Established by Congress in 2000 as a separately organized agency within DOE, NNSA has the primary mission of providing the United States with safe, secure, and reliable nuclear weapons and maintaining core competencies in nuclear weapons science, technology, and engineering. To support this highly technical mission, NNSA relies on capabilities in several thousand facilities located at eight nuclear security enterprise sites that support weapons activities. These sites are owned by the government but managed and operated by private contractors, and each has specific research and development (R&D) and/or production responsibilities within the nuclear security enterprise. (See fig. 1.) In addition to implementing NNSA’s nuclear weapons programs, some sites also support additional missions such as U.S. Navy nuclear propulsion, nuclear nonproliferation activities, and work for other federal agencies such as the Departments of Defense and Homeland Security. NNSA’s Office of Defense Programs is responsible for NNSA’s weapons activities and oversees the sites’ management and operating (M&O) contractors to execute R&D and production work. NNSA reimburses its M&O contractors under cost-reimbursement-type contracts for the costs incurred in carrying out the department’s missions, and M&O contractors have the opportunity to periodically earn additional award fees and contract extensions based on annual performance assessments. Congress funds NNSA’s nuclear weapons mission through an appropriation titled Weapons Activities. Weapons Activities is organized by NNSA into 14 operating programs with more than 40 budget lines across four activity areas. In fiscal year 2009, Congress appropriated approximately $6.4 billion for Weapons Activities, broken down by NNSA into the four areas described in table 1. RTBF is the single largest program within NNSA’s Weapons Activities appropriation, with nearly $1.7 billion for fiscal year 2009, and encompasses 90 percent of NNSA’s funds designated in congressional spending directives for the Infrastructure area. A significant RTBF mission, executed through its Operations of Facilities subprogram, is to operate and maintain NNSA-owned programmatic capabilities in a state of readiness, ensuring that each capability—defined to include facilities, infrastructure, and supporting workforce—is operationally ready to execute programmatic tasks identified in ST&E and Stockpile Support. Congressional spending directives designated nearly $1.2 billion of the RTBF program funds in the Weapons Activities account, or about 70 percent, for RTBF Operations of Facilities at NNSA’s eight sites. (See app. II for additional discussion.) In 2006, NNSA and its sites sought to improve linkages between programmatic tasks and the facilities and infrastructure that support the nuclear weapons program. To do so, NNSA established three categories for its facilities and infrastructure that indicate the extent to which they are critical to the achievement of Stockpile Support and ST&E milestones: Mission Critical facilities and infrastructure—such as for nuclear weapons production, R&D, and storage—are used to perform activities to meet highest-level Stockpile Support and/or ST&E milestones, and without these facilities and infrastructure, operations would be disrupted or placed at risk. Mission Dependent, Not Critical facilities and infrastructure—such as for waste management, nonnuclear storage, and machine shops—play a supporting role in meeting Stockpile Support and/or ST&E milestones, and loss of these facilities and infrastructure would only disrupt operations so long as operations could not resume within 5 business days. Not Mission Dependent facilities and infrastructure—such as cafeterias, parking structures, and excess facilities—do not have direct linkage to Stockpile Support or ST&E milestones but support secondary missions or quality-of-workplace initiatives. Together, Mission Critical and Mission Dependent, Not Critical facilities and infrastructure are deemed “mission essential.” In fiscal year 2009, NNSA categorized its over 4,500 facilities and infrastructure in these three categories. Across the entire nuclear security enterprise, over 200 facilities and infrastructure were deemed Mission Critical and over 1,400 were deemed Mission Dependent, Not Critical. Directed Stockpile Work is the second largest program within NNSA’s Weapons Activities appropriation, with nearly $1.6 billion in fiscal year 2009. The Directed Stockpile Work program is executed through four subprograms: Stockpile Services, the largest of these subprograms, with $866.4 million in fiscal year 2009, builds on weapons activities facilities and infrastructure to provide the foundational capabilities to conduct R&D and production work applicable to multiple warhead and bomb types. According to NNSA, the capabilities supported with Stockpile Services funds enable the achievement of other Directed Stockpile Work missions. Weapons Dismantlement and Disposition, with $190.2 million in fiscal year 2009, supports efforts to reduce the inventory of retired nuclear weapons and their components. The Life Extension Program, with $205 million in fiscal year 2009, represents one of NNSA’s two subprograms focused on specific warhead and bomb types. The Life Extension Program funds efforts to refurbish and extend the expected stockpile lifetime of legacy warheads and bombs for 20 to 30 years. Stockpile Systems funding supports ongoing sustainment activities for the active nuclear weapons stockpile, such as the exchange of components with limited lives and weapon-specific assessments. In fiscal year 2009, Congress directed $328.5 million for these activities, which NNSA prioritized among specific weapon and bomb types. NNSA reimburses its M&O contractors for the costs incurred in carrying out NNSA’s missions. These include costs that can be directly identified with a specific NNSA program (known as direct costs)—for example, the costs for dismantling a retired weapon—and costs of activities that indirectly support a program (known as indirect costs), such as administrative activities. To ensure that NNSA programs are appropriately charged for incurred costs, M&O contractors’ accounting systems assign the direct costs associated with each program and collect similar types of indirect costs into pools and allocate them among the programs. Consistent with Cost Accounting Standards (CAS), M&O contractors must classify their costs as either direct or indirect, and once costs are classified, must consistently charge their costs. M&O contractors are required to disclose their cost accounting practices in formal disclosure statements, which are updated annually and approved by NNSA officials. M&O contractors’ cost accounting practices cannot be readily compared with one another because contractors’ methods for accumulating and allocating indirect costs vary—that is, a cost classified as an indirect cost at one site may be classified as a direct cost at another. NNSA has developed national work breakdown structures for RTBF Operations of Facilities and for Stockpile Services, management tools that define the scope of work associated with the two subprograms. (See app. II and app. III for these fiscal year 2009 work breakdown structures.) In March 2009, we issued a cost estimating guide, a compilation of cost estimating best practices from across industry and government. Among other things, these best practices discuss establishing product-oriented work breakdown structures, where a product is defined as an output and 100 percent of the work associated with achieving that output. Product- oriented work breakdown structures allow a program to track cost and schedule by defined deliverables, promote accountability by identifying work products that are independent of one another, and provide a basis for identifying resources and tasks for developing a program cost estimate. The ability to generate reliable cost estimates is a critical function, and a program’s cost estimate is often used to establish budgets. While individual M&O contractors account for the activities included in NNSA’s work breakdown structures according to their own accounting practices and these practices vary, NNSA is required to provide reliable and timely information on the full cost of its programs because this information is crucial for effective management of government operations and for oversight. Full costs include direct and indirect costs that contribute to programs, regardless of funding sources. To meet this requirement, NNSA needs complete and reliable information from its M&O contractors so that it can determine the full (or total) costs of its programs. We have previously reported on NNSA’s lack of managerial cost accounting systems for its programs, particularly with respect to stockpile life extension programs. NNSA cannot accurately identify the total costs to operate and maintain weapons activities