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Testimony: 

Before the Subcommittee on Energy and Water Development, Committee on 
Appropriations, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 2:00 p.m. EST:
Wednesday, March 4, 2009: 

Department Of Energy: 

Contract and Project Management Concerns at the National Nuclear 
Security Administration and Office of Environmental Management: 

Statement of Gene Aloise, Director:
Natural Resources and Environment: 

GAO-09-406T: 

GAO Highlights: 

Highlights of GAO-09-406T, a testimony before the Subcommittee on 
Energy and Water Development, Committee on Appropriations, House of 
Representatives. 

Why GAO Did This Study: 

The Department of Energy (DOE) manages over 100 construction projects 
with estimated costs over $90 billion and 97 nuclear waste cleanup 
projects with estimated costs over $230 billion. DOE has about 14,000 
employees to oversee the work of more than 93,000 contractor employees. 
Due to DOE’s history of inadequate oversight and management of 
contractors, GAO continues to include DOE contract and project 
management on its list of government programs at high risk for fraud, 
waste, abuse, and mismanagement. This testimony discusses (1) recent 
GAO work on contract and project management within two of DOE’s largest 
program offices—the National Nuclear Security Administration (NNSA) and 
the Office of Environmental Management (EM), (2) preliminary results of 
ongoing GAO work on project management at NNSA’s Mixed Oxide Fuel 
Fabrication Facility (MFFF) project at the Savannah River Site in South 
Carolina, and (3) actions needed by NNSA and EM to improve contract and 
project management. 

GAO’s reports over the past 3 years have contained nearly 60 
recommendations collectively calling for DOE to ensure that project 
management requirements are consistently followed, to improve oversight 
of contractors, and to strengthen accountability. While DOE has 
generally agreed with these recommendations and some actions have been 
taken, the majority are still open and awaiting action by DOE. 

What GAO Found: 

Since 2006, GAO has issued 12 reports examining DOE’s contract and 
project management. Two of these reports examined the performance of 
DOE’s largest construction projects—nearly all of which are managed by 
NNSA or EM—and EM’s largest nuclear waste cleanup projects. These 
reports documented that the cost increases and schedule delays that 
have occurred for most of these projects have been the result of 
inconsistent application of project management tools and techniques on 
the part of both DOE and its contractors. Specifically, GAO reported in 
March 2007 that 8 of the 10 major NNSA and EM construction projects 
that GAO reviewed had exceeded the initial cost estimates for 
completing these projects—in total, DOE added nearly $14 billion to 
these initial estimates. GAO also reported that 9 of the 10 major 
construction projects were behind schedule—in total, DOE added more 
than 45 years to the initial schedule estimates. In particular, the 
Waste Treatment Plant project at the Hanford Site had exceeded its 
original cost estimate by almost $8 billion and experienced schedule 
delays of over 8 years. GAO also reported in September 2008 that 9 of 
the 10 major EM cleanup projects GAO reviewed had experienced cost 
increases and schedule delays—in total, DOE estimated that it needed an 
additional $25 billion to $42 billion to complete these cleanup 
projects over the initial cost estimates and an additional 68 to 111 
more years than initially estimated. In addition, GAO has issued a 
number of other reports over the past 3 years on specific projects 
which found similar management problems with NNSA and EM. 

Preliminary results from GAO’s ongoing review of NNSA’s MFFF project 
indicate project management concerns continue. The facility, which is 
designed to convert 34 metric tons of surplus weapons-grade plutonium 
into fuel for use in commercial nuclear reactors, is estimated to cost 
about $4.8 billion and begin operations in 2016. One of the key 
management systems NNSA uses to measure and report on the project’s 
progress—the project’s earned value management system—depends on a 
reliable schedule that specifies, for example, when the project’s work 
activities will occur, how long they will take, and how they relate to 
one another. GAO has previously identified nine key practices necessary 
for developing a reliable schedule. However, the project’s schedule, in 
addition to other problems, does not adhere to a key practice that is 
fundamental to having a sufficiently reliable schedule—specifically, 
MFFF project staff have not conducted a risk analysis on their current 
schedule using statistical techniques. DOE officials responded that 
they plan on conducting a risk analysis of the schedule for the MFFF 
project during the summer of 2009. Consequently, NNSA cannot adequately 
state its level of confidence in meeting the MFFF project’s completion 
date, and NNSA’s schedule for the project therefore may not be 
reliable. GAO’s work on this project is continuing, and GAO intends to 
work with NNSA to resolve these issues. 

View [hyperlink, http://www.gao.gov/products/GAO-09-406T] or key 
components. For more information, contact Gene Aloise at (202) 512-3841 
or aloisee@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss GAO's work on contract and 
project management at the Department of Energy (DOE). As you are aware, 
we issue a high-risk status report at the start of each new Congress to 
help in setting congressional oversight agendas and to promote a more 
effective, credible, and results-oriented government. GAO designated 
DOE's contract management as a high-risk area in 1990--the first year 
the high-risk list was published. DOE, the largest civilian contracting 
agency in the federal government, relies primarily on contractors to 
carry out its diverse missions and operate its laboratories and other 
facilities--about 90 percent of its annual budget is spent on 
contracts. DOE has about 14,000 employees to oversee work performed 
under contract by more than 93,000 contractor employees. DOE's record 
of inadequate management and oversight of its contractors resulted in 
our initial high-risk designation for contract management and, as noted 
in our January 2009 high-risk report, [Footnote 1] DOE's contract 
management, including both contract administration and project 
management, continues to be at high risk for fraud, waste, abuse, and 
mismanagement. 

