TWF Construction Project

The TWF project is to replace NNSA’s existing capabilities that reside at  Area G for storage, characterization, and certification of newly generated  TRU waste at LANL. GAO’s Cost Guide

Drawing from federal cost-estimating organizations and industry, the Cost  Guide provides best practices about the processes, procedures, and  practices needed for ensuring development of high-quality—that is,  reliable cost estimates.characteristics of a high-quality, reliable cost estimate:   The Cost Guide identifies the following four
Comprehensive when it accounts for all life-cycle costs associated  with a project, is based on a completely defined and technically  reasonable plan, and it contains a cost estimating structure in  sufficient detail to ensure that costs are neither omitted nor double- counted;
Well-documented when supporting documentation explains the  process, sources, and methods used to create the estimate and  contains the underlying data used to develop the estimate;
Accurate when it is not overly conservative or too optimistic and is  based on an assessment of the costs most likely to be incurred; and
Credible when a sensitivity analysis has been conducted, the level of  confidence associated with the point estimate has been identified  through the use of risk and uncertainty analysis, and the point  estimate has been cross-checked with an independent cost estimate  (ICE). NNSA Has Not Met Its Cost Estimates to Complete the TRU Waste Removal Project at LANL

NNSA’s TRU waste removal project at LANL did not meet its 2006 cost  estimate and is not expected to meet the 2009 cost estimate established  for the completion of the project. As of the end of fiscal year 2014, NNSA had spent about $931 million on  the project, which exceeded the 2006 cost estimate of $729 million by  $202 million (see fig. According to NNSA officials, they  could not formally approve the 2009 estimate because it included a 2018  estimated completion date for the TRU waste removal project, which  conflicted with the required 2015 closure date established in the Consent  Order. For example, the funding assumptions in the  new estimate may already be invalid. More  specifically, NNSA’s cost estimate—which consisted of separate cost  estimates for completing construction and for operations and  maintenance, as the TWF’s life-cycle costs—partially reflected each of  the four characteristics of a reliable estimate (comprehensive, well- documented, accurate, and credible) as established by best practices. In  contrast, NNSA did not document the approach (data sources and  methodologies) used to develop the operations and maintenance  estimate, even though the operations and maintenance costs  represented about 74 percent of the TWF’s life-cycle costs. Because  NNSA did not document the approach used, we could not determine  whether it was appropriate for developing the operations and  maintenance estimate; whether NNSA management reviewed the  estimate, including its risks and uncertainties, or whether NNSA  management approved the estimate. However, because DOE’s project  management order does not define the operations and maintenance  costs as project costs, NNSA was not required to include these costs  in the ICE. Moreover, because  DOE’s project management order does not require it, NNSA’s  contractor did not follow the best practice to complete a sensitivity  analysis to quantify the extent to which either the construction or  operations and maintenance cost estimates could vary because of  changes in key assumptions and ground rules. According to cost-estimating best  practices, doing a sensitivity analysis increases the chance that  decisions that influence the design, production, and operation of the  TWF will be made with a focus on the elements that have the greatest  effect on cost. By revising the estimate to include the current understanding of project  conditions, including the uncertainty at WIPP, NNSA program managers  can more accurately identify cost overruns consistent with best practices. Updating the TWF’s  cost estimate to include all life-cycle costs, as well as needed analyses,  would provide NNSA more reliable information for better managing the  TWF as it prepares for the start of operations, which NNSA expects could  be as early as April 2016. Recommendations for Executive Action

To develop reliable cost estimates for the TRU waste removal project and  for the TWF construction project at LANL, we recommend that the  Secretary of Energy take the following two actions:
Direct NNSA and EM to revise the cost estimate for the TRU waste  removal project to ensure that it uses updated assumptions based on  the current understanding of project conditions, such as the status of  WIPP. As we  noted in the report, however, NNSA expects the TWF to provide TRU  waste capabilities at LANL to support NNSA’s nuclear weapons mission  for the next 50 years. Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine (1) the extent to which the National  Nuclear Security Administration (NNSA) has met its cost targets for the  transuranic (TRU) waste removal project at Los Alamos National  Laboratory (LANL) and (2) the extent to which NNSA’s cost estimate for  the TRU Waste Facility (TWF) project at LANL met best practices for a  reliable cost estimate.
Why GAO Did This Study

