Nuclear Waste: Action Needed to Improve Accountability and Management of DOE's Major Cleanup Projects
Released: 2008-09-26T00:00:00

Letter

Background

DOE oversees and implements its major cleanup projects through agreements with contractors who operate the nuclear weapons research and production sites and the cleanup projects at those sites. Some of EM’s cleanup projects are located at DOE sites administered by the National Nuclear Security Administration, a separately organized agency within DOE.

EM’s major cleanup projects involve efforts to clean up sites where nuclear weapons were produced and production waste stored. EM’s cleanup projects handle a wide array of waste types and levels of radioactivity and hazardous constituents, and can involve multiple activities to, among other things, retrieve, characterize, treat, package, store, transport, and dispose of the waste, as well as disassemble, treat, package, store, transport, and dispose of the contaminated containers or processing lines/equipment used for weapons production or for storing or treating the waste. Multiple EM cleanup projects can occur at a single DOE site responsible for a multitude of other noncleanup-related activities. The cleanup projects are organized generally around similar waste types and activities. For example, the soil and water remediation activities at each site are organized under one umbrella, as are the nuclear facility decontamination and decommissioning projects, and the radioactive liquid tank waste projects, among others. EM generally manages these similar work activities, grouped into a category known as a Project Baseline Summary, through numerical designations; for example, all activities for soil and water remediation are grouped under Project Baseline Summary 30. (See app. II for additional information on the 10 DOE major cleanup projects reviewed.)

Funding for and Costs of DOE’s Major Cleanup Projects

Unlike construction projects, which are funded on a line item basis, cleanup projects receive funding through operating funds designated for each DOE site. In 2003, EM began applying project management principles contained in DOE Order 413 to these cleanup projects in order to apply more discipline and rigor in planning and expending these project funds, among other things.

A cleanup project can cost several billion dollars and its life cycle can span several decades. EM divides the life cycle baselines for its major cleanup projects into three distinct parts––prior year costs, near term (usually a 5- year period), and out year (through project completion). Life cycle costs for each project range from a low of almost $1.7 billion to over $44 billion, and some projects might not be completed until after 2050. (See app. III for detailed information on the life cycle baseline costs for the 10 projects we reviewed.)

EM applies different approaches to managing these wastes, depending on the type and extent of contamination and the state or federal regulatory guidelines and milestones it needs to comply with. DOE has agreements with state and federal regulators to clean up sites, and the agreements lay out a framework for determining the cleanup standards to be met. Furthermore, because all projects have a certain degree of uncertainty, such as not fully knowing the condition of buried waste containers, EM needs to plan for this uncertainty and identify ways to prevent serious disruption to projects should problems arise. To address this uncertainty, DOE Order 413 requires project managers to identify contingency funds that may be needed to cover potential cost increases stemming from a variety of project risks, including technical complexities, regulatory issues, and funding shortfalls. Although EM project managers build contingency funding into their near-term and out-year estimates, EM management does not generally include funding in its budget requests to cover contingency for cleanup projects until after it is actually needed to address a problem; therefore, EM contingency for cleanup projects has been referred to as “unfunded contingency.”

Earned Value Management for Tracking Work Progress

To be effective, program managers need information on program deliverables and on the progress made in meeting them. One method that can help program managers track this progress is EVM data. These data include, for example, detailed information on budgeted costs and actual costs for work scheduled and work performed, as well as forecasted costs at project completion. Among other things, EVM data can be used to compare (1) budgeted costs to actual costs and (2) the value of work accomplished during a given period with the value of work scheduled for that period. By using the value of work completed as a basis for estimating the cost and time to complete a project, EVM data should alert program managers to potential problems sooner than expenditures alone can.

As a key management tool, EVM has evolved from an industrial engineering concept to a government and industry best practice to better oversee programs. Both OMB and DOE Order 413 require the use of EVM. OMB Circular A-11, part 7, requires the use of an integrated EVM system across an entire program to measure how well the government and its contractors are meeting a program’s approved cost, schedule, and performance goals. The American National Standards Institute and the Electronic Industries Alliance have jointly established a national standard for EVM systems. Recognizing the benefits of having these national standards, OMB states in its 2006 Capital Programming Guide that major acquisitions that require product development are to require that contractors use an EVM system that meets the American National Standards Institute guidelines. In addition, DOE Order 413 requires that projects with total cleanup costs of $50 million or more use an EVM system that complies with industry standards and is certified by DOE’s OECM to comply with these standards.

GAO also has developed EVM best practices that, when followed, can help project managers consistently develop and analyze EVM data to gain a complete and accurate understanding of project status. Among other things, our guidance on EVM states that (1) EVM data should not have data errors and anomalies that may skew and distort the EVM analysis, and (2) information such as staffing levels and the root causes of and corrective actions for cost and schedule variances should be reported through the EVM system.

Major Cleanup Projects Experienced Billions of Dollars in Additional Costs and Schedule Delays, Primarily because Initial Baselines Were Overly Optimistic

Nearly all the cleanup projects we reviewed have had cost increases and schedule delays in the life cycle baseline, as much as $9 billion for one project, and schedule delays of as much as 15 years for two projects. These cost increases and schedule delays occurred primarily because the previous baselines for these projects had schedule assumptions that were not linked to technical or budget realities, and other assumptions also proved to be overly optimistic.

Major Cleanup Projects’ Costs Have Increased by Billions and Schedules Have Been Delayed by As Much As 15 Years

The estimated costs of the 9 of the 10 DOE major cleanup projects we reviewed have significantly exceeded original estimates, as table 1 shows.

As the table shows, estimated costs increased from a minimum of $139 million for one project to more than $9 billion for another project. The smallest dollar and percentage increase—$139 million, or 9 percent— occurred at Los Alamos’ soil and water remediation project, which is focused on cleaning up known or suspected chemical and radiological contamination in addition to treating soil and groundwater that was contaminated by this waste. This project, however, is expected to further increase its life cycle cost estimate. The largest dollar increase among the 10 major projects—more than $9 billion—was for Hanford’s radioactive liquid tank waste project, which is expected to remove, treat, and dispose of more than 56 million gallons of high-level radioactive waste in 177 underground storage tanks. In fact, the other radioactive liquid tank waste project, at Savannah River, registered the second largest dollar increase— almost $7 billion. However, the largest percentage increase—about 64 percent—occurred at Oak Ridge’s nuclear facilities decontamination and decommissioning project.

Table 2 shows that 8 of the 10 projects we reviewed experienced delays in scheduled project completion, ranging from 2 years to 15 years.

As table 2 shows, the shortest delay is at Hanford’s nuclear material stabilization and disposition project, while the longest delays—15 years— also are at Hanford: the soil and water remediation and the solid waste stabilization and disposition projects.

Overly Optimistic Baselines Contributed to Significant Changes in Projects’ Life Cycle

The changes in schedule and costs occurred primarily for two reasons. First, initial project baselines were built on accelerated schedules that were not always linked to technical capabilities or available budgets, although EM has begun to tie its new baselines to anticipated funding. Second, the initial baselines included other assumptions that did not hold true, including conditions on the ground at the sites, expected completion dates for related construction projects, and activities that would be included in projects’ scopes of work.

Baseline Schedules Were Not Linked to Technical or Funding Realities

The initial baselines for 8 of the 10 major projects we reviewed contained schedules that were influenced by an EM-wide effort to accelerate the office’s cleanup work. In 2002, EM management worked with its sites and regulators to create new, earlier milestones for completing key cleanup projects and for closing entire sites to reduce the public health and environmental risks posed by the waste at these sites. Before this effort, some of the major cleanup projects were not estimated to complete work until the 2030s and 2040s. Under the accelerated schedules, four projects’ completion dates were moved up by 15 years or more, as was the case for the radioactive liquid tank waste stabilization and disposition project at the Hanford site; its completion date was moved from 2048 to 2028. The baselines containing the accelerated schedules—those generally created between 2003 and 2006—tied their work scope and funding assumptions to the completion dates and not necessarily to available cleanup technologies. For example: Solid waste stabilization and disposition project at Idaho. To meet its accelerated completion date of 2012—down from 2018—DOE’s Idaho National Laboratory assumed its Advanced Mixed Waste Treatment Plant could process nuclear waste at a rate of about 8,500 cubic meters per year—more than 50 percent faster than the rate of about 5,400 cubic meters per year demonstrated when DOE established the baseline. At the time, because the plant had only recently begun operating, project staff lacked confidence that they could meet the processing rate. Moreover, the independent team reviewing the baseline reported that the rate was optimistically high. Nevertheless, DOE proceeded with the initial baseline, increasing the amount of unfunded contingency in its baseline and attempting to meet the optimistic rate by providing the contractor with performance incentives. Still, the processing rate has fallen short of baseline assumptions—it is currently roughly 6,000 cubic meters per year. To reflect this more realistic rate, DOE subsequently revised its baseline, adding 4 years to the project schedule and increasing costs by about $450 million.

