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Testimony: 

Before the Subcommittee on Energy and Water Development and Related 
Agencies, Committee on Appropriations, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 10:00 a.m. EDT: 

Thursday, April 6, 2006: 

Hanford Waste Treatment Plant: 

Contractor and DOE Management Problems Have Led to Higher Costs, 
Construction Delays, and Safety Concerns: 

Statement of Gene Aloise, Director, Natural Resources and Environment: 

GAO-06-602T: 

GAO Highlights: 

Highlights of GAO-06-602T, a testimony to the Subcommittee on Energy 
and Water Development and Related Agencies, Committee on 
Appropriations, House of Representatives: 

Why GAO Did This Study: 

The Waste Treatment Plant Project at the Department of Energyís (DOE) 
Hanford site in southeastern Washington state is a massive effort to 
stabilize and prepare for disposal 55 million gallons of radioactive 
and hazardous wastes currently held in underground tanks. In 2000, DOE 
awarded an 11-year, $4.3 billion contract project to Bechtel National, 
Inc. (Bechtel) to design and construct the plant. Since then, numerous 
problems and changes have occurred that will significantly increase the 
projectís final cost and completion date. 

This testimony discusses (1) how and why the projectís cost and 
schedule have changed since 2000; (2) the status of DOE and Bechtel 
efforts to address these problems and improve project management ; and 
(3) our observations on issues that need to be addressed in going 
forward. It is based on previous GAO reports and ongoing work. 

What GAO Found: 

Since the waste treatment plant construction contract was awarded in 
2000, the projectís estimated cost has increased more than 150 percent 
to about $11 billion, and the completion date has been extended from 
2011 to 2017 or later. There are three main causes for the increases in 
the projectís cost and completion date: (1) the contractorís 
performance shortcomings in developing project estimates and 
implementing nuclear safety requirements, (2) DOE management problems, 
including inadequate oversight of the contractorís performance, and (3) 
technical challenges that have been more difficult than expected to 
address. 

To address the causes of the cost and schedule increases and regain 
management control of the project, DOE and Bechtel have taken steps to 
develop a more reliable cost and schedule baseline; slow down or stop 
construction activities on some of the facilities to allow time to 
address technical and safety problems and to advance design activities 
farther ahead of construction activities; and strengthen both project 
management and project oversight activities. 

Despite these actions, we have continuing concerns about the current 
strategy for going forward on the project. Our main concerns include: 
(1) the continued use of a fast-track, design-build approach for the 
remaining work on the construction project, (2) the historical 
unreliability of cost and schedule estimates, and (3) inadequate 
incentives and management controls for ensuring effective project 
management and oversight. 

Progression of Cost Estimates on the WTP Project: 

[See PDF for image] 

[End of figure] 

What GAO Recommends: 

GAO recommends that DOE (1) consider the feasibility of completing 90 
percent of facility design or facility component design before 
restarting construction; (2) ensure that the revised project baseline 
fully reflects remaining uncertainties; and (3) improve management 
controls. 

DOE generally agreed, but was concerned about the costs of delaying 
construction to complete design activities. 

www.gao.gov/cgi-bin/getrpt?GAO-06-602T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Gene Aloise at (202) 512-
3841 or aloiseg@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to appear before the Subcommittee today to discuss our 
work on the Department of Energy's (DOE) Waste Treatment Plant Project 
(WTP) under construction at DOE's Hanford site in southeastern 
Washington state. The purpose of this massive project is to stabilize 
and prepare for disposal large quantities of radioactive and hazardous 
wastes stored in underground tanks. From the 1940s through most of the 
1980s, 9 nuclear reactors operated at the Hanford site, producing 
plutonium and other special nuclear materials primarily for DOE's 
weapons program. Producing these special nuclear materials generated 
large volumes of hazardous and radioactive waste. Some of this waste 
was deposited directly into the ground in trenches, injection wells, or 
other facilities designed to allow the waste to disperse into the soil; 
and some was packaged into drums and other containers and buried. The 
most dangerous waste was stored in 177 large underground storage tanks. 
DOE has managed this tank waste over the years as high-level waste. The 
underground tanks currently hold more than 55 million gallons of this 
waste--enough to fill an area the size of a football field to a depth 
of over 150 feet. DOE, the Environmental Protection Agency (EPA), and 
the Washington state Department of Ecology--have determined that 
stabilizing this waste is one of the most urgent cleanup activities at 
the Hanford site. 

The Hanford site occupies 586 square miles near the cities of Richland, 
Pasco, and Kennewick, with a combined regional population of over 
200,000. The Columbia River--the second largest river in the United 
States and a source for hydropower production, agricultural irrigation, 
drinking water, and salmon reproduction--flows through the site for 
almost 50 miles. Although the underground storage tanks are several 
miles from the river, tank monitoring data and detection techniques 
have shown that some of the tanks have leaked in the past. Because the 
contamination has reached the groundwater under the tanks, officials 
are concerned that it is now making its way to the Columbia River. 

To stabilize the approximately 55 million gallons of waste remaining in 
the tanks, Hanford's waste treatment project involves (1) designing, 
constructing, and testing a waste treatment plant[Footnote 1] (the 
construction project) and (2) operating this plant and others in 
subsequent years to process and prepare the tank waste for permanent 
disposal (the operations project). Schedule milestones for stabilizing 
the tank waste and preparing it for disposal, as well as agreements on 
the technologies to be used, are set forth in the Hanford Federal 
Facility Agreement and Consent Order between DOE, Washington state's 
Department of Ecology, and EPA. This agreement, commonly called the 
"Tri-Party Agreement," was signed in May 1989. 

In 2000, DOE awarded an 11-year, $4.3 billion contract for the 
construction project to Bechtel National, Inc. (Bechtel). DOE plans to 
solicit bids through a competitive process and award a separate 
contract to operate the WTP once the construction project is completed. 

Since the contract with Bechtel began in 2000, numerous problems with 
and changes to the construction project have occurred, which has 
significantly affected the project's final cost and completion date. My 
testimony will discuss: (1) how the project's cost and schedule have 
changed since the contract was awarded to Bechtel in December 2000, and 
the primary causes for those changes; (2) the status of DOE and Bechtel 
efforts to address these causes and establish effective management 
controls over the project; and (3) our observations on issues that need 
to be addressed in going forward on the project. 

My testimony is based on our past reviews of DOE's Environmental 
Management program and the Hanford project, especially our 2004 report 
on the project,[Footnote 2] and our currently ongoing work for this 
Subcommittee. Regarding our ongoing work, in order to understand how 
the project's cost and schedule estimates have changed, the reasons for 
those changes, and efforts to address any problems, we obtained and 
analyzed project documents and records developed by DOE and Bechtel as 
well as evaluations of various aspects of the project conducted by the 
U.S. Army Corps of Engineers and other independent reviews. We also 
interviewed DOE and Bechtel project and technical managers about the 
main causes of the cost increases and schedule delays and steps they 
are taking to address the problems. We also toured the construction 
site to observe the actual condition of the facilities. A more complete 
discussion of our scope and methodology is presented in appendix II. We 
conducted our review from June through September 2005 and from January 
through April 2006 in accordance with generally accepted government 
auditing standards. We are continuing our work on this project and plan 
to issue a final report in October 2006. 