facilities and infrastructure because of differences in sites’ cost accounting practices. NNSA does not require sites to report the total cost to execute their RTBF Operations of Facilities work scope, but the results of our analysis of sites’ responses to our data collection instrument showed that the total cost to execute the RTBF Operations of Facilities work scope likely significantly exceeds the budget for the RTBF Operations of Facilities program justified to Congress. Efforts are under way to revise NNSA’s work breakdown structure that includes RTBF Operations of Facilities. According to NNSA officials, once the revised work breakdown structure is fully implemented it will capture these total costs, but NNSA will not begin collecting this information until 2011. Each of the eight sites in the nuclear security enterprise has established its own practices for how to account for the activities necessary to operate and maintain weapons activities facilities and infrastructure. While individual M&O contractors are required to be CAS compliant, differences in their cost accounting practices preclude NNSA from being able to identify the total costs to operate and maintain the facilities and infrastructure essential to achieving Stockpile Support and ST&E program missions. These differences include determining (1) which weapons activities facilities and infrastructure individual sites support with RTBF Operations of Facilities funds, (2) which activities included in the RTBF Operations of Facilities work breakdown structure each site supports directly or indirectly, and (3) the additional funding sources sites use to support certain activities included in the RTBF Operations of Facilities work breakdown structure. (For a detailed discussion of the differences in M&O contractors’ cost accounting practices, see app. II.) For example, While NNSA has identified the Mission Critical facilities and infrastructure at each of its sites, NNSA does not require M&O contractors to pay for them with RTBF Operations of Facilities funds. In fiscal year 2009, Pantex fully funded the RTBF Operations of Facilities work scope at all of its Mission Critical facilities with RTBF Operations of Facilities funds. In contrast, LANL partially funded the RTBF Operations of Facilities work scope at the majority, but not all, of its Mission Critical facilities with RTBF Operations of Facilities funds. Six of the eight sites in the nuclear security enterprise reported to us that in fiscal year 2009 they allocated the costs of certain activities included in the RTBF Operations of Facilities work scope into indirect cost pools, including the costs of activities such as utilities purchasing and real property maintenance. These indirect cost pools are often funded through multiple funding sources. All sites used funding in addition to RTBF Operations of Facilities funds to pay for activities included in the RTBF Operations of Facilities work scope in fiscal year 2009. In response to our data collection instrument, site officials identified 11 sources of funding congressionally directed for other Weapons Activities programs and subprograms that they expended, in part, on activities they considered to be included in NNSA’s RTBF Operations of Facilities work breakdown structure. In addition, some sites have developed user fee or cost recovery models for multiprogram facilities. These models are generally based on charges to programmatic users based on rates applied to, for example, the square footage of a facility users occupy or the volume of waste they produce. User fees or cost recovery may be charged as direct costs to Weapons Activities programs as well as to other programs and projects, or they may be charged through an indirect cost pool. As a result of these differences, NNSA cannot reliably identify the total costs to operate and maintain these facilities and infrastructure across the nuclear security enterprise. Rather, NNSA officials can only accurately identify the direct costs to the RTBF Operations of Facilities program, and in some instances, the direct costs to other Weapons Activities programs. Senior NNSA officials in the RTBF Program Office acknowledged that NNSA does not know the sites’ baseline costs to fully execute RTBF Operations of Facilities work scope, and NNSA does not require M&O contractors to track their sites’ total operations and maintenance costs for weapons activities facilities and infrastructure. Instead, NNSA officials told us they rely on individual contractors to know this information for their sites as a basis for formulating budget requests; however, some contractors did not identify a total cost for their sites’ weapons activities facilities and infrastructure. For example, when we asked, M&O contractors from two sites—Y-12 and LANL—did not provide the total cost to operate and maintain weapons activities facilities and infrastructure at their sites. LANL did not provide this information because site officials could not determine the extent to which costs charged against indirect cost pools were associated with activities included in the RTBF Operations of Facilities work scope. Y-12 did not provide this information because, according to officials, while their management system is capable of identifying this information, it cannot do so readily with accuracy. The total costs to operate and maintain weapons activities facilities and infrastructure likely significantly exceed the amount NNSA justified to Congress in the President’s Weapons Activities budget request for RTBF Operations of Facilities and that Congress directed to NNSA’s sites in fiscal year 2009. While NNSA requires M&O contractors to report information on their direct costs to the RTBF Operations of Facilities program, NNSA does not require M&O contractors to report on the total sitewide operation and maintenance costs for their weapons activities facilities and infrastructure. NNSA officials acknowledged that a more accurate figure for total costs to support the enterprisewide work scope for RTBF Operations of Facilities would include these other funding sources M&O contractors use to operate and maintain weapons activities facilities and infrastructure. As reported above, when we asked, not all M&O contractors determined the total cost to operate and maintain weapons activities facilities and infrastructure at their sites. However, for the six contractors that did so, the cost to fully operate and maintain weapons activities facilities and infrastructure greatly exceeded the amount of funding for RTBF Operations of Facilities in fiscal year 2009. Congressionally directed RTBF Operations of Facilities funding for these six sites in fiscal year 2009 totaled approximately $558.6 million, but their estimated fiscal 2009 expenditures for this work scope drawn from all funding sources totaled approximately $1.1 billion. Officials from the two M&O contractors that did not provide the total costs to operate and maintain weapons activities facilities and infrastructure at their sites also told us that their expenditures for this purpose in fiscal year 2009 exceeded their congressionally directed RTBF Operations of Facilities funds, as funding from other programs also contributed. NNSA’s congressional budget justification for RTBF Operations of Facilities is not based on total cost information, and it does not fully support the scope of work it describes. NNSA officials and M&O contractors told us that RTBF program representatives from all of the sites are working closely together and with NNSA to develop an updated national RTBF work breakdown structure that will be integrated into a larger national work breakdown structure for all of the activities overseen by the Office of Defense Programs. The revised Defense Programs work breakdown structure, once implemented, is to more closely align activities, including RTBF activities, at the sites with the nuclear weapons R&D and production capabilities they support. Moreover, according to NNSA officials, NNSA envisions the sites using the revised work breakdown structure for budget formulation, budget execution, and cost collection, unlike the current RTBF work breakdown structure, which is used only for program management during a single fiscal year. NNSA has asked that the sites begin submitting their RTBF program budget requests using the revised Defense Programs work breakdown structure format. NNSA and site officials agreed that the revised work breakdown structure should help better explain how RTBF supports the core missions of the weapons complex and the base capabilities needed to support those missions. NNSA officials expect the first phase of revisions to the Defense Programs work breakdown structure to be completed around the end of 2010. Starting in 2011, NNSA officials said they plan to begin efforts to further enhance the revised work breakdown structure by including total cost information for operating and