSA, while other efforts have been identified in later versions of the Stockpile Stewardship and Management Plan and in the 2011 update to the DOD-DOE joint report. Table 4 shows key milestone dates for LEPs and major construction efforts as they have changed since 2010.

Estimates for the two major construction projects we reviewed—the Uranium Processing Facility and the Chemistry and Metallurgy Research Replacement construction project—did not change or saw a reduction in estimates along with a recategorization of costs. These projects, included in the infrastructure category in NNSA’s budget materials, support NNSA’s uranium and plutonium strategies, respectively. The Uranium Processing Facility project budget line in the Fiscal Year 2016 Stockpile Stewardship and Management Plan stayed the same as reported in the 2015 plan, with a total estimated budget of $5.2 billion from 2015 through the project’s planned completion in 2025.

The 2016 budget estimates for the Chemistry and Metallurgy Research Replacement construction project decreased, and in comparison to the 2015 budget materials, these estimates also shifted from one budget category to another. The Fiscal Year 2015 Stockpile Stewardship and Management Plan included a line for budget estimates for this project; however, the estimates were zero for each year except for 2012. The 2015 plan included budget estimates that totaled $3.1 billion in the program readiness subcategory under the infrastructure category, which NNSA officials stated were ultimately intended for the Chemistry and Metallurgy Research Replacement construction project. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA shifted $1.7 billion in planned spending out of program readiness and into the construction project’s line item, also under the infrastructure category. This shift appears to be an increase in the total amount for major construction activities in the 2016 budget materials. However, as noted above, the overall total for infrastructure declined slightly, in part because NNSA officials said that they determined that the remainder of the $3.1 billion from program readiness is not required to support the project. Nevertheless, the $1.7 billion reported in the Fiscal Year 2016 Stockpile Stewardship and Management Plan is $214 million lower than the total estimates that NNSA reported in its 2016 congressional budget justification, which included a more detailed construction project data sheet for the project. An NNSA official confirmed that this amount should have been included in the plan and its omission was the result of a data entry error. Consequently, the amount for the project in the construction line item should be approximately $1.9 billion.

The Fiscal Year 2016 Stockpile Stewardship and Management Plan includes a goal to stop the growth of the agency’s deferred maintenance backlog. The plan notes that there has been limited availability for capital and maintenance funding in recent years, but NNSA officials stated that they are working to ensure that there is no increase in deferred maintenance relative to the level at the end of 2015. In August 2015, we found that NNSA’s infrastructure budget estimates were not adequate to address its deferred maintenance backlog and that the backlog would continue to grow. We recommended that in instances where budget estimates do not achieve DOE benchmarks for maintenance and recapitalization investment over the 5-year budget estimates, NNSA identify in the budget materials the amount of the shortfall and the effects, if any, on the deferred maintenance backlog. We also recommended that until improved data about the importance of facilities and infrastructure to mission are available, NNSA clarify in the budget materials for the Future-Years Nuclear Security Program the amount of the deferred maintenance backlog that is associated with facilities that have little to no effect on programmatic operations and is therefore low priority to be addressed. NNSA concurred with our recommendations. Specifically, NNSA agreed to include more information on maintenance, recapitalization, and deferred maintenance on excess facilities and stated that it will address them in the 2017 budget request or budget support materials as appropriate. Similarly, NNSA officials agreed that until improved data about the importance of facilities and infrastructure to the mission are available, they plan to clarify in the budget materials for the Future-Years Nuclear Security Program the amount of the deferred maintenance backlog that is associated with facilities that have little to no effect on programmatic operations and is therefore low priority to be addressed.

Budget Estimates Do Not Reflect All Elements of Modernization Plans, although the Full Cost Difference May Be Difficult to Assess

The estimates in NNSA’s 2016 nuclear security budget materials may not align with plans for some major modernization efforts for several reasons. In particular, the Fiscal Year 2016 Stockpile Stewardship and Management Plan includes several major modernization efforts that may require more funding in some years than the plan reflects, raising questions about the alignment of NNSA’s modernization plans with potential future budgets. In addition, for some nuclear weapon refurbishment programs, the low end of NNSA’s internally developed cost ranges exceeds the estimates included in the budget materials. Further, some costs, such as those for certain infrastructure upgrades, are not included in NNSA’s budget estimates, and dependency on other NNSA programs could lead to increases in program costs. NNSA officials provided various reasons for the discrepancies, which they said could be addressed in future planning.

