The KCP facility, NNSA’s primary site for producing or procuring nonnuclear components, is the first site within the nuclear weapons complex scheduled for significant modernization. KCP does not possess weapons-grade nuclear materials, but it supplies approximately 85 percent of the nonnuclear components that compose a typical nuclear weapon— ranging from simple items like nuts and bolts to more complex components, such as radars, arming and firing mechanisms, and critical nuclear safety devices meant to prevent accidental detonation. The facility has a footprint of nearly 3 million square feet and costs about $400 million per year to operate. Currently, about 127,000 square feet of this space is devoted to stored inventory, including production equipment, tooling, gauges, and testers. The production infrastructure of the nuclear weapons complex is aging and becoming increasingly outdated. A 2001 Department of Defense (DOD) review of the nation’s nuclear policy found that the nuclear weapons production infrastructure needed to be repaired and made more flexible so that it could adapt to the changing needs of the nuclear weapons stockpile. Subsequently, NNSA developed the strategic Complex Transformation Plan, which seeks to develop a smaller, more responsive production infrastructure—one that will ultimately support a smaller nuclear weapons stockpile—while continuing to maintain and refurbish the weapons currently in the stockpile. As part of its Complex Transformation Plan, in 2006 NNSA directed KCP to develop plans for modernizing its production facilities. In its plans, KCP identified three key avenues for achieving NNSA’s goals: Increasing outsourcing. KCP is increasing the percentage of nonnuclear components purchased from external suppliers from about 54 to 70 percent. At the same time, it is consolidating and reducing its external suppliers from about 412 in May 2008 to 320 in September 2009 to reduce the costs of working with and certifying multiple suppliers. As more components are acquired from external suppliers, KCP expects the equipment and infrastructure necessary for the production of many of those components to be eliminated, reducing the need for the large size and associated operating costs of the facility. KCP currently uses domestic-based suppliers, with the exception of those components that are acquired from Malaysia and Mexico. Nearly all of the components and processes that KCP outsources are unclassified; KCP officials told us that they have only certified one supplier that is approved for classified processing, production, and storage. Transforming its business processes. Honeywell, the contractor that manages KCP, is implementing more commercial-like business practices. In particular, KCP officials note that they have recently been granted relief from some DOE and NNSA oversight, such as NNSA nuclear security orders, because it does not possess weapons-grade nuclear material and because commercial standards are being used. KCP officials believe that these changes will lead to more streamlined business processes with lower administrative costs. According to KCP officials, an independent review estimated that these lower costs will amount to $37 million each year— more than one-third of the $100 million annual cost savings KCP projects will result from its modernization plans. Building a modern, more flexible facility. NNSA plans to have a new KCP facility built on an undeveloped site in Kansas City, Missouri. KCP’s new facility is designed to be smaller and more adaptable than the current facility, allowing quick and economical changes to the capability and capacity of the facility, such as using more open manufacturing space and modular utility systems so that it can be quickly and inexpensively reconfigured to adapt to changing production needs. NNSA committed to Congress that the new KCP facility would be operating by 2012 but now expects a delay of about 1 year. Financing the New Facility To construct this new facility, NNSA identified three financing options. The traditional approach for financing construction projects is to request funding from Congress using a budget line item in the President’s annual request for appropriations. If the requested funds are appropriated, a federal manager directly controls the scope, cost, and schedule of the design and construction of the facility. These projects usually require significant funding up front when the facility is being designed and constructed. However, as we have reported, large amounts of funding have become more difficult to obtain, and agencies are increasingly interested in financing alternatives that distribute costs over longer periods of time. One alternative is to acquire facilities using the General Services Administration’s (GSA) leasing authority, which allows GSA to lease space from a private developer on behalf of many government agencies. For a lease on privately owned land, the process culminates with a lease agreement of up to 20 years. Another alternative, according to KCP officials, allows NNSA to secure financing directly through private developers for the construction of facilities, but this alternative allows only for a maximum 5-year lease term. We have considered federal leasing, in general, to be a challenge for almost 20 years. In January 2003 we designated federal real property as a high-risk area, citing the government’s overreliance on costly, long-term leasing as one of the major reasons. Our work has also