In summary, we found the following: 

The Hanford waste treatment plant construction project's estimated cost 
has increased over 150 percent to about $11 billion since 2000, and the 
completion schedule has been extended by 6 years to at least 2017. 
There are three main causes for these results--contractor performance 
problems, DOE management shortcomings, and difficulties addressing 
various technical challenges encountered during design and 
construction. 

Regarding the contractor's performance: 

* Bechtel has performed poorly on several aspects of the project. For 
example, Bechtel significantly underestimated the price of steel and 
how much engineering effort would be needed to complete facility 
designs. These mistakes, and others like them, have added about $2 
billion to project costs. Bechtel also continues to need increased 
contingency funding for unexpected problems. Adjusting for additional 
contingency funding added over $2 billion to the cost estimate. 
Importantly, Bechtel failed on several occasions to ensure that nuclear 
safety requirements were being met, including allowing design changes 
to be made without following nuclear safety procedures and failing to 
detect serious construction flaws in tanks that will hold radioactive 
material in the facilities. 

Regarding DOE management: 

* DOE has followed an approach to constructing the project known as 
"fast-track," design-build ---where design, construction, and 
technology development occur simultaneously. However, this approach is 
not recommended for designing and constructing one-of-a-kind, complex 
nuclear facilities because, among other things, it increases the risk 
of encountering problems that can adversely affect a project's cost and 
schedule. DOE also did not establish project management requirements 
and DOE headquarters staff was not involved in evaluating the project 
or the contractor's performance. 

Regarding technical challenges: 

* Bechtel and DOE have encountered many technical problems with 
facility design and equipment that are taking considerable more time 
and money than expected to address and correct. These problems include 
reengineering plant facilities to withstand earthquakes; correcting 
design and operation problems with waste mixing pumps; and preventing 
flammable hydrogen gas from building up to unsafe levels in tanks and 
pipes. Although final cost estimates are not yet available, as of April 
2005, these technical challenges have added about $1.4 billion to 
project cost estimates. 

To address project cost and schedule problems, DOE and Bechtel have 
focused on three main areas--slowing down construction while addressing 
technical and safety problems; establishing new project cost and 
schedule estimates; and strengthening project management and oversight. 
For example, DOE directed Bechtel to slow down or stop construction 
activities on the two facilities affected by changing earthquake 
protection requirements--the pretreatment facility and the high-level 
waste treatment facility. Slowing the pace of construction will allow 
more time to address technical and safety problems and make any needed 
design changes before construction is restarted. DOE also directed 
Bechtel to develop a new project cost and schedule baseline starting 
with an analysis of material and labor quantities and costs, and 
incorporating more contingency funding to address future uncertainties. 
DOE's project management improvements have included developing a 
headquarters oversight board that includes several senior DOE 
executives and funding independent reviews of (1) the new project 
baseline by the Corps of Engineers and (2) the technical feasibility of 
the treatment project by a panel of outside experts. These initiatives 
are ongoing. Bechtel has focused on improving its project performance 
information, implementing several management and organizational 
changes, and strengthening safety and quality assurance practices. 

Despite the steps DOE and Bechtel have taken to address technical, 
safety, and other management problems on the construction project, we 
have continuing concerns about the current strategy for going forward. 
Our main concerns include: (1) the continued use of a fast-track, 
design-build approach for the remaining work on the construction 
project; (2) the reliability of the revised project cost and schedule 
estimates, and whether there is enough flexibility in the revised 
schedule to address remaining project uncertainties during the 
construction and commissioning phases; and (3) the adequacy of 
management actions taken to ensure effective project management and 
oversight. DOE is continuing with the fast-track approach to try and 
stay as close as possible to milestone dates agreed to in the Tri-Party 
Agreement and to keep costs down. However, the technical, safety, and 
management problems on the project make it clear that a fast-track 
approach is not appropriate. In our view, proceeding with a project 
construction plan more closely aligned with nuclear industry 
guidelines, which suggest completing at least 90 percent of the design 
before restarting construction provides a better chance of successfully 
completing the project and controlling the cost and completion date. 
Furthermore, the cost and schedule baseline is being revised before all 
of the technical issues are understood and the cost and time needed to 
address them is known. For example, it is not clear whether DOE has 
allowed sufficient time for testing of all the facilities during the 
commissioning phase of the project. Also, in our view, the revised cost 
estimate should contain cost and schedule contingencies that are 
sufficient to ensure that no further re-baselining of the project will 
be needed in the future. Finally, regarding overall project management, 
it is unclear whether the actions taken by DOE and Bechtel are adequate 
to bring the project under control and create greater overall 
accountability for results. Specifically, it is unclear how DOE will 
modify contractor incentives once the cost and schedule baselines are 
finalized. The current contract incentives are no longer meaningful 
because the current cost and schedule goals are no longer achievable 
and are being revised. However, modifying the contract to provide new 
incentives could be viewed as rewarding Bechtel's past performance. It 
remains to be seen whether DOE can establish a combination of project 
incentives and management controls that will lead to the successful 
completion of the construction project. 

We are recommending that the Secretary of Energy take steps to prevent 
further use of a fast-track, design-build approach to the project; 
ensure that facility design or facility component design have reached 
at least 90 percent completion and that technical and safety problems 
have been satisfactorily addressed before restarting construction; and 
take other management actions to help ensure that the new project 
baseline will be reliable and that controls and accountability are such 
that Bechtel will safely and effectively complete the project. 

On April 4, we met with DOE officials, including the Assistant 
Secretary for Environmental Management, to obtain oral comments on this 
testimony. DOE generally agreed with the testimony findings and 
conclusions and two of the three recommendations. DOE agreed with our 
recommendations to ensure that the new project baseline fully reflects 
all remaining uncertainties on the project and to strengthen management 
controls over the project. However, regarding our recommendation that 
DOE not restart construction until facility design has reached 90 
percent and the project's major technical and safety problems have been 
satisfactorily addressed, DOE only partially agreed. DOE said that it 
would discontinue using a fast-track, design-build approach to 
completing the project and acknowledged that use of this approach has 
led to increased costs and schedule delays on the project. DOE's 
Assistant Secretary for Environmental Management said that DOE has 
already taken some initial steps to discontinue the fast-track approach 
by widening the gap between facility design and construction to at 
least one year or longer. However, the Assistant Secretary expressed 
concern about delaying construction of WTP facilities until the 
facility design has reached at least 90 percent completion and the 
project's major technical and safety problems have been satisfactorily 
addressed. He said that DOE has not studied the extent to which such a 
delay in restarting construction could potentially increase the overall 
cost of the project. Accordingly, we modified our recommendation to 
ensure that DOE evaluates the feasibility of completing at least 90 
percent of the facility design or facility component design, and that 
major technical and safety issues have been satisfactorily addressed 
before restarting construction. 