Major Modernization Efforts Beyond the Future- Years Nuclear Security Program May Cost More Than Budget Estimates Reflect

The Fiscal Year 2016 Stockpile Stewardship and Management Plan’s estimates for Weapons Activities are $4.4 billion higher than the out-year projections for funding levels in the President’s budget provided in the DOD-DOE joint report. Specifically, for the years 2021 through 2025—the 5 years after the 2016 Future-Years Nuclear Security Program—the Fiscal Year 2016 Stockpile Stewardship and Management Plan’s Weapons Activities budget estimates total $56.6 billion. However, these budget estimates exceed a set of out-year projections for nuclear modernization and sustainment activities over the same time period. Specifically, the DOD-DOE joint report included additional information on out-year projections in the 2016 President’s budget for Weapons Activities through 2025. These out-year projections total $52.2 billion from 2021 to 2025, or $4.4 billion less than DOE’s budget estimates over the same time period (see table 5).

This misalignment between the Fiscal Year 2016 Stockpile Stewardship and Management Plan and the estimates described as out-year projections in the President’s budget in the DOD-DOE joint report corresponds to a challenging period for NNSA modernization efforts, as the agency plans to simultaneously execute at least four LEPs along with several major construction projects, including efforts to modernize NNSA’s uranium and plutonium capabilities. The differences between these two sets of numbers raise questions about the alignment of NNSA’s modernization plans with potential future budgets. NNSA notes this issue in the Fiscal Year 2016 Stockpile Stewardship and Management Plan and states that it will need to be addressed as part of fiscal year 2017 programming. According to an NNSA official from the office that coordinated production of the Fiscal Year 2016 Stockpile Stewardship and Management Plan, the additional line of out-year projections in the 2016 President’s budget was included in the 2016 DOD-DOE joint report at the request of the Office of Management and Budget. This official told us that the out-year projections included in the DOD-DOE joint report represent DOE’s evaluation of what modernization activities will cost for these years based on current plans and available information. NNSA officials also stated that the President’s budget information was included in the 2016 DOD-DOE joint report to show that the administration has not yet agreed to fund these activities beyond the Future-Years Nuclear Security Program at the level reflected in NNSA’s budget estimates. In addition, NNSA officials stated that there is a high level of uncertainty in the budget estimates beyond the Future-Years Nuclear Security Program, which makes planning beyond 5 years difficult.

Estimates for Some Major Modernization Efforts in NNSA’s Budget Materials Were Lower Than Its Program-Specific Estimates

On the basis of our analysis of NNSA’s internally developed cost ranges for certain major weapon modernization efforts, we found that the low end of these ranges sometimes exceeded the estimates that NNSA included for those programs in its budget materials. We analyzed NNSA’s budget estimates for nuclear weapon refurbishments over the 25 years covered in the Fiscal Year 2016 Stockpile Stewardship and Management Plan— the W76-1, the B61-12, the B61-13, the W80-4, and the IW-1, 2, and 3 LEPs, as well as the W88 Alteration 370. The Directed Stockpile Work category in the plan and in the 2016 Future-Years Nuclear Security Program contain detailed budget information on weapon refurbishment efforts that includes specific budget estimates for each effort as well as high and low cost ranges that NNSA developed for them. For each effort, we assessed the extent to which the budget estimates aligned with its high-low cost estimates. Specifically, we examined instances where the low end of the cost range estimates was greater than the budget estimates.

We found that the annual budget estimates are generally consistent with NNSA’s internal cost estimates; that is, in most years, the annual budget estimates for each weapon refurbishment effort fall within the high and low cost ranges that NNSA developed for each program. However, in some years, NNSA’s budget estimates for some refurbishment efforts may not align with modernization plans. Specifically, for some years, the low end of cost ranges that NNSA developed for some LEPs exceeds the budget estimates. This indicates potential misalignment between plans and budget estimates for those programs in those years, or the possible need for NNSA to increase budget estimates for those programs in the future. For instance, see the following:

The B61-12 LEP’s budget estimates during the 5-year period covered by the Future-Years Nuclear Security Program align with plans.