shown that building ownership often costs less than operating leases, especially for long-term space needs. Based on this work, we made recommendations in 2008 that agencies develop strategies to reduce reliance on leased space for long-term needs when ownership would be less costly. Another important consideration in KCP’s modernization plans is avoiding interruptions in the supply of components it produces. Such interruptions could negatively affect the nuclear weapons stockpile and weaken national security. For example, as nuclear weapons components age, they may need to be replaced to avoid undermining the reliability and performance of the weapon that they occupy. KCP produces or procures these replacement components. Much of KCP’s current workload supports the life extension program for the W76 warhead—carried on the Navy’s Trident II submarine-launched ballistic missile—which is a significant part of the U.S. nuclear weapons stockpile. Life extensions lengthen weapons’ operational life for an additional 20 to 30 years and allow NNSA to certify that the weapons continue to meet military performance requirements without underground nuclear testing. In addition, KCP currently produces or procures nonnuclear components needed to maintain the W88 submarine-launched ballistic missile warheads, the W78 and W87 intercontinental ballistic missile warheads, the W80 cruise missile warhead, and the B61 and B83 nuclear bombs. Another important consideration in KCP’s modernization plans, particularly as it begins to increase outsourcing, is that KCP manages components and technologies that might be attractive to terrorists or other potential adversaries. Passing components and technologies to external suppliers may put them at greater risk of being obtained and used by potential adversaries to develop or advance their own nuclear capabilities. Recently, the Department of Justice (DOJ) reported that on a daily basis, foreign states as well as criminal and terrorist groups seek arms, technology, and other material to advance their technological capacity, and the United States is a primary target because it produces advanced technologies. For fiscal year 2008, DOJ reported that more than 145 defendants faced criminal charges for attempting to illegally transfer these items and technologies, with roughly 43 percent of these defendants charged with attempting to transfer them to Iran or China. Some of the components KCP produces or procures, as well as technologies that can be developed from obtaining weapons-related design drawings and unique production processes, among other things, may be subject to laws and regulations controlling their export. Export control is primarily managed by the Departments of Commerce and State. The Department of Commerce, through the Export Administration Regulations, controls exports of most dual-use items and technologies. The Department of Commerce maintains the Commerce Control List, which describes the characteristics and capabilities of dual-use items that may require export licenses. The list is divided into 10 general categories of controlled technologies, such as sensors or electronics, which could include components that KCP produces or outsources. The Department of State, under the authority of the Arms Export Control Act and the International Traffic in Arms Regulations, controls exports of munitions items and technologies—those designed, developed, configured, adapted, or modified solely for military applications. These items are identified on the U.S. Munitions List, requiring most to be licensed for export. While these two departments are responsible for limiting the possibility of export-controlled items and technologies falling into the wrong hands, NNSA asserts that it is also generally responsible for the management and security of the nation’s nuclear weapons, including ensuring that nuclear weapons components or related information about these technologies are not used to advance the nuclear capabilities of potential adversaries. Many of the actions needed to successfully relocate the KCP facility require the ongoing cooperation of and collaboration with other NNSA laboratory sites. Design engineers at Lawrence Livermore, Los Alamos, and Sandia National Laboratories design the nonnuclear components produced or procured by KCP and determine whether the designs are classified, among other things. KCP produces or procures the components according to laboratory design specifications, but quality and production engineers from KCP continue to periodically collaborate with laboratory design engineers to oversee production, mitigate production risks, and integrate competing priorities, such as cost, schedule, design requirements, and quality. Before KCP begins full procurement or production of some components, laboratory design engineers must formulate a plan to qualify the component and assist in executing the qualification plan, which involves testing a sample of components to ensure that they meet quality, safety, and security standards. Such tests may include visual, environmental, mechanical, and electric tests, among others. In addition, if KCP decides to make major production changes or move the production process, components may have to be requalified to ensure that they still meet quality, safety, and security standards. Requalification can take from 1 month to more than 1 year, depending on the significance or complexity of the part and the extent of the planned production change.