The two largest program offices within DOE--the National Nuclear 
Security Administration (NNSA) and the Office of Environmental 
Management (EM)--continue to experience significant problems completing 
projects on time and on budget. Together, these two offices account for 
about $14 billion annually--roughly 60 percent of DOE's annual budget. 
Strong congressional oversight will continue to be important as NNSA 
embarks on a major initiative costing tens of billions of dollars to 
modernize the nation's aging nuclear weapons infrastructure and EM 
continues to spend billions of dollars to build facilities to treat and 
dispose of millions of gallons of radioactive waste. Further scrutiny 
is warranted because EM is the recipient of approximately $6 billion in 
additional funding under the recently enacted American Recovery and 
Reinvestment Act. 

In the nearly 3 years since we testified before this Subcommittee on 
the Hanford Site's waste treatment plant, one of DOE's most technically 
complex and largest construction projects, we have issued 12 reports-- 
9 at the request of this Subcommittee--examining DOE's largest 
construction and cleanup projects.[Footnote 2] These projects are 
projected to cost, in total, roughly $127 billion and take decades to 
complete. Nearly all of these projects are managed by NNSA or EM. These 
reports detail a litany of contract and management problems that have 
led to, in many cases, massive cost increases and significant schedule 
delays. 

My testimony today discusses (1) our work over the past 3 years on NNSA 
and EM contract and project management of large projects, (2) the 
preliminary results of our ongoing review of the cost and schedule 
performance and the status of licensing on a major NNSA construction 
project--the nearly $5 billion Mixed Oxide Fuel Fabrication Facility 
(MFFF) at the Savannah River Site in South Carolina, and (3) actions 
needed by NNSA and EM to improve contract and project management. 
Today's statement is based on published GAO products and ongoing work 
for this Subcommittee. In conducting our work on the MFFF project, we 
met with NNSA and contractor officials, visited the MFFF construction 
site in South Carolina, reviewed relevant project documents such as 
project execution plans and performance reports, examined the 
reliability of the project's earned value management data, and examined 
the reliability of the project's schedule. We conducted the performance 
audit work that supports this statement in accordance with generally 
accepted government auditing standards. Those standards require that we 
plan and perform the audit to obtain sufficient, appropriate evidence 
to produce 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 statements today. 

GAO's Recent Work Shows That NNSA's and EM's Projects Continue to Be at 
High Risk for Fraud, Waste, Abuse, and Mismanagement: 

Over the past 3 years, we have reported on significant problems with 
NNSA's and EM's ability to manage major projects within cost and 
schedule targets. Two of these reports examined the performance of 
DOE's largest construction projects--nearly all of these projects are 
managed by NNSA or EM--and EM's largest nuclear waste cleanup projects. 
The estimated cost of completing these construction projects is about 
$27 billion, and the estimated cost of completing these cleanup 
projects is about $100 billion. In summary, these reports documented 
that the cost increases and schedule delays that have occurred for most 
of these projects have been the result of inconsistent application of 
project management tools and techniques on the part of both DOE and its 
contractors. These reports identified issues, including inadequate 
systems for measuring contractor performance, approval of construction 
activities before final designs were sufficiently complete, ineffective 
project reviews, and ineffective development and integration of the 
technologies used in these projects. 

Regarding DOE's largest construction projects, we reported in March 
2007 that 8 of the 10 major NNSA or EM construction projects we 
reviewed had exceeded the initial cost estimates for completing these 
projects--in total, DOE added nearly $14 billion to these initial 
estimates.[Footnote 3] We also reported that 9 of the 10 projects were 
behind schedule--in total, DOE added more than 45 years to the initial 
schedule estimates. These projects included: 

* the MFFF, the Pit Disassembly and Conversion Facility, the Tritium 
Extraction Facility, and the Salt Waste Processing Facility at the 
Savannah River Site; 

* the Waste Treatment and Immobilization Plant at the Hanford Site; 

* the Highly Enriched Uranium Materials Facility at the Y-12 National 
Security Complex in Tennessee; 

* the National Ignition Facility at the Lawrence Livermore National 
Laboratory in California; and: 

* the Depleted Uranium Hexafluoride 6 Conversion Facilities at DOE 
sites in Kentucky and Ohio. 

Cost increases ranged from $122 million for the Tritium Extraction 
Facility to $7.9 billion for the Waste Treatment and Immobilization 
Plant, and schedule delays ranged from almost 2 years for the Highly 
Enriched Uranium Materials Facility to over 11 years for the Pit 
Disassembly and Conversion Facility, with seven projects having 
schedule delays of 2 years or more. Although external factors, such as 
additional security and safety requirements, contributed to cost growth 
and delays, we found that cost growth and schedule slippage in many of 
the DOE projects we reviewed occurred principally because of 
ineffective project management oversight on the part of DOE and poor 
project management on the part of DOE's contractors. We also found 
that, while DOE requires final project designs to be sufficiently 
complete before beginning construction, it has not systematically 
ensured that the critical technologies reflected in these designs have 
been demonstrated to work as intended prior to the start of 
construction. 

For example, we found that NNSA's National Ignition Facility project 
had over $1 billion in cost overruns and years of schedule delays, in 
large part because of poor management of the development and 
integration of the technologies used in the project's designs. The 
requirements for the National Ignition Facility--the use of 192 high- 
power laser beams focused on a single target in a "clean room" 
environment--had not been attempted before on such a large scale. 
According to the NNSA project director, early incorrect assumptions 
about the original facility design and the amount of work necessary to 
integrate the technologies and assemble the technical components 
contributed to about half of the project's cost increases and schedule 
delays. 