Background: 

DOE carries out its high-level waste cleanup program at Hanford under 
the auspices of the Assistant Secretary for Environmental Management 
and in consultation with a variety of stakeholders. The EPA and the 
Washington State Department of Ecology provide regulatory oversight of 
cleanup activities at the site. The Defense Nuclear Facilities Safety 
Board (Safety Board) also oversees DOE's operations. The Safety Board 
was created by the Congress in 1988 to provide an independent 
assessment of safety conditions and operations at defense nuclear 
facilities, including DOE's Hanford site. Other stakeholders involved 
in the Hanford cleanup project include county and local governmental 
agencies, citizen groups, advisory groups, and Native American tribes. 
These stakeholders advocate their views through various processes, 
including site-specific advisory boards. DOE manages the tank waste at 
Hanford through its Office of River Protection, which Congress directed 
DOE to establish in 1998. The office has a staff of about 110 DOE 
employees and a fiscal year 2006 budget of about $1 billion. It manages 
Hanford's tank waste through two main contracts: a tank farm operations 
contract with CH2M Hill Hanford Group[Footnote 3] to maintain safe 
storage of the waste and to prepare it for retrieval, and a 
construction contract with Bechtel to design, construct, and commission 
the operation of a waste treatment plant. For additional information on 
Hanford's tank wastes, see appendix I. 

The Hanford waste treatment construction project includes the 
construction of three primary processing facilities, a large analytical 
laboratory, and 23 supporting buildings on a 65 acre site. The three 
primary processing facilities are: 

* the pretreatment facility, which receives the waste from the tank 
farms and separates it into its low-activity and high-level waste 
components; 

* the high-level waste facility that immobilizes high-level waste for 
offsite disposal through a process known as vitrification, which mixes 
nuclear waste with molten glass;[Footnote 4] and: 

* the low-activity waste facility, which vitrifies the low-activity 
waste for onsite disposal. 

The waste treatment plant facilities are large and complex. For 
example, Bechtel estimates that the completed project will contain 
almost 270,000 cubic yards of concrete and nearly a million linear feet 
of piping. The largest building, the pretreatment facility, has a 
foundation the size of four football fields and is expected to be 12- 
stories tall. 

Contractor Performance Problems, DOE Management Shortcomings, and 
Technical Challenges Have Resulted in Significantly Higher Cost 
Estimates and Longer Completion Dates for the Construction Project: 

In just over 5 years, the estimated cost of the project has increased 
more than 150 percent to about $11 billion and the schedule has been 
extended from an 11-year project to a 17-year project. Three main 
factors were responsible for the cost and schedule increases: (1) poor 
contractor performance in developing project estimates and implementing 
nuclear safety and other requirements, (2) management weaknesses in 
DOE's approach to and oversight of the project, and (3) technical 
challenges that have been more difficult than expected to address. 

Project Cost and Schedule Have Increased Significantly: 

Since DOE awarded the contract to Bechtel in 2000, both the contract 
price and the completion date have increased significantly. In 2000, 
the contract price was $4.3 billion, including contractor fee and 
project contingencies. In 2003, Bechtel revised the estimate to $5.7 
billion, based on changes DOE wanted to make in plant capacity and to 
correct for estimating errors and other problems that were already 
occurring on the project. Since then, the cost estimate has continued 
to climb. For example, Bechtel's December 2005 estimate of the cost to 
complete the project, an estimate that DOE has not yet approved, totals 
about $10.5 billion plus contractor fee, a significant increase from 
the initial estimate in 2000. Bechtel is still revising its estimate of 
the project costs, and the final estimate will very likely be higher. 
For example, in a February 2006 hearing before the Senate Armed 
Services Committee, the Secretary of Energy said that the final cost 
for the project could be nearly $11 billion. Figure 1 shows this 
progression of cost estimates for the construction project. 

Figure 1: Progression of Cost Estimates for WTP Construction Project. 

[See PDF for image] 

[End of figure] 

The estimated completion date has also been extended. In 2000, the 
estimated date to complete the construction of the waste treatment 
project was 2011. This date corresponded to the work schedule agreed to 
by DOE in the Tri-Party Agreement under which DOE was to begin 
operating the waste treatment facilities by 2011. However, Bechtel's 
latest estimate, not yet approved by DOE, is that the construction 
project will be completed by 2017 or later, at least a 6-year extension 
and a 50 percent increase in the project's schedule. 

Furthermore, the revised cost and schedule estimates Bechtel developed 
in December 2005 are not final and will likely increase further. At 
least through the rest of 2006, DOE and Bechtel will continue to 
address identified technical and safety issues and incorporate 
additional design changes into its estimates. For example, Bechtel is 
currently reviewing several technical issues recently raised by a panel 
of experts DOE invited to study the project.[Footnote 5] Bechtel plans 
to incorporate changes resulting from the review into a new cost 
estimate. This revised estimate is expected to be complete in late May 
2006. Once that estimate is available and DOE has completed its review 
of the estimate, DOE and Bechtel will need to agree on a revised 
contract price that incorporates any changes made to the project, 
including any changes to the fee that Bechtel can potentially earn. DOE 
officials do not expect to have these activities completed until late 
2006. 

Bechtel and DOE Share Responsibility for the Main Causes of the Cost 
Increases and Schedule Delays: 

In our view, Bechtel and DOE both share in the responsibility for the 
problems with the Hanford waste treatment plant.[Footnote 6] 

Contractor performance. Poor contractor performance in the areas of 
developing and revising cost estimates and adhering to nuclear safety 
and other requirements contributed to cost and schedule increases. 

Bechtel made a number of miscalculations on a broad range of activities 
when developing and revising its cost estimates for the project. 
Specifically, we found that Bechtel: 

* underestimated by more than 50 percent the engineering hours needed 
to design the facilities (a small portion of this increase was due to 
changes in seismic design criteria). The current estimate for design 
hours is now over 14 million hours. 

* underestimated the cost of key commodities like steel. Steel prices 
climbed sharply once project construction started. 

* incorrectly assumed that it could obtain an exception to the fire 
code and avoid applying a protective coating on some of the structural 
steel used in the facilities and instead use a less expensive sprinkler 
system. 

In April 2005, Bechtel estimated that the estimating errors 
collectively added about $845 million to the estimated contract price. 

Additionally, Bechtel also incorrectly estimated the amount of 
contingency funds that would be needed to account for project 
uncertainties. In 2000, Bechtel estimated that $500 million in 
contingency was needed. However, in its December 2005 estimate, Bechtel 
proposed that a total of $2.8 billion in contingency be allocated to 
the project. The $2.8 billion in contingency funds included $1.76 
billion to address technical and programmatic risks outside the current 
scope of the project and an additional reserve of about $1 billion for 
potential future problems not yet identified. 

Finally, Bechtel was ineffective at ensuring that the completed 
facilities would meet nuclear safety requirements. In March 2006, DOE's 
Office of Enforcement issued a report documenting a number of different 
safety problems with the construction project, including a failure to 
(1) include safety requirements in design documents, (2) identify and 
use the correct design codes and safety standards, and (3) track design 
changes to ensure purchased materials and supplies were consistent with 
those changes.[Footnote 7] These failures led to significant problems. 
For example, Bechtel ordered approximately 70 tanks with incorrect 
structural specifications to ensure the quality of their welds. These 
tanks, that will be located in inaccessible areas of the waste 
treatment plant, were in various stages of fabrication. Had this 
problem not been identified, the quality of welds for all of these 
tanks could have been flawed. One tank had already been installed using 
these incorrect specifications before the problem was discovered. The 
tank was installed because neither the supplier nor Bechtel had 
performed the required weld inspection. Furthermore, when the welds 
were first repaired the subcontractor used incorrect welding rods, 
requiring more rework to repair the repairs. 