Nuclear weapons activities at LANL have generated large quantities of TRU waste that must be disposed of properly. To address a 2005 cleanup agreement with the state of New Mexico requiring DOE to close LANL's TRU waste site, NNSA is to oversee two TRU waste projects. The first is to remove the waste stored at LANL and ship it to WIPP for permanent disposal. The second is to construct a facility—the TWF—to provide new capabilities for managing newly generated TRU waste at LANL. NNSA has developed cost estimates for both projects.
GAO was asked to review cost estimates for the TRU waste projects at LANL. This report examines (1) the extent to which NNSA's TRU waste removal project at LANL has met its cost estimates and (2) the extent to which NNSA's cost estimate for the TWF met best practices for a reliable estimate. GAO reviewed spending data for the TRU waste removal project for fiscal years 2006 through 2014 and the cost estimates for both projects, compared the cost estimate for the TWF with best practices, and interviewed agency officials.

What GAO Found

The National Nuclear Security Administration's (NNSA) project to remove transuranic (TRU) waste—primarily discarded equipment and soils contaminated with certain radioactive material—at Los Alamos National Laboratory (LANL) did not meet its cost estimates. At the end of fiscal year 2014, NNSA had spent about $931 million on the project, exceeding its 2006 estimate of $729 million by $202 million. Under current plans, the project is also expected to exceed its 2009 estimate. NNSA did not meet its cost estimates, in part, because they were based on aggressive funding assumptions designed to meet the completion dates agreed to in a 2005 cleanup agreement, which the Department of Energy (DOE) did not fully fund. At the time of GAO's review, NNSA was developing a new project completion cost estimate of about $1.6 billion, with completion projected for October 2022. NNSA had not revised the project's cost estimate since 2009 because the agency was reluctant to approve an estimate with a completion date that conflicted with the 2005 cleanup agreement. However, according to an NNSA official, NNSA's new estimate may not reflect current conditions—partly because of uncertainty created by funding and the indefinite suspension of shipments of TRU waste to the permanent repository at DOE's Waste Isolation Pilot Plant (WIPP) after a radioactive release closed WIPP in February 2014. By revising the estimate to include the current understanding of project conditions, including the uncertainty at WIPP, NNSA program managers can, for example, more accurately identify cost overruns.
NNSA's cost estimate for the TRU Waste Facility (TWF), which consisted of separate cost estimates for completing construction and for operations and maintenance, partially reflected each of the four characteristics of a reliable estimate (comprehensive, well-documented, accurate, and credible) as established by best practices. For example, NNSA's estimate was partially well-documented by clearly documenting the data sources and methodology used to develop the construction estimate. However, NNSA did not sufficiently document the approach used to develop the operations and maintenance estimate, which represented about 74 percent of the TWF's life-cycle costs, because DOE's project management order does not require these costs to be documented when a project is approved to request funding from Congress for construction. As a result, GAO could not determine whether the cost-estimating approach was appropriate. In addition, NNSA's estimate was partially credible because NNSA completed an independent cost estimate (ICE) that provided an unbiased cross-check of the construction estimate consistent with best practices, but it did not include the operations and maintenance costs in the ICE because it was not required by DOE's project management order. Moreover, NNSA did not conduct a sensitivity analysis to quantify variations in the TWF's cost estimates due to changes in key assumptions because it was not required by DOE, which also affected the estimate's credibility. Doing a sensitivity analysis increases the chance that decisions for the TWF will focus on the elements that have the greatest effect on cost, according to best practices. Updating the TWF's cost estimate to include all life-cycle costs and needed analyses, would provide NNSA more reliable information for better managing the TWF as it prepares for the start of operations, which NNSA expects could be as early as April 2016.

What GAO Recommends

GAO recommends that DOE revise the cost estimate for the TRU waste removal project to reflect the current understanding of project conditions and update the TWF's cost estimate to allow better management of the project's life-cycle costs going forward. DOE generally agreed with GAO's recommendations.