maintaining weapons activities facilities and infrastructure to support future budget formulation activities. While this total cost information will not be wholly captured within the portion of the revised Defense Programs work breakdown structure associated with RTBF Operations of Facilities, according to NNSA officials total cost information will be captured in the revised work breakdown structure as a whole. Differences in how sites pay for RTBF Operations of Facilities activities—and weapons activities facilities and infrastructure—will persist under the revised work breakdown structure. However, NNSA officials said once the revised Defense Programs work breakdown structure is fully implemented, NNSA will have a tool to collect consistent cost information from contractors’ disparate cost accounting systems. While in total NNSA’s Stockpile Services work breakdown structure for fiscal year 2009 reflects $866.4 million in work scope as justified to Congress, the work breakdown structure does not fully identify or provide the estimated costs of the products or capabilities supported through the Stockpile Services program. Rather, the work breakdown structure is organized largely around work functions and only partially by specific products or capabilities. (See app. III for a more detailed Stockpile Services work breakdown structure.) NNSA officials told us that the largely functionally oriented work breakdown structure for Stockpile Services in total captures all the work activities associated with providing foundational programmatic capabilities for R&D and production capacity across the nuclear security enterprise. In addition, they said the work breakdown structure for Stockpile Services is a useful management tool for executing work functions across products and deliverables. However, the organization of much of the work breakdown structure precludes the ready identification of base capabilities and their costs. For example, the activities included in the Stockpile Services work scope range widely–– from basic infrastructure support to the manufacturing of actual weapons components––often without specifically identifying the products or capabilities they are supporting. The exception is Plutonium Sustainment, the one group that is product-based and that better aligns work activities with the product or capability it is ultimately supporting. The five work activity groups in the Stockpile Services work breakdown structure are as follows (see app. III for more detailed descriptions of these activities): Production Support ($293.1 million in fiscal year 2009) includes non- weapon-type specific or multi-weapon-type activities that a site performs to support its own production mission, whatever that mission might be. Examples of these activities include engineering and manufacturing operations; quality supervision and control; and tool, gauge, and equipment services. Management, Technology, and Production (MTP) ($195.3 million in fiscal year 2009) includes activities that (1) sustain and improve stockpile management, (2) develop and deliver weapon use control technologies, and (3) result in production of weapons components for use in multiple warhead and bomb types. In contrast to Production Support activities that are focused on individual sites’ production missions, MTP includes those activities that benefit the nuclear security enterprise as a whole. R&D Certification and Safety ($187.6 million in fiscal year 2009) provides the underlying capabilities to mature basic research conducted in ST&E programs and serves as a technology development bridge between research and weaponized technologies. Activities support design work to develop certain multisystem limited life weapon components; the specialized facilities, equipment, and personnel to maintain a base capability to perform hydrodynamic tests and subcritical experiments; and the preparation of various types of studies. R&D Support ($35.1 million in fiscal year 2009) consists largely of administrative and infrastructure support activities for sites’ R&D missions. These activities include program management for and coordination of Stockpile Services’ many different outputs, R&D quality control, computing hardware for personnel, and financial database maintenance. Plutonium Sustainment ($155.3 million in fiscal year 2009) captures work activities associated with pit manufacturing and related R&D, as well as associated indirect and overhead costs. These funds not only support the base capabilities for pit manufacturing, but also contribute to the operation and maintenance of the facilities and infrastructure necessary to conduct these activities and the actual manufacturing of a limited number of pits each year. According to SNL officil, etween $2.7 million nd $12.2 million in fil yer 2009 Prodction Support fndid for ctivitie tht cold e conidered RTBF Opertion of Fcilitie work cope relted to operting nd intining SNL’s netron genertor fcilitie nd infrastrctre. designed and manufactured at SNL. Activities associated with neutron generator R&D and production are distributed across several parts of the Stockpile Services work breakdown structure and are not combined by NNSA either to provide a total accounting of the activities necessary to sustain the neutron generator capability or to determine the total costs of these activities. Furthermore, common support costs—such as program management—are not allocated to the neutron generator capability. Our cost guide states that common support costs should be included in the work breakdown structures of their associated products or capabilities. In fil yer 2009, NNSA nd it M&O contrctor pent $45.9 million in MTP prodction fnd to provide the cabilitie, teter, engineering rerce, nd dgement tool to fcilitte enterpriewide interprettion of d nd informtion regrding the condition of tem, substem, nd component in the tockpile. Thi work support assssment of rhed reliability, as well as ongoing labortory safety, ecrity, nd use control evuation. Surveillnce cabilitie inclde imting nd teting the effect of vition, hock, ccelertion, temperre, nd rdition environment on wepon nd their component. The illustrtion elow how ker table, used for teting the effect of vition on wepon component. surveillance testing is used to assess the condition of systems, subsystems, and components in the stockpile. According to an NNSA official, surveillance costs in Stockpile Services for fiscal year 2009 could be as high as $100 million to $130 million, depending on the extent to which costs are included for activities that support both surveillance and other capabilities. For example, certain tools may be used for surveillance and for other production missions. The $45.9 million identified as the costs for surveillance do not include the costs to maintain or upgrade those tools. Rather, NNSA tracks the costs for tooling as a function across all products and capabilities. In its fiscal year 2011 congressional budget justification for both R&D Certification and Safety and MTP, NNSA discusses funding to support the surveillance testing capabilities. The budget justification provides no explanation for why funding in both activity groups is requested and does not identify the total amount requested for Stockpile Services surveillance activities. NNSA’s ongoing effort to revise the Defense Programs work breakdown structure includes revising the portion associated with Stockpile Services. Its primary purpose is to provide better evidence to support assertions made in congressional budget justifications. Our analysis shows the revised work breakdown structure, once fully implemented, will better identify products and capabilities supported through Stockpile Services and provide improved total cost information. NNSA is planning to “tag” individual activities in the revised Defense Programs work breakdown structure, including Stockpile Services activities, to identify the products and capabilities with which those activities are associated, where possible. This will allow officials to aggregate activities (and their costs) by product or capability as necessary within the Defense Programs work breakdown structure. NNSA officials also said that current plans include tagging indirect or overhead costs. According to NNSA officials, fully realizing the revised Defense Programs work breakdown structure will give federal program managers a tool to collect consistent cost information from disparate contractor cost accounting systems on the products supported through Stockpile Services. Reducing the stockpile size, as has recently been negotiated in the New Strategic Arms Reduction Treaty, if ratified, and reinforced by the 2010 Nuclear Posture Review, is unlikely to significantly affect NNSA’s RTBF Operations of Facilities and Stockpile Services costs, which represent about one-third of NNSA’s total nuclear weapons program budget. A sizable portion of these costs are fixed and represent the costs