In addition, we found that EM's Salt Waste Processing Facility project 
at the Savannah River Site had cost overruns and project delays, in 
part due to inadequate communication between officials on site and at 
DOE headquarters. This project, which is designed to treat radioactive 
waste from activities at the Savannah River Site, was originally 
scheduled to begin operating in 2009 but has been delayed twice and is 
not now projected to begin operations until as late as November 2013. 
We found that the Defense Nuclear Facilities Safety Board had expressed 
concerns in June 2004, 5 months after the preliminary design was 
started, that the facility design might not ensure nuclear wastes would 
be adequately contained in the event of earthquakes. However, project 
managers did not address these concerns for 17 months and continued to 
move forward with the existing project design. According to the DOE 
project director, better and more timely discussions between site 
officials and headquarters to decide on the actions needed to 
adequately address these safety and security requirements might have 
hastened resolution of the problem, and up to 1 year of design rework 
might have been avoided. Project delays added $180 million to the total 
project cost. EM officials now require a more rigorous safety analysis 
earlier in the decision-making process. 

In regard to EM's largest cleanup projects, in September 2008, we 
reported that 9 of the 10 major EM cleanup projects had experienced 
cost increases and schedule delays--in total DOE estimated that it 
needed an additional $25 billion to $42 billion to complete these 
cleanup projects over the initial cost estimates and an additional 68 
to 111 more years than initially estimated.[Footnote 4] These projects 
included: 

* the solid waste stabilization and disposition project at the Idaho 
National Laboratory in Idaho; 

* the nuclear facility decontamination and decommissioning project at 
the Oak Ridge Reservation in Tennessee; 

* the nuclear material stabilization and disposition project and the 
radioactive liquid tank stabilization and disposition project at the 
Savannah River Site in South Carolina; 

* the soil and water remediation project at the Los Alamos National 
Laboratory in New Mexico; and: 

* the nuclear material stabilization and disposition project, the solid 
waste stabilization and disposition project, the soil and water 
remediation project, and the radioactive liquid tank stabilization and 
disposition project at the Hanford Site in Washington. 

Cost increases ranged from $139 million for the Los Alamos soil and 
water remediation project to more than $9 billion for the Hanford 
radioactive liquid tank stabilization and disposition project. Schedule 
delays ranged from 2 years for the Hanford nuclear material 
stabilization and disposition project to 15 years for two additional 
projects at the Hanford Site--the solid waste stabilization and 
disposition project and the soil and water remediation project. We 
found that these changes arose primarily because the initial baseline 
estimates for these projects made schedule assumptions that were not 
linked to technical or budget realities. Also, most of the 10 projects 
had cost increases and schedule delays because the previous baselines 
(1) had not fully foreseen the type and extent of cleanup needed, (2) 
assumed that construction projects needed to carry out the cleanup work 
would be completed on time, or (3) had not expected substantial 
additional work scope. We also found that DOE had not effectively used 
management tools--including independent project baseline reviews, 
performance information systems, guidance, and performance goals--to 
help oversee major cleanup projects' scope of work, costs, and 
schedules. 

For example, the initial schedule estimate for a solid waste 
disposition project at DOE's Idaho National Laboratory was influenced 
by an EM-wide effort to accelerate the office's cleanup work by 
creating new, earlier completion dates for key cleanup projects and for 
closing entire sites to reduce the public health and environmental 
risks posed by the waste at these sites. To meet its 2012 accelerated 
completion date, the laboratory assumed its waste treatment plant could 
process waste at a rate that was more than 50 percent higher than the 
rate demonstrated at the time EM established the baseline. Because the 
plant had only recently begun operating, project staff lacked 
confidence that they could meet the processing rate. Moreover, the 
independent team reviewing the baseline reported that the rate was 
optimistically high. Nevertheless, EM proceeded with the initial 
baseline and attempted to meet the optimistic rate by providing the 
contractor with performance incentives, which proved ineffective. When 
the waste treatment plant did not meet that processing rate, EM revised 
its baseline, deferring 4 years of cleanup work, which added about $450 
million to the project. 

In addition, we found that cost increases and schedule delays occurred 
because EM project officials did not accurately anticipate site or 
safety conditions. For example, an EM project at the Oak Ridge 
Reservation in Tennessee to decontaminate and decommission 
approximately 500 facilities and remediate 160 sites experienced cost 
increases of $1.2 billion and a 9-year delay in its completion date 
from 2008 to 2017. These occurred because project officials did not 
accurately anticipate the site conditions or the types of work 
activities necessary to safely conduct the work, despite multiple 
estimates generated by the contractor, DOE, and the Army Corps of 
Engineers. In this case, a 1940s-era building was far more contaminated 
and deteriorated than first estimated. As a result, DOE changed its 
cleanup plan and implemented a more extensive--and therefore more 
expensive--approach to tearing down the building. In addition, after a 
worker fell through a weakened floor, the contractor had to reinforce 
the building's structure so that contaminated equipment could be 
removed safely. 

In addition to the findings in these two reports, we have issued other 
reports over the past 3 years that also found similar project 
management problems with NNSA and EM. We issued eight other reports 
that found poor scheduling practices, incomplete cost estimates, poor 
communication between DOE headquarters and its field locations, and 
other issues related to ineffective project management. 

