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United States Government Accountability Office: 
GAO: 

Report to the Subcommittee on Energy and Water Development, Committee 
on Appropriations, U.S. Senate: 

July 2012: 

Modernizing The Nuclear Security Enterprise: 

NNSA's Reviews of Budget Estimates and Decisions on Resource Trade-
offs Need Strengthening: 

GAO-12-806: 

GAO Highlights: 

Highlights of GAO-12-806, a report to the Subcommittee on Energy and 
Water Development, Committee on Appropriations, U.S. Senate. 

Why GAO Did This Study: 

NNSA, a semiautonomous agency within DOE, is responsible for the nation’
s nuclear weapons, nonproliferation, and naval reactors programs. 
Since its inception in 2000, the agency has faced challenges in its 
ability to accurately identify the costs of major projects. In 
addition, both the DOE Inspector General, in 2003, and GAO, in 2007, 
reported concerns with NNSA’s PPBE process, specifically in how NNSA 
validates budget estimates and decides on resource allocations or 
trade-offs. 

GAO was asked to review how NNSA manages programming and budgeting 
through its PPBE process. GAO examined (1) the current structure of 
NNSA’s PPBE process, (2) the extent to which NNSA reviews its budget 
estimates, and (3) how NNSA decides on resource trade-offs in its PPBE 
process. To carry out its work, GAO reviewed NNSA policies, 
instructions, guidance, and internal reports documenting the agency’s 
PPBE process and interviewed NNSA, DOE, and M&O contractor officials. 

What GAO Found: 

The National Nuclear Security Administration’s (NNSA) planning, 
programming, budgeting, and evaluation (PPBE) process provides a 
framework for the agency to plan, prioritize, fund, and evaluate its 
program activities. Formal policies guide NNSA and management and 
operating (M&O) contractors through each of four phases of the agency’
s PPBE cycle-—planning, programming, budgeting, and evaluation. These 
phases appear to be sequential, but the process is continuous and 
concurrent because of the amount of time required to develop 
priorities and review resource requirements, with at least two phases 
ongoing at any time. 

NNSA does not thoroughly review budget estimates before it 
incorporates them into its proposed annual budget. Instead, NNSA 
relies on informal, undocumented reviews of such estimates and its own 
budget validation review process—the formal process for assessing 
budget estimates. Neither of these processes adheres to Department of 
Energy (DOE) Order 130.1, which defines departmental provisions for 
the thoroughness, timing, and documentation of budget reviews. NNSA 
officials said the agency does not follow the order because it expired 
in 2003. Nevertheless, the order is listed as current on DOE’s 
website, and a senior DOE budget official confirmed that it remains in 
effect, although it is outdated in terminology and organizational 
structure. Additionally, according to NNSA officials, the agency’s 
trust in its contractors minimizes the need for formal review of its 
budget estimates. GAO identified three key problems in NNSA’s budget 
validation review process. First, this process does not inform NNSA, 
DOE, Office of Management and Budget, or congressional budget 
development decisions because it occurs too late in the budget cycle—
after the submission of the President’s budget to Congress. Second, 
this process is not sufficiently thorough to ensure the credibility 
and reliability of NNSA’s budget because it is limited to assessing 
the processes used to develop budget estimates rather than the 
accuracy of the resulting estimates and is conducted for a small 
portion of NNSA’s budget—approximately 1.5 percent of which received 
such review in 2011. Third, other weaknesses in this process, such as 
no formal evaluative mechanism to determine if corrective actions were 
taken in response to previous findings, limit the process’s 
effectiveness in assessing NNSA’s budget estimates. 

NNSA uses a variety of management tools to decide on resource trade-
offs during the programming phase of the PPBE process. One of these 
tools, integrated priority lists—which rank program activities 
according to their importance for meeting mission requirements—is to 
provide senior managers with an understanding of how various funding 
scenarios would affect program activities. However, NNSA has weakened 
its ability to gauge the effects of resource trade-offs. For example, 
in 2010, NNSA disbanded its Office of Integration and Assessments, 
created in response to DOE Inspector General and GAO recommendations 
that NNSA establish an independent analysis unit to perform such 
functions as reviewing proposals for program activities and verifying 
cost estimates. NNSA agreed with these recommendations and, in 2009, 
instituted the office to identify, analyze, and assess options for 
deciding on resource trade-offs. Without an independent analytical 
capability, NNSA may have difficulty making the best decisions about 
what activities to fund and whether they are affordable. 

What GAO Recommends: 

GAO recommends that, among other things, DOE update the departmental 
order for budget reviews, improve the formal process for reviewing 
budget estimates, and reinstitute an independent analytical 
capability. The agency agreed in principle with six recommendations 
but not with one to consolidate various integrated priority lists. GAO 
continues to believe this recommendation has merit as discussed in the 
report. 

View [hyperlink, http://www.gao.gov/products/GAO-12-806]. For more 
information, contact Gene Aloise at (202) 512-3841 or aloisee@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

NNSA Has Established a Formal PPBE Process That Includes Four Defined 
Phases: 

NNSA Does Not Thoroughly Review Budget Estimates When Developing Its 
Annual Budget: 

NNSA Has Implemented Some Tools to Support Decision Making on Resource 
Trade-offs but Has Stopped Using or Developing Other Capabilities: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the U.S. Department of Energy: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Figure: 

Figure 1: NNSA PPBE Schedule: 

Abbreviations: 

AFR: Administrator's Final Recommendation: 

DOD: Department of Defense: 

DOE: Department of Energy: 

M&O: management and operating: 

NNSA: National Nuclear Security Administration: 

OMB: Office of Management and Budget: 

PPBE: planning, programming, budgeting, and evaluation: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 31, 2012: 

The Honorable Dianne Feinstein:
Chairman:
The Honorable Lamar Alexander:
Ranking Member:
Subcommittee on Energy and Water Development:
Committee on Appropriations:
United States Senate: 

The National Nuclear Security Administration (NNSA)--a semiautonomous 
agency within the Department of Energy (DOE)--manages the nation's 
nuclear security programs, the primary goals of which are to maintain 
the safety, security, and effectiveness of the U.S. nuclear weapons 
stockpile; reduce the global threat posed by nuclear proliferation and 
terrorism; and provide nuclear propulsion systems for the U.S. Navy. 
To manage these programs, NNSA oversees eight separate sites--
collectively known as the nuclear security enterprise--that are 
managed and operated by private contractors, known as management and 
operating (M&O) contractors.[Footnote 1] Among other things, these 
contractors operate and maintain the government-owned facilities and 
infrastructure deemed necessary to support the nuclear security 
enterprise and to support the capabilities to conduct scientific, 
technical, engineering, and production activities. To fund these 
activities, the President requested more than $11.5 billion for NNSA 
in his fiscal year 2013 budget submission to Congress. Sound 
management practices, such as linking program activities to defined 
objectives and ensuring the reliability of budget estimates, can help 
NNSA use agency resources wisely. It is particularly important for 
NNSA to embrace this approach because, as our past work has shown, it 
has faced numerous challenges in accurately estimating the costs of 
major projects since its inception in 2000. For example, we reported 
in March of this year that the estimated cost to construct the 
Chemistry and Metallurgy Research Replacement Nuclear Facility at 
NNSA's Los Alamos National Laboratory rose from between $745 million 
and $975 million in 2005 to between $3.7 billion and $5.8 billion in 
2010--a near sixfold increase.[Footnote 2] In addition, in February of 
this year we testified that the estimated cost to construct the modern 
Uranium Processing Facility at NNSA's Y-12 National Security Complex 
jumped from between $600 million and $1.1 billion in 2004 to between 
$4.2 billion and $6.5 billion in 2011--a near sevenfold increase. 
[Footnote 3] Furthermore, in 2000 and 2009, respectively, we reported 
that NNSA's efforts to extend the operational lives of nuclear weapons 
experienced a $300 million cost increase for the refurbishment of one 
warhead and a $70 million increase for another.[Footnote 4] Given 
NNSA's record of weak management of major projects, we believe 
improved federal oversight of NNSA's modernization of the nuclear 
security enterprise is critical to ensuring that resources are spent 
in as an effective and efficient manner as possible. 

Under section 3252 of the National Defense Authorization Act for 
Fiscal Year 2000--the NNSA Act--NNSA was required to develop a 
planning, programming, and budgeting process that operated under sound 
financial and fiscal management principles.[Footnote 5] The NNSA Act 
also requires NNSA to annually submit to Congress a Future Years 
Nuclear Security Program plan that details NNSA's planned expenditures 
for the next 5 years. The value of this plan depends, in part, on the 
accuracy of the cost estimates supporting each program. A realistic 
cost estimate provides a basis for accurate budgeting and effective 
resource allocation, which increases the probability of a program's 
success in meeting its goals. NNSA's first Administrator indicated 
that he intended to comply with the NNSA Act by instituting a 
planning, programming, budgeting, and evaluation (PPBE) process--which 
uses short-and long-term planning to define program priorities and 
match them to available budgetary resources--that is similar to the 
Department of Defense's (DOD) budgetary process. As we have reported, 
DOD's PPBE process logically attempts to plan programs and develop 
budgets based on high-level strategic goals, but at times it has been 
poorly implemented.[Footnote 6] For example, DOD decision makers often 
commit to more programs than the department can reasonably support. 
Nonetheless, DOD's process has the potential to provide comparisons of 
the cost-effectiveness of program activities and to help managers 
develop the kinds of detailed program and budget plans called for in 
the NNSA Act. However, both the DOE Inspector General and GAO have 
reported on concerns with the development and implementation of NNSA's 
PPBE process.[Footnote 7] Specifically, these reports identified 
deficiencies in how NNSA ensures the validity of its budget estimates 
and how it decides to allocate its resources (resource trade-offs). In 
our January 2007 report, we recommended, among other things, that NNSA 
complete all of its PPBE policy guidance. In response, NNSA issued 
PPBE policy in the form of policy letters that identify the 
responsibilities of NNSA management, program and site offices, and 
contractors throughout the agency's PPBE cycle. 