Radioactive liquid tank waste stabilization and disposition project at Savannah River. This project, in part, combines high-level radioactive waste stored in tanks at the Savannah River Site with melted glass and places it in canisters ultimately to be sent to a federal repository for disposal. DOE directed that the project’s completion date be accelerated, from 2035 in its early planning documents to 2019 in the initial baseline. In order to make that date, according to project officials, they included some assumptions in the initial baseline they knew at the time would be difficult to realize. Specifically, they assumed that the project’s waste processing facility could produce canisters consisting of up to 49 percent high-level waste—with the remaining space filled with melted glass—when at the time it had not been able to produce a canister containing more than 42 percent high-level waste with an existing technology while remaining within the acceptance criteria for the federal repository. Those criteria dictate specific characteristics, including durability and leachability for the glass-waste mixtures in the canisters. DOE has since adjusted these assumptions—the current waste processing plan assumes the canisters will contain 34 percent to 38 percent high-level waste using the existing technology—contributing to the overall cost increase and schedule delay for this project.

These early baselines also were not tied to expected funding. According to several senior EM officials, before April 2007, project directors were instructed to create cost baselines to meet the accelerated schedules and their regulatory milestones without regard for the likely funding the projects could expect to receive. Consequently, the funding assumptions in the projects’ baselines were higher than the amount of funding DOE requested each year. According to a senior EM budget official, these shortfalls required project managers to continually adjust cost and schedule baselines as projects moved work activities into the out years to accommodate the lower funding levels. For example, according to site officials at Oak Ridge, when DOE did not request the full amount of funding in the nuclear facility’s decontamination and decommission project’s initial baseline, the project could not complete all the work as planned. Project managers responded by pushing work activities into the out years, which contributed, in part, to the project’s overall cost increase and schedule delay. Similarly, as noted in a recent DOE internal audit, according to Los Alamos officials, funding has not been sufficient to meet the site’s regulatory commitments, and has been a concern since 2003, when the site manager said he was concerned that appropriate resources had not been identified to conduct the necessary environmental restoration activities.

According to EM managers, they have implemented changes to the way baselines are created that address these problems. In April 2007, EM changed its policy for creating project baselines. Instead of tying baselines to the accelerated schedules and regulatory commitments with unconstrained funding, EM limited funding for its sites, directing that all future baselines be based on expected budget numbers generated for each site.

For three of the projects we reviewed, this change in direction resulted in deferral of work and schedule delays because the new funding levels represented significant reductions in what projects were planning on receiving, and these projects were low on EM’s priority list. For example, Hanford’s solid waste stabilization and disposition project’s funding was reduced to the point where it will receive minimal funding for the next 4 years in order to allow full funding of Hanford’s decontamination and decommissioning project at River Corridor, a higher priority. During this period, to comply with the funding levels provided, the project will maintain minimum activities to safeguard materials and will not advance its waste processing goals. As a result, according to project officials, life cycle costs for this project increased in some part to reflect a longer schedule and the additional costs of having to hire and train new workers in the future to complete a job that already was underway.

Not all sites have implemented these changes, however. EM’s direction to all sites to create their baselines tied to the funding profile outlined in the June 2007 policy memo has not been applied to two of the major cleanup projects. The Hanford radioactive liquid tank waste stabilization and disposition project—the most expensive cleanup project—and the Los Alamos soil and water remediation project have not aligned their baselines with the funding targets. The Hanford project’s baseline was validated just before the policy change took place and, for the period between 2009 and 2030, the baseline contains about $2.6 billion more than the funding targets. Similarly, EM approved the baseline for the Los Alamos project even though it was not aligned with the funding targets. The baseline identifies a projected funding shortfall each year through 2012 that peaks at a cumulative $236 million in 2010. This shortfall does not include an additional $947 million in unfunded contingency. At the same time EM approved the baseline, it directed project managers at the site to change the baseline to bring its costs in line with the targets.

Another likely contributing factor to the cleanup projects’ cost increases and extended schedules is DOE’s practice of not including contingency funding in its annual budget requests for EM’s cleanup projects. Specifically, EM has requested enough funding for its cleanup projects to ensure a 50 percent likelihood of completing the projects within the total estimated project costs. However, the requested amount generally has not included contingency funding, which project managers may have to use in order to complete a project on time by addressing risks that materialize during cleanup. For example, in 2007, the radioactive liquid tank waste project at Hanford had an unexpected spill of 85 gallons of radioactive material from one of its storage tanks; this spill required shutting down waste retrieval operations for 11 months in order to clean up the spill. Even though the retrieval operations represent a small percentage of the overall work scope ongoing at the project, the accident added at least $8 million to the retrieval cost for that one tank. Furthermore, in accordance with EM policy, projects are expected to account for the costs of such potential risks by increasing the amount of unfunded contingency in their near-term and life cycle baselines. Because funding for that contingency is not included in the budget request, however, increasing the amount of contingency funding in the near-term baseline is largely a paperwork exercise that has no active impact on preventing or solving problems or anticipating actions that could offset demonstrated slow progress.

According to a December 2007 report by the National Academy of Public Administration, EM’s practice of not funding contingency for its cleanup projects has meant that EM has not had additional funding available to address emergency problems when they arise and therefore has either taken money from another project or extended the schedule of the work into future fiscal years to manage them. Furthermore, according to EM officials, by providing enough funding for its projects to ensure that they have a 50 percent chance of meeting their project cost and schedule baselines, EM recognizes that 5 of the 10 major projects are likely to miss their cost and schedule goals. In contrast, DOE funds its construction projects at a level that reflects a greater probability of success—80 percent—an amount that reflects the industry standard for such projects. According to senior EM officials, EM does not fund contingency for its cleanup projects because allotting enough funds to cover the costs of risks that may not materialize would constrain the amount of work EM could perform for the money it receives each year. However, in accordance with a recommendation from the National Academy of Public Administration, EM is evaluating its practice of not including contingency funding in its budget requests for cleanup projects.

Baselines Included Assumptions about the Scope of Work and Technical Challenges That Did Not Hold True

For most of the projects we reviewed, EM included assumptions in its baselines that (1) did not represent the conditions at some of the major projects, (2) did not sufficiently anticipate delays in the completion of related construction projects, and (3) the scope of work activities to be accomplished would not increase. Correcting these assumptions often led to changes in the scope of work, higher costs, and extended schedules.

First, for four of the projects we reviewed—Oak Ridge’s nuclear facility decontamination and decommissioning project, Idaho’s solid waste stabilization and disposition project, and Savannah River and Hanford’s radioactive liquid tank waste stabilization and disposition projects—site conditions were worse than project staff originally estimated, leading to significant changes to the life cycle baseline. For example, at the Oak Ridge project, because a 1940s-era building was far more contaminated and deteriorated than first estimated, DOE changed its cleanup plan and implemented a more extensive—and therefore more expensive—approach to tearing down the building. After a worker fell through a weakened floor, the contractor had to first reinforce the building’s structure so that contaminated equipment could be removed safely. Primarily because project officials did not accurately anticipate the site conditions or the types of work activities necessary to safely conduct the work—despite multiple estimates generated by the contractor, DOE, and the Army Corps—this project’s costs increased by $1.2 billion and significant amounts of work were delayed, extending the completion date by 9 years, to 2017.

