Factors Leading to Cost Increases with the Uranium Processing Facility
GAO-13-686R: Published: Jul 12, 2013. Publicly Released: Jul 12, 2013.
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What GAO Found
In summary, GAO found the following:
- Overly optimistic National Nuclear Security Administration (NNSA) assumptions about the Uranium Processing Facility (UPF) contained in multiple cost estimates prepared from 2004 to 2011 (upper bound of cost range was approximately $1.1 billion and $6.5 billion, respectively) are the primary factors that contributed to its cost increase. Initial NNSA UPF cost estimates in 2004 and 2007 were largely based on the estimated cost to construct the Highly Enriched Uranium Materials Facility (HEUMF)--the nation's central repository for such material--because the facilities were assumed to be similar in form and design. However, NNSA, a separately organized agency within the Department of Energy, designed the HEUMF as a storage facility for highly enriched uranium, in contrast to the more complex assembly/disassembly, processing, and machining operations that are to be housed in UPF. In addition, revised UPF cost estimates in 2010 and 2011 assumed that annual appropriations would not be subject to budget constraints. None of these assumptions proved to be accurate.
- In June 2012, the Deputy Secretary of Energy approved an updated cost range for the UPF ($4.2 to $6.5 billion) and deferred significant portions of the original scope. According to NNSA documentation, this deferral was due, in part, to the UPF's increased cost estimate and to accelerate the completion of portions of the scope that were of highest priority.
- In August 2012, the UPF contractor concluded that the UPF's roof would have to be raised 13 feet and that the start of construction would be further delayed. These factors resulted in approximately $540 million in additional costs to the UPF and occurred because the contractor did not adequately manage and integrate the design work subcontracted to four other contractors. Given these additional costs, the confidence in the cost estimate range approved in June 2012 has been reduced, and it is not clear if the cost estimate range remains valid.
Why GAO Did This Study
At the request of the Senate Appropriations Committee, Subcommittee on Energy and Water Development and, in accordance with the requirements contained in the National Defense Authorization Act for Fiscal Year 2013, GAO is to report quarterly on the UPF. GAO's objective for this first quarterly report was to identify factors that contributed to UPF's cost increase.
What GAO Recommends
While GAO is currently not making any recommendations for congressional consideration or agency action, it will continue to review UPF as required by the National Defense Authorization Act for Fiscal Year 2013. In addition, GAO has ongoing audits on NNSA major projects and cost-estimating practices and will make recommendations, if appropriate, based on these future reviews.
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