However, the low cost range estimate of $195 million for the final year of production in 2025 exceeds the budget estimate of $64 million. NNSA officials said that this difference is not a concern because this misalignment occurs during the final year of the LEP effort and this estimate may overstate costs for the end of B61-12 program.

The W88 Alteration 370’s low cost range estimate exceeds its budget estimate for 2020. The budget materials report that the program’s budget estimate that year is $218 million; however, the low point of the cost range is $247 million. NNSA officials stated that this is not a concern because there is flexibility to address possible misalignments in future programming cycles. NNSA officials also stated that the total estimates for this program are above the total of the midpoint cost estimates for 2016 through 2020 and that funding for 2016 to 2019 is fungible and could be carried over to cover any potential shortfall in 2020.

The W80-4 LEP’s low range cost estimate of $476 million exceeds its budget estimates of $459 million for 2020. NNSA officials stated that because the budget estimates for this LEP are above the low point of its estimated cost range during other years, the misalignment in 2020 represents a small incongruity in an otherwise sound LEP profile.

The budget estimates for the IW-1 LEP are within the high and low estimated cost ranges for most years. However, the IW-1’s low cost range estimate of $175 million exceeds its budget estimate of $113 million in 2020, which is its first year of funding. NNSA officials said that by shifting funding projected for 2021 to 2020, the IW-1 budget estimates would still be within the cost ranges.

For the W76-1 LEP, we compared the budget estimates in the 2016 Future-Years Nuclear Security Program and the Fiscal Year 2016 Stockpile Stewardship and Management Plan with internal cost estimates NNSA developed for the LEP. We found that the budget estimates for all years within the Future-Years Nuclear Security Program, except for 2018, are below NNSA’s internal cost estimates for that program, raising questions about whether the budget for the LEP is aligned with anticipated costs. According to NNSA officials, the W76-1 LEP is nearing completion, and the model used to develop internal cost estimates for the W76-1 is predicting the LEP’s end-of-program costs in a way that may not reflect the rate at which the program winds down. For more information on the LEPs and their budget estimates and cost ranges in the Fiscal Year 2016 Stockpile Stewardship and Management Plan, see appendix II.

NNSA officials stated that the intent in providing budget estimates and cost range estimates for each weapon refurbishment effort is to show general agreement between the two sets of estimates. Notwithstanding the differences we identified between budget estimates and low-end cost range estimates for certain efforts in certain years, NNSA officials stated that the budget estimates and the cost range estimates are in general agreement for each LEP and alteration in terms of total costs and trend. In addition, NNSA officials stated that there is some flexibility in the funding for these efforts, and that the programs may carry over some funds from one year to the next if needed to cover costs, depending on the reason for the misalignment, among other things.

In our August 2015 report on NNSA’s nuclear security budget materials, we found that not including information that identifies potential misalignments in LEP budget estimates compared with the LEP internal cost estimates can potentially pose risks to the achievement of program objectives and goals, such as increase in program costs and schedule delays. NNSA agreed with our recommendation from that report to provide more transparency with regard to shortfalls in its budget materials. Specifically, NNSA said that it would include, as appropriate, statements in future Stockpile Stewardship and Management Plans on the effect of funding an LEP effort at less than suggested by a planning estimate cost range. NNSA officials also said that the agency plans to incorporate this recommendation, among others, into its 2017 budget materials.

Some Costs Are Not Included in Modernization Budget Estimates, and Dependency on Other Programs Could Lead to Increases in Estimates

We identified instances where certain modernization costs were not included in budget estimates or may be underestimated. For example, see the following:

The budget estimates for the W88 Alteration 370 with a conventional high explosive replacement—or “refresh”—are understated, according to NNSA officials. The budget estimates for the refresh reported in the 2016 budget materials are roughly $300 million less than the refresh requires. Officials told us that the initial budget planning for the refresh contained a cost of approximately $500 million. However, NNSA found that this estimate was incorrect and increased it to approximately $800 million. NNSA officials stated that this project is still in the process of establishing a new, official baseline, which officials expect to complete in 2016.