In addition, in September 2005, Bechtel discovered errors that had been 
made in structural steel calculations for the laboratory facility. 
These potentially serious errors included design specifications that 
were incorrect and discrepancies between engineering calculations and 
design drawing specifications, which led to replacing steel already 
purchased and correcting hundreds of engineering drawings. Of 
significant concern, a 2005 DOE-sponsored survey found that some 
construction and engineering employees were reluctant to raise safety 
concerns to Bechtel management, fearing reprisal. Bechtel is now 
developing a strategy for cultivating a more rigorous culture of safety 
among its workforce that it expects to complete by June 2006. 

DOE management. In our view, DOE's management of the project has been 
flawed, as evidenced by (1) adopting a fast-track approach to design 
and construction activities that both created and exacerbated problems 
and (2) failing to exercise adequate and effective oversight of 
contractor activities, both of which contributed to cost and schedule 
increases. 

DOE's decision to pursue a fast-track, design-build approach under 
which technology development, facility design, and construction 
activities were carried out concurrently has proven to be regrettable. 
DOE adopted the fast-track approach because of commitments made under 
the Tri-Party Agreement to have facilities operating by 2011, and to 
treat all of the tank waste by 2028. However, using a fast-track 
approach for nuclear facilities is considered "high risk," and is not 
recommended for designing and constructing one-of-a-kind, or first-of- 
a-kind complex nuclear facilities. DOE's own project management 
guidance cautions against using this approach for complex facilities. 
For example, DOE Order 413.3 cautions that a design-build approach 
should only be used in limited situations, such as when work scope 
requirements are well defined, projects are not complex, and technical 
risks are limited. 

Furthermore, the project approach included optimistic assumptions that 
virtually every major safety, technology, regulatory, and nuclear 
material acquisition uncertainty could be resolved while facilities 
were being constructed at an unusually fast pace for the largest, most 
complex, first-of-a-kind, nuclear waste treatment plant in the United 
States.[Footnote 8] Less than one year after construction began, DOE 
was already experiencing problems with construction activities 
outpacing design, technology problems that were affecting the critical 
path of the construction project, contractor safety control 
inadequacies, and outdated facility seismic criteria. Despite these 
problems, DOE insisted on continuing its fast-track design-build 
approach under its accelerated cleanup plan until early 2005. At that 
point, the effect of these and other unresolved issues, contractor 
performance problems, and signs of significant cost growth and schedule 
delays caused DOE to direct Bechtel to significantly slow construction, 
rework the design, and reevaluate safety, seismic, and regulatory 
requirements. 

The impact of many of these problems could have been lessened if 
facility design had been more complete before construction began. Under 
nuclear industry guidance, which recommends that facility design be 
essentially complete before construction begins, major environmental, 
technological, and regulatory issues can be resolved in advance of 
construction.[Footnote 9] The benefit of this process is that most 
uncertainties are resolved before major capital is at risk, and the 
potential for project delay is significantly reduced. On this project, 
under the fast track approach, actual schedule delays of more than two 
years have occurred, contributing to more than 1,000 workers being laid 
off, and work on the two largest waste treatment facilities coming to a 
halt. 

GAO, the Safety Board, and others have criticized DOE in the past for 
using the fast-track approach for large, complex first-of-a-kind 
nuclear cleanup facilities. We issued reports in 1993, and again in 
1998, that were critical of DOE for using an approach that differs so 
significantly from nuclear industry guidelines for constructing complex 
nuclear facilities. The Safety Board cautioned in June 2002, and again 
in March 2004, that a fast-track, design-build approach could lead to 
expensive plant modifications or to the acceptance of increased public 
health and safety risks. In June 2004, we recommended that DOE avoid 
using a fast-track approach to designing and constructing its complex 
nuclear facilities. The department accepted this recommendation, but 
apparently believes that it does not apply to this project. At the time 
of our 2004 report, the department could not identify a single instance 
where it had successfully used the approach to construct a large, 
complex nuclear cleanup facility. Despite the fact that DOE has never 
been successful with this approach on any complex nuclear cleanup 
project, Bechtel reported in its most recent cost and schedule estimate 
that a "fast-track engineering, procurement, and construction" approach 
is a standard commercial approach for large projects and the best 
approach for a schedule-driven project. 

DOE's lack of oversight of Bechtel's activities has also been 
unfortunate. DOE did not ensure adherence to normal project reporting 
requirements and, as a result, status reports provided an overly 
optimistic assessment of progress on the project. For example, in 
January 2005, DOE's project status report indicated that costs and 
scheduled work to date were proceeding as planned. However, Bechtel was 
not providing accurate information. The project almost always appeared 
to be on schedule because Bechtel adjusted the project baseline 
schedule to match actual project results. In addition, DOE headquarters 
oversight officials were generally unaware of the full extent of the 
problems with the project. 

Finally, DOE has not prevented significant safety problems from 
occurring on the project. DOE is responsible for ensuring that its 
activities follow nuclear safety requirements and generally receives no 
outside regulatory oversight of nuclear safety. However, the department 
was not fully effective in ensuring that nuclear safety requirements 
were being met. Contributing to the problem, DOE's internal safety 
oversight had been significantly reduced since 2000. Furthermore, key 
responsibilities to ensure quality control of contractors were placed 
under the responsibility of the DOE project manager who also had 
primary responsibility for meeting project cost and schedule targets. 
In late 2003, DOE began recognizing some of the nuclear safety problems 
on the project but many of these problems dated back to 2002, or 
earlier. Finally, in 2005 and 2006, according to the WTP project 
manager, DOE withheld a total of $800,000 in performance fee from 
Bechtel for industrial and nuclear safety problems, but problems 
continued. In 2006, DOE assessed a civil penalty of $198,000 for a 
number of nuclear safety violations. DOE also recently increased the 
number of staff assigned to oversee safety activities. 

Technical challenges. Constructing the waste treatment plant at the 
Hanford site is a massive, highly complex and technically challenging 
project. Problems in addressing these technical challenges have 
contributed to cost and schedule increases. 

A number of technical problems have continued to plague the project, 
including: 

* changing seismic standards that resulted in substantial re- 
engineering of the facility design; 

* problems with "pulse jet mixers" needed to keep waste constituents 
uniformly mixed while in various tanks in the facilities; 

* the potential buildup of flammable hydrogen gas in the waste 
treatment plant tanks and pipes; and: 

* problems with radioactive and hazardous wastes plugging treatment 
plant piping systems during operations. 

Bechtel estimated, in December 2005, that collectively these technical 
problems could add nearly $1.4 billion to the project's estimated cost. 

