After 36 years of using chemical and mechanical processes to produce slightly enriched uranium from ore, DOE’s Fernald site is faced with a variety of environmental problems. As with other sites in DOE’s nuclear weapons complex, an emphasis on production versus safety has produced a legacy of contaminated radioactive and hazardous wastes at storage sites, in buildings that are deteriorating, or in seepage to underground water supplies. Also, as with other DOE sites, contract management has been an ongoing problem. Stemming from the special contracting arrangements for the development of the atomic bomb during World War II, DOE continued with lax oversight of contractors of the weapons complex for decades. For this reason, in 1990 we designated DOE’s contracting as a high-risk area vulnerable to waste, fraud, abuse, and mismanagement and have issued numerous reports and testimonies that provided an impetus for change. The responsibility for the management and oversight of Fernald’s cleanup rests with two units at DOE’s headquarters—the Office of Environmental Management manages the technical, financial, and overall safety aspects of the cleanup, while the Office of Environment, Safety, and Health conducts periodic reviews to independently evaluate safety and heath programs at the site. At the field level, DOE’s Ohio Field Office and Fernald Area Office provide the planning, budgeting, and oversight of cleanup activities. Fernald Area Office staff interact daily with Fluor Daniel Fernald staff, who either directly or through subcontractors actually conduct the cleanup. As one of the first former weapons sites to be completely shut down—temporarily in 1989 and permanently in 1991—Fernald, in 1992, became one of the sites to pilot test a new contracting concept called the environmental restoration management contractor. DOE wanted to bring in new contractors, such as Fluor Daniel Fernald, that were experienced in environmental restoration to focus solely on the management and oversight of the cleanup. The actual cleanup was expected to be carried out by subcontractors. In addition, Fernald was one of the first DOE cleanup sites to propose accelerating its schedule for completing work at the site from 25 to 10 years. The management of the site’s activities has been complicated by reductions in the contractor’s workforce, DOE’s downsizing, and budget pressures common to other DOE sites. In 1993, shortly after Fluor Daniel Fernald assumed full responsibility for the site’s activities, DOE began a workforce reduction at the site to better match employees’ skills with Fernald’s cleanup needs. As a result, about 250 company and subcontractor employees were released, and 62 employees retired or resigned. These separations caused unrest and concerns among the remaining employees. For its part, DOE has not fully staffed the Fernald Area Office. From February 1992, when DOE established Fernald as a field office, through March 1994, when DOE proposed staffing for the newly created Ohio Field Office, DOE decreased Fernald’s staffing authorization from 190 to 82. At the time, DOE officials at Fernald had hired 72 individuals. After transferring positions and staff to the Ohio Field Office, Fernald was left with 39 individuals and an authorized staff level of 68. By April 1996, DOE had decreased Fernald’s authorized staff level to 53 and had 47 individuals on board at the site. DOE’s limited oversight early in the two key cleanup projects we reviewed contributed to cost increases and schedule slippages that mirror problems we have identified across DOE. The two projects cited in the Cincinnati Enquirer are (1) the vitrification pilot plant project to confirm the feasibility of converting 20 million pounds of low-level radioactive waste into a glass-like form for disposal and (2) the uranyl nitrate hexahydrate (uranium ore dissolved in nitric acid) project to process and dispose of about 200,000 gallons of the substance. From a budget perspective, these two projects represent about 5 percent of the site’s funding for fiscal years 1993 through 1996. The vitrification and uranyl projects are of similar size and complexity as some of the projects that DOE will undertake in the future. For the vitrification project, which is still ongoing, the estimated schedule to complete the testing of the waste has slipped 19 months, from March 1996 to October 1997. The original cost estimate in February 1994 was $14.1 million. This estimate did not include the costs for operating, maintaining, decontaminating, and decommissioning the plant. By December 1994, when DOE included operating costs in the estimate, DOE increased the projects to about $20.6 million, assuming that a key part of the facility—the melter used to superheat waste material—could operate at 100-percent efficiency. In July 1996, the estimate increased to $56 million, reflecting cost overruns in the initial estimates, and a more conservative estimate of 33-percent operating efficiency was made for the melter, as well as operating, maintaining, decontaminating, and decommissioning costs. As of September 1996, the estimate was $66 million. For the uranyl project, the original estimates made in fiscal year 1990 increased from $750,000 to