The 2016 budget materials may not contain all necessary costs for NNSA’s efforts to maintain its enriched uranium capability, which include relocating select operations performed in Building 9212 to other existing buildings and constructing a series of smaller buildings. Specifically, NNSA officials stated that the budget estimates in the 2016 budget materials for these efforts do not include the costs associated with infrastructure upgrades (such as ceiling repairs and heating, air conditioning, and other controls systems) in two existing buildings at the Y-12 site. NNSA officials stated that the scope to maintain operations in the existing facilities is being developed and prioritized into a multiyear effort among multiple programs, separate from the Uranium Processing Facility project. According to another NNSA official, these costs were still under development, but the official estimated that the upgrades may cost tens of millions of dollars for each building.

The costs of the plutonium infrastructure strategy—in which NNSA is currently preparing to move analytical chemistry and materials characterization capabilities into existing facilities as part of the Chemistry and Metallurgy Research Replacement construction project while also considering constructing new modular buildings under a separate project—are also uncertain and possibly underestimated. This uncertainty is due to the fact that NNSA has not yet determined the number of additional modular buildings that may be required, although the Fiscal Year 2016 Stockpile Stewardship and Management Plan calls for at least two. NNSA officials also stated that estimated costs for these efforts have not yet been baselined and that the cost of such a project cannot be estimated with any certainty until it has proceeded further into the planning process and established a baseline.

In addition to some costs not being included in budget estimates, the estimates for some NNSA modernization efforts could increase in the future because of their dependency on successful execution of other NNSA programs. Specifically, NNSA managers for the LEPs stated that some of these programs could incur future cost increases or schedule delays because of other NNSA programs supporting the LEPs. For instance, NNSA officials told us that the W80-4 LEP will require a new insensitive high explosive to support the system. This is because the B61- 12 LEP is consuming the currently available stocks of insensitive high explosive. As a result, NNSA is developing a new insensitive high explosive to meet the needs of the W80-4 LEP. However, NNSA officials told us that the performance of the new explosive currently being produced is not comparable to the quality of existing explosive being consumed by the B61-12 LEP. Consequently, these officials stated that the costs of the W80-4 LEP could rise because of additional funding that may be required to further develop the new explosive. The Fiscal Year 2016 Stockpile Stewardship and Management Plan notes that as design options are down selected, the budget estimate for the W80-4 may shift in response.

An NNSA official also stated that the IW-1 LEP budget estimates in the 2016 budget materials are predicated on NNSA successfully modernizing its plutonium pit production capacity. The official stated that if there are delays in the current plutonium infrastructure strategy, the IW-1 LEP will bear costs that are greater than currently estimated to produce the number of additional plutonium pits it needs to support the program. The Fiscal Year 2016 Stockpile Stewardship and Management Plan notes that estimates for programs in their earlier stages, such as the IW-1 LEP, are subject to uncertainty. We previously found that NNSA has experienced significant cost increases and schedule delays in its earlier strategies to modernize its plutonium pit production support facilities at Los Alamos National Laboratory. We have ongoing work examining the Chemistry and Metallurgy Research Replacement construction project in more detail.

Agency Comments

We provided a draft of this report to DOE and NNSA for their review and comment. NNSA provided written comments, reproduced in appendix III, in which it stated that it will continue to enhance information on potential funding levels in future budget supporting materials.

NNSA also provided technical comments separately, which we incorporated as appropriate.

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. GAO staff who made major contributions to this report are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to assess (1) the extent to which the National Nuclear Security Administration’s (NNSA) budget estimates and plans for modernization activities reflected in its fiscal year 2016 nuclear security budget materials differ, if at all, from those in its fiscal year 2015 budget materials and (2) the extent to which the fiscal year 2016 nuclear security budget materials align with modernization plans as presented in the Stockpile Stewardship and Management Plan.

We limited the scope of our review to NNSA’s Weapons Activities appropriations account, because NNSA’s activities in the Stockpile Stewardship and Management Plan are funded by this account. This scope is consistent with that of our August 2015 review. We focused our review on major modernization efforts—that is, the refurbishment of nuclear weapons through life extension programs (LEP) and alterations and major construction efforts to replace existing, aging facilities for plutonium and uranium. The budget projections in the 2015 and 2016 Stockpile Stewardship and Management Plans each contain budget dollar figures for 25 years, presented in current dollar values. Our report presents all figures in current, or nominal, dollars, which include projected inflation, unless otherwise noted. Further, all years noted in our report refer to fiscal years, unless otherwise noted.