In this context, you asked us to determine how NNSA manages its 
programming and budgeting activities through its PPBE process. For 
this report, our objectives were to examine (1) the current structure 
of NNSA's PPBE process, (2) the extent to which NNSA reviews its 
budget estimates, and (3) how NNSA decides on resource trade-offs in 
its PPBE process. 

To address these objectives, we analyzed NNSA documentation--including 
policies, instructions, guidance, and internal reports--related to the 
implementation of NNSA's PPBE policy across NNSA, as well as program-
specific documentation from the Offices of Defense Programs, Defense 
Nuclear Nonproliferation, and Naval Reactors; these three offices 
correspond to NNSA's primary missions and collectively account for 
approximately 85 percent of the President's fiscal year 2013 NNSA 
budget submission to Congress.[Footnote 8] To examine the current 
structure of NNSA's PPBE process, we reviewed NNSA policy documents, 
guidance, and instructions. To determine the extent to which NNSA 
reviews its budget estimates, we reviewed NNSA's formal budget 
validation review process and associated internal NNSA reports and met 
with officials involved in the development, oversight, or execution of 
NNSA budget estimate reviews. To identify the tools NNSA uses to 
decide on resource trade-offs, we analyzed how NNSA determines which 
program activities it considers necessary to achieve NNSA goals. 
Additionally, to address all these objectives, we met with officials 
from the NNSA Offices of the Administrator, Management and Budget, 
Defense Programs, Defense Nuclear Nonproliferation, Naval Reactors, 
and Acquisition and Project Management; the site offices for Los 
Alamos, Sandia, and the Y-12 National Security Complex; and the Naval 
Reactors Laboratory Field Office; DOE officials from the Office of 
Budget; and M&O contractor officials from Los Alamos and Sandia 
National Laboratories, the Y-12 National Security Complex, and Bettis 
Atomic Power Laboratory.[Footnote 9] Because NNSA's Office of Naval 
Reactors is organized as a separate entity within NNSA reporting both 
to NNSA and the U.S. Navy, we also met with Navy officials from its 
offices of Financial Management and Budgeting, and Cost Engineering 
and Industrial Analysis. Appendix I contains a detailed description of 
our objectives, scope and methodology. 

We conducted this performance audit from July 2011 to July 2012 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. 

Background: 

NNSA oversees programs to carry out its missions for nuclear weapons, 
nonproliferation, and naval nuclear propulsion, for which the 
President's budget submission to Congress requested more than $11.5 
billion for fiscal year 2013--about 42 percent of DOE's total budget. 
NNSA has primary mission responsibilities in three areas. First, it is 
responsible for providing the United States with safe, secure, and 
reliable nuclear weapons in the absence of underground nuclear testing 
and maintains core competencies in nuclear weapons science, 
technology, and engineering. Second, NNSA implements key U.S. 
government nuclear security, nonproliferation, and arms control 
activities, including securing vulnerable nuclear and radiological 
material at facilities throughout the world; removing plutonium and 
highly enriched uranium from partner countries; eliminating U.S. 
nuclear material declared surplus to defense needs; negotiating and 
providing the technical capability to verify arms control treaties and 
agreements; strengthening other countries' capacities to implement 
nonproliferation obligations; and enhancing other nations' 
capabilities to deter and detect illicit movement of nuclear and 
radiological materials. Third, NNSA provides the research, 
development, design, and operational support for militarily effective 
naval nuclear propulsion plants, as well as enriched uranium for 
fabrication into fuel for the Navy's propulsion reactors. NNSA 
receives four congressional appropriations to fund its activities, 
three of which align with its primary missions--Weapons Activities 
(for Defense Programs), Defense Nuclear Nonproliferation, Naval 
Reactors--and one that funds its management activities--Office of the 
Administrator.[Footnote 10] 

Since the Manhattan Project produced the first atomic bomb during 
World War II, NNSA, DOE, and predecessor agencies have depended on the 
expertise of private firms, universities, and others to carry out 
research and development work and efficiently operate the government-
owned, contractor-operated facilities necessary for the nation's 
nuclear defense. NNSA conducts its activities at research and 
development laboratories, production plants, and other facilities 
(collectively referred to as the nuclear security enterprise). 
Specifically, NNSA operates three national laboratories that design 
and ensure the reliability of nuclear weapons--Lawrence Livermore 
National Laboratory, California; Los Alamos National Laboratory, New 
Mexico; and the Sandia National Laboratories, New Mexico and 
California; and four nuclear weapons production sites--the Pantex 
Plant, Texas; the Y-12 National Security Complex, Tennessee; the 
Kansas City Plant, Missouri; and the Savannah River Site, South 
Carolina; as well as the Nevada National Security Site. 

NNSA's relationship with its contractors has been formally established 
over the years through its M&O contracts--contracting strategies that 
give these contractors responsibility to carry out major portions of 
NNSA's missions and apply their scientific, technical, and management 
expertise.[Footnote 11] M&O contractors at NNSA sites operate under 
NNSA's direction and oversight but largely independently of one 
another. Various headquarters organizations within NNSA develop 
policies and NNSA site offices, colocated with NNSA's sites, conduct 
day-to-day oversight of the M&O contractors, and evaluate the M&O 
contractors' performance in carrying out the sites' missions. 

NNSA Has Established a Formal PPBE Process That Includes Four Defined 
Phases: 

According to NNSA's policy, the NNSA PPBE process is composed of four 
phases--planning, programming, budgeting, and evaluation--and their 
associated activities. The different phases of PPBE appear sequential, 
but because of the amount of time required to develop and review 
resource requirements, the process is continuous and concurrent with 
at least two phases ongoing at any given time, including phases for 
different fiscal years. Figure 1 shows the four phases and the months 
during which each phase is scheduled to occur, according to NNSA 
policies and guidance. 

Figure 1: NNSA PPBE Schedule: 

[Refer to PDF for image: illustration] 

October 2011 through September 2012: 
FY 2012 Budget execution (Planned and programmed in 2010; Budget 
formulated in 2011). 

October 2011 through January 2012: 
FY 2013 Budget formulation (began in July 2011). 

November 2011 through February 2012: 
FY 2014 Planning.  

November 2011: 
FY 2012 Evaluation. 

February 2012: 
FY 2012 Evaluation. 

March 2012 through June 2012: 
FY 2014 Programming. 

May 2012: 
FY 2012 Evaluation. 

May 2012 through September 2012: 
FY 2013 Budget validation[A]. 

July 2012 through September 2012: 
FY 2014 Budget formulation. 

August 2012 through September 2012: 
FY 2012 Evaluation. 

Source: GAO analysis of NNSA documentation. 

[A] NNSA policy for budget validation calls for validation activities 
to begin in the April-May time frame and continue to September each 
year. However, in practice, the schedule of these activities can vary 
from year to year. For example, the NNSA memorandum initiating the 
budget validation process in 2011 scheduled validation activities to 
occur from June to October of that year. 

[End of figure] 

Planning. According to NNSA policy, in this phase, scheduled to begin 
annually in November, NNSA is to identify the goals it needs to 
achieve over the next 5 years and the program activities needed to 
meet these goals. According to NNSA officials, these goals are defined 
in a variety of documents, including presidential directives, policy 
statements, and DOE and NNSA strategic plans. This phase begins with 
the issuance of NNSA's annual Strategic Planning Guidance, which 
provides any updates to the strategic plans and identifies any 
emerging issues. The NNSA program offices use this guidance to conduct 
their own internal planning processes, update their multiyear plans, 
including revising or adding program activities needed to meet the 
agency's goals. 

Programming. According to NNSA policy, in this phase, scheduled to 
begin annually in February, NNSA is to determine which program 
activities and funding levels it will include in its budget proposal 
to DOE for the fiscal year beginning in October of the following 
calendar year. This determination is based on analysis of the 
activities' estimated costs, as well as the need to meet the NNSA 
goals defined in the planning process. To determine these activities, 
NNSA program offices are to work with their contractors to obtain 
estimates for the cost of the program activities identified in the 
planning phase and determine how to accomplish these activities within 
anticipated funding levels, which are defined in annual NNSA Program 
and Fiscal Guidance. NNSA program offices are to then rank these 
activities in order of priority for meeting program goals and document 
these decisions in integrated priority lists. These lists can include 
proposed program activities above the anticipated funding levels 
specified in NNSA guidance--these proposed activities are known as 
unfunded requirements. Using these lists, as well as other briefing 
materials, a group of senior NNSA officials including the heads of all 
program offices--the Program Review Council--then is to meet with the 
Principal Deputy Administrator to discuss and defend each program's 
proposed program activities. After reviewing the deliberations of the 
Program Review Council and the associated documents provided by the 
program offices, the NNSA Administrator is to decide on resources 
trade-offs that result in the combination of program activities that 
best meet NNSA's goals over the 5-year period covered by the Future 
Years Nuclear Security Program plan. The Administrator is responsible 
for issuing the Administrator's Final Recommendations (AFR), scheduled 
to be completed in May at the conclusion of the programming phase, to 
document NNSA's justification for its priorities and to serve as the 
basis for the agency's participation in DOE's program review process, 
the Strategic Resources Review. 