In 2002, the Safety Board began expressing concerns that the seismic 
standards used to design the facilities were not based on the most 
current ground motion studies and computer models, and were not based 
on geologic conditions present directly under the construction site. 
After more than 2 years of analysis and discussion, DOE contracted for 
a new seismic analysis that confirmed the Safety Board's concerns that 
the seismic criteria were not "sufficiently conservative" for the two 
largest treatment facilities--the high-level waste facility and the 
pretreatment facility. Revising the seismic criteria caused Bechtel to 
recalculate thousands of engineering estimates and to rework thousands 
of design drawings to ensure that tanks, piping, cables, and other 
equipment in these facilities were adequately anchored. Bechtel 
determined that the portions of the building structures already 
constructed were sufficiently robust to meet the new seismic 
requirements. By December 2005, however, Bechtel estimated that 
engineering rework and other changes to tanks and other equipment 
resulting from the more conservative seismic requirement would increase 
project costs by about $750 million to $900 million and result in a 26 
month schedule delay. 

In 2003, potential problems with the pulse jet mixers caused project 
construction delays. Bechtel initially planned to rely on computer 
modeling to confirm that the mixer would successfully keep the tank 
waste uniformly mixed. However, because these mixers were designed to 
be placed in "black cells" in the pretreatment facility where they 
could not be repaired or modified after operations began because of the 
high levels of radiation in the cells, mixer failure was considered 
high risk. Given this risk, in April 2003, just 9 months before the 
design configuration for the mixers was to be completed, Bechtel 
decided to conduct laboratory tests of the mixers to ensure that they 
would successfully mix the tank waste. Based on laboratory performance 
testing, Bechtel found that the mixers did not adequately work. 
Consequently, the mixers had to be re-designed. The tanks that were to 
house the mixers also had to be redesigned with greater structural 
support to accommodate more forceful mixing pumps and other 
modifications. DOE spent about two years addressing problems with the 
pulse jet mixers. According to DOE's project manager, Bechtel has 
completed the testing and design modifications for the mixers. As of 
May 2005, this problem had contributed more than $300 million to the 
project's cost growth. 

In June 2004, we reported on the possibility of hydrogen gas building 
up in the plant's tanks, vessels, and piping systems, and noted that 
the buildup of flammable gas in excess of safety limits could cause 
significant safety and operational problems. Although DOE and Bechtel 
have been aware of this problem since 2002, the problem has not been 
fully resolved. As of March 2006, Bechtel continued to assess how to 
resolve this technical problem but has not identified final solutions. 
In April 2005, Bechtel estimated that this problem contributed about 
$90 million to the project's cost growth. 

In March 2006, an external technology review identified another 
technological problem called "line plugging," involving the potential 
that solid and liquid radioactive and hazardous wastes could plug waste 
treatment facility piping systems during treatment operations.[Footnote 
10] Described as the most serious problem the external group 
identified, the report emphasized that unless corrected, this flaw 
could prevent the plant from operating successfully. The review 
concluded that the treatment plant's piping systems could begin 
plugging within days to a few weeks of operational start up. The 
external review did not estimate the potential cost and schedule impact 
of correcting this problem, but concluded that DOE identify and 
consider the corrective actions needed to resolve the problem. Bechtel 
plans to address these actions in its final cost and schedule estimate 
due in late May 2006. 

DOE and Bechtel Have Taken Several Steps to Strengthen Management and 
Oversight of the Project: 

To address underlying causes contributing to cost and schedule growth 
on the construction project, DOE and Bechtel have undertaken three main 
initiatives: (1) slowing construction to allow time to address 
technical and safety problems and to advance design activities further 
ahead of construction activities, (2) developing a more credible cost 
and schedule baseline, and (3) improving project management and 
oversight. 

Slowing construction to address technical problems and advance the 
design work: 

Because of the scope of the technical problems on the project, 
especially the need to apply more conservative seismic standards to the 
pretreatment and high-level waste facilities, in December 2004, DOE 
directed Bechtel to slow construction on these facilities. This allowed 
Bechtel to focus on addressing the technical problems and to advance 
plant design further ahead of construction activities. According to the 
DOE project manager, as of March 2006, the design for the waste 
treatment plant was about 60 percent complete. DOE's project manager 
told us that once construction starts again, he expects to have a gap 
of about one year between completing the design of specific building 
components and beginning construction of those components. Slowing the 
construction of project facilities has also allowed DOE and Bechtel to 
resolve some of the technical issues that contributed to cost and 
schedule growth. For example, according to DOE's WTP project manager, 
seismic criteria have been revised and are being incorporated into 
facility design. The Corps is reviewing Bechtel's design rework to 
ensure that it meets the revised criteria. These criteria are scheduled 
to be confirmed by the Corps in early 2007. Similarly, DOE's WTP 
project manager said that problems with tank waste mixing pumps have 
apparently been resolved and changes are being incorporated into the 
revised design. However, issues involving the potential for hydrogen 
gas to build up in the waste treatment plant tanks and piping systems 
have not yet been resolved, according to DOE's project manager. 

Developing a more reliable project baseline: 

Bechtel and DOE have taken steps to develop estimates they believe will 
better reflect the project's true cost. Bechtel has been conducting a 
more detailed review of cost and schedule elements than occurred in 
developing previous baselines. In the past, Bechtel relied more on 
estimating techniques to develop the baseline because the design was 
not sufficiently mature to more accurately estimate material and labor 
costs. Bechtel's December 2005 baseline estimate of $10.5 billion was 
based on using detailed design drawings and a better understanding of 
the actual material and labor costs. According to Bechtel's deputy 
project manager, the new estimate better defines risk on the project 
and assigns a more realistic contingency value to that risk. Bechtel 
also brought in outside experts and conducted two major corporate 
reviews of the estimates in April and December 2005. Bechtel is 
expected to submit a final revised cost and schedule estimate by the 
end of May 2006. 

In addition to Bechtel's efforts, DOE has hired two external teams to 
review the revised estimates. First, DOE contracted with the Corps of 
Engineers to review the reasonableness of various aspects of Bechtel's 
estimate. DOE expects the Corps of Engineers to validate such things as 
the revised ground motion criteria and other geophysical data, whether 
the ground motion criteria has been adequately incorporated into the 
plant design, and the reasonableness of material and labor cost 
estimates, including the amount of contingency funds needed for the 
project. DOE expects the Corps of Engineers to complete its review by 
July 2006. Second, DOE directed Bechtel to hire an independent review 
team of experts from industry and academia to review the technical, 
cost, and schedule aspects of the project. The team's preliminary 
report concluded that the project's cost estimate should be increased 
to $11.3 billion, plus contractor fee.[Footnote 11] 

In our view, while these reviews are a step in the right direction, 
given the Department's past history in developing a credible project 
baseline, it is too soon to tell whether these reviews will assist DOE 
and Bechtel in providing reliable cost and schedule estimates. 

Taking other steps to improve management and oversight: 

Both Bechtel and DOE have undertaken several other actions to improve 
management and oversight of the project. Bechtel's actions include (1) 
improving its cost and schedule performance tracking system, (2) making 
management and organizational changes, and (3) taking steps to improve 
quality and safety on the project. Regarding the cost and schedule 
performance tracking system--referred to as an earned value system--DOE 
requires that a contractor's system be certified to comply with 
industry standards. However, DOE had not certified Bechtel's earned 
value system. Bechtel is now working to have its earned value 
management system certified by September 2006. In addition, to improve 
its management of the project, Bechtel has reorganized to provide 
greater control and oversight of facilities engineering work and 
greater standardization in purchasing material and supplies. According 
to Bechtel's deputy project manager, the new organizational structure, 
along with selected personnel changes will strengthen oversight of this 
work. Finally, following a March 2006 nuclear safety enforcement action 
by DOE, Bechtel is in the process of developing a nuclear safety and 
quality culture change initiative. This includes holding meetings to 
emphasize quality and safety, implementing new training requirements, 
and conducting employee focus groups to promote greater awareness of 
safety requirements. 