Similarly, the initial baseline for the radioactive liquid tank waste stabilization and disposition project at Hanford assumed that 99 percent of the waste contained in the 177 storage tanks could be removed by using only one type of technology to retrieve the tank waste. However, DOE subsequently determined that almost half of the tanks contained a hardened layer of waste that could not be removed with the chosen technology and therefore a second technology was needed to remove this waste. Correcting the optimistic assumptions—adding the second technology and re-estimating the costs of retrieving waste from the tanks based on field experience gained––increased the baseline by more than $2 billion.

Second, delays in completing related construction projects directly contributed to schedule delays––and corresponding cost increases—for four of the cleanup projects we reviewed. Three of these projects are at the Hanford site in Richland, Washington. The initial baselines for these projects included assumptions that the major construction project there— the Waste Treatment Plant (WTP)—would be ready to begin operations in 2011. In 2006, DOE extended the WTP construction completion date by 5 years, resulting in schedule extensions for three cleanup projects. The major cleanup project that will run the WTP—the radioactive liquid tank waste stabilization and disposition project—had to increase its life cycle cost estimate by about $4.8 billion and extend its schedule by 10 years in order to safely maintain the waste storage tanks while the treatment plant is being built and to operate the plant for additional years, among other things. Similarly, in response to the WTP delay, the schedules for the solid waste stabilization and disposition project and the soil and water remediation project were extended by 15 years—increasing costs by more than $4 billion combined. These projects cannot complete their missions until the WTP has finished processing all of the liquid waste in the storage tanks. According to the currently approved baselines, the liquid tank waste project will complete its operations in 2042, and activities under the latter two projects are not expected to be completed until 2050. However, as we recently reported, DOE has acknowledged that the start of waste treatment operations will be delayed by at least 8 years (from 2011 to 2019), not 5 years, which will likely affect further these projects’ costs and schedules.

Third, for three of the projects we reviewed, increases in work scope—the activities required to complete the project—contributed to cost increases and schedule delays. For example, a major contributor to the more than $3 billion cost increase and at least 9-year schedule delay at the nuclear materials stabilization and disposition project at Savannah River was DOE’s approval of a new initiative in 2006 that added additional amounts of nuclear materials for the project’s facilities to disposition, including materials from other DOE sites. Those facilities were originally scheduled to complete their mission in 2007—the new scope extended the mission until 2019. Similarly, Savannah River’s other major cleanup project— radioactive liquid tank waste stabilization and disposition—also had significant scope added. Under a law passed in 2004, DOE determined that the salt waste in its tanks is not high-level waste and therefore can be disposed of at the site instead of in a geologic repository. The law required DOE to consult with the Nuclear Regulatory Commission when making this determination. According to DOE, this consultation and the resulting changes to the cleanup process added significant scope to the project, causing DOE to lengthen the estimated time to close the 49 tanks at the site.

According to EM, most of the cost increases and schedule delays experienced by the major cleanup projects were the direct result of unrealized aggressive planning assumptions. EM has since recognized that project baselines must be based on realistic technical and regulatory assumptions and be planned on the basis of realistic out year budget profiles. However, it appears that the practice of incorporating optimistic assumptions into project baselines has not yet been eliminated. As we recently reported, some of the underlying assumptions in the baseline for the Hanford radioactive liquid tank waste project may be overly optimistic. For example, DOE assumes that the tanks will remain viable throughout what has become a protracted waste treatment process, with some tanks expected to remain in service more than 60 years longer than originally anticipated. This extended operation raises the risk of tank failure and leaks to the environment. The baseline also assumes that emptying single-shell tanks will proceed significantly faster than it has to date. Hanford project management officials have since acknowledged that the ambitious retrieval schedule might not be achievable and are adjusting their planning estimates.

DOE Has Not Effectively Used Available Management Tools to Help Control Major Cleanup Projects’ Scope of Work, Costs, and Schedule

While DOE has several mechanisms in place to help manage cleanup projects, including independent reviews, performance information systems, guidance, and performance goals, it has not always used them to effectively manage major cleanup projects’ scopes, costs, and schedules.

DOE’s Baseline Reviews Highlight Problems but Have Not Succeeded in Ensuring Work Can Be Accomplished within Stated Cost and Schedule

OECM’s independent reviews of the baselines, meant, among other things, to provide reasonable assurance that the project’s work activities can be accomplished within the stated cost and schedule, have not done so for four of the projects we reviewed. Instead, these baselines were significantly modified shortly after approval. As a result, the usefulness of the independent baseline reviews is questionable when significant baseline changes occur very shortly after the reviews are completed, as the following discussion illustrates.

The advanced mixed waste treatment project under Idaho’s solid waste stabilization and disposition project. OECM’s 2006 independent review accurately noted that the project baseline submitted for validation for the treatment plant included an unrealistic rate for processing waste—more than 50 percent faster than the rate demonstrated at the time the baseline was established. In response, project officials proposed correcting the problem primarily by increasing the amount of unfunded contingency in the baseline, a move that reflected common practice within EM, and OECM officials approved this action and validated the baseline. As the panel predicted, the project’s actual processing rate after its baseline was validated was slower than expected. Within 7 months of OECM’s validation of the near-term baseline, project officials proposed modifying it. DOE had to defer the activities that the contractor was not able to accomplish in the near term, extending the project life cycle by about 4 years and increasing costs by about $450 million. We believe that DOE’s approval of increasing unfunded contingency as a corrective action for an unrealistic processing rate was ineffective. Although DOE also attempted to increase the processing rates through contractor performance incentives, we believe DOE should have revised the baseline using a more realistic processing rate to calculate baseline cost and schedule before validating it.

Oak Ridge’s nuclear facility decontamination and decommissioning project. Significant cost increases began 2 years before OECM’s independent validation of the project in 2006, and have continued to increase. Specifically, life cycle costs for the project were estimated at $1.8 billion in 2004—the beginning of the project’s previous near-term baseline—with expected project completion by fiscal year 2008. By August 2006, when OECM completed its review of the baseline and issued its validation recommendation, life cycle costs for the project had grown to about $2.2 billion and project completion was extended by about 1 year. However, roughly 1 year after OECM validated the baseline, EM revised it again, adding about $800 million in costs and delaying project completion by an additional 8 years. EM justified the change because, among other things, it wanted to adjust the baseline to conform to new funding targets as directed by DOE in June 2007 and to account for other changes it needed to make in its approach to decontaminating the building.

Los Alamos soil and water remediation project. In March 2008, EM approved an independent review of this project and the associated baseline although it expected that the baseline would change. According to the EM memorandum approving the baseline, changes in EM’s priorities and funding plans were likely to necessitate changes to the Los Alamos project’s baseline, and the project was directed to submit a baseline change that would align the baseline with funding targets. OECM officials also acknowledged that their independent review of the baseline was based on assumptions that would likely not prove to be true. Specifically, OECM’s review assumed that the project would receive the full funding needed even though DOE’s funding targets at the time were below the funding levels needed to comply with the state cleanup agreement. As a result, project officials expect that the estimated life cycle costs of nearly $1.7 billion will increase substantially during 2008 but could not tell us the extent of the cost and schedule change until they receive DOE’s new funding commitments for the project.

Hanford’s radioactive liquid tank waste stabilization and disposition project. The most significant cost increase—more than $9 billion— occurred about 2 years after DOE’s initial independent review and approval of this project. The project’s baseline was first approved in 2004, with life cycle costs expected to be about $22 billion and completion scheduled for 2032. However, in 2006, life cycle costs increased to about $31 billion—not including an additional $8.6 billion in unfunded contingency—and the completion date was extended by 10 years, to 2042. Project officials expect the baseline will require another update and independent review in 2009 to reflect anticipated changes as a result of the project’s new contractor and because of changes resulting from ongoing negotiations with state regulators over regulatory agreement milestones.