Budgeting. According to NNSA policy, this phase is to integrate NNSA 
planning and programming priorities and budget estimates into DOE's 
departmental budget process and consists of the following three parts: 

* Budget formulation. During formulation, which is scheduled to begin 
annually in July for the fiscal year beginning in October of the 
following calendar year, NNSA submits its proposed budget to DOE and 
participates in the Strategic Resources Review. If DOE's budget 
deliberations result in changes to NNSA's proposed budget, NNSA may 
have to rebalance its work activities. In September each year, DOE 
submits its proposed budget to the Office of Management and Budget 
(OMB) for review. Depending on OMB revisions, NNSA may need to again 
revise its work activities. These revisions are incorporated into the 
President's final budget request for DOE, which is submitted to 
Congress in February. 

* Budget validation. According to NNSA guidance, the agency uses its 
budget validation review process to ensure its budget request is 
consistent with NNSA priorities and its budget estimating processes 
are reasonable. NNSA policy calls for NNSA's Office of PPBE to manage 
a three-phase process of validating approximately 20 percent of NNSA's 
programs each year, so that 100 percent of its budget is validated 
every 5 years.[Footnote 12] Programs to undergo validations are to be 
determined by a combination of factors, including Program Managers' 
request, Administrator direction, and/or significant external 
interest/high program visibility. During Phase I of the process, 
scheduled for completion in June, before the beginning of the fiscal 
year in October, program officials determine if their activities 
conform with strategic guidance and program plans and review their 
methods for formulating budgets. In Phase II, scheduled annually for 
July to September, NNSA contractors or program offices, whichever 
developed the budget estimates, conduct a self-assessment of their 
budget planning, formulation, and cost-estimating processes. Phase II 
self-assessments are to be reviewed by a team--known as a validation 
review team--that comprises NNSA headquarters and site office staff. 
During Phase III, scheduled to occur from July through August, these 
validation review teams also review the cost-estimating practices used 
by the NNSA contractors and program offices. Importantly, NNSA's 
validation guidance emphasizes that reviews should focus on the 
processes used to formulate budget plans and derive budget estimates 
rather than on the accuracy of the resulting estimates. According to 
this guidance, validation review teams are to issue a report on their 
findings on Phases II and III in September to inform NNSA, DOE, and 
OMB decisions for the following year's budget cycle. 

* Budget execution. According to NNSA policy, during this process, DOE 
and NNSA are to allocate, distribute, and control funds to achieve the 
priorities established in the programming phase, and to maintain the 
fiscal limits set up in the budgeting phase, which are subject to 
appropriation of funds by Congress. The execution coincides with the 
fiscal year and commences once appropriated funds become available--
whether by appropriation or Continuing Resolution--at the beginning of 
the fiscal year every October. 

Evaluation. According to NNSA policy, NNSA is to employ an ongoing 
cycle of evaluations to review program performance. Evaluations are to 
include annual and quarterly NNSA performance reviews, performance 
reviews conducted as part of the Government Performance and Results 
Act, reviews conducted by OMB, and DOE oversight activities. 

NNSA Does Not Thoroughly Review Budget Estimates When Developing Its 
Annual Budget: 

NNSA does not thoroughly review budget estimates before it 
incorporates them into its annual budget request. Instead, it relies 
on undocumented, informal reviews of these estimates by site and 
headquarters program office officials and the formal budget validation 
reviews, which conclude after the submission of the President's budget 
to Congress. Neither of these processes meets DOE provisions for 
ensuring the credibility and reliability of agency budgets, as defined 
in DOE Order 130.1. According to senior NNSA officials, NNSA does not 
comply with DOE Order 130.1 because it believes the order expired in 
2003 and therefore no longer applies to NNSA budget activities. 
Furthermore, they stated that the need for a formal review of budget 
estimates is minimized, in part, because of the inherent trust between 
NNSA and its M&O contractors. Additionally, we identified three key 
problems in NNSA's formal budget validation review process: it occurs 
too late to affect budget decisions, is not sufficiently thorough, and 
includes other weaknesses that limit its effectiveness. 

NNSA's Process for Reviewing Budget Estimates Is Not Thorough or 
Documented: 

NNSA does not have a thorough, documented process for assessing the 
validity of its budget estimates prior to their inclusion in the 
President's budget submission to Congress, thereby limiting the 
reliability and credibility of the budget submission. Specifically, 
according to NNSA officials from NNSA's Offices of Management and 
Budget, Defense Programs; Defense Nuclear Nonproliferation; and the 
site offices for Los Alamos, Sandia, and Y-12, during the programming 
phase of PPBE, site and headquarters program office officials conduct 
informal, undocumented reviews of the budget estimates that M&O 
contractors submitted to determine their reasonableness, though some 
officials noted that the level of review may vary across site and 
headquarters program offices.[Footnote 13] According to these 
officials, this informal review is often conducted by comparing 
current budget estimates with those from previous years because the 
work is largely the same from year to year. If the estimates are 
similar, and no major programmatic change has taken place, site office 
and headquarters program office officials said that they generally 
view these budget estimates as reasonable for inclusion in NNSA's 
budget estimate. However, site office officials told us that their 
ability to thoroughly review budget estimates is limited. For example, 
according to NNSA officials at the Los Alamos Site Office, they do not 
have the personnel needed or the time, because of other laboratory 
management responsibilities, to oversee the laboratory's budget 
estimation practices. They told us that only one dedicated budget 
analyst is employed at the site office and, because of insufficient 
personnel resources in the office, a majority of this analyst's time 
is spent conducting work that is not directly related to budget 
oversight. NNSA officials from the Y-12 Site Office also told us that 
they informally review budget estimates when they initially submit 
them to headquarters program offices. However, they also stated that 
they become more involved in reviewing budget estimates when the 
agency is formulating its final budget submission, and the M&O 
contractors are asked to develop multiple iterations of budget 
estimates based on various hypothetical funding scenarios. However, 
these officials also stated that their reviews are not documented. 
NNSA officials from Defense Programs' Office of Analysis and 
Evaluation told us that the presence of certified cost engineers--
individuals with professional certification in the field of cost 
assessment and program management--at the NNSA site offices could 
enhance NNSA's ability to understand how M&O contractors and programs 
develop budget estimates and assess those estimates. 

The practices the site and headquarters program offices follow do not 
align with the criteria for thoroughness or documentation established 
in DOE Order 130.1. Specifically, DOE Order 130.1 states that 
contractor-developed budget estimates should be thoroughly reviewed 
and deemed reasonable prior to their inclusion in agency budgets and 
that these reviews should be documented. Senior officials from NNSA's 
Office of Management and Budget told us that the agency does not 
strictly adhere to DOE Order 130.1 because it believes that the order 
has expired and no longer applies to NNSA budget activities. According 
to these officials, this order expired in 2003, and they are unaware 
of any other DOE or federal government requirement to conduct budget 
validation reviews.[Footnote 14] They further stated that NNSA is 
conducting budget validation reviews only because it considers them to 
be a good business practice and that NNSA will work with DOE on 
updating the order if DOE initiates that process. NNSA officials 
stated that, if DOE updated and reissued DOE Order 130.1, it would 
comply to the extent that it had the resources to do so. However, DOE 
Order 130.1 remains listed on DOE's "All Current Directives" website, 
and a senior DOE budget official told us that DOE Order 130.1 remains 
an active order. Additionally, this official stated that a key 
principle of DOE Order 130.1--federal oversight of contractors' 
practices for budget formulation--is appropriate and valid. This 
official noted, however, that the order is outdated in terms of the 
terminology it uses to describe DOE--it was issued in 1995, predating 
the 2000 establishment of NNSA--and should be updated to reflect the 
department's current organizational structure. Furthermore, in March 
2009, we issued a cost-estimating guide--a compilation of cost-
estimating best practices drawn from across industry and government--
in which we reported that validation is considered a best practice to 
ensure that cost data are credible and reliable for use in justifying 
estimates to agency management.[Footnote 15] As a result, NNSA's site 
and headquarters program office reviews of budget estimates are 
neither thorough nor documented. According to the Principal Deputy 
Administrator, NNSA continues to face challenges in moving away from 
its historical process for developing budgets based solely on the 
unreviewed estimates produced by NNSA M&O contractors and that NNSA's 
practices for understanding its program activity costs are not as 
sufficient as they need to be. 

In contrast, NNSA's Office of Naval Reactors' is jointly staffed and 
funded by both NNSA and the Navy and is therefore subject to naval and 
DOD, as well as NNSA, standards for reviewing contractor-developed 
budget estimates. The Office of Naval Reactors conducts a semiannual 
process--known as budget confirmation--to review all contractor-
developed budget estimates. This review is conducted and documented by 
NNSA technical experts and approved by the Director of the Office of 
Naval Reactors; this director manages both NNSA and the Navy's 
activities within the office and has final budgetary decision 
authority. Officials in NNSA's Office of Management and Budget told us 
that the Office of Naval Reactors' process is much more rigorous than 
that used by other NNSA program offices we reviewed. Furthermore, NNSA 
has exempted the Office of Naval Reactors from NNSA's formal budget 
validation review process because of management's confidence in the 
quality of the office's budget confirmation process. 

Senior officials in NNSA's Office of Management and Budget told us 
that NNSA does not have the financial and personnel resources needed 
to conduct budget estimate reviews with the same rigor as the Navy and 
DOD. Furthermore, these officials said, the need for a formal review 
of M&O contractor-developed budget estimates is minimized within NNSA 
because site office officials have historical knowledge of work with 
NNSA's M&O contractors that allows them to assess the reasonableness 
of M&O contractor-developed budget estimates without conducting a 
formal review and because of the "inherent trust" between NNSA and its 
M&O contractors that results from its contracting strategy with them. 
Specifically, one of these officials stated that, to a large extent, 
only the M&O contractors are in a position to know the scientific and 
engineering details of nuclear weapons and the associated work scope 
and funding necessary to ensure their safety and reliability. However, 
for the last 10 years, we have reported that NNSA has significant 
weaknesses in its ability to control costs and effectively manage its 
M&O contractors.[Footnote 16] We are therefore concerned that NNSA 
management continues to deny the need for NNSA to improve its 
processes for developing credible and reliable budget estimates. 