of maintaining the base capabilities necessary to ensure that the nuclear weapons stockpile continues to be safe, secure, and reliable without underground nuclear testing. NNSA and its sites are working to reduce fixed costs and to bring these costs into line with base capabilities by modernizing and downsizing facilities and infrastructure and by eliminating excess production and experimental capacity. However, NNSA lacks information on the costs of these base capabilities that could adequately justify planned budget increases, particularly with respect to infrastructure investment. NNSA and site officials identify the scope of work captured in the RTBF Operations of Facilities and Stockpile Services work breakdown structures as providing the base capabilities necessary to conduct the ST&E and system-specific work that ensures the continued safety, security, and reliability of the nuclear weapons stockpile without underground nuclear testing. According to NNSA and site officials, most of the base capabilities these programs provide would be necessary to maintain even if the size of the stockpile were significantly reduced. Furthermore, NNSA and site officials identify the majority of the costs associated with these base capabilities as fixed and thus relatively insensitive to stockpile size. NNSA recently analyzed its fiscal year 2008 costs to determine the extent to which these costs represented the fixed or variable costs of sustaining the nuclear security enterprise. NNSA’s resulting analysis showed that 100 percent of RTBF cost is fixed for certain capabilities, including high explosives and weapons assembly/disassembly facilities and infrastructure. In addition, the analysis showed that between 85 and 90 percent of cost was fixed for nonnuclear components and plutonium and uranium work. Many of these costs are included in the RTBF Operations of Facilities and Stockpile Services work scopes. While we were unable to independently verify NNSA’s analysis, during the course of our review we did observe the relatively fixed nature of the infrastructure and activities necessary to maintain base capabilities. For example, an NNSA official estimated that the base capability cost for pit manufacturing is about $120 million in Stockpile Services funds annually, in comparison with overall Plutonium Sustainment funding for fiscal year 2009 of $155.3 million. Plutonium Sustainment funding also included production-related R&D costs, as well as incremental costs for actual component manufacturing. In addition, officials from several sites highlighted equipment that may be operated for only a limited portion of each year but that still must be maintained and operated when needed. Officials at Y-12 noted that the fixed costs to maintain certain of these capabilities currently exceed the value of their output; however, to ensure that Stockpile Support and ST&E missions are achieved, these capabilities must be maintained. While base capability costs for the nuclear security enterprise are unlikely to significantly decline as a result of stockpile reductions, a primary purpose of NNSA’s effort to modernize the nuclear security enterprise is to reduce the overall level of fixed costs at and among sites by consolidating infrastructure and reducing capacity to base levels without compromising national security. According to an NNSA official, 10 years from now one- third of NNSA’s total existing facilities and infrastructure will be in excess of programmatic need. Furthermore, NNSA’s modernization plans call for consolidating experimental capabilities among sites within the complex and for reducing excess production capacity. We previously reported on efforts at several sites, including LANL and LLNL, to reduce or eliminate storage of significant quantities of weapons-grade special nuclear material in site facilities. We also recently reported on progress to replace KCP infrastructure with a new, modern facility that NNSA expects to result in significantly reduced operations and maintenance costs for that site. Other efforts include construction of the new Highly Enriched Uranium Materials Facility at Y-12, which will enable closure of several older storage facilities at the Y-12 site. In addition, facility disposition at multiple sites, including LANL, LLNL, NTS, Pantex, and Y-12, will reduce both ongoing maintenance costs and deferred maintenance backlogs. Consolidation of equipment at NTS will reduce maintenance. While base capability costs appear to be relatively insensitive to changes in the stockpile, complete and reliable information about the costs of these capabilities is necessary for sound program management and to help inform future planning. This is particularly important in the current political and budgetary environment, in which stockpile reductions are anticipated, and the Administration has planned to increase budget requests for Weapons Activities by $4.25 billion over the fiscal year 2010 enacted level between fiscal years 2011 and 2015. This planned budget increase is envisioned in part to ensure adequate support to maintain and improve base capabilities, including infrastructure recapitalization and replacement. In such an environment, NNSA is likely to face increased scrutiny of its planning, programming, and budget execution to determine the effect of funding increases on the overall health of base capabilities. In the past, Congress, we, and NNSA have examined different ways of generating information on the costs of the nuclear weapons program that would be useful to NNSA management and congressional decision makers for planning purposes. In 2000 we recommended that NNSA develop a method to relate its program structure to DOE’s cost accounting considerations so that fixed and variable costs of the program’s activities could be determined and made available when the program makes its annual budget submission. In fiscal year 2005, NNSA reorganized its budget structure in response to congressional appropriations committees, which instructed NNSA to begin budgeting by warhead and bomb type— another way to understand program costs. The current budget structure does identify some type-specific information. However, NNSA and site officials have continued to caution against allocating RTBF and Stockpile Services costs to specific warhead or bomb types, stating that allocating fixed costs does not really provide any additional information than is already available and could prove to be misleading; in the event of stockpile reductions, fixed costs would simply be reallocated across remaining warhead and bomb types and fail to produce the significant cost savings that might be anticipated. Statement of Federal Financial Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Standards, states a general standard for federal agencies to provide reliable and timely information on the full cost of federal programs. The principal purpose of SFFAS No. 4 is to determine the cost of delivering a program or output to allow an organization to assess the reasonableness of this cost or to establish a baseline for comparison. Congressional appropriations committees sought to define individual warhead and bomb types as NNSA’s programs; however, since 2005 NNSA has defined its programs as a mix of individual warhead and bomb types, production and R&D functions that support multiple warhead and bomb types, facilities and infrastructure support, and other supporting programs such as security. In part, NNSA has done so because DOE’s accounting guidance does not require NNSA to allocate basic R&D costs and certain infrastructure capacity costs. Also, by identifying RTBF and Stockpile Services as programs, NNSA has identified in its budget structure costs it has determined are fixed. Going forward, NNSA appears to be moving toward a budget structure aimed at ensuring sufficient funding to sustain base capabilities and to identify additional funding that may be necessary to modernize capabilities or to achieve a level of research or production capacity above the base level. NNSA currently lacks the total cost information about its existing programs to ensure it can accurately identify the costs of its base capabilities for future budget justifications. Through its ongoing effort to revise its Defense Programs work breakdown structure, which includes portions associated with RTBF Operations of Facilities and Stockpile Services, NNSA has the opportunity to capture this information. More specifically, NNSA’s preliminary revisions to its national work breakdown structure for RTBF Operations of Facilities reorients the work breakdown structure around capabilities and products; highlights Mission Critical facilities that support these capabilities; and identifies three types of costs to support these capabilities: (1) operations, which represents the current program; (2) risk reduction, which includes costs above base capability to support facility and equipment