* In January 2007, we reported that management problems within NNSA 
persisted, in part, because NNSA and DOE had not fully agreed on how 
NNSA should function within the department as a separately organized 
agency.[Footnote 5] This lack of agreement resulted in organizational 
conflicts that have inhibited effective operations. We also identified 
the following areas where additional management improvements were 
needed: (1) regarding project management, we found that NNSA had not 
developed a project management policy, implemented a plan for improving 
its project management efforts, or fully shared project management 
lessons learned between its sites; (2) regarding program management, we 
found that NNSA had not identified all of its program managers or 
trained them to a certified level of competency; and (3) regarding 
financial management, we found that NNSA had not established an 
independent analysis unit to review program budget proposals, confirm 
cost estimates, and analyze budget alternatives. 

* In May 2007, we reported that despite a number of efforts by DOE to 
improve its approach to project management, the department's overall 
performance on projects had not substantially improved.[Footnote 6] DOE 
had set a performance goal of having 90 percent of its ongoing projects 
being managed within a 10 percent variance of cost and schedule 
baseline targets. However, we found that since October 2002, when DOE 
began reporting monthly project performance data, the department had 
achieved its performance goals for construction projects only about one-
third of the time. Also, we found that since February 2004, EM's 
cleanup projects met cost and schedule performance goals only about one-
fifth of the time. 

* In June 2007, we reported that DOE's preliminary estimate of the cost 
to address the five waste sites where transuranic wastes are buried was 
about $1.6 billion in 2006 dollars, but the estimate was likely to 
increase for several reasons.[Footnote 7] For example, DOE's estimate 
reflected the costs of leaving most waste under earthen barriers-- 
typically the least expensive approach. If DOE was required to retrieve 
substantial portions of these wastes, costs would increase 
dramatically. In addition, DOE's estimate excluded unknown costs, such 
as the cost of disposing of wastes off-site, if necessary. For example, 
DOE's lifecycle cost estimate to remove transuranic wastes buried near 
the Columbia River at the Hanford Site could triple once options and 
costs for disposal are fully evaluated. 

* Also, in June 2007, we reported that EM did not follow key 
departmental project management requirements for its Bulk Vitrification 
Demonstration Project, which aimed to demonstrate an alternative 
technology to treat low-activity radioactive waste at the Hanford Site. 
[Footnote 8] Specifically, early in the demonstration, EM did not 
conduct key internal and external reviews that would have evaluated the 
project's design, procurement, and construction management approaches 
to identify potential problems and address them before starting 
construction. In addition, EM did not fully develop or update key 
project planning documents, such as a project execution plan, an 
acquisition plan, and a validated estimate of project costs. Without 
these management tools, EM initially overlooked a number of technical 
and safety problems facing the demonstration project, such as 
uncertainties about the quality of the glass formed using the bulk 
vitrification technology and inadequate systems to shield and confine 
radioactive material from workers and the environment. These problems 
contributed to an increase in estimated project costs from $62 million 
to $230 million, a 6-year delay, and an increase to the estimated life- 
cycle cost of a future full-scale bulk vitrification facility from 
about $1.3 billion to $3 billion. The project was subsequently 
suspended, after an investment of $100 million and several years of 
effort. 

* In July 2007, we reported that EM had performed little or no review 
of contractor invoices or supporting documents for millions of dollars 
in charges billed to DOE each month by the contractor for the 
construction of the Waste Treatment Plant at the Hanford Site.[Footnote 
9] Given the multibillion-dollar cost and schedule overruns already 
experienced with the project, the need for close, ongoing review of 
invoiced transactions and support is particularly compelling. We found 
that the contractor's invoices provided little detail as to the items 
purchased, contrary to federal acquisition regulations and contract 
requirements. EM officials chose to rely primarily on another agency 
(the Department of Defense's Defense Contract Audit Agency) to review 
and approve the contractor's corporate-wide financial systems, which EM 
officials believed allowed them to rely on the contractor's systems 
with little or no DOE oversight. In addition, EM relied primarily on 
its contractor to review and validate subcontractor charges without 
having a process in place to assess whether its contractor was properly 
carrying out its subcontractor oversight responsibility. EM's heavy 
reliance on others, with little oversight of its own, exposed the 
hundreds of millions of dollars it spent annually on the project to an 
unnecessarily high risk of improper payments. We also concluded that 
the property control weaknesses we identified, coupled with the lack of 
DOE oversight, created an environment in which property could be lost 
or stolen. 

* In May 2008, we reported that NNSA's project to manufacture pits--the 
key component in a nuclear warhead that starts the nuclear chain 
reaction--at the Los Alamos National Laboratory in New Mexico did not 
include all associated costs in its estimates and did not establish a 
clear schedule for manufacturing pits.[Footnote 10] NNSA established a 
goal in 2002 to create the capability to manufacture 10 pits per year 
starting in 2007 and to deliver a single war reserve pit--a pit that 
can be used in the U.S. nuclear weapons stockpile--for the W88 nuclear 
warhead in 2007. NNSA estimated that this effort would cost about $1.55 
billion between fiscal years 2001 and 2007. NNSA subsequently reported 
that it was implementing the project under budget by spending $1.29 
billion on the pit manufacturing effort between fiscal years 2001 and 
2007. However, NNSA's cost estimate did not include costs for a variety 
of activities that directly and indirectly supported the pit 
manufacturing project. These support activities, which included 
scientific experiments as well as facility operations and maintenance, 
totaled over $1 billion. In addition, we found that NNSA did not 
establish a clear, consistent schedule of the number of war reserve 
pits it planned to produce. Specifically, although NNSA produced eight 
W88 war reserve pits in 2007--exceeding the goal established in 2002 of 
one W88 war reserve pit in 2007--other NNSA documents (including budget 
requests to the Congress) called for a goal of delivering 10 W88 war 
reserve pits per year starting in 2007. 

