DOE's Contract Management for the National Nuclear Security Administration and Office of Environmental Management

Why It's High Risk

The Department of Energy's (DOE), the largest non-Defense contracting agency in the federal government, relies primarily on contractors to carry out its diverse missions and operate its laboratories and other facilities. About 90 percent of DOE's annual budget is spent on contracts. Two of DOE's largest program elements—the National Nuclear Security Administration (NNSA) and Office of Environmental Management (EM)—account for about 60 percent of the annual budget.

GAO designated DOE's contract management as a high-risk area in 1990 because of DOE's record of inadequate management and oversight of its contractors. Based on progress over the past 2 years, GAO is narrowing the scope of this high-risk area to focus on NNSA and EM, although projects across DOE will continue to receive scrutiny. With a combined annual budget of more than $15 billion and with missions often involving complex one-of-a-kind efforts, consistent and rigorous contract and project management are vital. Effective contract and project management will remain critical over the coming decades as NNSA embarks on a major initiative to modernize the nation's aging nuclear weapons production facilities costing tens of billions of dollars and EM will spend billions of dollars to build facilities to treat and dispose of millions of gallons of radioactive waste.

^ Back to topWhat We Found

Over the last 2 years, DOE has been working to better understand the underlying weaknesses in its contract and project management and develop appropriate corrective actions to address the weaknesses. Specifically:

• As part of the Office of Management and Budget initiative for federal agencies to develop detailed corrective action plans for high-risk areas, DOE obtained input from headquarters and field officials with contract and project management expertise to develop a root-cause analysis to better understand the underlying weaknesses with its contract and project management.
• Based on its root-cause analysis, DOE also completed a comprehensive corrective action plan to address these weaknesses, with both near-term and long-term goals and objectives.

On the basis of these actions, and other improvements made over the past decade to establish a more structured and disciplined approach to contract and project management, GAO believes DOE as a whole has substantially met three of the five criteria necessary for removal from our high-risk list. Specifically, DOE has:

• demonstrated strong commitment and leadership,
• demonstrated progress in implementing corrective measures, and
• developed a corrective action plan that identifies root causes, effective solutions, and a near-term plan for implementing the solutions.

Two criteria remain:

• having the capacity (people and resources) to resolve its contract and management problems. DOE's April 2008 root-cause analysis report recognized, as one of the top 10 issues, that the department lacked an adequate number of federal contracting and project personnel with the appropriate skills (such as cost estimating, risk management, and technical expertise) to plan, direct, and oversee project execution.
• monitoring and independently validating the effectiveness and sustainability of corrective measures, which will take time to demonstrate.

GAO's recent work at the Office of Science—DOE's third-largest program element—showed additional progress in meeting these criteria. Specifically:

• Science officials are taking steps to address human capital and resource issues, and
• Science has demonstrated strong performance in meeting cost and schedule targets. Of the 42 Office of Science projects completed or under way from fiscal years 2003 through 2007, more than two-thirds were completed or being carried out within original cost and schedule targets.

Despite DOE's efforts, its contract management continues to be at high risk for fraud, waste, abuse, and mismanagement, and projects across DOE will continue to receive scrutiny, especially as investments in the research and development of innovative energy technologies are projected to increase in the coming years. In particular, the National Nuclear Security Administration (NNSA) and the Office of Environmental Management (EM):

• do not yet consistently follow departmental requirements for project management, and
• continue to struggle to meet cost and schedule goals on major projects.

Specifically:

• For 12 major construction projects with total costs of about $27 billion—10 of which were NNSA or EM projects—9 exceeded original cost or schedule estimates, principally because of ineffective DOE project oversight and poor contractor management.
  • Cost increases on these projects ranged from $79 million to $7.9 billion.
  • Schedule delays ranged from 9 months to more than 11 years.
• Neither NNSA nor EM consistently applied project management policies.

^ Back to topWhat Needs to Be Done

NNSA and EM are each facing daunting tasks over the coming decades:

• NNSA is embarking on a major initiative to modernize the nation's aging nuclear weapons production facilities, a project that will take more than a decade and cost, at a minimum, tens of billions of dollars.
• EM continues to face complex and long-term challenges in cleaning the legacy of radioactive and hazardous waste from decades of weapons production.

Billions of dollars will be spent, and DOE needs to ensure that it has the needed people and resources in place to solve problems and that its solutions are independently validated for their effectiveness and sustainability.

GAO has made a series of recommendations to strengthen DOE's contract management. These recommendations collectively call for DOE to:

• ensure that project management requirements are consistently followed,
• improve its oversight of contractors, and
• strengthen accountability for performance.

DOE generally agreed with these recommendations but in some cases asserted that its ongoing efforts already addressed the recommendations, while GAO concluded that further improvements were needed.

^ Back to topKey Reports

Nuclear Waste: Uncertainties and Questions about Costs and Risks Persist with DOE's Tank Waste Cleanup Strategy at Hanford

GAO-09-913, September 30, 2009

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 57 pages)   Accessible Text   Recommendations (HTML)

Department of Energy: Contract and Project Management Concerns at the National Nuclear Security Administration and Office Of Environmental Management

GAO-09-406T, March 4, 2009

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 23 pages)   Accessible Text

Nuclear Waste: Action Needed to Improve Accountability and Management of DOE's Major Cleanup Projects

GAO-08-1081, September 26, 2008

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 60 pages)   Accessible Text   Recommendations (HTML)

Department of Energy: Office of Science Has Kept Majority of Projects within Budget and on Schedule, but Funding and Other Challenges May Grow

GAO-08-641, May 30, 2008

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 46 pages)   Accessible Text   Recommendations (HTML)

More Reports