upgrades; and (3) transformation, which includes costs to replace facilities and infrastructure or otherwise significantly invest in their modernization. These revisions are positive developments that we believe will enable NNSA to improve its understanding of facilities and infrastructure costs paid for with congressionally directed RTBF Operations of Facilities funds and to improve the transparency of its RTBF Operations of Facilities budget justification. According to NNSA officials, once the revised work breakdown structure for all of Defense Programs has been fully implemented, it should allow NNSA to capture information on the total costs to operate and maintain weapons activities facilities and infrastructure, not just those costs paid for with congressionally directed funds for RTBF Operations of Facilities. In the absence of total cost information, according to a senior NNSA official, NNSA is challenged to balance operations and maintenance costs with recapitalization projects and with large facility replacement projects. According to NNSA officials, the portion of the revised Defense Programs work breakdown structure for Stockpile Services will include a reorientation around capabilities and products, where possible. While several NNSA officials said that improving cost estimating is not a primary impetus for revising the Stockpile Services work breakdown structure because all Stockpile Services costs are fixed, officials responsible for revising the Defense Programs work breakdown structure told us that doing so will help achieve transparent cost reporting from disparate contractor cost accounting systems, regardless of the fixed nature of these costs. Without identifying the total costs of Stockpile Services-supported products and capabilities, NNSA will be challenged to explain the effects of funding changes or justify the necessity for increased investment to support or enhance base capabilities. It is important to recognize that having a product- or capability-oriented work breakdown structure for Stockpile Services that includes associated support costs should not reduce NNSA’s or its M&O contractors’ flexibility to manage Stockpile Services activities by function. Within the global community, the Administration, and Congress, a bargain is being struck on nuclear weapons policy. Internationally, if the treaty is ratified, significant stockpile reductions have been negotiated between the United States and Russia. Domestically, a new Nuclear Posture Review has provided an updated policy framework for the nation’s nuclear deterrent. To enable this arms reduction agenda, the Administration is requesting from Congress billions of dollars in increased investment in the nuclear security enterprise to ensure that base scientific, technical, and engineering capabilities are sufficiently supported such that a smaller nuclear deterrent continues to be safe, secure, and reliable. For its part, NNSA must accurately identify these base capabilities and determine their costs in order to adequately justify future presidential budget requests and show the effects on its programs of potential budget increases. As it now stands, NNSA may not be accurately identifying the costs of base capabilities because (1) without guidance to M&O contractors for consistent reporting, NNSA cannot identify the total costs to operate and maintain essential weapons activities facilities and infrastructure, and (2) NNSA analyzes the reported costs of R&D and production functions without fully identifying these functions with the specific capabilities supported through Stockpile Services. Without taking action to identify these costs, NNSA risks being unable to identify the return on investment of planned budget increases on the health of its base capabilities or to identify opportunities for cost saving. NNSA has the opportunity to mitigate these risks by addressing them through the ongoing revision of work breakdown structures and through identifying means of collecting the total costs of its base capabilities from M&O contractors, which will not necessitate any changes to the way that Weapons Activities programs are budgeted or how funds are expended. Without taking these actions, NNSA will not have the management information it needs to better justify future budget requests by making its justifications more transparent. Additionally, the availability of this information will assist Congress with its oversight function. We recommend that the Administrator of NNSA take the following five actions. To allow Congress to better oversee management of the nuclear security enterprise and to improve NNSA’s management information with respect to the base capabilities necessary to ensure nuclear weapons are safe, secure, and reliable: (1) develop guidance for M&O contractors for the consistent collection of information on the total costs to operate and maintain weapons activities facilities and infrastructure; (2) require M&O contractors to report to NNSA annually on the total costs to operate and maintain weapons activities facilities and infrastructure at their sites; (3) evaluate the total costs of operating and maintaining existing weapons activities facilities and infrastructure as part of program planning processes and budget formulation, especially in relation to recapitalization and modernization of the nuclear security enterprise; and (4) once the Stockpile Services work breakdown structure reflects a product or capability basis, use this work breakdown structure to develop product/capability cost estimates that adequately justify the congressional budget request for Stockpile Services. In light of significant proposed increases to NNSA’s nuclear weapons program budget in fiscal year 2011 and beyond, we also recommend that the Administrator of NNSA: (5) include in future years’ congressional budget justifications (a) detailed justifications for how these proposed funding increases will affect program execution and (b) information about how the funding increases affected programs. We provided a draft of this report to NNSA for its review and comment. NNSA agreed with the report and its recommendations. NNSA’s comments on our draft report are presented in appendix IV. NNSA and several of its sites also provided technical comments, which we incorporated into the report as appropriate. In particular, we worked with NNSA officials to ensure the technical accuracy of the discussion of NNSA’s efforts to revise the Defense Programs national work breakdown structure. Because this effort is ongoing, we and NNSA wanted to ensure that information included in this report is as current and complete as possible. We are sending copies of this report to the appropriate congressional committees, Secretary of Energy, Administrator of NNSA, and other interested parties. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. At the request of the Chairman and Ranking Member, Subcommittee on Strategic Forces, Committee on Armed Services, House of Representatives, we were asked to (1) determine the extent to which the National Nuclear Security Administration’s (NNSA) Readiness in Technical Base and Facilities (RTBF) Operations of Facilities congressional budget justification that supplements the Budget of the United States Government (i.e., the President’s Budget) for fiscal year 2009 is based on the total cost of operating and maintaining weapons facilities and infrastructure; (2) determine the extent to which NNSA’s fiscal year 2009 congressional budget justification for Stockpile Services identifies the total costs of providing foundational research and production support capabilities; and (3) discuss the implications, if any, of a smaller stockpile on RTBF Operations of Facilities and Stockpile Services costs. In conducting our review and to accomplish all of these objectives, we reviewed and analyzed relevant documents concerning NNSA’s weapons programs and activities, such as NNSA’s congressional budget justifications for fiscal years 2009, 2010, and 2011 and the fiscal year 2009 national work breakdown structures for RTBF Operations of Facilities and Stockpile Services (see apps. II and III). We analyzed NNSA’s work breakdown structures and compared them with GAO’s best practices, as published in the GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs. To help assess the merits and requirements of indirect cost allocations to warhead and bomb types, we examined the Statement of Federal Financial Accounting Standards No. 4, promulgated by the Federal Accounting Standards Advisory Board, and Cost Accounting Standards, promulgated by the U.S. Cost Accounting Standards Board. In addition, we interviewed key officials from the Department of Energy’s Office of the Chief Financial Officer and Office of Engineering and Construction Management, and NNSA’s Office of Defense Programs, Office of Management and Administration, Office of Field Financial Management, and site offices. Furthermore, we