NNSA's Formal Budget Validation Review Process Occurs Too Late to 
Affect Budget Decisions and Is Not Sufficiently Thorough: 

We identified three key problems in NNSA's annual budget validation 
review process--its formal process for assessing M&O contractor-and 
program-developed budget estimates. First, NNSA's annual budget 
validation review process occurs too late in the budget cycle to 
inform NNSA, DOE, OMB, and congressional budget development or 
appropriations decisions. DOE Order 130.1, which is referenced in 
NNSA's policy for its budget validation review process, states that 
agencies should thoroughly review budget estimates before using these 
estimates to develop budgets. However, NNSA's Phase II and Phase III 
budget validation reviews are scheduled to begin 5 months after the 
President submits his budget to Congress. Additionally, during each of 
the past four budget validation cycles, NNSA did not complete its 
budget validation reports for at least 12 months following the 
President's budget submission to Congress and at least 4 months after 
the beginning of the fiscal year for which NNSA reviewed the budget 
estimates. Therefore, Congress considered the budget request for NNSA 
and appropriated funds to it, and NNSA executed these funds to M&O 
contractors, before NNSA had published the results of the budget 
validation reviews. Because of their timing, NNSA's budget validation 
reviews cannot inform NNSA's budget development, DOE or OMB reviews, 
or Congress' appropriation processes. According to NNSA policy, the 
timing of NNSA's budget validation review process is designed to 
inform the NNSA, DOE, and OMB budgeting processes for the fiscal year 
following that for which the budget validation reviews were conducted. 
However, the timing of the publication of the budget validation review 
reports for each of the last 4 years precluded even such delayed 
consideration because they were issued following the OMB budget 
formulation process for the following fiscal year. 

Second, NNSA's budget validation review process is not sufficiently 
thorough to ensure the credibility and reliability of NNSA's budget. 
DOE Order 130.1 states that budgets should be based on budget 
estimates that have been thoroughly reviewed by site and headquarters 
program offices. However, NNSA's budget validation review process is 
limited to assessing the processes M&O contractors and programs used 
to develop budget estimates rather than the accuracy of the resulting 
budget estimates.[Footnote 17] NNSA's 2010 budget validation review 
guidance states that the agency lacks the resources and expertise 
needed to thoroughly evaluate the accuracy of budget estimates on its 
own and therefore relies on assessments of the reasonableness of the 
processes used by M&O contractors to develop budget estimates. NNSA 
officials from the Los Alamos and Y-12 Site Offices told us that they 
believe the budget validation review process would benefit NNSA more 
if it more thoroughly assessed the budgetary processes M&O contractors 
used to develop their budget estimates. Furthermore, NNSA policy and 
budget validation review guidance stipulate that 20 percent of the 
agency's programs should be reviewed annually to help ensure its 
validity, but NNSA's formal validation process actually results in 
significantly smaller portion of its budget being reviewed. For 
example, in 2011, NNSA's annual budget validation guidance identified 
four programs subject to budget validation review--the Engineering 
Campaign, Nuclear Counterterrorism Incident Response, Global Threat 
Reduction Initiative, and Fissile Materials Disposition--each of which 
is conducted at multiple NNSA sites.[Footnote 18] However, NNSA 
conducted validation reviews at only one site for each of these 
programs, which resulted in a formal validation review of 
approximately 12, 21, 15, and 4 percent of each of those programs' 
total budgets, respectively, which, together, constituted 1.5 percent 
of NNSA's budget request for fiscal year 2012. 

Third, other weaknesses in NNSA's budget validation review process 
limit its effectiveness as a resource to assess the validity of its 
budget estimates. In particular, NNSA workgroups that reviewed the 
2007 and 2008 budget validation review cycles recommended that NNSA 
formally evaluate the status of recommendations made during previous 
budget validation reviews. However, NNSA has not incorporated a formal 
mechanism for implementing an evaluation into its budget validation 
review process. NNSA officials at the Los Alamos and Y-12 site offices 
also told us that not having such an evaluative mechanism was a 
weakness in NNSA's budget validation process. Without a formal 
mechanism, NNSA is limited in its ability to measure (1) any progress 
M&O contractors or programs have made in their processes for 
estimating budgets in response to recommendations from previous budget 
validation reviews and (2) the effectiveness of NNSA's budget 
validation review process. For example, a 2010 budget validation 
review of the Readiness Campaign recommended that the program more 
formally document its budget processes, guidance, and estimating 
assumptions.[Footnote 19] Furthermore, a 2009 budget validation review 
of the Elimination of Weapons Grade Plutonium Production program found 
that the program could not provide documentation of its internal 
budget processes.[Footnote 20] However, in both instances, NNSA did 
not follow up to determine if the programs had addressed these 
concerns during subsequent budget validation reviews. Additionally, 
budget validation reviews do not always include recommendations to 
improve M&O contractor or program processes for estimating budgets 
when they identify potentially serious weaknesses in those M&O 
contractor's or programs' ability to develop cost estimates. For 
example, according to a 2010 budget validation review of budget 
estimation activities for the Nonproliferation and Verification 
Research and Development program at Sandia National Laboratories, six 
of the eight projects reviewed lacked sufficient documentation to 
support their cost estimates, including two that lacked any supporting 
documentation.[Footnote 21] The report noted the importance of 
credible cost estimates, but it did not formally recommend any 
remedial improvements and rated the overall processes used to develop 
those cost estimates as satisfactory. Additionally, NNSA officials in 
the Defense Programs' Office of Analysis and Evaluation told us that 
the cost information used to support budget validation review reports 
is often flawed or nonexistent. 

NNSA Has Implemented Some Tools to Support Decision Making on Resource 
Trade-offs but Has Stopped Using or Developing Other Capabilities: 

During the programming phase of PPBE, NNSA uses a variety of 
management tools, such as integrated priority lists and requirements 
and resources assessments, to support its programming phase and assist 
senior managers in making decisions on resource trade-offs. However, 
it has stopped using these capabilities or developing others. 

NNSA Has Developed and Implemented Some Tools to Assist Management in 
Deciding on Resource Trade-offs: 

NNSA uses the following management tools to decide on resource trade-
offs during the programming phase of its PPBE process: 

Integrated priority lists. NNSA's policy for the programming phase 
stipulates that each of NNSA's nine program offices is to annually 
develop an integrated priority list that ranks program activities 
according to their importance for meeting mission requirements. These 
lists provide senior NNSA and DOE managers with an understanding of 
how various funding scenarios would affect program activities. 
Specifically, these lists rank the priority of program activities that 
are within anticipated appropriation levels--which are of the highest 
priority--as well as those that NNSA would fund if the appropriation 
levels were sufficiently high to do so. For example, the program 
activity listed last on an integrated priority list would be the first 
to forgo funding if appropriation levels are lower than anticipated. 
Conversely, these lists define program activities--unfunded 
requirements--that would be funded if appropriation levels are higher 
than anticipated. NNSA instructions for the programming phase 
stipulate that the agency is to combine the nine program office-
developed integrated priority lists into four that correspond to the 
four congressional appropriations NNSA receives. Three of the 
integrated priority lists--those of the Offices of the Administrator, 
Defense Nuclear Nonproliferation, and Naval Reactors--correspond 
directly to specific appropriations,[Footnote 22] but NNSA does not 
combine the six others that represent activities funded by the Weapons 
Activities appropriation into a single integrated priority list. NNSA 
officials stated that these six others represent separate and distinct 
mission areas and only the Administrator can decide on the resource 
trade-offs among them. Of the six program offices funded by the 
Weapons Activities appropriation, Defense Programs accounts for a 
large majority--approximately 82 percent--of the funding requested in 
NNSA's fiscal year 2013 budget submission to Congress. According to 
officials in NNSA's Office of Management and Budget, the Administrator 
is responsible for deciding on how to allocate resources across 
program offices. However, these decisions are not documented or 
reflected in a single integrated priority list for program activities 
funded by the Weapons Activities appropriation. By not combining these 
lists, NNSA is limiting the formal documentation available to inform 
DOE about how various Weapons Activities appropriation funding 
scenarios would affect the program activities conducted by these six 
program offices. Specifically, because these six lists are not 
integrated, it is unclear which program activities would be affected 
by changes to appropriation levels or which programs across the six 
lists are of the highest priority. 

Requirements and Resources Assessments. During the 2010 and 2011 
programming cycles, NNSA used its Requirements and Resources 
Assessment process to independently assess the need to conduct new 
program activities and unfunded requirements. According to the NNSA 
handbook for this process, officials in NNSA's Office of Management 
and Budget review program offices' budget submissions for activities 
that are either above anticipated funding levels or are for new 
activities. For these assessments, officials are to analyze specific 
factors related to these activities, such as their need for meeting 
agency priorities and the reasonableness of the assumptions used to 
produce their budget estimates. The objective of this process is to 
ensure that new program activities and unfunded requirements are 
needed to meet NNSA priorities. For example, according to officials in 
NNSA's Office of Management and Budget, the use of the Requirements 
and Resources Assessment process was a contributing factor in reducing 
the amount of unfunded program activities included in NNSA's budget 
from approximately $1 billion for fiscal year 2012 to approximately 
$80 million for fiscal year 2013. Furthermore, draft NNSA guidance 
states that the process has identified inconsistencies in the quality 
of estimates and the level of insight and understanding program 
managers have regarding the fidelity of the estimates supporting their 
budgets. According to officials in NNSA's Office of Management and 
Budget, this process is a simple and effective tool for providing 
management with additional information on the need to conduct proposed 
new program activities or unfunded requirements. However, these 
officials also stated that this process is time-consuming and would 
not be practical or efficient to apply to the entirety of NNSA program 
activities because it was designed to assess program components rather 
than entire programs; they added that other types of program reviews 
or validations would be better suited for conducting program needs 
analysis on an enterprise-wide basis. Additionally, because the NNSA 
Office of Integration and Assessments, which was responsible for 
conducting these assessments, was dissolved in 2010, officials in 
NNSA's Office of Management and Budget told us that they may 
discontinue the use of Requirements and Resources Assessment process 
in future programming cycles. Furthermore, in the current austere 
budget environment, they do not foresee any programs proposing 
activities that are either new or above anticipated funding levels. 
Therefore, the continued use of this process in future programming 
cycles is uncertain. However, we believe that NNSA has demonstrated 
this process can be an important tool for assessing the necessity to 
fund certain activities in order to meet its mission requirements. 

