	GAO’s Recent Work Shows That NNSA’s and EM’s Projects Continue to Be at High Risk for Fraud, Waste, Abuse, and Mismanagement

Over the past 3 years, we have reported on significant problems with  NNSA’s and EM’s ability to manage major projects within cost and  schedule targets. Two of these reports examined the performance of  DOE’s largest construction projects—nearly all of these projects are  managed by NNSA or EM—and EM’s largest nuclear waste cleanup  projects. In summary, these reports documented that  the cost increases and schedule delays that have occurred for most of  these projects have been the result of inconsistent application of project  management tools and techniques on the part of both DOE and its  contractors. Regarding DOE’s largest construction projects, we reported in March 2007  that 8 of the 10 major NNSA or EM construction projects we reviewed had  exceeded the initial cost estimates for completing these projects—in total,  DOE added nearly $14 billion to these initial estimates. We also reported  that 9 of the 10 projects were behind schedule—in total, DOE added more  than 45 years to the initial schedule estimates. In regard to EM’s largest cleanup projects, in September 2008, we reported  that 9 of the 10 major EM cleanup projects had experienced cost increases  and schedule delays—in total DOE estimated that it needed an additional  $25 billion to $42 billion to complete these cleanup projects over the initial  cost estimates and an additional 68 to 111 more years than initially  estimated. In addition to the findings in these two reports, we have issued other  reports over the past 3 years that also found similar project management  problems with NNSA and EM. Preliminary Results From Ongoing GAO Work on NNSA’s Mixed Oxide Fuel Fabrication Facility Indicate Continuing Project Management Concerns

We are currently reviewing the cost and schedule performance and the  status of licensing the MFFF construction project at the Savannah River  Site, a nearly $5 billion facility that is designed to convert 34 metric tons of  surplus weapons-grade plutonium into fuel for use in commercial nuclear  reactors. In accordance with DOE’s project management requirements,  NNSA is using an earned value management system to measure and report  the progress of the MFFF construction project. For example, a schedule should specify when the  project’s set of work activities will occur, how long they will take, and how  they relate to one another. Although the MFFF project’s schedule was developed using many of these  practices, the schedule, in addition to other problems, does not employ a  key practice that is fundamental to having a sufficiently reliable  schedule—specifically, MFFF project staff have not conducted a risk  analysis on their current schedule using statistical techniques. Consequently, NNSA cannot adequately state its level of confidence in  meeting the MFFF project’s completion date of October 2016, and NNSA’s  schedule for the project therefore may not be reliable. II for the preliminary results of our analysis of the MFFF project’s  schedule). Specifically, project officials told us that they plan to  conduct a schedule risk analysis during the summer of 2009. Our work on  this project is continuing, and we intend to work with NNSA to resolve  these issues to the extent possible. These recommendations collectively call for  DOE to ensure that project management requirements are consistently  followed, to improve oversight of contractors, and to strengthen  accountability for performance. Although DOE’s responses to these  recommendations have been largely positive, and some corrective actions  have been taken, most of the recommendations are still open, awaiting  action by the department. DOE has also taken steps to better understand weaknesses underlying its  contract and project management. Hanford Waste Treatment Plant: Department of Energy Needs to  Strengthen Controls over Contractor Payments and Project Assets. National Nuclear Security Administration: Additional Actions Needed  to Improve Management of the Nation’s Nuclear Programs.
Why GAO Did This Study

The Department of Energy (DOE) manages over 100 construction projects with estimated costs over $90 billion and 97 nuclear waste cleanup projects with estimated costs over $230 billion. DOE has about 14,000 employees to oversee the work of more than 93,000 contractor employees. Due to DOE's history of inadequate oversight and management of contractors, GAO continues to include DOE contract and project management on its list of government programs at high risk for fraud, waste, abuse, and mismanagement. This testimony discusses (1) recent GAO work on contract and project management within two of DOE's largest program offices--the National Nuclear Security Administration (NNSA) and the Office of Environmental Management (EM), (2) preliminary results of ongoing GAO work on project management at NNSA's Mixed Oxide Fuel Fabrication Facility (MFFF) project at the Savannah River Site in South Carolina, and (3) actions needed by NNSA and EM to improve contract and project management. GAO's reports over the past 3 years have contained nearly 60 recommendations collectively calling for DOE to ensure that project management requirements are consistently followed, to improve oversight of contractors, and to strengthen accountability. While DOE has generally agreed with these recommendations and some actions have been taken, the majority are still open and awaiting action by DOE.

What GAO Found

Since 2006, GAO has issued 12 reports examining DOE's contract and project management. Two of these reports examined the performance of DOE's largest construction projects--nearly all of which are managed by NNSA or EM--and EM's largest nuclear waste cleanup projects. These reports documented that the cost increases and schedule delays that have occurred for most of these projects have been the result of inconsistent application of project management tools and techniques on the part of both DOE and its contractors. Specifically, GAO reported in March 2007 that 8 of the 10 major NNSA and EM construction projects that GAO reviewed had exceeded the initial cost estimates for completing these projects--in total, DOE added nearly $14 billion to these initial estimates. GAO also reported that 9 of the 10 major construction projects were behind schedule--in total, DOE added more than 45 years to the initial schedule estimates. In particular, the Waste Treatment Plant project at the Hanford Site had exceeded its original cost estimate by almost $8 billion and experienced schedule delays of over 8 years. GAO also reported in September 2008 that 9 of the 10 major EM cleanup projects GAO reviewed had experienced cost increases and schedule delays--in total, DOE estimated that it needed an additional $25 billion to $42 billion to complete these cleanup projects over the initial cost estimates and an additional 68 to 111 more years than initially estimated. In addition, GAO has issued a number of other reports over the past 3 years on specific projects which found similar management problems with NNSA and EM. Preliminary results from GAO's ongoing review of NNSA's MFFF project indicate project management concerns continue. The facility, which is designed to convert 34 metric tons of surplus weapons-grade plutonium into fuel for use in commercial nuclear reactors, is estimated to cost about $4.8 billion and begin operations in 2016. One of the key management systems NNSA uses to measure and report on the project's progress--the project's earned value management system--depends on a reliable schedule that specifies, for example, when the project's work activities will occur, how long they will take, and how they relate to one another. GAO has previously identified nine key practices necessary for developing a reliable schedule. However, the project's schedule, in addition to other problems, does not adhere to a key practice that is fundamental to having a sufficiently reliable schedule--specifically, MFFF project staff have not conducted a risk analysis on their current schedule using statistical techniques. DOE officials responded that they plan on conducting a risk analysis of the schedule for the MFFF project during the summer of 2009. Consequently, NNSA cannot adequately state its level of confidence in meeting the MFFF project's completion date, and NNSA's schedule for the project therefore may not be reliable. GAO's work on this project is continuing, and GAO intends to work with NNSA to resolve these issues.