To determine the extent to which NNSA’s budget estimates and plans for modernization activities differed from those in the 2015 nuclear security budget materials, we compared the information in the 2016 materials with the information in the 2015 materials. NNSA’s nuclear security budget materials are composed of two key policy documents that are issued annually: the agency’s budget justification, which contains estimates for the 5-year Future-Years Nuclear Security Program, and the Stockpile Stewardship and Management Plan, which provides budget estimates over the next 25 years. Specifically, we (1) compared differences between the 2016 and 2015 budget materials in the four broad modernization areas—stockpile; infrastructure; research, development, testing, and evaluation; and other weapons activities—and (2) compared differences between the 2016 and 2015 budget materials for specific weapons refurbishment activities and major construction projects. We interviewed knowledgeable officials from NNSA about changes we identified between the 2016 and 2015 budget materials. We also reviewed a third, integrated document on plans for the nuclear deterrent that includes information on the Department of Defense (DOD) and Department of Energy’s (DOE) modernization budget estimates. This annual report that DOD and DOE are required to submit jointly to the relevant Senate and House committees and subcommittees is referred to as the section 1043 report; in our report, we refer to it as the DOD-DOE joint report. We compared the information in the 2016 DOD-DOE joint report with that in the Fiscal Year 2016 Stockpile Stewardship and Management Plan.

To determine the extent to which NNSA’s budget materials align with its modernization plans, we compared information on the budget estimates in the 2016 budget materials with the information on modernization plans in the materials as well as the DOD-DOE joint report, reviewed prior GAO reports to provide context for the concerns we identified, and interviewed NNSA officials to obtain further information on changes to modernization plans and discussed any perceived misalignments with them.

For weapons refurbishment efforts under way during the 25 years covered by the Fiscal Year 2016 Stockpile Stewardship and Management Plan, we analyzed NNSA’s budget estimates for all those to be conducted over the 25-year period by comparing them against NNSA’s internally developed cost ranges for each LEP. According to DOE officials, for all LEPs besides the W76-1, DOE uses two different approaches to estimate the costs of LEPs. Under the first approach, according to officials, DOE develops specific budget estimates by year through a “bottom-up” process. DOE officials describe this as a detailed approach to developing the LEP budget estimates, which, among other things, integrates resource and schedule information from site participants. Under the second approach, which DOE refers to as a “top-down” process, DOE uses historical LEP cost data and complexity factors to project high and low cost ranges for each LEP distributed over the life of the program using an accepted cost distribution method. Officials noted that the values in these cost ranges reflect idealized funding profiles and do not account for the practical constraints of the programming and budgeting cycle. For the W76-1 LEP, DOE has developed specific budget estimates by year.

Because the W76-1 LEP is the basis of DOE’s top-down model, DOE does not develop high and low cost ranges for it. Instead, DOE published the W76-1 LEP estimates in the Fiscal Year 2016 Stockpile Stewardship and Management Plan as a comparison between the Future-Years Nuclear Security Program request and a single LEP model line. For the W76-1 LEP, we compared the budget estimates with the LEP model line.

For all LEPs besides the W76-1, we assessed the extent to which the specific bottom-up budget estimates were aligned with the high-low cost ranges developed through the top-down model. Specifically, we examined where the specific budget estimates were under the low end of the cost range predicted by the top-down model. We did this by reviewing charts in the Fiscal Year 2016 Stockpile Stewardship and Management Plan and the underlying data for those charts. In instances where the low cost range exceeded the budget estimates, we followed up with NNSA officials for additional information.

To assess the reliability of the data underlying NNSA’s budget estimates, we reviewed the data to identify missing items, outliers, or obvious errors; interviewed NNSA officials knowledgeable about the data; and compared the figures in the congressional budget justification with those in the Fiscal Year 2016 Stockpile Stewardship and Management Plan to assess the extent to which they were consistent. We determined that the data were sufficiently reliable for our purposes, which were to report the total amount of budget estimates and those estimates dedicated to certain programs and budgets and to compare them to last year’s estimates.

We conducted this performance audit from May 2015 to March 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Figures Showing Life Extension Program and Alteration Budget Estimates and Cost Ranges from the Fiscal Year 2016 Stockpile Stewardship and Management Plan

The National Nuclear Security Administration (NNSA) has developed budget estimates for its nuclear weapons life extension programs (LEP) and major alterations: the B61-12, the W76-1, the W80-4, the IW-1, the IW-2, the IW-3, and the B61-13 LEPs, as well as for the W88 Alteration 370. The estimates include NNSA’s internally developed high and low cost ranges for each program. The budget estimates appear as bars for each year, while the high and low cost ranges are represented by lines across the figures. The following figures present budget estimates for each LEP and alteration. Similar figures also appear in the Fiscal Year 2016 Stockpile Stewardship and Management Plan.