Enterprise Portfolio Analysis Tool. NNSA's Office of Defense Programs 
is implementing a data system--the Enterprise Portfolio Analysis Tool--
designed to provide a consistent framework for managing the PPBE 
process within Defense Programs, which accounts for 54 percent, or 
$6.2 billion, of the President's $11.5 billion fiscal year 2013 budget 
request for NNSA. As we testified in February 2012, a tool such as 
this could help NNSA obtain the basic data it needs to make informed 
management decisions, determine return on investment, and identify 
opportunities for cost saving.[Footnote 23] Currently, this tool 
includes a mechanism to identify when decisions on resource trade-offs 
must be made if, for example, M&O contractor-developed budget 
estimates for program requirements exceed the budget targets NNSA 
provided for those programs. Additionally, the tool is to incorporate 
Defense Programs' common work activity structure--known as its work 
breakdown structure--to facilitate an analysis of consistent budget 
data from across the NNSA enterprise. Specifically, the tool may allow 
Defense Programs managers to compare the budget estimates for 
analogous activities across the nuclear security enterprise regardless 
of which M&O contractor or program is conducting them. Furthermore, 
Defense Programs officials stated that they eventually plan to use 
this tool to compare budget estimates of program activities with the 
amounts the programs ultimately expended, but they said that the 
introduction of this capability is not imminent. According to Defense 
Programs and M&O contractor officials, the implementation of this tool 
is placing an additional labor burden on NNSA M&O contractors because 
of the quantity of historical budget data that need to be entered into 
it. However, according to Defense Programs officials, once these 
initial historical data are entered, the M&O contractors will need to 
annually update the system with the most recent year's data. 

NNSA Does Not Use Capabilities That Were Previously Implemented or 
Partially Developed to Support Its Programming Activities: 

NNSA no longer has an independent analytical capability to perform 
such functions as reviewing proposals for program activities and 
verifying cost estimates. In addition, since 2009, the NNSA 
Administrator has not formally documented his decisions on resource 
trade-offs at the close of the programming phase in the AFR. 
Furthermore, NNSA has not completed cost estimating guidance to assist 
NNSA program managers in identifying reliable M&O contractor practices 
for estimating costs for operations and sustainment activities. By not 
using these capabilities, NNSA has reduced its ability to decide on 
resource trade-offs because it has not enhanced, made formal, or 
implemented capabilities that it had already, to varying degrees, 
developed or used. 

Independent Analytical Capability: 

The DOE Inspector General and GAO, recommended in 2003 and 2007, 
respectively, that NNSA establish an independent analysis unit to 
perform such functions as reviewing proposals for program activities 
and verifying cost estimates.[Footnote 24] NNSA agreed with these 
recommendations and, in 2009, instituted the Office of Integration and 
Assessments to identify, analyze, assess, and present to senior NNSA 
management options for managing its programs and making decisions on 
resource trade-offs. The specific responsibilities of this office 
included analyzing program performance, evaluating programming and 
funding alternatives, and assessing the implementation and 
effectiveness of process improvement initiatives. Furthermore, this 
office managed the Requirements and Resources Assessment process 
during the 2010 programming cycle. However, NNSA disbanded the office 
in 2010, 18 months after it was formally created. NNSA officials also 
told us that it was never properly staffed, which thereby limited its 
effectiveness. 

In the memorandum establishing the Office of Integration and 
Assessments, NNSA stated that it expected the office, in conjunction 
with DOE's Office of Cost Analysis, to provide DOD-like analytical 
resources across NNSA.[Footnote 25] Since then, however, DOE has also 
eliminated its Office of Cost Analysis. With both of these offices now 
gone, neither NNSA nor DOE has independent cost assessment or program 
evaluation capabilities analogous to those of DOD. In contrast, 
because NNSA's Office of Naval Reactors is organized as a separate 
entity within NNSA reporting both to NNSA and the U.S. Navy, unlike 
the rest of NNSA, it is subject to the Navy's independent analytical 
resources, such as assessments by the Naval Sea Systems Command's 
Office of Cost Engineering and Industrial Analysis and the Naval 
Center for Cost Analysis, which conduct independent reviews and 
analyses of program cost estimates. Furthermore, DOD has an Office of 
Cost Assessment and Program Evaluation, which has a similar function 
but with a purview that extends across DOD, including the Navy. These 
layers of independent review approximate NNSA's vision for independent 
analysis, as described in the memorandum establishing the Office of 
Integration and Assessments. Following the dissolution of the Office 
of Integration and Assessments in 2010, NNSA's Office of Defense 
Programs created the Office of Analysis and Evaluation to conduct 
similar program review functions. However, the capabilities of this 
office are limited by several factors. For example, because the office 
is positioned within Defense Programs, it does not have purview to 
conduct analysis on any of NNSA's other programs, which, in total, 
constitute nearly half of the agency's budget request for fiscal year 
2013. Additionally, according to Defense Programs officials, this 
office does not have the capability to self-initiate reviews of 
programs but rather is instructed by Defense Programs' management on 
what activities to assess, thereby limiting the office's independence. 
Furthermore, NNSA officials from this office stated that properly 
staffing the office remains a challenge because many qualified 
individuals left DOE and NNSA when they eliminated the Offices of Cost 
Analysis and Integration and Assessments, respectively. 

Even though NNSA has had difficulty in maintaining an agencywide 
independent analytical capability, NNSA's Principal Deputy 
Administrator told us that NNSA remains supportive of the concept of 
an independent analytical unit to conduct assessments of programs 
agencywide. However, senior NNSA officials told us that creating and 
developing the capabilities of such an office would be difficult in 
the current budget environment and that therefore NNSA has no current 
plans to institute such a capability. 

Administrator's Final Recommendations: 

The NNSA Administrator has not formally documented his decisions on 
resource trade-offs at the close of the programming phase in the AFR 
since 2009, which is inconsistent with NNSA policy and instructions. 
When issued, this document articulated the Administrator's rationale 
and methodology for deciding on resource trade-offs during the 
programming phase of the PPBE process--which one senior official in 
NNSA's Office of Management and Budget described as an important 
component of the PPBE process--to support in his budget proposal to 
DOE and to better facilitate NNSA's participation in DOE's Strategic 
Resources Review. According to senior NNSA officials, the 
Administrator considered the AFR to be a useful management tool but 
decided to discontinue issuing it because of concerns that its 
contents, which are predecisional Executive Branch deliberative 
material and embargoed from public release by OMB Circular A-11, could 
be leaked and thereby reduce the flexibility of DOE and OMB in making 
final decisions regarding the President's Budget. Instead of the AFR, 
the Administrator now develops an internal document called 
"Administrator's Preliminary Decisions," which is not required in NNSA 
policy, guidance, or instructions; contains more generalized 
information; and does not have the rationales, methodologies, and 
justifications for decision making on resource trade-offs that were 
previously incorporated into the AFR. 

Issuance of Supplemental Guide on Cost Estimating: 

NNSA developed a draft guide--the Program Managers' Guide to 
Understanding and Reviewing Cost Estimates for Operations and 
Sustainment Activities--in 2010 to assist NNSA program managers in 
identifying reliable M&O contractor practices for estimating costs for 
operations and sustainment activities--activities not related to 
construction; according to this guide, these activities constitute 
approximately 80 percent of NNSA's annual budget. This guide was also 
created to supplement the information provided in NNSA's Business 
Operating Procedure 50.005, Establishment of an Independent Cost 
Estimate Policy and interim Cost Estimating Guide 50.005, which 
identifies best practices for preparing cost estimates.[Footnote 26] 
However, the Program Managers' Guide to Understanding and Reviewing 
Cost Estimates for Operations and Sustainment Activities was largely 
completed but never finalized before NNSA dissolved the Office of 
Integration and Assessments, which had drafted the guide, and NNSA 
officials said the agency has no plans to complete or issue it. 
According to officials in NNSA's Office of Management and Budget, NNSA 
drafted this guide because it recognized that supplemental information 
focused on operations and sustainment activities cost estimates--the 
development of which, according to this guide, are not governed by any 
specific NNSA guidance or processes--could enhance the tools available 
to program managers in evaluating cost estimates and how they are 
translated into budget estimates. The objective of the guide was to 
provide an instructive document to facilitate program managers' 
ability to understand what constitutes a rigorous process for ensuring 
quality operations and sustainment cost estimates on an ongoing basis 
and evaluate the reasonableness those estimates. This guide also 
defined key components of cost estimating to clarify the 
responsibilities and expectations of NNSA program managers and 
included instructions for how NNSA program managers can assess the 
quality of budget estimates submitted by M&O contractors. NNSA 
officials with Defense Programs' Office of Analysis and Evaluation 
told us that additional guidance on how to assess the costs of 
operations and sustainment activities could enhance program managers' 
ability to assess the reliability and credibility of cost estimates. 