In addition to changes to the baselines soon after the independent reviews, DOE has recently relaxed standards used for conducting these reviews. In 2003, DOE issued standard operating procedures for conducting independent reviews—primarily of construction projects. These procedures stated that baselines should be considered, once approved, as set in concrete. The EM-OECM 2005 protocol—and its 2007 update—for cleanup projects replaced the standard operating procedures and directed OECM to validate only the near-term baseline for cleanup projects while reviewing the life cycle estimate “for reasonableness.” In this way, EM and OECM sought to acknowledge what they believe are the greater uncertainties present in the out-years of a cleanup project compared with a typical construction project. However, within a year of the 2007 protocol, OECM had changed its approach for EM cleanup projects from validating baselines to “certifying” them, which is a more limited statement of assurance than validation. Specifically, according to OECM officials, certification means that the near-term baselines are reasonable if near- term baseline costs are funded as outlined in the baseline and contingency funds are provided as needed. The change is intended to reflect OECM’s belief that, because funding for cleanup projects is more uncertain than for construction projects, the same confidence level cannot, nor should, be applied to reviews of EM cleanup project baselines as it is applied to construction projects. Since EM headquarters does not consistently provide contingency funds for its cleanup projects, and half of the major projects have significant contingencies in their near-term baselines, the most likely result for projects experiencing problems is to extend schedules and increase life cycle costs. In commenting on a draft of this report, OECM stated it intends to go back to validating near-term baselines for cleanup projects, assuming, in part, that funding becomes more stable and EM gains greater experience managing near-term baselines.

DOE Lacks Reliable and Consistent Performance Information

DOE managers depend on data about the performance of EM’s major cleanup projects to make informed decisions about how best to handle unexpected events and manage shifting priorities. DOE site and headquarters staff generate a number of regular reports to update senior managers on the status of these projects, both to justify making significant changes to project baselines and to request funding from Congress. Although these reports provide valuable information to managers on the progress of work at cleanup sites around the country, they do not consistently provide the key information needed to make fully informed management decisions about EM’s major cleanup projects. Specifically, (1) proposals for baseline changes do not consistently identify reasons for proposed changes or possible root causes that contributed to problems, (2) use of EVM data does not consistently conform to industry standards or GAO’s best practices, (3) quarterly reports do not always describe the impact of contractor performance on near-term or life cycle costs and schedules, and (4) reports to Congress on the status of and changes to major cleanup projects are limited to a small snapshot in time and do not provide information necessary for effective oversight.

EM Baseline Change Reports Do Not Consistently Include Needed Information

When a project reaches a point at which it is likely to miss the goals in its baseline, project managers are required to propose changes to the project’s cost, schedule, or scope baseline, a process that is akin to hitting the reset button. EM project managers request such a change by, among other things, documenting certain information in a Baseline Change Proposal report, including current approved costs and new proposed costs, proposed project start and end dates, and a justification for the changes. For the key change proposals we reviewed for the major cleanup projects, the information provided describing the changes and their impacts varied widely, with some projects providing little to no explanatory information about what led to the change and others explaining the causes of the changes in detail. For example, a change proposal for Hanford’s nuclear material stabilization and disposition project simply described the project’s scope of work and did not provide any explanation for why the project’s schedule was being delayed by 3 years, while a proposal from Savannah River’s radioactive liquid tank waste stabilization and disposition project included information on the causes for its cost and schedule changes, as well as the specific cost and schedule impacts of each cause. However, the change proposals we reviewed generally did not address the root causes that resulted in the changes to the baseline. For example, the Savannah River change proposal explained that almost $500 million of the total proposed cost increase was due to revising the strategy for finishing the project. However, the proposal did not explain why this strategy needed revision. In investigating the reason for this proposed revision, we determined that a robust strategy for finishing the project was not included in the original baseline because the project was directed to meet a completion date of 2025 and could not do so if it included the thorough closure strategy. Without including this kind of information in the proposals, it would be difficult for EM managers to effectively identify the true causes of the baseline changes, take steps to address them, and transfer any lessons learned to other projects.

In addition, EM does not centrally gather and systematically analyze the narrative information in the baseline change proposals. We recognize that such information is not easily analyzed to identify common causes across projects. However, without such analysis, EM senior managers are potentially hindered in addressing problems collectively. One EM project management official agreed that having the ability to analyze the information in the change proposals across projects would be beneficial, but that his office had not yet made it a priority to collect this information because it was still addressing reliability issues with the data in the change proposals.

EM has made some effort to identify root causes of its project management problems. It recently participated in a DOE-wide effort to identify root causes of project and contract management problems in response to GAO’s inclusion of DOE’s contract management on its high- risk list. However, DOE’s analysis was focused more on construction projects than EM cleanup projects. The report notes that the emphasis of the effort was on the capital line item—construction—projects, but that several of the issues identified also are applicable to other projects, including EM cleanup projects. According to one project participant from OECM, the participants discussed how some of the issues raised related to cleanup projects but they did not examine those projects as extensively as the construction projects. In commenting on a draft of this report, DOE explained that its analysis was based more on data from construction projects than EM cleanup projects because more data exist documenting DOE’s past project management deficiencies for construction projects since those projects have a longer history of a structured, disciplined management process.

Use of Earned Value Data Does Not Always Conform to Industry Standards or GAO- Identified Best Practices

At three of the major cleanup projects––nuclear facilities cleanup at the Hanford Site’s river corridor cleanup project, solid waste stabilization and disposition at Idaho National Laboratory, and soil and water remediation at Los Alamos National Laboratory––we found several instances in which the use of EVM data did not conform to industry standards or our best practices. As a result, EM and site project managers using the data may be less able to make informed decisions to effectively manage these projects.

Data anomalies. For all three projects, the EVM systems we assessed contained data errors or anomalies that could potentially distort the analysis of EVM data. Anomalies included, for example, reporting negative actual costs or reporting costs that are not tied to work scheduled or performed. The Los Alamos EVM data contained both types of these anomalies, which may have distorted the results of data analyses by as much as $34 million, preventing managers from understanding the true status of project performance. According to project officials, the anomalies occurred primarily because Los Alamos had initially assigned costs to a general account, and waited up to several months before assigning these costs to the correct specific work activities. In another case, in a significant number of instances the contractor at Hanford’s river corridor closure project reported costs incurred for work activities performed that had not been scheduled to start until future years, skewing the reported performance results. The contractor explained that these data anomalies occurred because it had performed work sooner than originally expected—and therefore the work was not incorporated into the project’s EVM planned schedule in the periods for which it was actually performed. Project officials at the site stated that they believe the EVM information, as reported, correctly represents the project’s status. As such, the summary-level EVM data seem to depict a favorable schedule performance in April 2008; however, our independent analysis of this data shows that when we removed the value of the work that was started and completed ahead of schedule, the remainder of the originally scheduled work was actually behind schedule in April 2008, and trends indicated that the variance was worsening.

Data on the availability of staff to perform future work was not always developed. For one of the projects we reviewed, the EVM system lacked important information on staffing, contrary to GAO-identified best practices. DOE officials at Los Alamos’ soil and water remediation project told us they plan to begin asking for staffing information from the contractor, and contractor officials stated they are setting up a staffing report within their EVM system. Without this information, project managers lack important information necessary for ensuring that they have, or will have, an adequate number and type of staff to perform the upcoming scheduled work.

Reliability of earned value systems is questionable. OECM has certified that the earned value system used to report performance for only one of the three systems we assessed meets the required industry standards. The EVM system used by the contractor operating the advanced mixed waste treatment project—a significant portion of the solid waste stabilization and disposition project at the Idaho National Laboratory—has not been reviewed by OECM to determine whether it is compliant with industry standards, and contractor officials stated they believed their system does not meet the standards. In addition, OECM was in the process of reviewing the system used by the contractor responsible for the soil and water remediation project at Los Alamos National Laboratory at the time of our review. As a result, these projects lack the necessary assurances that the EVM data were free of errors and anomalies that could skew and distort the EVM analyses.

Once a system is certified as meeting the standards, regular surveillance is needed in order to ensure its continued compliance. Surveillance allows managers to focus on how well a contractor is using its EVM system to manage cost, schedule, and technical performance, and is important because it monitors problems with performance and the EVM data. If these kinds of problems go undetected, EVM data may be distorted and not meaningful for decision making. OECM’s surveillance program is under development: it recently hired one staff person to lead its surveillance efforts, and is developing a guide to better define its surveillance protocol. DOE also requires its sites to perform surveillance of EVM monthly contractor performance data, which includes developing EVM surveillance plans and conducting random EVM surveillance.