B61-12: The B61 bomb is one of the oldest nuclear weapons in the stockpile. The B61-12 LEP will consolidate and replace the B61-3, -4, -7, and -10 bombs. According to the Fiscal Year 2016 Stockpile Stewardship and Management Plan, this consolidation will enable a reduction in the number of gravity bombs, which is consistent with the objectives of the 2010 Nuclear Posture Review. The first production unit of the B61-12 is planned for 2020; the program is scheduled to end in 2026. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that the B61-12 LEP will require a total of $5.7 billion from 2016 to 2026. See figure 1 for an illustration of budget estimates against projected cost ranges.

W76-1: The W76 warhead was first introduced into the stockpile in 1978 and is deployed with the Trident II D5 missile on the Ohio-class nuclear ballistic missile submarines. The W76-1 LEP is intended to extend the original warhead service life and address aging issues, among other things. The first production unit was completed in September 2008, and the program will end in calendar year 2020. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that approximately $847 million will be required for this program from 2016 to 2021. See figure 2 for an illustration of budget estimates against projected cost ranges.

W80-4: The W80-4 LEP is intended to provide a warhead for a future long-range standoff missile that will replace the Air Force’s current air- launched cruise missile. The first production unit is planned for 2025, and the program is scheduled to end in 2032. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that the W80-4 LEP will require approximately $8.2 billion from 2016 to 2032. See figure 3 for an illustration of budget estimates against projected cost ranges.

W88 Alteration 370: Among other things, the W88 Alteration 370 will replace the arming, fuzing, and firing subsystem for the W88 warhead, which is deployed on the Navy’s Trident II D5 submarine-launched ballistic missile system. In November 2014, the Nuclear Weapons Council decided to replace the conventional high explosive main charge, which led to an increase in costs for the alteration. The first production unit is planned for 2020, and the program is scheduled to end in 2026. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that the program will require a total of $2 billion from 2016 to 2026. See figure 4 for an illustration of budget estimates against projected cost ranges.

IW-1: The IW-1, also known as the W78/88-1, is the first ballistic missile warhead LEP in NNSA’s interoperable strategy to transition the stockpile to three interoperable ballistic missile warheads and two air-delivered warheads The first production unit is planned for 2030; the 2016 budget materials do not report an end date for the LEP. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that the program will require a total of $13.4 billion from 2020 to 2040. See figure 5 for an illustration of budget estimates against projected cost ranges.

IW-2: The IW-2 is an interoperable warhead intended to replace the W87/88 warhead. The Nuclear Weapons Council has not yet developed a more detailed implementation plan for this LEP. The first production unit is planned for 2034; the Fiscal Year 2016 Stockpile Stewardship and Management Plan does not contain a projected end date. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that the program will require a total of $12.1 billion from 2023 to 2040. See figure 6 for an illustration of budget estimates against projected cost ranges.

IW-3: The IW-3 is intended to provide the third interoperable warhead for NNSA’s future strategy for the stockpile. The first production unit is not yet specified, and there is not yet a budgeted end date. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that a total of $6.3 billion will be required for this program from 2030 to 2040. See figure 7 for an illustration of budget estimates against projected cost ranges.

B61-13: According to NNSA officials, the B61-13 LEP is intended to replace the B61-12 bomb. The first production unit is not yet specified, and there is not yet a budgeted end date. In the Fiscal Year 2016 Stockpile Stewardship and Management Plan, NNSA estimates that a total of $1.2 billion will be required for this program from 2038 to 2040. See figure 8 for an illustration of budget estimates against projected cost ranges.

Appendix III: Comments from the National Nuclear Security Administration

Appendix IV: GAO Contact and Staff Acknowledgment

Staff Acknowledgment

In addition to the contact named above, William Hoehn (Assistant Director), Antoinette Capaccio, Pamela Davidson, Philip Farah, Bridget Grimes, Carol Henn, Aaron Karty, and Cynthia Norris made key contributions to this report.