collected and analyzed budget, cost, and program documents and interviewed key officials from all eight NNSA sites. We visited six of the eight sites, including Lawrence Livermore (LLNL), Los Alamos (LANL), and Sandia National Laboratories (SNL); Nevada Test Site (NTS); Pantex Plant (Pantex); and Y-12 National Security Complex (Y-12), where in total we toured more than 30 weapons activities facilities. All of these facilities were Mission Critical—directly employed to meet highest- level NNSA weapons program milestones. We selected these facilities based upon the following criteria: (1) their uniqueness within the nuclear security enterprise, (2) the importance of the capabilities provided by the facilities, and (3) the complexity of their operations. We went to these sites to understand their roles in weapons program activities and the nuclear weapons budget, and to see the facilities, equipment, and infrastructure within the nuclear security enterprise. To determine the extent to which NNSA’s RTBF Operations of Facilities congressional budget justification for fiscal year 2009 is based on the total cost of operating and maintaining weapons facilities and infrastructure, we also collected data from NNSA’s eight sites on their facilities and the sources of funding they use to fully support the operations and maintenance of weapons activities facilities and infrastructure. These data were collected through the use of a data collection instrument we developed and transmitted electronically to officials identified at all eight sites in the form of a Word Electronic Questionnaire. The data collection instrument was used to obtain RTBF program information and fiscal year 2009 expenditure data. The practical difficulties of employing any data collection instrument may introduce unwanted discrepancies. For example, differences in how a particular question is interpreted, the sources of information available to respondents, or the individual characteristics of the people who respond can introduce unwanted variability into the results. We included steps in both the data collection and data analysis stages to minimize such discrepancies. For example, we took the following steps: In developing this data collection instrument, we consulted with stakeholders within GAO and with NNSA officials to properly phrase our questions and to format the instrument; we also pretested the instrument with NNSA officials in the Office of Defense Programs and the NNSA Service Center, and with NTS, Pantex, and SNL management and operating (M&O) contractors, on a line-by-line basis to ensure the questions were clear, complete, and accurate, and made appropriate modifications and clarifications to increase data validity and reliability. Upon receiving responses from the sites to the data collection instrument, we analyzed data on costs, budget, work scope, direct funding sources, and indirect cost pools on a consistent basis for all sites; we followed up with sites as needed to ensure their responses were accurate and complete; and finally, we performed a reliability assessment of these data and determined they were sufficiently reliable for the purposes of our report. In addition, we reviewed NNSA documents such as the RTBF Operations of Facilities national work breakdown structure, the RTBF Mission Dependency Guidance, and sites’ documents such as their RTBF Site Execution Plans and RTBF Quarterly Reports, and interviewed NNSA and site officials. We also requested general information and general fiscal year 2009 funding information from sites on several specific weapons activities facilities to use as examples in this report. We worked with GAO methodologists to develop criteria for selecting the facility examples such as facilities at sites we visited, facilities at both laboratories and plants, facilities with diverse funding expenditures, and facilities conducting both R&D and production missions. To determine the extent to which NNSA’s fiscal year 2009 congressional budget justification for Stockpile Services identifies the total costs of providing foundational research and production support capabilities, we also examined and analyzed NNSA’s Stockpile Services national work breakdown and NNSA’s expenditure data for fiscal year 2009, observed neutron generator and plutonium pit manufacturing facilities supported with Stockpile Services funds, and interviewed NNSA and site officials. In addition, we requested information from NNSA on specific Stockpile Services activities to use as examples in our report. We selected activities based on their financial significance in the Stockpile Services work breakdown structure. To discuss the implications, if any, of a smaller stockpile on RTBF Operations of Facilities and Stockpile Services costs, we also reviewed documents such as NNSA’s Final Complex Transformation Supplemental Programmatic Environmental Impact Statement and NNSA’s Infrastructure and Modernization Report to obtain estimates of the nuclear security enterprise’s fixed costs. In addition, we interviewed NNSA and site officials. We conducted the work between April 2009 and June 2010 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. Congressional spending directives designate funds within NNSA’s Weapons Activities appropriation for the RTBF Operations of Facilities subprogram at each of NNSA’s eight sites. In addition, a small amount is also directed for Institutional Site Support, which is at NNSA’s discretion to prioritize for expenditure (see table 2). Table 3 provides NNSA’s RTBF work breakdown structure applicable to all sites for fiscal year 2009 and showing three levels of detail. Sites may create further levels of detail for their own management, budgeting, or cost collection. Alternatively, sites may use their own work breakdown structures that they ultimately cross-walk to NNSA’s work breakdown structure to report to NNSA program managers on how congressionally directed funds were expended. Each of the eight sites in the nuclear security enterprise has established its own cost accounting practices for how to account for the activities necessary to operate and maintain weapons activities facilities and infrastructure. While individual M&O contractors may be Cost Accounting Standards (CAS) compliant, differences in their cost accounting practices preclude NNSA from being able to identify the total costs to operate and maintain the facilities and infrastructure essential to achieving Stockpile Support and science, technology, and engineering (ST&E) program missions. These differences include determining (1) which weapons activities facilities and infrastructure individual sites support with RTBF Operations of Facilities funds, (2) which activities included in the RTBF Operations of Facilities work breakdown structure each site supports directly or indirectly, and (3) the additional funding sources sites use to support certain activities included in the RTBF Operations of Facilities work breakdown structure. Consistent with congressional funding direction, each site has discretion to determine which of its facilities and infrastructure will be supported with RTBF Operations of Facilities funds. While NNSA has identified the mission essential facilities and infrastructure at each of its sites, NNSA does not require M&O contractors to pay for essential facilities and infrastructure with RTBF Operations of Facilities funds. For example, LLNL officials told us their top priority for RTBF Operations of Facilities funds is fully supporting safe and secure nuclear facilities operations. In fiscal year 2009, only KCP fully funded all of its essential weapons activities facilities with RTBF Operations of Facilities funds. Table 4 shows the extent to which weapons activities facilities and infrastructure were fully, partially, or not supported with RTBF Operations of Facilities funds in fiscal year 2009 across the nuclear security enterprise. While NNSA can identify the activities its contractors classify as direct to the RTBF Operations of Facilities program, NNSA cannot easily identify those activities its contractors classify as indirect but that also are included in the RTBF Operations of Facilities work breakdown structure. Six of the eight sites in the nuclear security enterprise reported to us that in fiscal year 2009 they allocated certain activities included in the RTBF Operations of Facilities work scope into indirect cost pools. These indirect cost pools are often funded through multiple funding sources. For example, NNSA includes utilities and general services, such as electric power and steam supplied to weapons activities facilities, as an activity in its RTBF Operations of Facilities work breakdown structure, but two sites—LLNL and SNL—did not consider utilities costs to be direct to the RTBF Operations of Facilities program in fiscal year 2009. The RTBF Operations of Facilities work breakdown structure includes real property