	Background

DOE’s missions encompass energy resources, scientific and  technological development, environmental cleanup, and nuclear security. DOE Faces Challenges Managing Its Major Projects and Programs

As we have reported in the past decade, DOE continues to face  challenges managing its major projects and programs, which have  incurred significant cost increases and schedule delays in several  instances. Some recent examples include:
As we reported earlier this month, NNSA estimates that the project to  build the Uranium Processing Facility (UPF) at the Y-12 National  Security Complex in Oak Ridge, Tennessee, will cost between five  and seven times more than previously thought and will be completed  over a decade behind schedule. NNSA estimated in 2004 that the  UPF would cost from $600 million to $1.1 billion to construct and  would start operating in 2012. We also reported in December 2012 on progress by EM and NNSA in  managing nonmajor projects (i.e., those costing less than $750  million). We are currently assessing DOE cost estimating policies and practices  and plan to issue a report based on this work later this year. DOE’s  actions to improve project management appear promising, but their  impact on meeting cost and schedule targets may not be clear. Because  all ongoing major projects have been in construction for several years,  neither EM nor NNSA has a major project that can yet demonstrate the  impact of DOE’s recent reforms. DOE Faces Challenges Managing Security and Safety

As we testified before this Subcommittee in March 2013, reviews of the  July 2012 security breach at the Y-12 National Security Complex  identified numerous, long-standing, and systemic security issues across  the nuclear security enterprise, and significant safety problems remain at  DOE sites that have not been fully addressed. In addition, both a NNSA Security Task  Force and an independent panel convened at the request of the  Secretary of Energy and composed of three former executives from  federal agencies and the private sector found systemic security issues  across the nuclear security enterprise. Both the Secretary’s panel and  the NNSA Security Task Force’s leader found deficiencies in DOE’s  security culture and oversight, with some of these being closely  matched to issues we identified a decade earlier. We have ongoing work assessing DOE security  reforms and plan to issue a report based on this work later this year. DOE Has Not Produced Reliable Enterprise-Wide Management Data

For more than a decade, we have reported that DOE has not produced  reliable enterprise-wide management data needed to, among other  things, prepare its budget requests, identify the costs of its activities and  ensure the validity of its cost estimates. Some recent examples include:  In June 2013, we reported that NNSA’s M&O contractors differ in how  they classify and allocate indirect costs at NNSA laboratories. Although different approaches are allowed by Cost Accounting  Standards, these differences limit NNSA’s ability to assess cost data  and meaningfully compare cost management performance across  laboratories, potentially impeding NNSA’s efforts to oversee M&O  contractors’ costs. This work built on the report we issued in June  2010, in which we found that NNSA could not accurately identify the  total costs to operate and maintain weapons facilities and  infrastructure because of differences among contractors’ accounting  practices. We have made  numerous recommendations in our reports to address challenges such as  those identified in this testimony, and DOE has agreed with and  implemented most of them. In addition, our work has recognized steps  that DOE has taken to address these challenges. For example, in the  most recent update of our high-risk series in February 2013, we narrowed  the focus of the high-risk designation of DOE’s contract management to  EM’s and NNSA’s major contracts and projects. As  the new Secretary of Energy considers needed reforms in these areas,  we note that DOE’s management of projects and programs, security and  safety, and enterprise-wide data must improve—regardless of the  department’s structure. We will continue to monitor DOE’s implementation  of actions to resolve its long-standing management challenges, including  actions that we have recommended to facilitate the resolution of these  challenges. Department of Energy: Observations on Project and Program Cost  Estimating in NNSA and the Office of Environmental Management,  GAO-13-510T (Washington, D.C.: May 8, 2013).
Why GAO Did This Study

DOE missions encompass energy resources, scientific and technological development, environmental cleanup, and nuclear security. Management of major projects and contracts within EM and NNSA, a separately organized agency within DOE, remain on GAO's list of areas at high risk of waste, fraud, abuse, and mismanagement, where they have been listed since 1990. Progress has been made, but GAO continues to identify management problems related to cost and schedule overruns on major environmental cleanup and nuclear projects and safety problems at DOE sites that have not been fully addressed.
This testimony discusses DOE's management challenges in (1) managing major projects and programs, (2) managing security and safety at DOE sites, and (3) producing reliable enterprise-wide information, including budget and cost data.
Over the past decade, GAO has made numerous recommendations in its reports to address challenges such as those identified in this testimony. DOE agreed with most of them and is taking steps toward implementing them. GAO's work has also recognized some of the steps that DOE has taken to address these challenges. For example, in the most recent update of GAO's high-risk series, GAO narrowed the focus of the high-risk designation of DOE's contract management to EM's and NNSA's major contracts and projects (i.e., those costing $750 million or more). GAO will continue to monitor DOE's implementation of actions to resolve long-standing management challenges, including actions taken in response to GAO's recommendations.

What GAO Found

As GAO has reported over the last decade, the Department of Energys (DOE) management of major projects and programs, security and safety at DOE sites, and reliable enterprise-wide management information, including budget and cost data, are among the most persistent management challenges the department faces.
 Challenges managing major projects and programs . The Office of Environmental Management (EM) and the National Nuclear Security Administration (NNSA) continue to face challenges managing major projects and programs, which have incurred significant cost increases and schedule delays. For example, GAO reported in July 2013 that the cost estimate range for a project to construct a modern Uranium Processing Facility (UPF) at DOEs Y-12 National Security Complex in Oak Ridge, Tennessee, had increased five- to seven-fold to up to $6.5 billion since the projects inception in 2004. Furthermore, the most recent cost estimate range may no longer be valid after the contractor reported in August 2012 that the UPFs roof would have to be raised 13 feet. GAO is currently assessing DOE cost estimating policies and practices and plans to issue a report based on this work later this year. DOE's actions to improve project management appear promising, but their impact on meeting cost and schedule targets may not be clear. Because all ongoing major projects have been in construction for several years, neither EM nor NNSA has a major project that can yet demonstrate the impact of DOE's recent reforms.
 Challenges managing security and safety . Reports about the July 2012 security breach at the Y-12 National Security Complex identified numerous, long-standing and systemic security issues across the nuclear security enterprise and significant safety problems at DOE sites that have not been fully addressed. A NNSA Security Task Force and an independent panel convened at the request of the Secretary of Energy also found systemic security issues across the nuclear security enterprise, and found deficiencies in DOEs security culture and oversight, which closely matched issues GAO identified a decade earlier. GAO has ongoing work assessing DOE security reforms and plans to issue a report based on this work later this year. GAO has also found that DOE management weaknesses have contributed to persistent safety problems at NNSA sites.
 Challenges in producing reliable enterprise-wide management information . GAO has reported that DOE does not have reliable enterprise-wide management data needed to, among other things, prepare its budget requests, identify the costs of its activities, and ensure the validity of its cost estimates. For example, in June 2013, GAO reported that while different approaches are allowed by Cost Accounting Standards, NNSAs management and operations contractors differ in how they classify and allocate indirect costs at NNSA laboratories, which limits NNSAs ability to assess cost data and meaningfully compare cost management performance across laboratories. In addition, GAO reported in June 2010 that NNSA could not accurately identify the total costs to operate and maintain weapons facilities and infrastructure because of differences among contractors accounting practices. GAO is currently monitoring DOEs ongoing efforts to improve its capability to produce reliable enterprise-wide information.