* In June 2008, we reported that EM had made limited progress in its 
cleanup efforts at the Hanford Site, specifically in transferring waste 
from its 149 single-shell tanks to its larger and more robust double- 
shell tanks.[Footnote 11] We also reported that DOE's cost estimate for 
retrieving tank waste was significantly understated and that DOE's 2003 
estimate of $4.3 billion increased to $7.6 billion. Under the current 
Tri-Party Agreement--an agreement between DOE, the state of Washington, 
and the Environmental Protection Agency laying out milestones for the 
cleanup efforts at Hanford--DOE agreed to empty all 149 single-shell 
tanks at the site by September 2018 and close them by 2024. To date, 
only seven tanks have been emptied, and at its present rate of 
progress--currently only one tank is emptied per year--DOE will not 
achieve the milestones it committed to in the Tri-Party Agreement. DOE 
has since acknowledged that (1) the start of waste treatment operations 
will be delayed by at least 8 years (from 2011 to 2019) and (2) the 
completion of waste treatment operations may be delayed by at least 29 
years (from 2018 to 2047). 

* In July 2008, we reported that EM's cost estimate for processing 23 
metric tons of highly enriched uranium and plutonium at a facility at 
the Savannah River Site known as H-Canyon did not include all 
associated costs.[Footnote 12] Although EM estimated that it would cost 
approximately $4.3 billion to $4.6 billion to process these materials 
through 2019, this estimate did not include several costs EM expects 
will be associated with canyon operations. According to EM and NNSA 
officials, more highly enriched uranium and plutonium may be identified 
as suitable for processing using H-Canyon, which could delay its 
shutdown and increase its operational costs. In addition, the estimate 
did not include the cost of storing and treating the waste generated by 
H-Canyon operations through 2019--approximately $253 million, according 
to EM. We also reported that completion of some safety and 
environmental analyses have been delayed by as much as 2 years, and any 
further delays could affect canyon operations. 

Preliminary Results From Ongoing GAO Work on NNSA's Mixed Oxide Fuel 
Fabrication Facility Indicate Continuing Project Management Concerns: 

We are currently reviewing the cost and schedule performance and the 
status of licensing the MFFF construction project at the Savannah River 
Site, a nearly $5 billion facility that is designed to convert 34 
metric tons of surplus weapons-grade plutonium into fuel for use in 
commercial nuclear reactors.[Footnote 13] In accordance with DOE's 
project management requirements, NNSA is using an earned value 
management system to measure and report the progress of the MFFF 
construction project. One critical component of an effective earned 
value management system is the development of a reliable schedule. For 
example, a schedule should specify when the project's set of work 
activities will occur, how long they will take, and how they relate to 
one another. The schedule not only provides a roadmap for the 
systematic execution of a program but also provides the means by which 
to gauge progress, identify and address potential problems, and promote 
accountability. 

GAO has identified nine practices associated with effective schedule 
estimating: (1) capturing key activities, (2) sequencing key 
activities, (3) establishing the duration of key activities, (4) 
assigning resources to key activities, (5) integrating key activities 
horizontally and vertically, (6) establishing the critical path for key 
activities, (7) identifying "float time" between key activities, (8) 
performing a schedule risk analysis, and (9) distributing reserves to 
high-risk activities.[Footnote 14] Most of these practices are also 
identified by DOE in a recent guidance document on establishing 
performance baselines.[Footnote 15] 

Although the MFFF project's schedule was developed using many of these 
practices, the schedule, in addition to other problems, does not employ 
a key practice that is fundamental to having a sufficiently reliable 
schedule--specifically, MFFF project staff have not conducted a risk 
analysis on their current schedule using statistical techniques. 
Consequently, NNSA cannot adequately state its level of confidence in 
meeting the MFFF project's completion date of October 2016, and NNSA's 
schedule for the project therefore may not be reliable. In addition, we 
found that the schedule does not fully employ other key practices that 
are also fundamental to having a sufficiently reliable schedule. For 
example, another key scheduling practice--the proper sequencing of key 
activities--requires that project officials logically schedule key 
activities in the order that they are to be carried out to establish a 
basis for guiding work and measuring progress. However, based on the 
preliminary results of our analysis, the MFFF project only partially 
satisfied this practice. Specifically, we found that almost 1,500 of 
the over 24,000 activities listed in the MFFF project's schedule were 
not sequenced in a logical manner. As a result, we have reduced 
confidence in the ability of the MFFF project's schedule to accurately 
reflect how the MFFF project will be executed (see app. II for the 
preliminary results of our analysis of the MFFF project's schedule). 

As recently as December 2008, the MFFF project's earned value 
management system indicated that the project was meeting its cost and 
schedule goals. However, correcting weaknesses in the MFFF project's 
schedule is important because the project is currently spending 
approximately $25 million a month and plans to spend an additional $3.6 
billion before the project is completed in 2016. In our view, 
correction of these schedule reliability concerns now could avert 
potentially expensive schedule overruns in the future and will enable 
NNSA to more effectively measure the performance status of the MFFF 
project. NNSA and contractor officials told us that they recognize some 
of the problems we identified with the MFFF project's schedule and are 
planning to make improvements. Specifically, project officials told us 
that they plan to conduct a schedule risk analysis during the summer of 
2009. Our work on this project is continuing, and we intend to work 
with NNSA to resolve these issues to the extent possible. In the 
meantime, we would urge caution in using the results from the MFFF 
project's earned value management reports until these issues have been 
addressed. 

