	Background

This section describes (1) the purpose of LEPs and the process that  NNSA and DOD use to manage them, known as the phase 6.X process;  (2) the management of the ongoing LEP for the W76 warhead—an  important historical reference for the B61-12 LEP—and the status of the  two other ongoing LEPs; (3) future nuclear modernization plans and our  past conclusions and recommendations on the affordability of these  plans; and (4) the objectives of the B61-12 LEP and the roles and  responsibilities of NNSA and the Air Force in conducting the program. Consolidating the stockpile. Figure 3 illustrates the delivery aircraft for the B61-12. Our cost estimating guide  identifies best practices for developing a high-quality, reliable cost  estimate and identifies four characteristics of such an estimate: it is  comprehensive, well-documented, accurate, and credible. Well-documented: Substantially met. Varying Methods and Assumptions about Future Program Performance Led to Differences between the Estimates, but NNSA Did Not Document the Rationale for Adopting the Program’s Estimate Unchanged

The $7.6 billion program cost estimate for the B61-12 LEP differs from the  $10 billion independent cost estimate primarily because the program  office used different methods and assumptions than the Office of Cost  Estimating and Program Evaluation, which prepared the independent cost  estimate. The B61-12 program developed its estimate by compiling site- specific cost and schedule estimates for activities at each of the NNSA  sites participating in the LEP; in contrast, the independent cost estimate  projected a cost and completion date by evaluating program activities  completed to date and applying a historical model to estimate costs and  durations for remaining activities. NNSA agreed with this recommendation. NNSA Officials Met to Reconcile the Program’s Cost Estimate and the Independent Cost Estimate but Did Not Document the Rationale for Adopting the Program’s Estimate Unchanged

Cost estimating best practices specify that a program cost estimate and  an independent cost estimate should be reconciled and that differences  between them should be examined and discussed to achieve  understanding of overall program risk. In addition, our prior work has shown that  independent cost estimates are historically higher than program office  cost estimates because the team conducting the independent cost  estimate is more objective and less prone to accept optimistic  assumptions. NNSA agreed with our January 2018  recommendation, stating that by March 2018, it would establish a protocol  to document management decisions regarding significant variances  between LEP cost estimates and the independent cost estimates  produced by the Office of Cost Estimating and Program Evaluation. However, NNSA has not provided evidence that it has done so. NNSA and DOD Have Identified Risks and Are Taking Steps to Manage Them

NNSA and DOD have identified and are managing various risks that  could complicate efforts to meet the fiscal year 2025 completion date for  the B61-12 LEP. The  program also faces risks that program officials told us lie outside the  program’s direct control—such as risks related to the F-35 delivery  aircraft, nuclear certification, and NATO coordination issues—and officials  said they have provided information to the responsible DOD organizations  to help address these risks. Risk Identification Process

The B61-12 LEP has a formal risk management process that has  identified joint NNSA and Air Force risks within the program’s areas of  responsibility that could significantly impact the overall program’s  schedule, its cost, or the technical performance of the weapon. NNSA provided technical comments, which we incorporated as  appropriate. DOD indicated that it did not have any comments.
Why GAO Did This Study

Weapons in the U.S. nuclear stockpile are aging. To refurbish or replace nuclear weapons' aging components, NNSA and DOD undertake LEPs. The B61-12 LEP is the most complex and expensive LEP to date. In October 2016, NNSA formalized a program cost estimate of about $7.6 billion, which is lower than an independent cost estimate of about $10 billion.
Senate Report 113-44 included a provision for GAO to periodically assess the status of the B61-12 LEP. This report assesses (1) the extent to which NNSA followed best practices for cost estimation in producing the program cost estimate for the B61-12 LEP; (2) the reasons for differences between the program cost estimate and the independent cost estimate and how the differences were reconciled; and (3) the extent to which NNSA and DOD have identified and managed program risks. GAO assessed the program cost estimate against best practices, reviewed NNSA and DOD documents, conducted site visits to four NNSA and Air Force sites responsible for design, production, and management activities, and interviewed NNSA and DOD officials.

What GAO Found

The National Nuclear Security Administration (NNSA) incorporated most cost estimating best practices to develop the program cost estimate for the B61-12 Life Extension Program (LEP), which seeks to consolidate four versions of a nuclear weapon—the B61 bomb—into a bomb called the B61-12. As shown in the figure below, the program substantially met best practices for ensuring the estimate was comprehensive, well-documented, accurate, and credible.
The B61-12 LEP's program cost estimate differs from an estimate prepared by another NNSA office independent of the program primarily because the program used different methods and assumptions than the independent office. The program developed its estimate by compiling cost and schedule estimates for activities at each of the NNSA contractor sites participating in the LEP. In contrast, the independent office evaluated program activities completed to date and applied a historical model to estimate costs and durations for remaining activities. NNSA management met with officials from both offices to reconcile the estimates but did not document the rationale for adopting the program estimate unchanged. GAO recommended in a January 2018 report that NNSA document and justify such decisions, in part because GAO's prior work has shown that independent cost estimates historically are higher than programs' cost estimates because the team conducting the independent estimate is more objective and less prone to accept optimistic assumptions. In response to the January 2018 report, NNSA agreed to establish a protocol to document management decisions on significant variances between program and independent cost estimates, but it has not yet provided evidence that it has done so.
NNSA and the Department of Defense (DOD) have identified and are managing risks that could complicate efforts to meet the LEP's fiscal year 2025 completion date. Risks within the program's areas of responsibility include an aggressive flight test schedule for bomb delivery aircraft. The program is managing these and other risks with a formal risk management process. The program has also taken steps to address risks outside its direct control, such as risks related to the readiness and certification of the weapon's F-35 delivery aircraft, by providing information to the responsible DOD organizations.

What GAO Recommends

GAO is making no new recommendations but discusses a prior recommendation that NNSA document and justify decisions regarding independent cost estimates. NNSA provided technical comments, which GAO incorporated as appropriate. DOD did not have any comments.