UPF Project Design Costs Have Already Increased

NNSA’s current estimate, which was prepared in 2007 at critical decision 1,  indicates that the UPF will cost between $1.4 and $3.5 billion to construct. This is more than double NNSA’s initial 2004 estimate that was prepared at  critical decision 0 of between $600 million and $1.1 billion. Cost estimates  for project engineering and design, which are less than halfway completed,  have already increased by about 42 percent—from $297 to $421 million. According to UPF project officials, these increases are the result of, among  other things, changes in engineering and design pricing rates. Estimated Savings from the New Facility May Not Begin to Be Realized until Several Years after the UPF Is Built

According to NNSA officials, efficiency gains resulting from consolidating  facilities at the Y-12 plant are likely to result in a savings of about $200  million annually in operations, maintenance, security, and other costs. Although NNSA Currently Estimates UPF Construction Will Be Completed between 2018 and 2022, Funding Shortfalls Could Result in Delays

NNSA’s current estimate prepared in 2007 at critical decision 1 indicates  that the UPF construction will be completed as early as 2018 and as late as  2022. However, NNSA officials currently expect the UPF will not be  completed before 2020 due to funding shortfalls. NNSA Is Developing Several New Technologies for the UPF and Is Assessing Their Maturity but Cannot Be Certain That All Technologies Will Work as Intended

NNSA is developing 10 new technologies to install in the UPF and is using  a systematic approach to gauge their maturity; however, NNSA may lack  assurance that all technologies will work as intended before making key  project decisions in accordance with best practices and our prior  recommendations. This technology consists of a system that combines  multiple machining operations into a single, automated process. However, NNSA does not expect to achieve the required levels of  readiness for another key technology. Specifically, based on discussions  with NNSA and contractor officials and our analysis of NNSA documents,  NNSA does not expect one critical technology it is developing—agile  machining—to reach TRL 6 until 18 months after approval of the project’s  cost and schedule performance baseline. DOE’s guidance on the use of TRLs is inconsistent with best practices  used by DOD and with our previous recommendations with regard to  technology readiness at another critical decision—start of construction. Six of the 10 technologies NNSA is developing  are not expected to reach TRL 7 before UPF construction begins. This  could force the project to revert to existing or alternate technologies,  which could result in design changes, higher costs, and schedule delays. Emerging Changes in the Composition and Size of the Nuclear Weapons Stockpile May Only Have a Minor Effect on the UPF

According to NNSA officials and an independent study commissioned by  NNSA, emerging changes in the composition and size of the nuclear  weapons stockpile as a result of changes in the nation’s nuclear strategy or  a proposed arms treaty with Russia should have relatively minor effects on  the UPF project. In addition, the New Strategic Arms Reduction Treaty (New START)  signed in April 2010 by the leaders of the United States and Russia would,  if ratified, reduce the number of deployed strategic warheads from about  2,200 to 1,550. Moreover, NNSA’s decision to approve  an initial project cost range immediately after a 2007 technical review  warned of a disconnect between the UPF project’s funding requirements  and NNSA’s future years’ spending plan, and then requesting $200 million  less in fiscal year 2011 than the UPF project estimated it needed, raises  concerns that NNSA is not placing sufficient high-level management focus  on ensuring that UPF’s cost and schedule estimates, and the associated  funding plans these estimates are based upon, are consistent with NNSA’s  broader plans for funding the nation’s nuclear weapons complex. In the event technologies being developed for the UPF project do not  reach levels of maturity called for by best practices, inform the  appropriate committees and Members of Congress of any NNSA decision  to approve a cost and schedule performance baseline or to begin  construction of UPF without first having ensured that project technologies  are sufficiently mature. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) assess the National Nuclear Security  Administration’s (NNSA) estimated cost and schedule for constructing the  Uranium Processing Facility (UPF) at the Y-12 National Security Complex  in Oak Ridge, Tennessee; (2) determine the extent to which the UPF will  use new, experimental technologies and any risks to the project’s cost and  schedule of replacing the existing, proven technologies; and (3) determine  the extent to which emerging changes in the stockpile could affect the  UPF project. In addition, we toured enriched uranium processing and  nuclear weapons component facilities.
Why GAO Did This Study