In addition to our work on the MFFF project, we are also currently 
conducting work on DOE cost estimating for this Subcommittee. 
Specifically, we are examining cost estimating practices within NNSA, 
EM, and DOE's Office of Science by selecting a sample of large projects 
and comparing their cost estimates with DOE policy and GAO-identified 
best practices. We also plan to identify any impediments that DOE may 
face in developing reliable, credible, and comprehensive cost 
assessments. Finally, we are evaluating the cleanup strategy DOE is 
using to address the 56 million gallons of radioactive and hazardous 
waste at the Hanford Site in Washington State. Specifically, we will be 
evaluating the legal, technical, and risk issues affecting this multi- 
billion, decades-long project. We plan to update the Subcommittee on 
the status of our work later this spring. 

Action Underway and Needed to Reduce Project Vulnerability to Fraud, 
Waste, Abuse, and Mismanagement: 

In the nearly 3 years since we last testified before this Subcommittee, 
the reports we have issued on projects across NNSA and EM have 
contained nearly 60 recommendations. These recommendations collectively 
call for DOE to ensure that project management requirements are 
consistently followed, to improve oversight of contractors, and to 
strengthen accountability for performance. Although DOE's responses to 
these recommendations have been largely positive, and some corrective 
actions have been taken, most of the recommendations are still open, 
awaiting action by the department. 

DOE has also taken steps to better understand weaknesses underlying its 
contract and project management.[Footnote 16] First, with input from 
headquarters and field officials with contract and project management 
expertise, it completed a root-cause analysis. In this analysis, DOE 
found a number of problems, including: 

* Risks associated with projects are not objectively identified, 
assessed, communicated, or managed through all phases of planning and 
execution. 

* Ineffective project oversight has resulted in failure to identify 
project performance issues in a timely manner. 

* DOE is not effectively executing its ownership role on some large 
projects with respect to overseeing and managing contracts and 
contractors. 

On the basis of its root-cause analysis, DOE also completed a 
comprehensive corrective action plan to address these weaknesses, with 
both near-term and long-term goals and objectives. 

Because of these actions, and other improvements made over the past 
decade to establish a more structured and disciplined approach to 
contract and project management, we believe that DOE as a whole has 
substantially met three of the five criteria necessary for removal from 
our high-risk list. Specifically, DOE has (1) demonstrated strong 
commitment and leadership; (2) demonstrated progress in implementing 
corrective measures; and (3) developed a corrective action plan that 
identifies root causes, effective solutions, and a near-term plan for 
implementing the solutions. 

Two criteria remain for removal from our high-risk list: having the 
capacity (people and resources) to resolve the problems and monitoring 
and independently validating the effectiveness and sustainability of 
corrective measures. Regarding capacity, DOE's April 2008 root-cause 
analysis report recognized as one of its top 10 issues a lack of an 
adequate number of federal contracting and project personnel with the 
appropriate skills (such as cost estimating, risk management, and 
technical expertise) to plan, direct, and oversee project execution. 

Monitoring and validating the effectiveness and sustainability of 
corrective measures will take time to demonstrate. Our recent work has 
shown that the Office of Science--DOE's third-largest program office-- 
has demonstrated strong performance in meeting cost and schedule 
targets.[Footnote 17] Specifically, we found that, of 42 Office of 
Science projects completed or under way from fiscal years 2003 through 
2007, more than two-thirds were completed or being carried out within 
original cost and schedule targets. The office's ability to generally 
achieve projects' original cost and schedule targets is due in part to 
factors often considered fundamental to effective project management: 
leadership commitment to meeting cost and schedule targets; appropriate 
management and technical expertise; and disciplined, rigorous 
implementation of project management policies. The Office of Science's 
frequent independent reviews, in particular, were cited by DOE 
officials as a key reason for its project management performance. Until 
NNSA and EM can demonstrate these principles and consistently complete 
projects on time and within budget, it will be difficult to demonstrate 
that any of the corrective actions taken have achieved their desired 
effect--improved cost and schedule performance. Until that time, both 
NNSA and EM will remain vulnerable to fraud, waste, abuse, and 
mismanagement and therefore will remain on our high-risk list. 

Agency Comments and Our Evaluation: 

We provided a draft of our preliminary findings with respect to the 
MFFF project's schedule to NNSA for its review and comment. Overall, 
NNSA and project officials agreed with many of our specific findings, 
including the fact that project officials have not conducted a risk 
analysis of the current project schedule using statistical techniques. 
However, NNSA officials did not agree with our conclusion that, as a 
result of some of the shortcomings we identified, the project's 
schedule may not be reliable. In addition, project officials told us 
that they planned to conduct a schedule risk analysis on the current 
schedule during the summer of 2009. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
respond to any questions that you or Members of the Subcommittee may 
have at this time. 

GAO Contacts and Staff Acknowledgments: 

For further information on this testimony, please contact me at (202) 
512-3841 or aloisee@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this statement. Ryan T. Coles, Daniel Feehan, and Janet Frisch, 
Assistant Directors; Alison Bawden; Carole Blackwell; James Espinoza; 
Stephanie Gaines; Eugene Gray; Jason Holliday; Chris Pacheco; Tom 
Perry; Leslie Pollock; Steve Rossman; Peter Ruedel; and Carol 
Herrnstadt Shulman made key contributions to this testimony. 

[End of section] 

Appendix I: Related GAO Products: 

High Risk Series: An Update. [hyperlink, 
http://www.gao.gov/products/GAO-09-271]. Washington, D.C.: January 22, 
2009. 

Nuclear Waste: Action Needed to Improve Accountability and Management 
of DOE's Major Cleanup Projects. [hyperlink, 
http://www.gao.gov/products/GAO-08-1081]. Washington, D.C.: September 
26, 2008. 