Conclusions: 

NNSA has established a formal four-phase PPBE process that uses short-
and long-term planning to define program priorities and match them to 
available budgetary resources. However, DOE and NNSA have not taken 
adequate steps to make this process as effective and efficient as 
possible. In particular, DOE Order 130.1, which defines DOE's 
provisions for budget activities, references outdated terminology and 
organizations that no longer exist within the department, leading to 
confusion regarding the order's applicability and requirement for 
implementation. As a result, NNSA believes that the order has expired 
and that it is not required to adhere to its provisions. By not 
adhering to these provisions, NNSA is reducing the credibility of its 
budget proposals. Moreover, NNSA's process for developing budget 
estimates continues to rely heavily on its M&O contractors to develop 
budget estimates without an effective, thorough review of the validity 
of those estimates. Without thorough reviews by site and headquarters 
program offices of budget estimates, NNSA cannot have a high level of 
confidence in its budget estimates or in its ability to make informed 
decisions on resource trade-offs and to enhance the credibility and 
reliability of its budget. Furthermore, NNSA's formal budget 
validation review process does not sufficiently ensure the credibility 
and reliability of NNSA's budget, primarily because of deficiencies in 
the timing of these reviews. Also, without a formal mechanism to 
evaluate the status of recommendations made during previous budget 
validation reviews, NNSA is limited in its ability to measure any 
progress M&O contractors or programs have made to their budget 
estimating processes. 

NNSA has reduced its ability to decide on resource trade-offs because 
it has not enhanced, made formal, or implemented capabilities that it 
has already, to varying degrees, developed or used. In particular, 
NNSA does not follow its instructions for preparing an integrated 
priority list for each congressional appropriation, as it does not 
combine the six priority lists that represent activities funded by the 
Weapons Activities appropriation into a single integrated list. By not 
combining these lists into a single integrated priority list, NNSA is 
limiting the formal documentation available to inform DOE which 
program activities would be affected by changes to this appropriation. 
Moreover, NNSA instituted and then disbanded an independent analytic 
capability that would provide it with an independent cost assessment 
or evaluation capabilities of the reasonableness and affordability of 
various programs and projects proposed by NNSA offices. By disbanding 
its independent analytical capability, NNSA is losing its ability to 
improve its cost-estimating capabilities and better ensure that its 
project cost estimates are credible and reliable. Because of the 
fiscal constraints in the current budget environment, it is all the 
more critical that NNSA have the capability to conduct independent 
cost analyses to enhance its ability to make the most effective and 
efficient resource decisions on resource trade-offs. Despite previous 
recommendations that DOE's Inspector General made in 2003, and that we 
made in 2007, to institute an independent analytical capability to 
assess programs throughout all of NNSA, NNSA continues to lack such a 
function. Not having this capability could preclude NNSA from making 
the best decisions about what activities to fund and whether they are 
affordable. In addition, NNSA may cease using its Requirements and 
Resources Assessment process--which is intended to provide some 
independent analysis of new program activities and unfunded 
requirements--in future PPBE budget cycles because it does not 
anticipate program proposals for new activities or unfunded 
requirements. By not retaining this process, NNSA would lose an 
important tool for assessing the necessity to fund certain activities 
in order to meet its mission requirements. 

Furthermore, NNSA no longer follows its policy to issue the AFR. 
Without a formal document, NNSA and DOE have no formal record of the 
Administrator's rationale and methodology for deciding on resource 
trade-offs during the programming phase of the PPBE process. We 
recognize that NNSA needs to hold confidential, internal budgetary and 
resource trade-off deliberations; however, we do not believe that this 
need supersedes NNSA policy or the benefits provided by documented 
decision making during programming, which one senior NNSA official 
described to us an important component in NNSA's PPBE process. Not 
issuing the AFR (or some similarly precise documentation) places the 
Administrator in conflict with official NNSA policy and with an 
important PPBE precept--the importance of transparency. 

Finally, NNSA developed draft guidance in 2010 to assist NNSA program 
managers in identifying reliable M&O contractor practices for 
estimating costs for operations and sustainment activities. Such 
guidance would better equip NNSA program managers to more accurately 
evaluate the reasonableness of cost estimates, but this guidance is in 
draft form and NNSA has no plans to complete and issue it. Without 
such guidance, NNSA program managers are limited in their ability to 
assess the reliability and credibility of budget estimates. 

Recommendations for Executive Action: 

To enhance NNSA's ability to better ensure the validity of its budget 
submissions, and to decide on resource trade-offs, we recommend that 
the Secretary of Energy take the following seven actions: 

* Direct the DOE Office of Budget to formally evaluate DOE Order 130.1 
and revise as necessary, and communicate any revisions to the NNSA 
Administrator so that the agency will have updated provisions for 
assessing the quality of its budget estimates. 

* Direct the Administrator of NNSA to: 

- Develop a formal process, or amend its budget validation review 
process, to ensure that all budget estimates are thoroughly reviewed 
by site and headquarters program offices, and that these reviews are 
timed to inform NNSA, DOE, OMB, and congressional budget decisions. 

- Once this process is developed, incorporate a formal mechanism to 
evaluate the status of recommendations made during previous budget 
validation reviews so that NNSA can measure M&O contractors' and 
programs' progress in responding to deficiencies with their budget 
estimates. 

- Combine the integrated priorities lists for each of the program 
offices funded within the Weapons Activities appropriation into a 
single integrated priorities list, as stipulated in NNSA instructions, 
to better inform DOE which program activities would be affected by 
changes to this appropriation. 

- Reinstitute an independent analytical capability to provide senior 
decision makers with independent program reviews, including an 
analysis of different options for deciding on resource trade-offs, and 
facilitate NNSA making the best decisions about what activities to 
fund and whether they are affordable. As part of this capability, 
formally retain the Requirements and Resources Assessment process to 
review proposed new activities and unfunded requirements. 

- Reinstitute the issuance of the Administrator's Final 
Recommendations to document the Administrator's rationale and 
methodology for deciding on resource trade-offs to support in his 
budget proposal to DOE and to better facilitate NNSA's participation 
in DOE's budget process. 

- Complete and formally issue the Program Managers' Guide to 
Understanding and Reviewing Cost Estimates for Operations and 
Sustainment Activities so that program managers will be better 
equipped to evaluate the reasonableness of cost estimates. 

Agency Comments and Our Evaluation: 

We provided DOE with a draft of this report for its review and 
comment. In its written comments, NNSA, responding on behalf of DOE, 
provided observations on the report's findings and stated that it 
generally agreed in principle with six of our seven recommendations 
and did not concur with one. NNSA did not concur with our 
recommendation to combine the integrated priorities lists for all 
program offices funded by the Weapons Activities appropriation into a 
single integrated priorities list, as is stipulated by NNSA 
instructions for the programming phase of PPBE. NNSA agrees that the 
integrated priorities lists are a useful tool to facilitate NNSA and 
DOE decision-making. However, NNSA states that it believes reaching 
management consensus on a single integrated priorities list for these 
program offices would be a difficult, time consuming process and that 
its current approach for deciding on resource trade-offs is effective 
and efficient. We acknowledge that NNSA uses a variety of tools in 
addition to integrated priorities lists to conduct programming 
activities, but we continue to believe that combining the integrated 
priorities lists for all program offices funded by the Weapons 
Activities appropriation could enhance the agency's ability to support 
its decisions on resource trade-offs for DOE consideration during the 
Strategic Resources Review. However, NNSA stated in its comments that 
it would consider the development of more robust integrated priority 
lists if circumstances require changes to its current approach. 

NNSA further acknowledged that aspects of its PPBE process could be 
improved but disagreed with our report's characterization of its 
budget estimate review processes as not being thorough. NNSA commented 
that it believes that our conclusions overemphasize some procedural 
areas for potential improvement, without accurately considering the 
cumulative effectiveness of NNSA's PPBE process as a whole. We 
continue to believe that the agency's processes for reviewing budget 
estimates are not sufficiently thorough to ensure the credibility and 
reliability of those estimates and do not meet the provisions defined 
in DOE Order 130.1. Specifically, the reviews conducted by site and 
headquarters program office officials are informal and undocumented, 
and NNSA's budget validation review process--the agency's formal 
process for assessing M&O contractor-and program-developed budget 
estimates--does not assess the accuracy of budget estimates and is 
conducted for a small portion of the agency's annual budget. NNSA's 
letter is reproduced in appendix II. 

NNSA also provided technical comments, which we incorporated 
throughout the report as appropriate. 

We are sending this report to the Secretary of Energy, the 
Administrator of NNSA, the appropriate congressional committees, and 
other interested parties. In addition, the report is available at no 
charge on the GAO website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-3841 or aloisee@gao.gov. Contact points for 
our Office of Congressional Relations and Public Affairs may be found 
on the last page of this report. Key contributors to this report are 
listed in appendix III. 

Signed by: 

Gene Aloise: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

The objectives of our review were to determine (1) the current 
structure of the National Nuclear Security Administration's (NNSA) 
planning, programming, budgeting, and evaluation (PPBE) process; (2) 
the extent to which NNSA reviews its budget estimates; and (3) how 
NNSA decides on resource trade-offs in its PPBE process. 

To determine the current structure of NNSA's PPBE process, we reviewed 
the NNSA policies and other headquarters-developed instructions and 
guidance documents that define how the process is designed to 
function. We also reviewed program-specific PPBE documentation from 
the Offices of Defense Programs, Defense Nuclear Nonproliferation, and 
Naval Reactors; these three offices correspond to NNSA's primary 
missions and collectively account for approximately 85 percent of the 
President's fiscal year 2013 NNSA budget submission to Congress. We 
also interviewed officials from NNSA's Office of Management and 
Budget, which is responsible for managing NNSA's PPBE process, as well 
as the offices of Defense Programs, Defense Nuclear Nonproliferation, 
and Naval Reactors to discuss how NNSA's PPBE process is designed to 
function. 

