Nuclear Weapons:

Opportunities Exist to Improve the Budgeting, Cost Accounting, and Management Associated with the Stockpile Life Extension Program

GAO-03-583: Published: Jul 28, 2003. Publicly Released: Aug 7, 2003.

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As a separately organized agency within the Department of Energy (DOE), the National Nuclear Security Administration (NNSA) administers the Stockpile Life Extension Program, whose purpose is to extend, through refurbishment, the operational lives of the weapons in the nuclear stockpile. NNSA encountered significant management problems with its first refurbishment. NNSA has begun three additional life extensions. This study was undertaken to determine the extent to which budgetary, cost accounting, and other management issues that contributed to problems with the first refurbishment have been adequately addressed.

GAO found that NNSA's budget for the Stockpile Life Extension Program has not been comprehensive or reliable. For instance, the fiscal year 2003 budget for this program was not comprehensive because it did not include all activities necessary to successfully complete each of the refurbishments. As a result, neither NNSA nor the Congress was in a position to properly evaluate the budgetary tradeoffs among the refurbishments in the program. NNSA does not have a system for tracking the full costs associated with the individual refurbishments. Instead, NNSA has several mechanisms that track a portion of the refurbishment costs, but these mechanisms are used for different purposes, include different types of costs, and cannot be reconciled with one another. As a result, NNSA lacks information regarding the full cost of the refurbishment work that can help identify cost problems as they develop or when management intervention in those cost problems may be necessary. Finally, NNSA does not have an adequate planning, organization, and cost and schedule oversight process. With respect to planning, NNSA has not, for instance, consistently developed a formalized list of resource and schedule conflicts between the individual refurbishments in order to systematically resolve those conflicts. Regarding organization, NNSA has not, for example, clearly defined the roles and responsibilities of those officials associated with the refurbishments or given the refurbishments' managers proper project/program management training required by DOE standards. Finally, NNSA has not developed an adequate process for reporting cost and schedule changes or developed performance measures with sufficient specificity to determine the progress of the three refurbishments that GAO reviewed. As a result, NNSA lacks the means to help ensure that the refurbishments will not experience cost overruns potentially amounting to hundreds of millions of dollars or encounter significant schedule delays.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve the budgeting associated with the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to include NNSA's stockpile life extension effort as a formal and distinct program in its budget submission and present, as part of its budget request, a clear picture of the full costs associated with this program and its individual refurbishments by including the refurbishment-related costs from Campaigns, Readiness in Technical Base and Facilities, and multiple system work.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: In its fiscal year 2005 budget submission, NNSA submitted a budget request that presented a clear picture of the full costs associated with individual refurbishings by including refurbishment-related costs from Campaigns, Readiness in Technical Base and Facilities, and multiple systems work. NNSA did not aggregate these individual system budgets into an overall life extension program budget.

    Recommendation: To improve the budgeting associated with the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to validate the budget request in accordance with DOE directives.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: With respect to the validation process, NNSA officials cited two actions. First, NNSA officials said that they conduct validations as part of the quarterly program reviews. They also said that program managers might also do independent reviews. Second, they said that NA-62 has developed a formal validation process, whereby they pick 20 percent of the programs per year to validate. In fiscal year (FY) 2005, the W76 and B61 life extension programs were selected. For FY 2006, the Science and Readiness programs will be selected. In addition, because the B61 life extension program was going to stage 6.4, an independent review was conducted by the Albuquerque Service Center. This NA-62 process is consistent with DOE Order 130.1 as discussed on pages 12-13 of GAO's report and demonstrates that they have complied with GAO's recommendation.

    Recommendation: To improve cost accounting associated with the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to establish a managerial cost accounting process that accumulates, tracks, and reports the full costs associated with each individual refurbishment, including the refurbishment-related costs from Campaigns, Readiness in Technical Base and Facilities, and multiple system work.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: Beginning in fiscal year 2005, NNSA began to report and manage its budget and cost information by individual life extension. Specifically, distinct Budget and Reporting (B&R) Codes were developed not only for the four life extensions but for also for all of the activities associated with maintaining each individual weapon system in the stockpile. In the successive fiscal years, NNSA has presented its budget based on the B&R codes and has accounted for its expenditures using the same B&R codes.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to planning, finalize the Office of Defense Programs' integrated program plan and, within that plan, rank the Stockpile Life Extension Program against all other defense program priorities, establish the relative priority among the individual life extension refurbishments, and disseminate the ranking across the nuclear weapons complex so that those within that complex know the priority of the refurbishment work.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: NNSA Officials stated that the Directed Stockpile Work integrated plan is complete and ranks the Stockpile Life Extension Programs against other DSW activities. NNSA officials said that while they do not differentiate that much between the four life extensions in this plan, the B61 life extension is given priority since it is the next one in the queue. The NNSA-wide program guidance also sets priority guidelines among the 11 program elements for which the Office of Defense Programs is responsible. The life extensions are the third priority. The program guidance is distributed across the complex.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to planning, develop a formalized process for identifying resource and schedule conflicts between the individual life extension efforts and resolve those conflicts in a timely and systematic manner.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: With respect to processes for identifying and resolving conflicts, NNSA has established a Quarterly Program Reviews (QPR) process. The QPR is NNSA's Defense Programs (NA-10) senior management tool for managing its programs including the individual life extension efforts and establishes a formalized process for identifying and resolving resource and schedule problems in executing NNSA programs.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to planning, finalize individual refurbishment project plans.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: The individual life extension implementation plans have been completed according to NNSA officials.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to management structure, establish the individual refurbishments as projects and manage them according to DOE project management requirements.