Furthermore, EM managers do not appear to consistently gather or analyze EVM data to maximize the data’s benefits for project management. GAO best practices recommend that EVM system reports include thorough narrative explanations of any root causes of, or proposed corrective actions, for reported cost and schedule variances shown in the data. For the soil and water remediation project at Los Alamos, for example, EM did not require that this information be reported by its contractor. As a result, EM project managers at Los Alamos have not always received the information necessary for ensuring that effective corrective actions are implemented to prevent additional changes to the cost and schedule baselines. According to contractor officials, they reported information on root causes and corrective actions to EM routinely before fiscal year 2008, but DOE asked them to stop providing it. According to the project director for the soil and water remediation project at Los Alamos, the Los Alamos Site Office Assistant Manager had directed the contractor to not provide the variance reports as part of its project status reviews because the contractor’s explanation of these variance reports during scheduled meetings was taking several hours to review and wanted instead to use the available time to focus more on risk management and other project issues. However, according to this site official, the site office’s direction was not intended to discontinue all variance analysis reporting. Although the contractor discontinued including the variance analyses reports in its project status reviews, the project director stated that DOE continues to obtain information from the contractor by other means, such as cost performance reports and weekly contractor meetings at which DOE and the contractor discuss the root causes of variances that resulted in risks to meeting milestone compliance agreements. However, contractor cost performance reports we reviewed did not provide any narrative information on causes or corrective actions. Furthermore, the weekly contractor meetings discuss only certain root causes of the variances that resulted in risks to milestone compliance agreements and therefore are neither comprehensive nor documented. Because verbal information can easily be forgotten, lost, or misinterpreted, among other things, we believe that a written report would be a best practice.

In addition, EM projects report their EVM data to headquarters managers at the project summary level, which can mask problems occurring in the project that more detailed reporting could reveal. At Idaho, in early 2008, EVM data showed the solid waste stabilization and disposition project was performing ahead of schedule and under cost, although major problems had occurred at the advanced mixed waste treatment project––the primary subproject. Without EVM reports that contain more specific detail, project managers at headquarters may not recognize that a problem is occurring until it becomes large enough to recognize at the summary project level of reporting. In addition, greater detailed information provided to managers earlier in the project potentially could allow for early intervention.

Beyond more detailed reports, some project managers in the field and at headquarters have not always systematically reviewed or independently analyzed the EVM data they received, which also would help improve their understanding, as well as mitigate potential problems occurring within a project. At one site we visited, the DOE official receiving the data said he did not analyze the information before entering it into the EM headquarters database. In turn, headquarters EM project managers told us they also do not analyze the EVM data the projects report. One oversight official indicated he would prefer to analyze the information he receives from the projects but he did not have the time required to do so. A senior EM project management official told us that he recognizes this deficiency and is working to address it: EM intends to pilot a new software package that will allow managers to analyze EVM data. According to EM, the software will enable EM managers to drill down into the EVM data received from the contractors, thus improving their oversight capabilities. In addition, according to EM project management officials, EM has insufficient federal staff to conduct oversight, which is being addressed as part of an ongoing effort to improve project management. In commenting on a draft of this report, EM stated it also intends to provide additional EVM training for its analysts.

Quarterly Reports Do Not Present a Comprehensive Picture of Performance against Near-Term or Life Cycle Commitments

In accordance with Order 413, EM senior managers, including the Assistant Secretary, receive quarterly updates on the status of the major cleanup projects. Two key reports are the quarterly project reviews (QPR), generated by EM project managers, and a quarterly project status report created by OECM. These reports contain contractor performance data and information about new or ongoing issues that need addressing at the sites, but do not always describe how contractor performance affects performance against the near-term or life cycle baselines. Without this information, managers cannot develop a comprehensive assessment of progress against agreed-upon goals.

The QPRs and OECM quarterly reports we reviewed largely use EVM data to assess project performance, but these data only reflect performance against the current contract period. Current contract period start and end dates do not line up with the start and end dates of the near-term baselines for any of the major cleanup projects we reviewed, and contract goals have not always been tied to what would be necessary to meet near-term baseline goals. For example, we found the EVM data for Idaho’s solid waste stabilization and disposition project—including the advanced mixed waste treatment subproject—that was reported in the QPRs and OECM quarterly reports from early 2008 did not line up with the near-term baseline because the advanced mixed waste treatment project’s contract period was not the same as the near-term baseline period, which ends in 2012. EVM data for this project are reported as a combination of work done by two contractors: disposal of low-level and mixed-low-level waste, among other things, by the major site contractor, whose contract runs through 2012, and the advanced mixed waste treatment project operations contractor, who, in early 2008, was operating under a contract extension that expired in April 2008, 4 years shy of the end of the near-term baseline. In addition, according to project officials, the goal of processing 15,500 cubic meters of waste contained in that contract extension was not based on what was necessary to meet the near-term baseline goal of processing 65,000 cubic meters of waste by 2012, which was DOE’s commitment at the time of the extension. Since the advanced mixed waste treatment project’s activities make up about 75 percent of the cost baseline for the overall project, EVM data for this project as reported in the QPRs and OECM quarterly reports were not an accurate indicator of how the project was performing against the approved near-term baseline. DOE has further extended the advanced mixed waste treatment project contract through September 2009, and project officials explained the current extension is better linked to the current baseline, meaning EVM data reported should represent a better indication of performance against that baseline.

In addition, although the QPRs we reviewed include data on current life cycle cost and schedule estimates, they do not always include information about changes to the schedule or scope, nor do they explicitly mention when a change to the baseline has been proposed. Instead, the QPRs generally present information on life cycle cost increases and provide comparisons to original baselines. QPRs also contain a schedule for each project detailing key milestones and expected end dates. However, when a change to a project completion date is made, the schedule shown in the QPR in most cases does not preserve the original completion date as a point of comparison. Similarly, there does not appear to be any mechanism in the QPR to present a change in a project’s scope of work, for example, a move of some work activities from the near term into the out years. As a result, the reports tell only that life cycle costs have increased, but corresponding changes to schedule and scope are not apparent. Furthermore, there is no clear place in a QPR for a project manager to mention that a baseline change proposal has been submitted to headquarters if the results of that proposal are not yet presented in the life cycle cost or schedule information in the report. Including mentions of pending change proposals may help ensure senior managers clearly understand the true state of a project’s performance.

A key performance indicator used in OECM’s quarterly reports also may create the impression that a project is performing well overall when it is in fact encountering problems. As directed in the 2007 protocol for cleanup projects, OECM uses a traffic light indicator—red-yellow-green—as an at- a-glance way to highlight developing problems for DOE managers. This indicator is intended to represent expected performance against the approved near-term baseline and is based largely on EVM data. However, since projects encountering problems tend to manage those problems by moving work scope into the out years, the effects of problems occurring today show up as increases to out-year cost and schedule estimates and not as increases or delays in a near-term baseline. Therefore, a project rated “green” by OECM may simultaneously be experiencing increases in overall life cycle costs and delays in project completion. OECM officials agreed that it would be beneficial to present projected impacts of current performance on life cycle estimates wherever practical in its reports.

EM Does Not Report Information about Significant Changes to Near-Term and Life Cycle Baselines to Congress

DOE’s reports to Congress do not include key information that would aid oversight efforts, including the extent of and reasons for significant changes to near-term and life cycle baseline estimates, and the status of estimated life cycle costs. DOE’s annual budget request to Congress for fiscal year 2009 for EM included funding requests for each site and each project, as well as the funding appropriated in fiscal years 2007 and 2008.

The budget request also contains, among other things, descriptive information about the sites and projects, including EM’s major cleanup projects, and about cleanup goals, regulatory frameworks, and key uncertainties. However, the request did not provide any project-specific life cycle costs or completion dates. In the previous three budget requests, EM had provided life cycle costs and planned completion dates for each project. Without this information, Congress cannot know what progress each project has made and the extent of work still needed, cannot understand how the project may be changing and has changed over time, and cannot know whether the project experienced problems since the previous budget request and the reasons for these problems. The absence of this information makes it more challenging to effectively oversee the department and its major cleanup projects.