Built in the 1940s and 1950s, the Y-12 National Security Complex, located in Oak Ridge, Tennessee, is the National Nuclear Security Administration's (NNSA) primary site for enriched uranium activities. Because Y-12 facilities are outdated and deteriorating, NNSA is building a more modern facility--known as the Uranium Processing Facility (UPF). NNSA estimates that the UPF will cost up to $3.5 billion and save over $200 million annually in operations, security, and maintenance costs. NNSA also plans to include more advanced technologies in the UPF to make uranium processing and component production safer. GAO was asked to (1) assess NNSA's estimated cost and schedule for constructing the UPF; (2) determine the extent to which UPF will use new, experimental technologies, and identify resultant risks, if any; and (3) determine the extent to which emerging changes in the nuclear weapons stockpile could affect the UPF project. To conduct this work, GAO reviewed NNSA technology development and planning documents and met with officials from NNSA and the Y-12 plant.

What GAO Found

The UPF project costs have increased since NNSA's initial estimates in 2004 and construction may be delayed due to funding shortfalls. NNSA's current estimate prepared in 2007 indicates that the UPF will cost between $1.4 and $3.5 billion to construct--more than double NNSA's 2004 estimate of between $600 million and $1.1 billion. In addition, costs for project engineering and design, which are less than halfway completed, have increased by about 42 percent--from $297 to $421 million--due in part to changes in engineering and design pricing rates. With regard to the project's schedule, NNSA currently estimates that UPF construction will be completed as early as 2018 and as late as 2022. However, because of a funding shortfall of nearly $200 million in fiscal year 2011, NNSA officials expect that the UPF will not be completed before 2020, which could also result in additional costs. NNSA is developing 10 new technologies for use in the UPF and is using a systematic approach--Technology Readiness Levels (TRL)--to gauge the extent to which technologies have been demonstrated to work as intended. Industry best practices and Department of Energy (DOE) guidance recommend achieving specific TRLs at critical project decision points--such as establishing a cost and schedule performance baseline or beginning construction--to give optimal assurance that technologies are sufficiently ready. However, NNSA does not expect all 10 new technologies to achieve the level of maturity called for by best practices before making critical decisions. For example, NNSA is developing a technology that combines multiple machining operations into a single, automated process--known as agile machining--but does not expect it to reach an optimal TRL until 18 months after one of UPF's critical decisions--approval of a formal cost and schedule performance baseline--is made. In addition, DOE's guidance for establishing optimal TRLs prior to beginning construction is not consistent with best practices or with our previous recommendations. As a result, 6 of 10 technologies NNSA is developing are not expected to reach optimum TRLs consistent with best practices by the time UPF construction begins. If critical technologies fail to work as intended, NNSA may need to revert to existing or alternate technologies, possibly resulting in changes to design plans and space requirements that could delay the project and increase costs. Changes in the composition and size of the nuclear weapons stockpile could occur as a result of changes in the nation's nuclear strategy, but NNSA officials and a key study said that the impact of these changes on the project should be minor. For example, the New Strategic Arms Reduction Treaty signed in April 2010 by the leaders of the United States and Russia would, if ratified, reduce the number of deployed strategic warheads from about 2,200 to 1,550. According to NNSA officials, NNSA and DOD have cooperated closely and incorporated key nuclear weapons stockpile changes into UPF's design. Also, an independent study found that most of the UPF's planned space and equipment is dedicated to establishing basic uranium processing capabilities that are not likely to change, while only a minimal amount--about 10 percent--is for meeting current stockpile size requirements.

What GAO Recommends

GAO is making five recommendations for, among other things, improving the UPF's cost and funding plans, ensuring that new UPF technologies reach optimal levels of maturity prior to critical project decisions, and for improving DOE guidance. NNSA generally agreed with the recommendations.