DOE has also taken steps to strengthen its management and oversight. To 
address organizational and staffing oversight issues, DOE formed a 
special headquarters task force, in late 2005, to study various aspects 
of the Hanford project and to advise the Secretary and the DOE project 
manager as the project goes forward. In addition, the Assistant 
Secretary for Environmental Management directed the DOE site manager to 
hire at least eight additional contracting staff to help administer the 
project, including a director of procurement, a procurement attorney, 
two senior contracting officers, two senior contract specialists, and 
two contract specialists. DOE expects to fill these positions by spring 
2006. DOE also established a new headquarters office--the Office of 
Project Recovery--to focus greater attention on projects, such as the 
waste treatment plant project, that have performance problems. This 
office, which reports directly to the Assistant Secretary for 
Environmental Management, is intended to work with field officials to 
help get projects in trouble back on track. 

To address project management and reporting concerns, DOE is improving 
the use of its earned value information--data DOE uses to monitor cost 
and schedule performance on its projects. DOE is also requiring Bechtel 
to comply with DOE's project management requirements, as defined in DOE 
Order 413.3. In our June 2004 report on the Hanford waste treatment 
project,[Footnote 12] we found that DOE awarded the original contract 
in December 2000, without putting in place these key project management 
requirements. We noted that this approach added significantly to 
project risk. Additionally, the Assistant Secretary for Environmental 
Management directed DOE's Office of Engineering and Construction 
Management to provide more frequent assessments of the waste treatment 
project and, if necessary, initiate more external reviews of the 
project. 

To address continuing problems in nuclear safety and quality, DOE 
recently initiated an enforcement action, including a civil penalty of 
$198,000, against Bechtel for the continuing recurrence of quality and 
safety violations. In its March 16, 2006 Preliminary Notice of 
Violation letter, DOE listed several areas where Bechtel had violated 
nuclear safety requirements, including non-adherence to procedures, 
inadequate training for staff, and emphasizing meeting cost and 
schedule requirements over quality and safety. In its March 16 letter, 
DOE noted that past actions by Bechtel to correct these long-standing 
problems had not been effective. DOE plans to meet with Bechtel in June 
2006 to discuss the contractor's progress in improving nuclear safety 
on the project and determine what additional steps will be necessary to 
ensure safety and quality on the project. 

Observations About Selected Issues DOE Will Need to Address in Going 
Forward on the Project: 

Despite the actions taken by DOE and Bechtel to address technical, 
safety, and other management problems on the project, we have 
continuing concerns about the current strategy for going forward. Our 
main concerns include: 

* the continued use of a fast-track, design-build approach to the 
remaining work on the construction project, 

* the reliability of the project baseline and whether it will fully 
account for remaining uncertainties, and: 

* the adequacy of project incentives and management controls for 
ensuring effective project management and oversight. 

The use of a fast-track, design-build approach to the project: 

It is unclear whether DOE plans to go forward with the fast-track 
approach and allow Bechtel to work concurrently on technology, design, 
and construction activities. Although design and construction 
activities will be less "close-coupled" than before, the work schedule 
will still not fully comply with nuclear industry guidelines to 
complete at least 90 percent of the design before constructing the 
facilities. DOE is continuing with this fast-track, design-build 
approach to try and stay as close as possible to milestone dates agreed 
to in the Tri-Party Agreement, and because DOE believes that doing so 
will help to control costs on the project. However, the myriad of 
technical, safety, and management problems that have already occurred 
on the project make it clear that a more systematic approach to the 
project is needed. Indeed, many of those problems have not yet been 
fully resolved. Continuing with a fast-track, design-build approach 
under these conditions increases the risk that the completed facilities 
may require major rework to operate safely and effectively, which could 
further increase costs. In our view, proceeding with a project 
construction plan more closely aligned with nuclear industry guidelines 
for complex nuclear facilities will provide the best chance of 
successfully completing the project and controlling the final cost and 
completion date. 

The reliability of the revised project estimates: 

None of the estimates Bechtel has developed so far have been reliable. 
Estimates of material and labor costs have been inadequate and Bechtel 
has not included sufficient contingencies in the project baseline to 
account for the high risk, technical complexities, and managerial 
challenges it has faced. As DOE's project management guidance states, 
the key is to develop a project baseline estimate that is fully 
achievable. Re-baselining the project is a time-consuming and costly 
effort. Bechtel's December 2005 baseline proposal is contained in a 
roughly 44,000 page document that according to Bechtel's deputy project 
manager required the efforts of about 200 staff over a 6-month period 
and cost about $10 million to develop. Furthermore, outside reviews and 
baseline validations have cost DOE an additional $20 million since 
2003. 

Bechtel has indicated that the project's revised cost and schedule 
estimates will be comprehensive enough to account for known 
uncertainties, such as what it might take to address the problem of 
hydrogen gas building up in facility pipes as well as any less 
predictable unknowns that might occur, such as a shortage of a key 
commodity. While we are encouraged that Bechtel is taking a more 
systematic approach to developing the project estimates, we have some 
remaining concerns. In particular, the project estimate must not only 
account for constructing the facilities but also commissioning---when 
DOE and Bechtel will demonstrate that the facilities are safe and ready 
to operate. In the past, to try and achieve milestone dates agreed to 
for beginning facility operations, DOE and Bechtel reduced the amount 
of time in the baseline schedule allocated to facility commissioning 
and testing activities from about 58 months to 42 months. In our June 
2004 report, we expressed a concern that shortening the commissioning 
schedule may affect the reliability of the completed facilities. We 
also contacted former DOE and contractor officials and industry 
technology development managers who told us that the commissioning 
approach in the 2003 baseline could result in significant problems 
being overlooked. 

Under Bechtel's most recent proposal, the timeframe for commissioning 
and testing activities has been increased to about 46 months, including 
about 21 months of component testing before commissioning with 
simulated and actual waste begins. However, Bechtel does not yet have a 
detailed plan for the commissioning activities that demonstrates a 46 
month period is adequate. Furthermore, one independent review has 
concluded that the commissioning phase will be the most difficult 
aspect of the entire construction project.[Footnote 13] Given the 
nuclear safety problems Bechtel has encountered so far on the project, 
and the complexity and size of the waste treatment plant, the 
commissioning phase portion of the schedule will need to be long enough 
to allow full testing of the facilities and sufficient time to identify 
and address any remaining problems before operations begin. 

The adequacy of project management and oversight: 

One of the remaining management uncertainties is how DOE will modify 
contract incentives once the new baseline is finalized. Due to cost 
increases and schedule delays that have occurred, the incentive fees in 
the current contract are no longer meaningful. Those incentives 
included more than $300 million for meeting cost and schedule goals or 
construction milestones, and about $111 million for building a plant 
that operates effectively. This greater focus on cost and schedule 
milestones may help explain why DOE has found a less than adequate 
concern for nuclear safety on the project. Another issue, however, is 
that modifying the contract to provide new incentives could be viewed 
as rewarding Bechtel's past performance. Overall, it remains to be seen 
whether DOE can finally put in place a combination of performance 
incentives and management controls that will support the successful 
treatment of the Hanford tank wastes over the next few decades. 