DOE has not been directed to provide such information about its major cleanup projects to Congress. In contrast, Congress has required the Department of Defense to report annually on its major defense acquisition programs—those costing $2 billion or more and typically consisting of a weapons system, such as Navy ships or fighter planes—or report quarterly when programs are experiencing significant cost increases or schedule delays. Congress established the reporting requirement to improve oversight of these defense programs by providing visibility and accountability for any growth in cost that may occur. Known as Selected Acquisition Reports, each annual report includes information on full life cycle program costs, unit costs—the cost per plane or ship—and the history of those costs. A quarterly report also includes reasons for any change in unit cost or program schedule since the previous report, information about major contracts under the program and reasons for any cost or schedule variances, and program highlights. In addition, the Department of Defense includes development and procurement schedules, with estimated costs through program completion, in its annual budget justification submissions to Congress.

DOE Guidance for Management and Oversight Functions Is Unclear and Not Implemented Uniformly across Sites

EM’s key policies for managing its cleanup projects—including developing project baselines, managing risk, and planning for contingency funding— are not consolidated but spread across various guidance documents and memos and provide contradictory and confusing information. Although Order 413 serves as the overarching policy document for project management, according to EM, the order contains requirements that are unnecessary or expensive and awkward to implement for cleanup projects. EM thus has issued numerous memos outlining the way in which its project managers should implement the order. See table 3 for a list of key memos we identified that contribute to project management guidance and policy for EM cleanup projects.

As the table shows, rather than having a consolidated source for guidance, EM project managers must consult multiple sources to determine how to correctly create a baseline or calculate contingency funding for a project. Furthermore, some of EM’s guidance includes vague language and various exceptions to rules, which are likely to contribute to a project manager’s difficulty in determining how to implement EM policy. For example, according to the April 2007 protocol for cleanup projects, once a contract is awarded and a detailed near-term baseline is developed, a follow-up independent review will be required if the baseline (1) exceeds the previously validated near-term baseline costs by 15 percent or more, (2) increases the schedule by a year, or (3) modifies scope significantly. The first two conditions for requiring a follow-up review are tied to fairly precise numbers—15 percent and 1 year—although there could be some question as to whether these numbers are to be applied to the original or reset baseline calculations, especially for projects that have been extended multiple times. However, the protocol provides no parameters for determining when the third condition, a “significant” scope modification, has occurred.

In addition, agency officials were not able to provide us with formal documentation of a significant shift in policy. As explained earlier, OECM recently shifted from validation to certification of the cleanup projects’ near-term baselines. In response to our request for documentation of the switch to certification, OECM provided us with an e-mail from an OECM official to a DOE Inspector General auditor that defined certification and explained the reasons for the change. According to this e-mail, the change was made to acknowledge OECM’s belief that EM cleanup projects should not be reviewed under the same standard as construction projects. The OECM official also directed us to DOE’s fiscal year 2009 budget request for an explanation of the new approach. While the budget request includes a description of baseline certification, it neither mentions that the certification is a departure from the previous policy, nor does the request serve as an adequate means of communicating a significant policy change.

Furthermore, different guidance documents appear to be in conflict with one another. Specifically, EM’s 2006 memo outlining its policy on contingency funding explained that DOE’s risks associated with implementing a project are covered through contingency that is part of the “unfunded” portion of the baseline; that is, its funding is not requested or budgeted in advance of when it may be needed. However, a 2008 EM memo primarily concerned with explaining a new process for entering baseline changes into a database contains a description of the elements of a near-term baseline that includes a line for “other funded contingency,” which has been interpreted by some EM officials as including DOE contingency. If, according to the 2008 memo, some DOE contingency should be funded—requested in advance—that memo directly contradicts the guidance provided in the 2006 memo. However, although the 2008 memo states it is updating the baseline change process, it does not specifically state that it replaces any part of the 2006 memo.

In part because of this confusion, project managers at cleanup sites have been implementing EM’s contingency policy differently. According to EM officials, recent independent reviews have alerted senior EM officials to this inconsistent implementation of the policy guidance. The review teams found that the project managers were using a variety of methodologies to calculate the contingency for their projects. As a result, according to one EM official with expertise in contingency, managers were likely underestimating the amount of contingency needed for their projects. To address this problem, EM senior managers directed the creation of a contingency implementation guide to provide a definitive interpretation of existing EM policy on contingency, and this guide is expected to be issued in September 2008.

Furthermore, at least one of DOE’s policies—on independent reviews of cost estimates—is not being implemented at all. According to Order 413 and the April 2007 protocol, an independent cost estimate—a top-to- bottom, independent estimate that serves to cross-check a cost estimate developed by project officials—should be developed as part of the OECM review process for major projects when “complexity, risk, cost, or other factors create a significant cost exposure for the Department.” We believe that a review of a major cleanup project, given its level of expected spending over the near term, would meet the criteria for requiring an independent cost estimate. According to an OECM official, OECM has not performed an independent cost estimate for any of EM’s major cleanup projects, primarily because OECM lacks the resources required to perform this type of rigorous estimate for the projects. Instead, OECM has taken a less rigorous and less expensive approach in its reviews—examining cost estimates generated by the projects but not producing a separate estimate for comparison.

According to DOE officials, it is addressing some of these guidance issues. By the end of September 2008, officials told us, DOE plans to replace its manual directing implementation of Order 413 with a series of 16 guides. The guides are expected to cover a range of project management issues, including risk management and contingency funding, with one guide providing direction on the management of EM cleanup projects. In addition to the guides, as part of an EM-wide effort to improve project performance, EM has issued 18 recommended priority actions that contain additional EM-specific requirements for cleanup projects. It is unclear whether the guides and priority actions are expected to supplant all other guidance, or whether they will adequately address the challenge project managers face in determining the most up-to-date, comprehensive guidance to be followed.

DOE Recently Changed Expectations for Cleanup Projects’ Performance

According to EM senior managers, EM cleanup projects are significantly different from DOE’s construction projects in a number of ways. That is, it is harder in many instances to clearly define up-front requirements for cleanup projects, and there are more unknowns, especially since some of these projects are the first of their kind, with undefined scopes of work and significant risks scheduled many years into the future. Because of these differences and because it has said changing budget priorities may affect funding over time, DOE recently changed its performance goal—the amount of work to be accomplished and the cost margin for accomplishing that work—for EM cleanup projects to reflect a much larger margin of error than the performance goal set for construction projects.

Before 2008, a major cleanup project was measured against the same goal as a construction project: achieve at least 100 percent of the scope of work in its baseline with less than a 10 percent cost increase over the life of the project. However, EM’s current cleanup project performance goal applies only to the near-term baseline, and the projects now are considered to be successful if they achieve at least 80 percent of the scope of work in their near-term baselines with less than a 25 percent cost increase. The new performance goal permits up to 20 percent of the scope of work to be deferred from the near term to out years, which creates a substantially greater risk that life cycle costs will continue to increase and that completion dates will be delayed. As a result, for example, under this goal the four major projects each expected to cost more than $2 billion in the near term could increase their costs by $500 million each over that period and be considered successful. Furthermore, because a directed change— defined as a change caused by DOE policy, or regulatory or statutory actions—already exempts projects from meeting the performance goals, creating a less stringent goal for EM cleanup projects further waters down the impact of having a performance goal in the first place. By lowering expectations for adhering to near-term baselines, DOE inadvertently may be creating an environment in which large increases to project costs become not only more common, but accepted and tolerated.

DOE Is Undertaking Efforts to Implement Project Management Improvements

EM is undertaking a number of efforts to improve its project performance and address long-standing problems. One such effort is EM’s “Best-in- Class” Project Management Initiative through which EM leadership has committed to improving project performance. Under the initiative, EM contracted with the Army Corps to assess the current status of project management at EM headquarters and its offices. Using the Army Corps’ analysis, EM identified a set of challenges it faced in executing its mission, which resulted in the creation of the 18 priority actions for it to undertake to address the challenges and implement its initiative. Those priority actions include, among others, completing DOE’s project management guide, which is expected to bring all project management guidance documents under one umbrella document; establishing standard reporting formats for project updates produced by project managers, including QPRs; implementing new project management software packages, including those for EVM analysis; and better integrating its project and contract management activities. EM has developed a set of implementing steps and a summary of expected benefits for each priority action. According to EM, 10 of the priority actions are being implemented in fiscal year 2008, and 5 of those are scheduled to be completed by the end of that fiscal year. It appears that execution of the priority actions would create new tools and potentially enhance existing ones in EM’s effort to improve its cleanup projects’ performance. According to EM, full implementation of the priority actions will address many EM project management problems and deficiencies. However, since the actions are still being implemented, it is too soon to determine their effectiveness.