To determine the extent to which NNSA reviews its budget estimates, we 
reviewed DOE Order 130.1 and NNSA policies, instructions, and guidance 
that define how such reviews are to be conducted. We also analyzed 
documentation of the formal budget validation reviews conducted by 
NNSA for the last five review cycles, as well as the results of two 
NNSA workgroups that evaluated the budget validation review process. 
Furthermore, we interviewed officials involved in the development, 
oversight, or execution of NNSA budget estimate reviews from the NNSA 
Offices of the Administrator, Management and Budget, Defense Programs, 
Defense Nuclear Nonproliferation, Naval Reactors, and Acquisition and 
Project Management; the site offices for Los Alamos, Sandia, and the Y-
12 National Security Complex, and the Naval Reactors Laboratory Field 
Office; DOE officials from the Office of Budget; and M&O contractor 
officials from Los Alamos and Sandia National Laboratories, the Y-12 
National Security Complex, and Bettis Atomic Power Laboratory. 
[Footnote 27] Because NNSA's Office of Naval Reactors is organized as 
a separate entity within NNSA reporting both to NNSA and the U.S. 
Navy, we also met with Navy officials from its Offices of Financial 
Management and Budgeting, and Cost Engineering and Industrial Analysis. 

To determine how NNSA decides on resource trade-offs, we reviewed NNSA 
policies, instructions, and guidance for its programming process. 
Based on these documents, we identified the tools that NNSA uses, or 
has used, to assist NNSA management in deciding on resource trade-offs 
and reviewed documentation of how these tools were applied by program 
offices and NNSA management during the programming phases of previous 
PPBE cycles. We also interviewed officials from the NNSA Offices of 
the Administrator, Management and Budget, Defense Programs, Defense 
Nuclear Nonproliferation, Naval Reactors to discuss how they decide 
on, and document, resource trade-offs. 

We conducted this performance audit from July 2011 to July 2012 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. 

[End of section] 

Appendix II: Comments from the U.S. Department of Energy: 

NNSA: 
Department of Energy: 
National Nuclear Security Administration: 
Washington, DC 20585: 

July 12, 2012: 

Mr. Gene Aloise: 
Director: 
Natural Resources and Environment: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Aloise: 

The National Nuclear Security Administration (NNSA) appreciates the 
opportunity to review the Government Accountability Office's (GAO) 
draft report, GAO-12-806, "Modernizing The Nuclear Security 
Enterprise: NNSA's Review of Budget Estimate and Decisions on Resource
Trade-offs Need Strengthening." 

Overall, NNSA agrees that there are selected areas within our 
Planning, Programming, Budgeting and Evaluation (PPBE) process that 
can continue to be improved. However, we believe the report 
misrepresents the status of NNSA's budgeting and estimating processes, 
and draws invalid conclusions based on the information provided during 
the audit. For example, in the GAO Highlights section, it states that 
"NNSA does not thoroughly review budget estimates before incorporating 
them into its proposed annual budget." It then goes on to conclude that
"Instead, NNSA relies on informal, undocumented reviews of such 
estimates and NNSA's budget validation review process..." On the 
contrary, NNSA has demonstrated a wide range of review activities 
including the formal budget validations (which are fully documented), 
as well as formal reviews by site and Headquarters organizations which 
are a part of successive levels of review that go into validating 
NNSA's budget submissions. However, as certain parts of the process 
are not documented fully and/or are conducted at varying levels of the 
organization, GAO has chosen to label the reviews as not being 
thorough. We believe this conclusion as stated, overemphasizes some 
procedural areas for potential improvement, without accurately 
considering the cumulative effectiveness of NNSA's PPBE process as a 
whole. 

As a result, NNSA has not fully concurred with the GAO's 
recommendations. In most cases we agree with the desired outcomes the 
auditors are trying to achieve; however, we have identified alternate 
actions and/or clarification of NNSA's position. Our formal response 
to the initial recommendations (including a response to the one 
recommendation directed to the Department of Energy), are captured in 
the enclosure to this letter. In addition, we have provided technical 
and general comments to further enhance the factual accuracy and 
balance of the report. 

If you have any questions related to this response, please contact 
Dean Childs, Director, Office of Management Controls and Assurance, at 
301-903-1341. 

Sincerely, 

Signed by: 
Cynthia A. Lersten: 
Associate Administrator for Management and Budget: 

Enclosure: 

[End of letter] 

Initial Response to Recommendations for GAO Report GAO-12-806, 
"Modernizing The Nuclear Security Enterprise: NNSA's Review of Budget 
Estimate and Decisions on Resource Trade-offs Need Strengthening" 

To enhance NNSA's ability to better ensure the validity of its budget 
submissions, and to decide on resource trade-offs, we recommend: 

Recommendation 1: 

DOE Office of Budget formally evaluate Doe Order 130.1 and revise as 
necessary, and communicate any revisions to the NNSA Administrator so 
that the agency will have updated provisions for assessing the quality 
of its budget estimates. 

Management Response: 

DOE Office of Budget will evaluate and revise ORDER 130.1 as 
necessary, and will communicate revisions to NNSA as a appropriate. 

Recommendation 2: 

NNSA Develop a formal process, or amend its budget validation review 
process, to ensure that all budget estimates are thoroughly reviewed 
by site and headquarters program offices, and that these reviews are 
timed to inform the NNSA, DOE, OMB and congressional budget decisions. 

Management Response: Agree in Principle. 

NNSA agrees with the GAO that budget estimates should be thoroughly 
reviewed by site and headquarters program offices and that these 
reviews are timed to inform the NNSA, DOE, OMB and congressional 
budget decisions. We believe this recommendation is closely tied to
Recommendation #1 where the formal policy and process to review all 
budget estimates is rooted in expired DOE Order 130.1. NNSA stands 
ready to work with the Department to develop and implement any new 
guidance that applies across the board. However, considering the 
limited resources both at Headquarters and the sites, NNSA believes 
that it meets the spirit and intent of this recommendation and current 
guidelines, although we recognize there is room for further 
improvement, especially the formality and documentation of the reviews 
to ensure consistency across the NNSA. As such, NNSA considers this 
specific recommendation closed but will continue to identify and 
incorporate on-going process improvements as appropriate. 

It is also important to understand that contractor involvement in the 
Federal budget process is intentionally limited. Budget estimates are 
provided by the contractors early on in the process to help Federal 
program managers decide on the work to be done, but due to the 
confidentiality of deliberations leading to the President's budget 
decisions, contractors are not involved in changes to estimates 
throughout the budget process. The process used to develop the 
estimates is validated by a team lead by Headquarters. It would be 
inappropriate for Federal employees to let contractors review the 
implications of potential budget scenarios because it would inform 
contractors of pre-decisional Executive Branch deliberations before 
the President transmits his funding request to Congress. Once an 
appropriation is received, and the contractors have a better 
understanding of the total funding expected at their site including 
Work for Others, overhead rates are established, and the estimates for 
the specific work orders and tasks assigned to the contractor are 
refined. 

Recommendation 3: 

Once this process is developed, [NNSAJ incorporate a formal mechanism 
to evaluate the status of recommendations made during previous budget 
validation reviews so that NNSA can measure M&O contractors' and 
programs' progress in responding to deficiencies with their budget 
estimates. 

Management Response: Agree in Principle. 

NNSA agrees that a formal mechanism to evaluate the status of 
recommendations made during previous budget validation reviews is a 
process improvement that should be implemented and will do so in the 
next budget validation cycle. Estimated completion date is May 31, 
2013. 

However, NNSA does not agree with the first part of the recommendation 
which states, "Once this process is developed..." As noted in our 
response to recommendation #2 and as validated by the GAO audit work, 
NNSA has a formal process in place for reviewing budget estimates and 
does not need to develop a new process prior to implementing this 
recommendation. Therefore, NNSA recommends this part of the 
recommendation be deleted, which would change our management response 
to agree. 

Recommendation 4: 

NNSA combine the integrated priority lists for each of the program 
offices funded within the Weapons Activities appropriation into a 
single integrated priority list, as stipulated in NNSA instructions, 
to better inform DOE and OMB which program activities would be 
affected by changes to this appropriation. 

Management Response: Non-Concur. 

NNSA agrees with GAO's findings that Integrated Priority Lists (IPLs) 
are a useful management tool to facilitate NNSA and DOE decision-
making (OMB does not receive the IPLs). However, NNSA believes that 
IPLs are only meaningful when program offices prioritize activities 
within their mission areas. The Weapons Activities (WA) appropriation 
is an account that funds multiple missions and, during Programming, 
these mission areas compete for funding from all NNSA funding sources, 
not just the WA appropriation. NNSA believes that its current approach 
toward decision-making is effective and efficient, and reaching 
consensus on an integrated IPL for the WA account would be difficult 
and time consuming with marginal value-added. However, the NNSA is 
continually looking for ways to improve PPBE and, if circumstances 
require changes to our approach, we would certainly consider the 
development of more robust IPLs. NNSA will also update its 
instructions to clarify its objectives and approach toward IPLs.
No additional action is planned at this time. 

Recommendation 5: 

NNSA reinstitute an independent analytical capability to provide 
senior decision makers with independent program reviews, including an 
analysis of different options for deciding on resource trade-offs, and 
facilitate NNSA making the best decisions about what activities to 
fund and whether they are affordable. As part of this capability, 
formally retain the Requirements and Resource Assessment process to 
review proposed new activities and unfunded requirements. 

Management Response: Agree in Principle. 