maintenance—maintenance for facilities, facility equipment, and programmatic equipment—when that real property supports multiple, not individual, weapon programs. SNL officials told us that their direct costs to the RTBF Operations of Facilities program for real property maintenance include only the programmatic equipment that provides mission capabilities inside weapons activities facilities. Real property maintenance costs for facilities or facility equipment are indirect. In contrast, LLNL officials told us that real property maintenance costs for programmatic equipment, facility equipment, and facilities themselves may be direct costs to the RTBF Operations of Facilities program, depending on the facility and the nature of the equipment. equipment and training staff to operate this equipment, in its RTBF Operations of Facilities work breakdown structure, but there were significant differences across the nuclear security enterprise in how SPEC costs were actually funded during fiscal year 2009. Three sites— KCP, Pantex, and NTS—funded all SPEC costs directly with RTBF Operations of Facilities funds. Another three sites—LLNL, LANL, and SNL—classified SPEC costs as direct and partially paid for these costs with RTBF Operations of Facilities funds. Y-12 did not fund SPEC with RTBF Operations of Facilities funds at all, while SRS reported that it did not spend any money on SPEC activities in fiscal year 2009. Finally, all sites used funding in addition to RTBF Operations of Facilities funds to pay for activities included in the RTBF Operations of Facilities work scope in fiscal year 2009. Consistent with CAS, M&O contractors are allowed to use these additional funding sources as long as their cost accounting practices are disclosed; their costing practices for supporting facilities and infrastructure are consistently applied; the programs supporting facilities and infrastructure benefit from their use; and their practices otherwise comply with applicable cost principles, CAS, and the M&O contract. These additional sources of funding included (1) other Weapons Activities programs that in some instances are congressionally mandated, and (2) programs outside of Weapons Activities, including Defense Nuclear Nonproliferation, Department of Energy (DOE), and other federal agencies. NNSA officials cannot easily identify all of the costs associated with RTBF Operations of Facilities work scope paid for through these other funding sources. In response to our data collection instrument, site officials identified 11 sources of funding congressionally directed for other Weapons Activities programs and subprograms that they expended, in part, on activities they considered to be included in NNSA’s RTBF Operations of Facilities work breakdown structure. For example, As congressionally directed, LLNL expended funds designated for the Inertial Confinement Fusion and High Yield and the Advanced Simulation and Computing Campaigns to support RTBF Operations of Facilities activities for facilities and infrastructure associated with these programs. LANL expended congressionally directed funds for the Directed Stockpile Work program to support activities included in the RTBF Operations of Facilities work breakdown structure—including some facilities management and support, real property maintenance, and SPEC costs. SRS expended funds congressionally directed for the Tritium Readiness Campaign to support all the activities included in the RTBF Operations of Facilities work breakdown structure at its Tritium Extraction Facility. Y-12 expended funds congressionally directed for the Facilities Infrastructure Recapitalization Program (FIRP) to support RTBF Operations of Facilities activities covering real property maintenance, excess facilities management and disposition, and construction projects. NNSA Defene Progr mission supported: High exploive rerch, development, nd teting for the Science nd Engineering Cmpign, Advnced Sim- tion nd Compting (compter modeling), nd Directed Stockpile Work (detontor surveillnce) facility equipment in its RTBF Operations of Facilities work breakdown structure. However, most M&O sites only partially paid for capital equipment costs in their weapons activities facilities with RTBF Operations of Facilities funds in fiscal year 2009. Officials from multiple sites, including Pantex and SNL, told us that some capital equipment costs that could be paid for with RTBF Operations of Facilities funds can also be paid for with funds directed for other Weapons Activities programs, such as Stockpile Services, that use the equipment. The exception is KCP, which fully funded its capital equipment costs in fiscal year 2009 with RTBF Operations of Facilities funds. million in user fees to Weapons Activities programs—such as the pit manufacturing program, and the Science and Engineering Campaigns—as well as to other work sponsors that used space inside the laboratory’s plutonium facility. Congressional spending directives designate funds within NNSA’s Weapons Activities appropriation for the Stockpile Services subprogram. Within the subprogram, NNSA obligates funds to its eight sites for expenditure. In fiscal year 2009, NNSA obligated $866.4 million to its sites to execute Stockpile Services work scope (see fig. 2). According to our cost guide, a work breakdown structure is the cornerstone of every program because it defines in detail the work necessary to accomplish a program’s objectives and promotes accountability by identifying work products that are independent of one another. This provides a basis for identifying resources and tasks for developing a program cost estimate. The ability to generate reliable cost estimates is a critical function, and a program’s cost estimate is often used to establish budgets. NNSA’s sites may create further levels of detail within the work breakdown structure for their own management, budgeting, or cost collection. Our cost guide is a compilation of cost estimating best practices from across industry and government. Among other things, these best practices discuss establishing a product-oriented work breakdown structure, which allows a program to track cost and schedule by defined deliverables. This allows a program manager to more precisely identify which components are causing cost or schedule overruns and to more effectively mitigate the root causes of overruns. For NNSA, a product may best be thought of more broadly as a capability, since a significant portion of NNSA’s mission is research and development (R&D). Thus, a product-oriented work breakdown structure for NNSA could be focused on the capability to execute a class of experiments, to produce a weapon component, or to conduct specified R&D. Our cost guide emphasizes that a product-oriented work breakdown structure should contain program management and other overhead activities to make sure all work activities are included. In contrast, a functionally based work breakdown structure—for example, one based on manufacturing, engineering, or quality control—would not have the detailed information to reflect cost, schedule, and technical performance on specific deliverables. Table 5 provides NNSA’s work breakdown structure applicable to all sites for fiscal year 2009 and showing four levels of detail. In fil yer 2009, $59.6 million in Prodc- tion Support fndas pent to provide tooling nd tooling ervice ite where prodction work occ. Tooling provide prodction fcilitie with the tool, prt nd ccessorie, mchinery, eqipment, nd labor needed for prodction nd to mintin prodction eqipment. Thi work o involve preption of pecifiction nd deign for tooling nd tet eqipment. The illustrtion elow how uum clition tem— piece of pecilized eqipment used to clite/certify vuum gge—for which tooling fnd support corrective nd preventive mintennce. production mission, whatever that mission may be. More specifically, these support activities—such as engineering and manufacturing operations; quality supervision and control; tool, gage, and equipment services (tooling); purchasing, shipping, and materials management; and electronic information systems—enable the production of weapons components and weapon assembly/disassembly, and help support surveillance testing. To this end, NNSA officials characterized Production Support as paying directly for the indirect activities at individual sites that (1) are associated with providing manufacturing support for production processes and (2) support more than one warhead or bomb type. Management, Technology, and Production (MTP). MTP is the second largest activity group within Stockpile Services. According to NNSA, MTP includes activities that (1) sustain and improve stockpile management, (2) develop and deliver weapon use control technologies, and (3) result in production of weapons components for use in multiple warhead and bomb types. In contrast to Production Support activities that are focused on individual sites’ production missions, MTP