Nuclear Material: DOE Needs to Take Action to Reduce Risks Before 
Processing Additional Nuclear Material at the Savannah River Site's H- 
Canyon. [hyperlink, http://www.gao.gov/products/GAO-08-840]. 
Washington, D.C.: July 25, 2008. 

Nuclear Waste: DOE Lacks Critical Information Needed to Assess Its Tank 
Management Strategy at Hanford. [hyperlink, 
http://www.gao.gov/products/GAO-08-793]. Washington, D.C.: June 30, 
2008. 

Department of Energy: Office of Science Has Kept Majority of Projects 
within Budget and on Schedule, but Funding and Other Challenges May 
Grow. [hyperlink, http://www.gao.gov/products/GAO-08-641]. Washington, 
D.C.: May 30, 2008. 

Nuclear Weapons: NNSA Needs to Establish a Cost and Schedule Baseline 
for Manufacturing a Critical Nuclear Weapons Component. [hyperlink, 
http://www.gao.gov/products/GAO-08-593]. Washington, D.C.: May 23, 
2008. 

Hanford Waste Treatment Plant: Department of Energy Needs to Strengthen 
Controls over Contractor Payments and Project Assets. [hyperlink, 
http://www.gao.gov/products/GAO-07-888]. Washington, D.C.: July 20, 
2007. 

Nuclear Waste: DOE Should Reassess Whether the Bulk Vitrification 
Demonstration Project at Its Hanford Site Is Still Needed to Treat 
Radioactive Waste. [hyperlink, http://www.gao.gov/products/GAO-07-762]. 
Washington, D.C.: June 12, 2007. 

Nuclear Waste: Plans for Addressing Most Buried Transuranic Wastes Are 
Not Final, and Preliminary Cost Estimates Will Likely Increase. 
[hyperlink, http://www.gao.gov/products/GAO-07-761]. Washington, D.C.: 
June 22, 2007. 

Department of Energy: Consistent Application of Requirements Needed to 
Improve Project Management. [hyperlink, 
http://www.gao.gov/products/GAO-07-518]. Washington, D.C.: May 11, 
2007. 

Department of Energy: Major Construction Projects Need a Consistent 
Approach for Assessing Technology Readiness to Help Avoid Cost 
Increases and Delays. [hyperlink, 
http://www.gao.gov/products/GAO-07-336]. Washington, D.C.: March 27, 
2007. 

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.: January 19, 
2007. 

[End of section] 

Appendix II: GAO's Preliminary Analysis of the Mixed Oxide Fuel 
Fabrication Facility Project's Schedule: 

Table 1: Extent to Which the MFFF Project's Schedule Used Key 
Practices: 

Practice: Capturing key activities; 
Explanation: The schedule should reflect all key activities as defined 
in the program's work breakdown structure, including activities to be 
performed by both the government and its contractors; 
Satisfied?: Yes; 
GAO analysis: The project's schedule reflects both government and 
contractor activities, such as the building and testing of software 
components, as well as key milestones for measuring progress. 

Practice: Sequencing key activities; 
Explanation: The schedule should be planned so that it can meet 
critical program dates. To meet this objective, key activities need to 
be logically sequenced in the order that they are to be carried out. In 
particular, activities that must finish prior to the start of other 
activities (predecessor activities), as well as activities that cannot 
begin until other activities are completed (successor activities), 
should be identified. This helps ensure that interdependencies among 
activities that collectively lead to the accomplishment of events or 
milestones can be established and used as a basis for guiding work and 
measuring progress; 
Satisfied?: Partially; 
GAO analysis: Of 24,289 total activities, 1,474 are not logically 
sequenced--that is, the schedule does not identify interdependencies 
among work activities that form the basis for guiding work and 
measuring progress. 

Practice: Establishing the duration of key activities; 
Explanation: The schedule should realistically reflect how long each 
activity will take to execute. In determining the duration of each 
activity, the same rationale, historical data, and assumptions used for 
cost estimating should be used. Durations should be as short as 
possible and have specific start and end dates. The schedule should be 
continually monitored to determine when forecasted completion dates 
differ from the planned dates; this information can be used to 
determine whether schedule variances will affect downstream work; 
Satisfied?: Partially; 
GAO analysis: 1,064 of the 24,289 total activities have durations of 
over 200 days. Durations should be as short as possible and have 
specific start and end dates to ensure the objective measurement of 
progress. 

Practice: Assigning resources to key activities; 
Explanation: The schedule should reflect what resources (e.g., labor, 
material, and overhead) are needed to do the work, whether all required 
resources will be available when needed, and whether any funding or 
time constraints exist; 
Satisfied?: Yes; 
GAO analysis: The schedule reflects $3.2 billion in resource costs. 

Practice: Integrating key activities horizontally and vertically; 
Explanation: The schedule should be horizontally integrated, meaning 
that it should link the products and outcomes associated with other 
sequenced activities. These links are commonly referred to as 
"handoffs" and serve to verify that activities are arranged in the 
right order to achieve aggregated products or outcomes. The schedule 
should also be vertically integrated, meaning that traceability exists 
among varying levels of activities and supporting tasks and subtasks. 
Such mapping or alignment among levels enables different groups to work 
to the same master schedule; 
Satisfied?: Yes; 
GAO analysis: The program has provided evidence that the schedule is 
sufficiently integrated. 

