Chemical Demilitarization: Actions Needed to Improve the Reliability of the Army's Cost Comparison Analysis for Treatment and Disposal Options for Newport's VX Hydrolysate
Highlights
The U.S. stockpile of 1,269 tons of VX nerve agent stored at the Newport Chemical Depot (Newport), Indiana, is one of nine stockpiles that the Department of Defense (DOD) must destroy in response to congressional direction initially provided in 1985. In addition, the stockpile must be destroyed to comply with the requirements of the Chemical Weapons Convention, which the United States became a party to in 1997. The stockpile at Newport is the first U.S. stockpile containing VX that will be destroyed by using neutralization--a process that mixes hot water and sodium hydroxide (a caustic chemical) with VX to change the chemical composition to a less toxic form. The resulting by-product is a liquid wastewater commonly referred to as hydrolysate that consists mostly of water but also has a caustic component and organic salts that need further treatment to meet Chemical Weapons Convention requirements and to meet federal and state environmental requirements for disposal. The Army, DOD's designated executive agent, began neutralizing Newport's VX stockpile on-site in May 2005 and, as of December 1, 2006, reports neutralizing about 34 percent of the stockpile. None of the generated hydrolysate--expected to be about 2 million gallons when the neutralization process is completed--has been treated. The hydrolysate is being stored on-site until a post-treatment plan can be implemented. The Army has been evaluating options for treating the hydrolysate since the mid-1990s. The John Warner National Defense Authorization Act for Fiscal Year 2007 mandated that GAO review the Army's Cost-Benefit Analysis of Off-Site Versus On-Site Treatment and Disposal of Newport Caustic Hydrolysate. Specifically, GAO (1) assessed the reasonableness of the Army's rationale to eliminate five of the eight technologies for treating Newport's hydrolysate; (2) determined what other options the Army considered, such as incineration; and (3) evaluated the adequacy of the cost comparison analysis presented for the three remaining technologies considered as alternatives to the Army's proposed plan. To meet the December 1, 2006, due date, GAO briefed or offered to brief your offices prior to that time. This report provides details of our findings and our conclusions and recommendations. GAO will also issue a separate letter on its assessment of the Army's cost-benefit analysis once DOD has completed its sensitivity review of the data in that letter.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | To ensure confidence in the reliability of the underlying cost estimates for the Army's decision to send hydrolysate from the Newport Chemical Depot, Indiana, off-site for treatment, which indicate significant cost and schedule savings compared to on-site disposal of the hydrolysate, the Secretary of Defense should direct the Secretary of the Army to conduct the Army's cost-benefit analysis again using best practices so that its data and conclusions are comprehensive, traceable, accurate, and credible. |
Based on our recommendation, DOD discarded its original cost-benefit analysis and agreed to conduct a new cost-benefit analysis, based on revised cost estimates, utilizing best practices to include the Association for the Advancement of Cost Engineering methods. While the revision process was underway, DOD changed its plans when the contractor associated with DOD's most favorable option dropped out of consideration for the project before the new analysis could be completed. Subsequently, DOD identified another contractor (Veolia Environmental Services) that used a technology (incineration) more proven than the ones considered in the original cost-benefit analysis. As such, it was considered cheaper than the remaining options, and had less schedule risk due to the contractor already having the necessary permits in place for disposal. DOD completed shipment to Veolia Environmental Services in Port Arthur, Texas, of all hydrolysate resulting from its neutralization process, and completed closure activities at the Newport facility in June 2010.
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| Department of Defense | To ensure confidence in the reliability of the underlying cost estimates for the Army's decision to send hydrolysate from the Newport Chemical Depot, Indiana, off-site for treatment, which indicate significant cost and schedule savings compared to on-site disposal of the hydrolysate, the Secretary of Defense should direct the Secretary of the Army to correct any technical and mathematical errors in the cost estimate. |
DOD agreed to correct any errors when performing a new cost-benefit analysis, but a new cost-benefit analysis was not completed because a key contractor dropped out of consideration. When a new option emerged that used proven technology, this recommendation was no longer relevant.
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| Department of Defense | To ensure confidence in the reliability of the underlying cost estimates for the Army's decision to send hydrolysate from the Newport Chemical Depot, Indiana, off-site for treatment, which indicate significant cost and schedule savings compared to on-site disposal of the hydrolysate, the Secretary of Defense should direct the Secretary of the Army to establish quality control and independent review processes that check data sources, calculations, and assumptions. |
DOD agreed to establish quality control and independent review processes when performing a new cost-benefit analysis, but a new cost-benefit analysis was not completed because a key contractor dropped out of consideration. When a new option emerged that used proven technology, this recommendation was no longer relevant.
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| Department of Defense | To ensure confidence in the reliability of the underlying cost estimates for the Army's decision to send hydrolysate from the Newport Chemical Depot, Indiana, off-site for treatment, which indicate significant cost and schedule savings compared to on-site disposal of the hydrolysate, the Secretary of Defense should direct the Secretary of the Army to perform a sensitivity analysis of key assumptions, including, at a minimum, (1) variations in the throughput rates for various options; (2) the technological uncertainty of options; and (3) for off-site treatment and disposal options, the risks associated with potential permitting, legal, and other challenges. |
DOD agreed to perform a sensitivity analysis when performing a new cost-benefit analysis, but a new cost-benefit analysis was not completed because a key contractor dropped out of consideration. When a new option emerged that used proven technology, this recommendation was no longer relevant.
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