Construction of the Y-12 plant in Oak Ridge, Tennessee, began in 1943 as part of the World War II Manhattan Project. The plant’s early mission included the processing of enriched uranium necessary for building nuclear weapons. Today, the Y-12 plant continues its mission as NNSA’s primary facility in the nuclear weapons complex for producing enriched uranium components necessary for maintaining the U.S. nuclear weapons stockpile. In addition, the Y-12 plant is used for dismantling weapons components, storing and managing nuclear material suitable for nuclear weapons, and processing fuel for Naval and research reactors, among other things. Currently, the Y-12 plant consists of a patchwork of facilities and equipment that are not always efficiently connected, requiring the transport of materials during processing and component production operations. According to NNSA documents, the workflow is inefficient and requires a significant number of security personnel to patrol a relatively large protected area. Moreover, because of age and facility deterioration, operations and maintenance costs are continually rising with frequent outages and interruption in work schedules. According to NNSA officials, the existing facilities also do not meet a number of significant regulatory and design standards that are either in place or projected to be in the near future. For example, these facilities do not meet current standards for protection against natural occurrences or fire. Furthermore, existing Y-12 plant facilities do not provide optimal worker safety and protection from exposure to radioactive materials, including uranium, and other hazardous materials. Although these facilities have had periodic upgrades, the equipment, buildings, and support utilities need to be modernized for the Y-12 plant to continue to meet its mission, according to NNSA officials. NNSA plans to transfer much of the ongoing uranium processing work and uranium component production that is performed at existing facilities at the Y-12 plant to the UPF in order to continue to support the nation’s nuclear weapons stockpile and provide uranium fuel to the U. S. Navy, among other things. The proposed UPF is to consist of a single, consolidated uranium processing and component production facility to encompass less than half the size of the existing Y-12 plant facilities. NNSA officials expect that a combination of modern processing equipment and consolidated operations at the UPF will significantly reduce both the size and cost of enriched uranium processing at the Y-12 plant. Specifically, the officials said that the more-efficient layout of the new facility and more- modern equipment will significantly reduce processing and production costs, including costs associated with facility and equipment maintenance and maintaining worker and environmental health and safety. DOE Order 413.3A establishes a process for managing the department’s major projects—including contractor-run projects that build large complexes that often house unique equipment and technologies. The order covers activities from identification of need through project completion. Specifically, the order establishes five major milestones—or critical decision points—that span the life of a project. These critical decision points are: Critical Decision 0: Approve mission need. Critical Decision 1: Approve alternative selection and cost range. Critical Decision 2: Approve performance baseline. Critical Decision 3: Approve start of construction. Critical Decision 4: Approve start of operations or project completion. Order 413.3A specifies the requirements that must be met, along with the documentation necessary, to move a project past each milestone. In addition, the order requires that DOE senior management review the supporting documentation and approve the project at each milestone. DOE also provides suggested approaches for meeting the requirements contained in Order 413.3A through additional guidance. For years, DOE and NNSA have had difficulty managing their contractor- run projects. Despite repeated recommendations from us and others to improve project management, DOE and NNSA continue to struggle to keep their projects within their cost, scope, and schedule estimates. Because of DOE’s history of inadequate management and oversight of its contractors, we have included contract and project management in NNSA and DOE’s Office of Environmental Management on our list of government programs at high risk for fraud, waste, abuse, and mismanagement since 1990. In response to its continued presence on our high-risk list, DOE analyzed the root causes of its contract and project management problems in 2007 and identified several major findings. Specifically, DOE found that the department: often does not complete front-end planning to an appropriate level before establishing project performance baselines; does not objectively identify, assess, communicate, and manage risks through all phases of project planning and execution; fails to request and obtain full project funding; does not ensure that its project management requirements are consistently often awards contracts for projects prior to the development of an adequate independent government cost estimate. To address these issues and improve its project and contract management, DOE has prepared a corrective action plan with various corrective measures to track its progress. The measures DOE is implementing include making greater use of third-party reviews prior