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. Planning. Evaluation. 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. 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. 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. 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. 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. 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. 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. 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. 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. However, NNSA disbanded the office in 2010, 18 months after it was  formally created. 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. 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. 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. 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. 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. 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.
Why GAO Did This Study

NNSA, a semiautonomous agency within DOE, is responsible for the nations 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 NNSAs 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 NNSAs 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 agencys PPBE process and interviewed NNSA, DOE, and M&O contractor officials.

What GAO Found

The National Nuclear Security Administrations (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 agencys PPBE cycleplanning, 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 processthe 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 DOEs 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 agencys trust in its contractors minimizes the need for formal review of its budget estimates. GAO identified three key problems in NNSAs 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 cycleafter the submission of the Presidents budget to Congress. Second, this process is not sufficiently thorough to ensure the credibility and reliability of NNSAs 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 NNSAs budgetapproximately 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 processs effectiveness in assessing NNSAs 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 listswhich rank program activities according to their importance for meeting mission requirementsis 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.