Conclusions: 

By just about any measure, the Hanford waste treatment project is in 
disarray, as evidenced by ever-increasing cost estimates, construction 
delays, and more recently, safety concerns. In our view, what is 
happening is uncharacteristic of a well-planned and well-managed 
construction project. Project costs are increasing rapidly and we do 
not know what the facilities will ultimately cost or when they will be 
operational. Of great concern to us is the fact that many nuclear 
safety and other technical problems have occurred on the project. We 
believe that it is imperative that Bechtel and DOE discover any and all 
safety problems and immediately address them. In going forward, it is 
unclear whether DOE plans to continue using a fast-track approach that 
we have found is inappropriate for this unique, complex nuclear 
facility. We believe that DOE needs to follow nuclear industry 
construction guidelines and take a more conservative approach to design 
and construction activities that avoids carrying out these activities 
concurrently. Furthermore, the revised baseline must be robust enough 
to adequately address remaining uncertainties and allow sufficient time 
for testing the facilities during the commissioning phase. Unless the 
revised baseline fully reflects all remaining uncertainties, especially 
problems that may occur during facility commissioning, DOE will be 
unable to ensure that no further re-baselining of the project will be 
necessary. Furthermore, it is unclear how DOE will modify contract 
incentives or carry out its revised plan for overseeing the project. We 
believe that DOE needs to develop contract incentives that better 
balance cost and schedule incentives and incentives to ensure that the 
facilities operate safely and effectively as well as improve the 
department's management and oversight of contractor activities. In our 
view, if DOE takes these actions the project will have a better chance 
of being successfully completed. 

Recommendations: 

We recommend that the Secretary of Energy take the following three 
actions: 

1. Discontinue using a fast-track, design-build approach to completing 
the project and consider the feasibility of completing at least 90 
percent of the facility design or facility component design before 
restarting construction, and ensure that the project's major technical 
and safety problems have been addressed before restarting construction. 

2. Develop a revised project baseline that fully reflects the remaining 
uncertainties, including potential problems that may be encountered 
during the commissioning phase, before presenting it as a reliable 
estimate of the project's cost and schedule. 

3. Establish improved management controls, including revising contract 
incentives and strengthening accountability for performing oversight 
activities. 

Thank you, Mr. Chairman and Members of the Subcommittee. That concludes 
my testimony. I would be pleased to respond to any questions that you 
may have. 

Contacts and Acknowledgments: 

For further information on this testimony, please contact Mr. Gene 
Aloise at (202) 512-3841. Individuals making key contributions to this 
testimony included Chris Abraham, John Delicath, Nancy Kintner-Meyer, 
Jeff Larson, Tom Perry, and Bill Swick. 

[End of section] 

Appendix I: Additional Information on Hanford's Tank Wastes: 

DOE has a vast complex of sites across the nation dedicated to the 
nuclear weapons program, but the high-level waste stemming from 
reprocessing spent nuclear fuel to produce weapons material such as 
plutonium and uranium has been limited mainly to three sites--the 
Savannah River site, South Carolina; the Idaho National Laboratory near 
Idaho Falls, Idaho; and the Hanford site near Richland, 
Washington.[Footnote 14] The underground storage tanks that store the 
high-level waste at the Hanford site consist of 149 single shell steel 
tanks and 28 double shell tanks encased in concrete. Most of these 
tanks have already exceeded their design life. DOE has concluded, based 
on tank monitoring data and other techniques used to detect 
contamination in soil under the tanks, that 67 of the single shell 
tanks have leaked about 1 million gallons of high-level waste into the 
soil. DOE does not believe that the double shell tanks have leaked any 
waste. 

The waste in these tanks contains radioactive components that emit 
dangerously intense radiation. Because of the intense radiation emitted 
from high-level waste, the waste must be isolated and handled remotely 
behind heavy shielding such as a layer of concrete in order to protect 
humans and the environment. In addition to intense radioactivity, some 
radioactive components are highly mobile in the environment and can 
quickly migrate to contaminate the soil and groundwater if not 
immobilized. In addition to radioactive components, DOE's high-level 
waste also generally contains hazardous components added during the 
process of dissolving used nuclear fuel to remove plutonium and other 
nuclear materials or to stabilize the waste for storage. These 
hazardous components include solvents, acids, caustic sodas, and toxic 
heavy metals such as chromium and lead. Radioactive waste components, 
when combined with hazardous components, are referred to as "mixed 
wastes." 

High-level waste generally exists in a variety of physical forms and 
layers inside the underground tanks, depending on the physical and 
chemical properties of the waste components. The waste in the tanks 
takes three main forms: 

* Sludge: The denser, water insoluble components generally settle to 
the bottom of the tank to form a thick layer known as sludge, which has 
the consistency of peanut butter. 

* Saltcake: Above the sludge may be water-soluble components such as 
sodium salts that crystallize or solidify out of the waste solution to 
form a moist sand-like material called saltcake. 

* Liquid: Above or between the denser layers may be liquids comprised 
of water and dissolved salts called supernate. 

The treatment and disposal of high-level waste produced at DOE 
facilities is governed by a number of federal laws, including laws that 
define the roles of DOE and the Nuclear Regulatory Commission (NRC) in 
waste management. The Atomic Energy Act of 1954 (AEA) and the Energy 
Reorganization Act of 1974 established responsibility for the 
regulatory control of radioactive materials including DOE's high-level 
wastes. Under amendments the Federal Facility Compliance Act of 1992 
made to the Resource Conservation and Recovery Act of 1976 (RCRA), DOE 
generally must develop waste treatment plans for its sites that contain 
mixed wastes.[Footnote 15] These plans are approved by states, 
including the state of Washington, that EPA has authorized to 
administer RCRA or by EPA in those states that have not been so 
authorized. 

[End of section] 

Appendix II: Scope and Methodology: 

To determine how costs and schedule for DOE's waste treatment plant 
located at the Hanford site near Richland, Washington have changed, and 
the primary causes for those changes since the contract was awarded in 
2000, we reviewed previous GAO reports on the project from 1993 to 
2005. In addition we reviewed several internal and external reports 
addressing cost, schedule, technology, and other issues on the project, 
including two studies by the Army Corps of Engineers, and a study 
conducted for DOE by LMI Government Consulting--a private engineering 
consulting firm. We also reviewed both the April and December 2005 
Estimates at Completion prepared by Bechtel and two March 2006 reports 
prepared by external review teams to assess the impact of a variety of 
technical issues on the project and Bechtel's estimated cost estimate 
for completing the project. Both of these reports were prepared under 
the direction of the department's Office of Environmental Management. 
While we did not independently verify the accuracy of the data 
presented in these reports, based on our review of much of the 
supporting documentation cited in the reports, we determined the data 
to be of sufficient reliability use in our report. To assist in 
evaluating these reports and other technical issues on the project, we 
obtained assistance from our technical consultant, Dr. George Hinman, 
who has a Ph. D. in physics and serves as Professor Emeritus at 
Washington State University. Dr. Hinman has extensive nuclear energy 
experience in industry, government, and academia. 