to project approval, establishing objective and uniform methods of managing project risks, better aligning cost estimates with anticipated budgets, and establishing a federal independent government cost-estimating capability. NNSA’s current cost estimates for constructing the UPF are already more than double its initial estimate. Moreover, the $200 million estimated annual savings in operations, maintenance, and security costs may not begin to be realized until the transition between existing uranium processing facilities at the Y-12 plant and the new UPF is complete. Although NNSA’s current estimate prepared in 2007 indicates that the UPF construction will be completed between 2018 and 2022, NNSA officials expect the UPF will not be completed before 2020 due to funding shortfalls. NNSA’s current estimate, which was prepared in 2007 at critical decision 1, indicates that the UPF will cost between $1.4 and $3.5 billion to construct. This is more than double NNSA’s initial 2004 estimate that was prepared at critical decision 0 of between $600 million and $1.1 billion. Cost estimates for project engineering and design, which are less than halfway completed, have already increased by about 42 percent—from $297 to $421 million. According to UPF project officials, these increases are the result of, among other things, changes in engineering and design pricing rates. In January 2010, we reported that NNSA’s current cost estimate for the UPF that was prepared in 2007 at critical decision 1 did not meet all cost estimating best practices because it did not exemplify the characteristics of a high-quality cost estimate. As identified by the professional cost- estimating community in our Cost Estimating and Assessment Guide, a high-quality cost estimate is credible, well documented, accurate, and comprehensive. However, our January 2010 report found that the UPF’s current cost estimate prepared in 2007 only partially or somewhat met these four characteristics. For example, we found the UPF cost estimate only somewhat credible because an independent cost estimate had not been conducted. Instead, the project received an independent cost review as part of an independent technical review. An independent cost review is less rigorous than an independent cost estimate because it only addresses the cost estimate’s high-value, high-risk, and high-interest aspects without evaluating the remainder of the estimate. Moreover, we found the UPF cost estimate was only somewhat accurate because it was not based on a reliable assessment of costs most likely to be incurred. The UPF cost estimate used an estimating methodology that was not appropriate for a project whose design was not stable and that was still anticipated to change. NNSA’s technical independent review of the UPF stated that the project’s cost-estimate range was unsupported in part because it was prepared with significant detail—for example, the estimate provided a count of pipings and fittings for the facility—despite the fact that there had been no design of technical systems or of the building on which to base these details. Our January 2010 report recommended, among other things, that DOE follow best practices and conduct an independent cost estimate for all major projects. In response to our recommendation and recent congressional committee direction, DOE’s Office of Cost Analysis is conducting an independent cost estimate on the UPF project before critical decision 2—approval of a formal cost and schedule performance baseline. This independent cost estimate is expected to be completed by the end of 2010. While this independent cost estimate may be used by NNSA headquarters officials as part of its process for approving the project’s performance baseline, it is uncertain the extent to which Y-12 officials will accept the independent cost estimate results as reliable. Specifically, NNSA Y-12 project officials told us that the independent cost estimate will be based, in large part, on a subjective assessment of the independent cost estimating team’s past experiences on similar construction projects. This is in contrast to the cost estimate prepared by the UPF project that is based on a detailed breakdown of the estimated prices of labor and materials specific to the UPF. Project officials noted that DOE’s Office of Cost Analysis currently has no formal process for reconciling the two estimates given their different approaches. However, officials from DOE’s Office of Cost Analysis told us that the independent cost estimate will be compared to the scheduled work and construction requirements specific to the UPF to understand what assumptions and cost elements are causing differences, if any, between the two estimates. According to these officials, this comparison will enable them and NNSA Y-12 project officials to understand cost risks for the project and determine how to address these issues. In addition, DOE is in the process of developing draft policy that is expected to help establish requirements and responsibilities for developing cost estimates for programs and performing independent estimates for program and project cost estimates. However, the current version of the draft policy does not specifically address how differing cost estimates should be reconciled. According to NNSA officials, efficiency gains resulting from consolidating facilities at the Y-12 plant are likely to result in a savings of about $200 million annually in operations, maintenance, security, and other costs.