NNSA agrees that we must harness sufficient analytical capability to 
ensure decision-makers are armed with accurate and reliable 
information with which to make critical budget decisions. However, 
NNSA is re-thinking its original approach to implementing this 
capability (i.e. a separately staffed office) to ensure that all key 
analytical activities are integrated and leveraged where appropriate 
to provide the most effective and efficient analysis solution. As 
such, NNSA is currently evaluating the needs and requirements for 
analytical capabilities to include consideration of: a) the definition 
and level of independence required; b) the impact of current 
organizational changes on NNSA's budget analysis requirements and 
responsibilities; c) the sufficiency of existing analytical processes 
to support decision making, including trade-space analysis; and d) the 
impact of automated system enhancements (e.g. the EPAT system) in 
supporting decision-making. Upon completion of this review, NNSA will 
select the best option given resource constraints. Estimated 
completion date is December 30, 2012. 

Recommendation 6: 

NNSA reinstitute the issuance of the Administrator's Final 
Recommendations to document the Administrator's rationale and 
methodology for deciding on resource trade-offs to support his budget 
proposal to DOE and to better facilitate NNSA's participation in DOE's 
budget process. 

Management Response: Agree in Principle. 

NNSA decided to discontinue the formal issuance of the Administrators 
Final Recommendations (AFR) document because of concerns that its 
contents, which are pre-decisional Executive Branch deliberative 
material, embargoed from public release by OMB Circular A-11, could be 
leaked and thereby reduce the flexibility of the Department and OMB in 
making final decisions regarding the President's Budget. The AFR was 
replaced with the Administrator's Preliminary Decisions (APD), an 
internal document that is not signed out by NNSA leadership. NNSA 
believes that its current approach is both prudent and effective. 
However, NNSA agrees with the GAO that the content of the APD document 
could be improved and NNSA will take the necessary steps to do so 
during the next PPBE cycle. In addition, NNSA policy documents will be 
updated to reflect this approach. Estimated completion date is May 31, 
2013. 

Recommendation 7: 

NNSA complete and formally issue the Program Managers' Guide to 
Understanding and Reviewing Cost Estimates for Operations and 
Sustainment Activities so that program managers will be better 
equipped to evaluate the reasonableness of cost estimates. 

Management Response: Agree In Principle. 

NNSA agrees that it is critical to ensure that cost estimators and 
program managers alike have the guidance and tools necessary to 
effectively execute their responsibilities for developing cost 
estimates and translating those estimates in to reliable budget 
estimates. However, during the time the referenced draft document was 
conceptualized, numerous cost estimating documents were also being 
developed by the Office of Acquisition and Project Management, which 
have since been issued and may negate the need for a supplemental 
guide. NNSA will review the existing cost estimating guides/tools 
currently in use and determine if additional guidance is necessary. 
Estimated completion date is March 1, 2013. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Gene Aloise, (202) 512-3841, or aloisee@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Dan Feehan (Assistant 
Director), Robert Baney, Matthew Tabbert, and Eugene Wisnoski made 
significant contributions to this report. Cheryl Peterson, Jeremy 
Sebest, Rebecca Shea, Carol Herrnstadt Shulman, and Kiki 
Theodoropoulos provided technical assistance. 

[End of section] 

Footnotes: 

[1] These sites include three national laboratories, four production 
plants, and one test site. 

[2] GAO, Modernizing the Nuclear Security Enterprise: New Plutonium 
Research Facility at Los Alamos May Not Meet All Mission Needs, 
[hyperlink, http://www.gao.gov/products/GAO-12-337] (Washington, D.C.: 
Mar. 26, 2012). 

[3] GAO, National Nuclear Security Administration: Observations on 
NNSA's Management and Oversight of the Nuclear Security Enterprise, 
[hyperlink, http://www.gao.gov/products/GAO-12-473T] (Washington, 
D.C.: Feb. 16, 2012). 

[4] GAO, Nuclear Weapons: Improved Management Needed to Implement 
Stockpile Stewardship Program Effectively; [hyperlink, 
http://www.gao.gov/products/GAO-01-48] (Washington, D.C.: Dec. 14, 
2000), and GAO, Nuclear Weapons: NNSA and DOD Need to More Effectively 
Manage the Stockpile Life Extension Program, [hyperlink, 
http://www.gao.gov/products/GAO-09-385] (Washington, D.C.: Mar. 2, 
2009). 

[5] NNSA was created by the National Defense Authorization Act for 
Fiscal Year 2000 (Pub. L. No. 106-65, § 3201 et seq. [1999]). 

[6] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach 
Could Improve Major Weapon System Program Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-08-619] (Washington, D.C.: July 2, 
2008), and GAO, DOD Weapon Systems: Missed Trade-off Opportunities 
During Requirements Reviews, [hyperlink, 
http://www.gao.gov/products/GAO-11-502] (Washington, D.C.: June 16, 
2011). 

[7] GAO, National Nuclear Security Administration: Additional Actions 
Needed to Improve Management of the Nation's Nuclear Programs, 
[hyperlink, http://www.gao.gov/products/GAO-07-36] (Washington, D.C.: 
Jan. 19, 2007); and National Nuclear Security Administration's 
Planning, Programming, Budgeting, and Evaluation Process, DOE/IG-0614, 
August 2003. 

[8] Six other NNSA offices are responsible for carrying out additional 
program activities: Management and Budget, Emergency Operations, 
Defense Nuclear Security, Chief Information Officer, Counterterrorism 
and Counterproliferation, and Acquisition and Project Management. 

[9] We selected a nonprobability sample of NNSA sites based on the 
levels of funding they receive from NNSA for the programs included in 
the scope of our work. Because we used a nonprobability sample, the 
results we obtained from these sites are not generalizable across the 
nuclear security enterprise; however, they did provide us with 
specific examples of how NNSA conducts PPBE activities at the site 
level. 

[10] The Weapons Activities appropriation also funds the Emergency 
Operations, Defense Nuclear Security, Chief Information Officer, 
Counterterrorism and Counterproliferation, and Acquisition and Project 
Management program offices. 

[11] Management and operating contracts are agreements under which the 
government contracts for the operation, maintenance, or support, on 
its behalf, of a government-owned or -controlled research, 
development, special production, or testing establishment wholly or 
principally devoted to one or more of the major programs of the 
contracting federal agency. Federal Acquisition Regulation, 48 C.F.R. 
§ 17.601. 

[12] NNSA's Office of PPBE is organizationally located within the NNSA 
Office of Management and Budget. 

[13] According to NNSA officials, site office officials conduct these 
informal reviews of the budget estimates for activities funded by the 
Weapons Activities appropriation because they are developed by the M&O 
contractors. Conversely, they stated that the budget estimates for the 
Defense Nuclear Nonproliferation Appropriation are developed by 
program federal employees at NNSA Headquarters. For these activities, 
contractors compete for projects based upon submitted proposals and 
funding availability. 

[14] DOE Notice 251.45 extended DOE Order 130.1 until May 1, 2003. 

[15] GAO, Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[16] [hyperlink, http://www.gao.gov/products/GAO-01-48], [hyperlink, 
http://www.gao.gov/products/GAO-07-36], and [hyperlink, 
http://www.gao.gov/products/GAO-12-337]. 

[17] The criteria used by validation review teams to assess the 
reasonableness of budget estimation processes include completeness, 
consistency, reasonableness, and documentation. 

[18] The Engineering Campaign provides modern components and 
engineering science capabilities to ensure the safety, security, 
reliability, and performance of the stockpile. The Nuclear 
Counterterrorism Incident Response program responds to and mitigates 
nuclear and radiological incidents worldwide. The Global Threat 
Reduction Initiative works in the United States and internationally to 
convert research reactors and medical isotope production processes 
from the use of highly enriched uranium, remove and dispose of excess 
nuclear and radiological materials, and protect high-priority nuclear 
and radiological sources from theft. The Fissile Materials Disposition 
program supports the downblending of highly enriched uranium that is 
excess to U.S. defense needs and is planning to assist Russia in 
modifying reactors in that country. 

[19] The Readiness Campaign identifies, develops, and deploys new or 
enhanced processes, technologies and capabilities to meet current 
nuclear weapon design, production, and dismantlement needs and provide 
quick response to national security requirements. 

[20] The Elimination of Weapons Grade Plutonium Production program 
seeks to facilitate the closure of Russian nuclear reactors by 
building or refurbishing replacement fossil fuel plants. 

[21] The Nonproliferation and Verification Research and Development 
program's mission is to conduct needs-driven research, development, 
testing, and evaluation of new technologies that are intended to 
strengthen the United States' ability to prevent and respond to 
nuclear, chemical, and biological attacks. 

[22] According to NNSA officials, the integrated priority list 
developed by NNSA's Office of Management and Budget includes all 
activities funded by the Office of the Administrator appropriation. 

[23] [hyperlink, http://www.gao.gov/products/GAO-12-473T]. 

[24] DOE/IG-0614 and [hyperlink, 
http://www.gao.gov/products/GAO-07-36]. 

[25] DOE established the Office of Cost Analysis in order to improve 
the department's cost-estimating capabilities and better ensure that 
its project cost estimates are reliable by providing a new independent 
cost-estimating function for the department. 

[26] The information included in NNSA's interim Cost Estimating Guide 
50.005 is applicable to all cost estimating activities, but one senior 
official in NNSA's Office of Acquisition and Project Management told 
us that it is most useful for construction and capital asset projects, 
which are land, structures, equipment, and information technology used 
by the federal government and have an estimated useful life of 2 years 
or more, as well as strategic assets that are unique physical or 
intellectual property that is of long-term or ongoing value to an 
enterprise. 

[27] We selected a nonprobability sample of NNSA sites based on the 
levels of funding they receive from NNSA for the programs included in 
the scope of our work. Because we used a nonprobability sample, the 
results we obtained from these sites are not generalizable across the 
nuclear security enterprise; however, they did provide us with 
specific examples of how NNSA conducts PPBE activities at the site 
level. 

[End of section] 

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