In addition, EM officials acknowledged that the actions they are implementing to improve the management of EM’s overall cleanup efforts, including their Best-in-Class initiative and actions being taken in response to the 2007 National Academy of Public Administration report have not been formally documented into a specific, corrective action plan that includes performance metrics and completion milestones. These officials agreed that such a comprehensive plan would demonstrate a more integrated and transparent commitment to improving the management of EM’s cleanup projects.

Conclusions

Cleaning up the nuclear weapons complex is a technically challenging and risky business. Even as DOE works to gain control of and better manage its major nuclear waste cleanup projects, cost increases and project delays continue to mount. Specifically, life cycle costs for EM’s major cleanup projects have increased by cumulative $25 billion over the past few years and schedules have been extended by a combined total of more than 75 years, primarily because DOE had to adjust the optimistic baselines it created to accommodate the realities it has encountered at its cleanup projects.

Given the cost and complexity of the major nuclear cleanup projects, it is critically important that DOE fully use the tools it has developed— independent reviews, performance information systems, guidance, and performance goals—to better ensure that projects stay within established parameters for scope of work, costs, and schedule. Independent baseline reviews to ensure that the work promised can be completed on time and for the estimated cost appear to be a useful planning tool, but the significant changes that have occurred within years or even months of the baseline reviews and validations indicate that implementation of these reviews has fallen short. Furthermore, EM’s site proposals for changes to cost and schedule baselines, quarterly performance reports, earned value data analysis and reports, and reports to Congress do not consistently provide accurate and comprehensive information on the status of projects, which undermines managers’ and Congress’s ability to effectively oversee projects and make timely decisions, such as targeting resources to particular projects or renegotiating cleanup milestones and other contract conditions. These problems are compounded by the lack of comprehensive and clear guidance for DOE project managers so that they consistently implement DOE management policies across the projects and EM’s recently relaxed performance goals establishing the acceptable baseline change parameters for major cleanup projects. Although DOE has identified a number of improvements it intends to make to its project management approach, it is still in the early stages of implementing these improvements, making it too soon to assess the effort’s full effect, and it has not yet formally documented all the improvements in a comprehensive corrective action plan.

Recommendations for Executive Action

So that DOE can better manage its major cleanup projects and more fully inform Congress on the status of these projects, we recommend that the Secretary of Energy direct the Assistant Secretary for Environmental Management to take the following five actions: Include in its budget request to Congress life cycle baseline cost estimate information for each cleanup project, including prior year costs, estimated near-term costs, and estimated out-year costs.

Develop an approach to regularly inform Congress of progress and significant changes in order to improve EM’s accountability for managing the near-term baseline and tracking life cycle costs. Similar to the Department of Defense’s Selected Acquisition Reports, which include annual information on full life cycle program costs, among other things, EM’s report, at a minimum should compare estimated near-term and life cycle scope, cost, and schedules with the original and subsequently updated baselines, and provide a summary analysis of root causes for any significant baseline changes.

Expand the content of EM performance reports to describe the implications of current performance for the project’s overall life cycle baseline, including the near-term baseline cost and out-year cost estimate, using, when appropriate, valid earned value data that conform to industry standards and GAO-identified best practices.

Consolidate, clarify, and update its guidance for managing cleanup projects to reflect (1) current policy regarding independent baseline reviews and (2) the results of DOE’s determination of the appropriate means for calculating and budgeting for contingency so that project managers can consistently apply it across nuclear waste cleanup sites.

Consolidate all planned and ongoing program improvements, including those stemming from the Secretary’s contract and project management root cause analysis corrective action plan, the Best-in-Class initiative, and the 2007 National Academy of Public Administration report, into a comprehensive corrective action plan that includes performance metrics and completion milestones.

Because independent baseline reviews have not always provided reasonable assurance of the stability of projects’ near-term baselines or the reasonableness of the life cycle baselines, we recommend that the Secretary of Energy direct the Director of the Office of Management to take the following action: Assess the Office of Engineering and Construction Management’s current approach and process for conducting baseline reviews of EM cleanup projects to identify and implement improvements that will better provide reasonable assurance that project work scope can be completed within the baselines’ stated cost and schedule. Consider including in the assessment process an analysis of past lessons learned and reasons for baseline changes, and an assessment of project affordability when conducting baseline reviews.

Agency Comments and Our Evaluation

We provided a draft of this report to DOE for its review and comment. DOE agreed with our recommendations but provided some suggested changes to them, which we incorporated as appropriate.

In addition, DOE provided some specific comments on our draft report. First, DOE stated that the report should provide a more balanced and accurate portrayal of EM’s cleanup projects by including descriptions of ongoing initiatives, a number of which EM launched in recognition of the need for improvement, as well as providing better context of the challenges and constraints the department’s cleanup program faces. The draft report included a brief description of EM’s ongoing initiatives, including its Best-in-Class effort, and acknowledged many of the key challenges DOE faces while illustrating the factors contributing to changes in scope, cost, and schedule for its cleanup projects. We also acknowledged DOE’s ongoing initiatives and progress in a 2007 report on project management. In addition, DOE cited its successes in the cleanup of Rocky Flats and Fernald as evidence of its project management accomplishments. We commend DOE on its past performance in successfully cleaning up these sites, which has resulted in some lessons learned that DOE can apply to other cleanup efforts, as we reported in 2006. Nevertheless, we found in this review that DOE has not always effectively used its management tools to help oversee the scopes of work, costs, and schedules for its present major cleanup projects.

Second, DOE stated that our draft report appears to confuse the term “baseline.” It noted that there is only one project baseline—the near-term baseline approved by EM senior management—for which DOE should be held accountable. Our use of the term “baseline” in this report conforms to EM’s guidance documents indicating a project’s “lifecycle baseline” is composed of its prior year, near-term, and out-year costs. In addition, we disagree with DOE’s assertion that it should be held accountable only for a project’s near-term baseline. As we state in this report, since projects encountering problems have tended to manage those problems by moving work scope into the out years, the effects of problems occurring today show up as increases to out-year cost and schedule estimates and not as increases or delays in a near-term baseline. Therefore, if DOE’s performance is measured solely on the basis of the near-term baseline, potentially significant cost and schedule increases would not be accounted for or transparent.

Third, DOE stated that one of our recommendations—to consolidate, clarify, and update its guidance for managing cleanup projects to reflect the results of DOE’s determination of the appropriate means for calculating and budgeting for project contingency—could be more specific, and it outlined three contingency options. These options include (1) increasing the amount of contingency funding for cleanup projects to an 80 percent confidence level, the level budgeted for construction projects; (2) creating a general contingency fund available for project managers at DOE headquarters to dispense as needed to manage project risks; and (3) continuing with the current approach of not including contingency funding for cleanup projects in its budget requests—funding cleanup projects at the 50 percent confidence level—and changing its recently established performance goal. We recognize that managing project contingency is an important issue, and in fact note in our report that DOE’s current approach is a likely contributing factor to cost increases and schedule delays for EM’s major cleanup projects. While we did not specifically assess these three options in our report, DOE should continue to study the lessons learned from managing and budgeting contingency and select the option that would provide contingency funds in an expedient manner to better mitigate the impacts of cleanup project changes while minimizing the amount of unused contingency funding left over at the end of the fiscal year.

Finally, as part of the explanation of its third option for funding project contingency, DOE stated that GAO has agreed to its recently established performance goal—to accomplish at least 80 percent of the scope of work in the near-term baselines with less than a 25 percent cost increase. GAO has not agreed to this goal. As we state in this report, we are concerned with DOE’s new goal given that it is lower than the previous goal for cleanup projects and that DOE may inadvertently be creating an environment in which large increases to project costs become not only more common, but accepted and tolerated.

DOE also provided detailed technical comments, which we have incorporated into our report as appropriate. DOE’s comments are reproduced in appendix IV.

We are sending copies of the report to interested congressional committees, the Secretary of Energy, and the Director of the Office of Management and Budget. 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 staffs have any questions about this report, please contact me at (202) 512-3841 or aloisee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other staff contributing to the report are listed in appendix V.