We also discussed the problems and underlying causes of cost and 
schedule growth with DOE and contractor officials at the site as well 
as DOE officials in its Office of Environmental Management, Office of 
Engineering and Construction Management, and Office of Budget. We 
discussed the project's cost and schedule changes with outside experts, 
including officials from the Defense Nuclear Facilities Safety Board. 
To document the primary causes for changes in the cost and schedule 
estimates, we relied on these documents as well as interviews with key 
project and program officials. We quantified the cost impact of each of 
the main causes for cost growth and schedule increases from information 
provided in Bechtel's April 2005 estimate and the Corps of Engineers' 
May 2005 report. These estimates were based on an estimated contract 
price of $9.3 billion. However, even though Bechtel updated its cost 
and schedule estimates to reflect a potential contract price of nearly 
$11 billion as of December 2005, it does not plan to finalize its 
estimate until late May 2006. As a result, we were not able to quantify 
the impact of each of the main causes we cited for cost and schedule 
changes to reflect the most recent cost estimate. 

To determine the steps DOE and Bechtel are taking to improve management 
and oversight of the project, we reviewed several documents, including 
a letter by the Assistant Secretary for Environmental Management 
directing that a number of management improvements be made. We reviewed 
DOE policy and procedure documents, and discussed DOE's strategy to 
manage the project with DOE headquarters officials in its Office of 
Environmental Management. We also discussed management improvement 
initiatives with senior Bechtel officials. In reviewing the role of 
fast track on the project, we obtained information from the nuclear 
industry to update current guidance on designing, licensing, and 
building nuclear facilities that may be equivalent in size, scope, and 
complexity to the Hanford waste treatment plant. 

To develop information on nuclear safety issues at the waste treatment 
plant and DOE's enforcement action, we obtained numerous documents from 
DOE and Bechtel describing safety problems that had been identified 
over the years, analyses of the causes, and proposed actions to correct 
the problems. We discussed nuclear safety issues with DOE's Director of 
Environmental Safety and Quality at Hanford as well as Bechtel's 
Quality Assurance Manager and Price-Anderson Amendments Act 
Coordinator. To understand the significance of safety violations raised 
in DOE's March 17, 2006 enforcement action, we discussed the Proposed 
Notice of Violation with the Director of the Office of Enforcement in 
DOE's Office of Environmental Safety and Health. We also discussed 
safety concerns with officials from the Defense Nuclear Facilities 
Safety Board and with state regulators. 

FOOTNOTES 

[1] The waste treatment plant consists of a pretreatment facility that 
separates waste into high-level and low-activity waste, two facilities 
to treat separated portions of the waste, one analytical laboratory, 
and a variety of supporting facilities. 

[2] U.S. General Accounting Office, Nuclear Waste: Challenges to 
Achieving Potential Savings in DOE's High-Level Waste Cleanup Program, 
GAO-03-593 (Washington, D.C.: June 17, 2003); U.S. General Accounting 
Office, Nuclear Waste: Absence of Key Management Reforms on Hanford's 
Cleanup Project Adds to Challenges of Achieving Cost and Schedule 
Goals, GAO-04-611 (Washington, D.C.: June 9, 2004); and U.S. Government 
Accountability Office, Nuclear Waste: Better Performance Reporting 
Needed to Assess DOE's Ability to Achieve the Goals of the Accelerated 
Cleanup Program, GAO-05-764 (Washington, D.C.: July 29, 2005). 

[3] CH2M Hill Group is a limited liability corporation of the CH2MHill 
Company. 

[4] DOE currently is evaluating the suitability of Yucca Mountain in 
Nevada as the site of the repository for the high-level waste 
canisters. 

[5] "Comprehensive Review of the Hanford Waste Treatment Plant Estimate 
at Completion--Preliminary Draft," Assessment Conducted by an 
Independent Team of External Experts, at the direction of the U.S. 
Department of Energy, Office of Environmental Management (Washington, 
D.C.: Mar. 20, 2006). 

[6] Between 2000 and 2003, cost increases estimated at $1.2 billion 
occurred because of engineering problems, estimating errors, and 
contingency funding increases. Cost increases occurring between 2003 
and May 2005, based on Bechtel's April 2005 estimate and the Corps of 
Engineers' May 2005 review of Bechtel's estimate, show that Bechtel 
underestimated costs by an additional $845 million, ongoing technical 
problems added an additional $1.15 billion to costs, and an additional 
$1.45 billion was added to the project's estimated contingency. These 
estimates were based on a revised contract price of $9.3 billion. These 
analyses have not yet been updated to document the current cost 
increases based on the latest estimated contract price estimate of 
nearly $11 billion. DOE expects Bechtel to complete its current cost 
and schedule estimate in late May 2006. 

[7] No estimate is available for how problems in meeting nuclear safety 
requirements specifically affected project cost estimates. 

[8] The Corps of Engineers reported in May 2004 that DOE did not 
properly account for cost increases that should have been expected from 
the overall complexity of nearly every aspect of the project--including 
the variety of tank wastes; the required technology integration; the 
design, construction, and commissioning of the plant; and the 
regulatory climate. See U.S. Army Corps of Engineers, Independent Cost 
and Schedule Baseline Review Summary Report, (Walla Walla, Washington, 
May 28, 2004). 

[9] 10 CFR 52.47(b)(1) for certification of a nuclear power plant 
design, calls for facility design to be "essentially complete" to 
resolve safety issues before starting construction. According to the 
director of new plant deployment at the Nuclear Energy Institute, for a 
first-of-a-kind plant, the commercial nuclear power industry's goal is 
to achieve 90 percent completion of final detailed design before 
construction begins. In addition, DOE's own Order 413.3 states that 
facility design should be "essentially complete" and all environmental 
and safety criteria met when the project is ready to begin 
construction. 

[10] Comprehensive Review of the Hanford Waste Treatment Plant 
Flowsheet and Throughput--Prepublication," Assessment conducted by an 
Independent Team of External Experts, at the direction of the U.S. 
Department of Energy, Office of Environmental Management (Washington, 
D.C.: Mar. 17, 2006). 

[11] "Comprehensive Review of the Hanford Waste Treatment Plant 
Estimate at Completion--Preliminary Draft," Assessment Conducted by an 
Independent Team of External Experts, at the direction of the U.S. 
Department of Energy, Office of Environmental Management (Washington, 
D.C.: Mar. 20, 2006). 

[12] U.S. General Accounting Office, Nuclear Waste: Absence of Key 
Management Reforms on Hanford's Cleanup Project Adds to Challenges of 
Achieving Cost and Schedule Goals, GAO-04-611 (Washington, D.C.: June 
9, 2004). 

[13] LMI Government Consulting, Hanford Waste Treatment and 
Immobilization Plant Project: After-Action Fact Finding Review, January 
2006. 

[14] DOE also agreed to clean up high-level waste at another site--the 
West Valley Demonstration Project at West Valley, New York--where the 
state sponsored reprocessing of both commercial and DOE spent nuclear 
fuel. DOE completed treatment and preparation of this waste for 
disposal in September 2002. 

[15] 42 U.S.C. 6939c(b).