includes those activities that benefit the nuclear security enterprise as a whole. NNSA officials characterized MTP as supporting a mix of direct and indirect activities. More specifically, among other things, MTP management funds support weapons test data archiving and other shared data systems; MTP technology funds support studies and assessments relating to the safety and security of nuclear weapons; and MTP production funds support the interpretation of the results from surveillance tests, which are used to monitor and evaluate the condition, safety, and reliability of weapons in the stockpile. In addition, certain activities are captured within MTP that would be classified by NNSA if associated with a specific warhead or bomb type. According to NNSA officials, costs for these activities represent a relatively small amount of MTP, which one official estimated at approximately 10 percent of surveillance costs, or about $4.6 million in fiscal year 2009. In fil yer 2009, NNSA nd it M&O contrctor pent $9. million in R&D Certifiction nd Safety fnd supporting the base cability to condct hydrodynmic nd subcriticl te. Thee experiment improve ndernding of weponteri. Hydrodynmic te assss the performnce nd reliability of wepon using high exploive to detonte mock wepon tht contin surrogte rther thn fissile mteri, to lyze the repone of the djcent teri in the wepon. Subcriticl te use exploive to assss the propertie of pltoninder high pressure thtop hort of cler detontion. The illustrtion elow how the Cygnusual-m rdiogrphic fcility, which provide X-ry imging of subcriticl te. Cygnus locted in the NTS’s U1 Tnnel Complex, pproximtely 1,000 feet ndergrond. R&D Certification and Safety. R&D Certification and Safety provides the underlying capabilities to mature basic research conducted in ST&E programs. In this sense, R&D Certification and Safety serves as a technology development bridge between research and weaponized technologies. Among other things, R&D Certification and Safety funds support three major activities. First, funds are used to support design work to develop certain limited life weapon components that are used in multiple warhead and bomb types and that must be exchanged on a regular basis because they expire. Second, funds support the specialized facilities, equipment, and personnel to maintain a base capability to perform hydrodynamic tests, which examine the performance of nuclear weapons pits using surrogate materials to replace fissionable materials, and subcritical experiments, which examine the material properties of plutonium. Finally, funds support the preparation of various types of studies, including those produced annually to report to the President of the United States on the safety, security, and reliability of the stockpile. R&D Support. R&D Support is the smallest of the functional work activity groups in Stockpile Services. R&D Support consists largely of indirect activities that provide administrative and infrastructure support for sites’ R&D missions. These activities include program management for and coordination of Stockpile Services’ many different outputs, R&D quality control, computing hardware for personnel, and financial database maintenance. Plutonium Sustainment. Plutonium Sustainment is the only fully product-oriented activity group in Stockpile Services. While incorporated as an activity group within Stockpile Services, Plutonium Sustainment has its own work breakdown structure that is independent from the other four Stockpile Services activity groups. The Plutonium Sustainment work breakdown structure includes production support, R&D support, and program management activities. According to an NNSA official, this work breakdown structure, which captures work activities associated with pit manufacturing and related R&D—as well as associated indirect and overhead costs—is largely a legacy from when Plutonium Sustainment was an ST&E program instead of part of Stockpile Services. This is markedly different from the other four groups, where production or R&D activities are organized separately from their supporting overhead activities. The same NNSA officials said that nearly all Plutonium Sustainment funds are spent at LANL, which is home to the nation’s pit manufacturing capability. These funds not only support the base capabilities for plutonium R&D and pit manufacturing, but also contribute to the operation and maintenance of the facilities and infrastructure necessary to conduct these activities as well as the actual manufacturing of a limited number of pits each year. In addition to the contact named above, the following staff members made key contributions to this report: Jonathan Gill, Assistant Director; John Bauckman; Allison Bawden; Muriel Brown; Abe Dymond; Eugene Gray; Carol Henn; Alison O’Neill; Timothy Persons; Cheryl Peterson; Rebecca Shea; Vasiliki Theodoropoulos; Jack Warner; and Franklyn Yao.

Summary: The National Nuclear Security Administration (NNSA) manages and secures the nation's nuclear weapons stockpile, with annual appropriations of about $6.4 billion. NNSA oversees eight contractor-operated sites that execute its programs. Two programs make up almost one-third of this budget: Readiness in Technical Base and Facilities (RTBF) Operations of Facilities, which operates and maintains weapons facilities and infrastructure, and Stockpile Services, which provides research and development (R&D) and production capabilities. Consistent with cost accounting standards, each site has established practices to account for these activities. The Administration has recently committed to stockpile reductions. GAO was asked to determine the extent to which NNSA's budget justifications for (1) RTBF Operations of Facilities and (2) Stockpile Services are based on the total costs of providing these capabilities. GAO was also asked to discuss the implications, if any, of a smaller stockpile on these costs. To carry out its work, GAO analyzed NNSA's and its contractors' data using a data collection instrument; reviewed policies, plans, and budgets; and interviewed officials. NNSA cannot accurately identify the total costs to operate and maintain weapons facilities and infrastructure because of differences in sites' cost accounting practices. These differences are allowable under current NNSA guidance as long as sites comply with cost accounting standards and disclose their practices to NNSA. The differences among cost accounting practices include the facilities and activities sites support with RTBF Operations of Facilities funds and how sites use other funding sources to support weapons facilities and infrastructure. GAO's analysis of sites' responses to a data collection instrument showed that the total cost to operate and maintain weapons facilities and infrastructure likely significantly exceeds the budget request for the RTBF Operations of Facilities program submitted to Congress for fiscal year 2009. NNSA has an effort under way that, if fully implemented, would provide more detail on the total costs to operate and maintain weapons facilities and infrastructure. NNSA does not fully identify or estimate the total costs of the products and capabilities supported through Stockpile Services R&D and production activities. Instead, NNSA primarily identifies the functional activities--such as engineering operations, quality control, and program management--and their costs supported through Stockpile Services and bases its future-year budget requests on the extent to which prior-year budgets were sufficient to execute these functions. In 2009, GAO issued a cost guide that identified using a product-oriented management tool, rather than a functionally oriented one, as a best practice for cost estimating. Using cost guide criteria, GAO's analysis found tracking costs by functions provides little information on the costs of the individual capabilities supported through Stockpile Services. NNSA has an effort under way that, if fully implemented, would provide more detail on the total costs of the products and capabilities supported through Stockpile Services. Reducing stockpile size is unlikely to significantly affect NNSA's RTBF Operations of Facilities and Stockpile Services costs because a sizable portion of these costs is fixed to maintain base nuclear weapons capabilities. The Administration has planned to increase budget requests for NNSA's nuclear weapons program by $4.25 billion between fiscal years 2011 and 2015. This planned increase is intended, in part, to invest in and modernize facilities and infrastructure and to ensure that base capabilities are supported such that a smaller nuclear deterrent continues to be safe, secure, and reliable. While base capability costs appear to be relatively insensitive to reductions in the stockpile, without complete and reliable information about these costs, NNSA lacks information that could help justify planned budget increases or target cost savings opportunities.