Appendix I: Scope and Methodology

To determine the extent to which the cost, schedule, and scope baseline estimates for the Department of Energy (DOE) Office of Environmental Management’s (EM) cleanup projects have changed and the key reasons for these changes, we identified 10 major cleanup projects at 5 DOE sites. We first identified 9 major cleanup projects with current near-term cost estimates (usually a 5-year period) above $1 billion, the DOE threshold for major cleanup projects. In addition, to include those projects that could potentially become major projects because of cost growth, we reduced the threshold to $900 million and identified another project, the Richland nuclear material stabilization and disposition project, which is estimated to cost between $900 million and $1 billion over the near term. We focused on these 10 major cleanup projects because of their significant cost–– combined estimated near-term costs of about $19 billion and combined life cycle costs estimated at more than $100 billion—and because they account for almost half of EM’s $5.5 billion fiscal year 2009 budget request. (See app. II for information on these projects.)

To identify the factors that may hinder DOE’s ability to effectively manage these cleanup projects, we spoke with DOE project directors and contractor officials and reviewed project management documents for the 10 major cleanup projects we had identified. We conducted site visits to Idaho National Laboratory, Los Alamos National Laboratory, Oak Ridge Reservation, Savannah River, and Hanford, and analyzed project documentation—contracts, policy directives and memoranda, project management plans, DOE’s Office of Inspector General reports, independent reviews, project execution plans, risk management plans, quarterly project reviews, monthly project status reports, earned value management (EVM) surveillance plans, and project control documents prepared to guide and control formal changes to the baselines. For our analysis of projects’ scope, cost, and schedule data, we examined the initial baselines reported as of the most recent contract award or major contract modification (which occurred between 2004 and 2007) and compared these baselines with the updated baselines at the time of our review. Initial cost baselines are the estimated life cycle costs at the beginning of the new contract period for operation of the DOE site or associated projects or the major contract modification or extension, which typically coincided with the beginning of the projects’ current or previous near-term baseline. We also calculated the percentages of cost increases on the basis of constant 2008 dollars to make them comparable across projects and to show real increases in cost while excluding increases due to inflation. In addition, because EM now is reporting its life cycle cost and schedule estimates as ranges, we included these ranges in the report. However, because the upper ends of these ranges include unfunded contingency and EM does not include funding in its budget requests for this contingency, we report cost increases and schedule delays based on the lower ends of the ranges.

We also analyzed contractor performance data to determine whether DOE major cleanup projects are consistently developing and analyzing accurate earned value data according to industry standards and best practices. We gathered and analyzed data produced by the EVM system used for one project at each of the following sites: Idaho National Laboratory, Los Alamos National Laboratory, and Hanford. Often, EVM systems differ depending on how the contractor chooses to implement the EVM approach. Because of these differences, we gathered and analyzed information on each EVM system on a case-by-case basis, according to the structure, reporting format, content, and level of detail, among other things, unique to each EVM system. We also considered the best practices developed by GAO for estimating and managing project costs to analyze the contractor EVM data.

In addition, we spoke with DOE officials from EM and the Office of Engineering and Construction Management in Washington, D.C., and with representatives from LMI Government Consulting, which conducts external independent reviews of the projects for DOE, to obtain their perspective on how these projects are managed.

Because we and others previously have expressed concern about the data reliability of a key DOE project management tracking database—the Project Assessment and Reporting System—we did not develop conclusions or findings based on information generated through that system. Instead, we collected information directly from project site offices and the contractors.

We provided an interim briefing to the Subcommittee on Energy and Water Development, House Committee on Appropriations, on the status of our work on April 3, 2008.

We conducted this performance audit from March 2007 to September 2008 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: Information on the 10 Department of Energy Major Cleanup Projects Reviewed

Solid Waste Stabilization and Disposition, Idaho National Laboratory, Idaho (PBS 13)

This project will characterize, treat, and ship approximately 64,000 cubic meters of transuranic waste that will ultimately be stored in the Waste Isolation Pilot Plant in New Mexico. Transuranic waste is radioactive waste containing more than 100 nanocuries of alpha-emitting transuranic isotopes per gram of waste with half-lives greater than 20 years, except for high-level radioactive waste. The transuranic waste that must be handled remotely through protective shielding, because it emits penetrating radiation, will be treated at the Radioactive Waste Management Complex. The project also will treat and dispose of a mixed low-level waste backlog and handle on-site low-level waste for disposal at the complex.

The project will decontaminate and decommission approximately 500 facilities and remediate 160 sites in the East Tennessee Technology Park. This project includes the park’s two major buildings—the K-25 and K-27 gaseous process buildings—and requires the contractor to remove processing equipment and excess materials stored in the buildings, demolish building structures, and dispose of all associated wastes.

The project will stabilize and dispose of enriched uranium materials and current and projected inventories of aluminum-clad spent nuclear fuel in H-Area facilities. It also will stabilize and dispose of highly enriched uranium solutions, miscellaneous fuels, plutonium residues, enriched uranium residues, and other materials DOE identifies that remain from the production of nuclear weapons. The project also will deactivate F-Area and H-Area facilities; and dispose of special nuclear materials in the K-Area Complex.

The project will remove, treat, and dispose of 49 underground storage tanks holding a total of 37 million gallons of highly contaminated legacy waste This effort includes pretreating radioactive waste such as sludge and salt waste, vitrifying sludge and high- level waste at the Savannah River Site’s Defense Waste Processing Facility, and treating and disposing of low-level saltstone waste.

The project will identify, investigate, and remediate, when necessary, areas with known or suspected chemical and radiological contamination attributable to past Laboratory operations. It will investigate and clean up (as needed) approximately 860 solid waste management units and areas of concern remaining from the original 2,129 sites spread over approximately 39 square miles. The protection of surface water and groundwater resources that may be impacted by these management units and past Laboratory operations also are within the scope of this project.

The project will stabilize, package, and ship (to the Savannah River Site) nuclear materials and fuels used for the production of plutonium nitrates, oxides, and metal from 1950 through 1989 and now stored primarily in vaults in several facilities. The project will then clean and demolish the facilities.

Solid Waste Stabilization and Disposition, Hanford, Washington (PBS 13C)

The project will treat and store spent nuclear fuel, transuranic waste, mixed low-level waste, and low-level waste generated at the Hanford site and other DOE and Department of Defense facilities. It eventually will transfer and ship spent nuclear fuel elements and 1,936 cesium and strontium capsules to the proposed geologic repository in Nevada. The project also will operate, among other things, the (1) Waste Receiving and Processing Facility to process transuranic waste and low-level waste and (2) Central Waste Complex to store low-level and mixed-low-level waste and transuranic waste pending final disposition.

The project will remediate contaminated groundwater. This effort involves characterizing the movement of radionuclides and chemicals (carbon tetrachloride, chromium, technetium-99, strontium, and uranium plumes); assessing the soil and groundwater characterization results; groundwater and risk assessment modeling; and operation of groundwater remediation systems among other related actions.

Also known as the River Corridor Closure Project, this project will remediate 761 contaminated waste sites at the Hanford site near Richland, Washington, and decontaminate, decommission and demolish 379 surplus facilities that are adjacent to the Columbia River. This project also will dispose of material in the Environmental Restoration Disposal Facility.

The project will retrieve, stabilize, treat, and dispose of 53 million gallons of radioactive mixed waste stored in 177 underground tanks at the Hanford site. The project also involves testing and implementing supplemental waste treatment methods; operating the Waste Treatment Plant; providing interim storage of immobilized waste planned for disposal in an offsite repository; receiving and disposing of immobilized low-activity waste on-site in near-surface disposal facilities; and closing tanks and tank farm facilities.

Appendix III: Current Life Cycle Baselines for 10 DOE Cleanup Projects

Prior years’ costs

Appendix IV: Comments from the Department of Energy

Appendix V: GAO Contact and Staff Acknowledgments

Staff Acknowledgments

In addition to the individual named above, Rudy Chatlos, Jennifer Echard, James Espinoza, Daniel Feehan (Assistant Director), Mike Gallo, Diane Lund, Mehrzad Nadji, Omari Norman, Brian Octeau, Christopher Pacheco, Leslie Pollock, Karen Richey, and Carol Herrnstadt Shulman made key contributions to this report.