    Agency Affected: Department of Energy

    Status: Closed - Not Implemented

    Comments: NNSA manages the life extension refurbishing in accordance with the NA-10 program management manual issued in March 2, 2005. However, NNSA does not manage the refurbishing in accordance with DOE Order 413.3 on project management. As an example of where NNSA does not follow that particular order, NNSA does not include any contingency costs in the total estimated costs associated with the refurbishing. In our February 2007 report on NNSA management issues--GAO-07-36, we found that NNSA continued to not manage the life extensions as projects under DOE Order 413.3 believing that their efforts to "projectize" the life extensions is sufficient. Therefore, we are closing this recommendation as not implemented.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to management structure, clearly define the roles and responsibilities of all parties associated with the Stockpile Life Extension Program.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: NNSA has addressed this issue with guidance contained in the NA-10 Program Management Manual. Section 3.2.1 and Appendix A in the manual discusses the program management responsibilities of the NNSA Deputy Administrator, the Assistant Deputy Administrator, the contracting officer representative, the program manager, the M&O contractor and the site office. In addition, Section 3.4 of the Life Extension Management Plan defines the roles and responsibilities of NNSA headquarters, Site Offices and the M&O contractors. The general responsibilities are given in Exhibit 3.1 and defined in more detail in subsequent sub-sections 3.4.1-3.4.12.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to management structure, provide the life extension program managers with the authority and visibility within the NNSA organization to properly manage the refurbishments.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: NNSA has addressed this issue with guidance contained in the NA-10 Program Management Manual. Section 3.2.1 and Appendix A in the manual discusses the program management responsibilities of all the various NNSA officials involved in life extensions, including the program manager. In addition, NNSA officials have stated in their formal responses to GAO that they believe that the designated Program Managers for each life extension have full authority and responsibility for all aspects of their programs and are held accountable for baseline costs, scope, risk assessment, technical assumptions and schedules.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to management structure, require that life extension program managers and others involved in management activities receive proper project/program management training and qualification.

    Agency Affected: Department of Energy

    Status: Closed - Not Implemented

    Comments: While the NA-10 Program Management Manual presently requires the Program Managers to be qualified and identifies the subject areas, levels of competence and a general approach to acquiring competence, the information supplied by the Director of the Office of Program Evaluation indicates that NNSA continues to struggle with identifying all of the necessary standards and training its Program Managers to those standards. Therefore, the recommendation is being closed not implemented.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to oversight of cost and schedule, institute a formal process for periodically tracking and reporting individual refurbishment cost, schedule, and scope changes against established baselines.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: According to the Director, Office of Program Evaluation NNSA prepares annual Selected Acquisition Reports (SARs) for each life extension and submits them to the Congress with their annual budget submission. These reports are intended to track cost, scope and schedule against established baselines. In addition, NNSA has developed a Milestone Reporting Tool that is used as part of quarterly reviews NNSA performs to measure progress on all of its major activities. These reviews collectively evaluate work progress.

    Recommendation: To improve the management of the Stockpile Life Extension Program, the Secretary of Energy should direct the NNSA Administrator to, with respect to oversight of cost and schedule, develop performance measures with sufficient specificity to determine program progress.

    Agency Affected: Department of Energy

    Status: Closed - Not Implemented

    Comments: An NNSA official indicated that NNSA annually evaluates cost and schedule progress for the refurbishing by reviewing the contractors' performance against contract performance measures. However, the contract performance measures have not been derived from cost, schedule, and scope baselines. In addition, NNSA is now in the process of reworking the contracts for Los Alamos National Laboratory and Lawrence Livermore National Laboratory. It is not clear if the new contracts will contain sufficient performance measures. Therefore, this recommendation is being closed not implemented.

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