Practice: Establishing the critical path for key activities; 
Explanation: Using scheduling software, the critical path--the longest 
duration path through the sequenced list of key activities--should be 
identified. The establishment of a program's critical path is necessary 
for examining the effects of any activity slipping along this path. 
Potential problems that might occur along or near the critical path 
should also be identified and reflected in the scheduling of the time 
for high-risk activities; 
Satisfied?: Partially; 
GAO analysis: A critical path has been established but the program 
first needs to satisfy the other scheduling best practices listed above 
before the critical path can be considered reliable. 

Practice: Identifying the "float time" between key activities; 
Explanation: The schedule should identify float time--the time that a 
predecessor activity can slip before the delay affects successor 
activities--so that schedule flexibility can be determined. As a 
general rule, activities along the critical path typically have the 
least amount of float time. Total float time is the amount of time 
flexibility an activity has that will not delay the project's 
completion (if everything else goes according to plan); 
Satisfied?: Partially; 
GAO analysis: The schedule contains 885 activities with extremely low 
float values (1 day or less). 

Practice: Performing a schedule risk analysis; 
Explanation: A schedule risk analysis should be performed using 
statistical techniques to predict the level of confidence in meeting a 
program's completion date. This analysis focuses not only on critical 
path activities but also on activities near the critical path, since 
they can affect program status; 
Satisfied?: No; 
GAO analysis: The MFFF project has not performed a schedule risk 
analysis using statistical techniques. Project officials told us that 
they plan to address this issue during the summer of 2009. 

Practice: Distributing reserves to high-risk activities; 
Explanation: The baseline schedule should include a buffer or a reserve 
of extra time. Schedule reserve for contingencies should be calculated 
using a schedule risk analysis. As a general rule, the reserve should 
be applied to high-risk activities, which are typically found along the 
critical path; 
Satisfied?: Partially; 
GAO analysis: Although project officials have not identified 
appropriate schedule reserves based on a schedule risk analysis, they 
have identified contingency funding using a programmatic risk program 
to identify high-risk activities. 

Source: GAO analysis of the MFFF project schedule, February 2009. 

[End of table] 

[End of section] 

Footnotes: 

[1] GAO, High Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: Jan. 22, 
2009). 

[2] A listing of related GAO products appears in appendix I. 

[3] GAO, Department of Energy: Major Construction Projects Need a 
Consistent Approach for Assessing Technology Readiness to Help Avoid 
Cost Increases and Delays, [hyperlink, 
http://www.gao.gov/products/GAO-07-336] (Washington, D.C.: March 27, 
2007). 

[4] GAO, Nuclear Waste: Action Needed to Improve Accountability and 
Management of DOE's Major Cleanup Projects, [hyperlink, 
http://www.gao.gov/products/GAO-08-1081] (Washington, D.C.: Sept. 26, 
2008). 

[5] 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). 

[6] GAO, Department of Energy: Consistent Application of Requirements 
Needed to Improve Project Management, [hyperlink, 
http://www.gao.gov/products/GAO-07-518] (Washington, D.C.: May 11, 
2007). 

[7] GAO, Nuclear Waste: Plans for Addressing Most Buried Transuranic 
Wastes Are Not Final and Preliminary Cost Estimates Will Likely 
Increase, [hyperlink, http://www.gao.gov/products/GAO-07-761] 
(Washington, D.C.: June 22, 2007). 

[8] GAO, Nuclear Waste: DOE Should Reassess Whether the Bulk 
Vitrification Demonstration Project at Its Hanford Site Is Still Needed 
to Treat Radioactive Waste, [hyperlink, 
http://www.gao.gov/products/GAO-07-762] (Washington, D.C.: June 12, 
2007). 

[9] GAO, Hanford Waste Treatment Plant: Department of Energy Needs to 
Strengthen Controls over Contractor Payments and Project Assets, 
[hyperlink, http://www.gao.gov/products/GAO-07-888] (Washington, D.C.: 
July 20, 2007). 

[10] GAO, Nuclear Weapons: NNSA Needs to Establish a Cost and Schedule 
Baseline for Manufacturing a Critical Nuclear Weapon Component, 
[hyperlink, http://www.gao.gov/products/GAO-08-593] (Washington, D.C.: 
May 23, 2008). 

[11] GAO, Nuclear Waste: DOE Lacks Critical Information Needed to 
Assess Its Tank Management Strategy at Hanford, [hyperlink, 
http://www.gao.gov/products/GAO-08-793] (Washington, D.C.: June 30, 
2008). 

[12] GAO, Nuclear Material: DOE Needs to Take Action to Reduce Risks 
Before Processing Additional Nuclear Material at the Savannah River 
Site's H-Canyon, [hyperlink, http://www.gao.gov/products/GAO-08-840] 
(Washington, D.C.: July 25, 2008). 

[13] Our March 2007 review of DOE's major construction projects found 
that the MFFF had incurred more than a $3.2 billion cost increase over 
the initial cost estimate and a schedule delay in excess of 11 years 
more than initially estimated. 

[14] GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs - Exposure Draft, [hyperlink, 
http://www.gao.gov/products/GAO-07-1134SP] (Washington, D.C.: July 2, 
2007). 

[15] U.S. Department of Energy, Performance Baseline Guide, G 413.3-5 
(Washington, D.C.: September 12, 2008). 

[16] Department of Energy, Root Cause Analysis: Contract and Project 
Management (Washington, D.C., April 2008). 

[17] GAO, Department of Energy: Office of Science Has Kept Majority of 
Projects within Budget and on Schedule, but Funding and Other 
Challenges May Grow, [hyperlink, 
http://www.gao.gov/products/GAO-08-641] (Washington, D.C.: May 30, 
2008). 

[End of section] 

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