more than $16.8 million and from 7 months to about 5 years for the project’s completion. DOE officials believe that (1) the Department’s deliberate policy of relying on the technical and managerial expertise of its new environmental restoration and management contractor to accomplish cleanup objectives and (2) the technical complexity of the vitrification project led to many of the Department’s subsequent problems with the projects. Although we agree that these factors contributed to the projects’ problems, other actions and decisions by DOE and the contractor helped cause the projects’ cost increases and delays. In fact, the projects suffered from several management and oversight weaknesses. For example, DOE had limited involvement during the early design and procurement stages of the vitrification plant and could have avoided major problems if it had exercised more oversight of the contractor’s early decisions. In addition, DOE and the contractor decided early on to accelerate the pace of this project without having fully tested the feasibility of the technology and underestimated the technical complexity of this first-of-a-kind project. DOE also allowed concurrent design and construction at the vitrification plant, which resulted in increased costs and schedule delays. Because the contractor built interfacing systems for a piece of equipment still in the design phase, about 225 design changes had to be made when the final components of the equipment differed from their preliminary designs. For the uranyl project, many of the required project management documents were not prepared until late or not prepared at all, contributing to the cost growth and schedule delays. For example, because a technical information plan was not prepared until late in the project, significant work was not done according to DOE’s requirements. As a result of a December 1995 DOE study of the problems at the vitrification plant and preliminary evaluations of alternatives to the current vitrification strategy, DOE has decided to postpone the additional construction and testing of radioactive material at the plant and to convene a panel of experts to reexamine the Department’s strategy for cleaning up the area. DOE expects that by June 1997, the Department and its stakeholders will reach a consensus on the appropriate cleanup strategy for the area. Furthermore, for its most important projects, DOE has increased the frequency with which it meets with the contractor to discuss the status of the projects. Cost overruns and schedule slippages similar to those of these two projects exist Departmentwide. They occurred in most of the 80 major systems acquisitions conducted across DOE from 1980 through 1996, one of which is the Fernald Environmental Management Program. Over the years, we and DOE’s Inspector General have reported that cost and schedule overruns on DOE’s major acquisitions have occurred for a number of reasons, including technical problems, poor initial cost estimates, and the ineffective oversight of contractors’ operations. Furthermore, we reported that underlying the problems were, among other things, a lack of sufficient DOE personnel with the appropriate skills to effectively oversee contractors’ operations and a flawed system of incentives both for DOE’s employees and contractors. As noted in a May 1996 report by DOE, the Fernald Area Office has made progress in its oversight of safety and health. However, the Area Office is still not complying with some oversight-related requirements and is in the early stages of planning changes to its program that may better address these requirements. However, because the plans have not been fully implemented, it is too early to assess whether they will fully comply with DOE’s standards and guidance. The ongoing decontamination and decommissioning activities at Fernald involve radioactive hazards, such as contaminated facilities and nearly 16 million pounds of stored uranium, as well as chemical hazards, such as acids and process waste. To minimize the risks of potential hazards to the workers and the public, DOE requires the contractor to comply with numerous safety and health standards. They include radiation protection of workers and the public, nuclear criticality safety, and occupational safety and health, among others. The Fernald Area Office is responsible for overseeing the contractor’s compliance with the safety and health requirements. The Area Office’s oversight activities include, among other things, formal assessments of the contractor’s processes, surveillance of items or activities, and walk-throughs to observe conditions in the site’s facilities. The Area Office’s facility representatives are responsible for monitoring the performance of the site’s facilities and serve as DOE’s primary points of contact with the contractor. Although many of the safety and health allegations in the Cincinnati Enquirer overstated the situation at Fernald (see app. II), the site did have serious problems. From 1993 to 1995, the Defense Nuclear Facilities Safety Board and DOE’s headquarters offices raised serious concerns regarding the Fernald Area Office’s ability to ensure the contractor’s compliance with DOE’s safety and health requirements.