Further Improvements Needed in the Department of Energy for Estimating and Reporting Project Costs

MASAD-82-37: Published: May 26, 1982. Publicly Released: May 26, 1982.

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GAO examined Department of Energy (DOE) policies, procedures, and practices for estimating the costs of major systems and the accuracy of information provided to Congress. The GAO survey focused on the Transient Reactor Test Facility Upgrade and the Program Support Facility projects.

GAO found problems with the cost estimating practices, particularly the lack of sufficient guidelines provided to contractors for preparing cost estimates or to DOE project officials for reviewing cost estimates. Specifically: (1) decisions were based on cost estimates prepared before the projects were sufficiently defined; (2) the inflation rates used were too low; (3) the provisions for risk were not realistic; and (4) the documentation supporting cost estimates was not adequate. GAO also found problems in reporting cost changes to Congress. When estimated project costs exceed appropriated funds, project scope has been reduced or costs have been categorized differently without fully notifying Congress.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should direct the DOE Chicago Operations and Regional Office to allow for adequate provision in cost estimates for program uncertainties, especially in high technology or first-of-a-kind projects.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should direct the DOE Chicago Operations and Regional Office to require that realistic estimates for inflation are used and consistently followed.

    Agency Affected: Department of Energy

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should direct the DOE Chicago Operations and Regional Office to ensure that projects are adequately defined in the conceptual design stage before the cost estimate is submitted to Congress.

    Agency Affected: Department of Energy

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should direct the DOE Chicago Operations and Regional Office to issue specific cost estimating guidelines.

    Agency Affected: Department of Energy

  5. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should institute tighter controls over project funds by requiring DOE Headquarters review and approval of all cost classification changes within individual projects.

    Agency Affected: Department of Energy

  6. Status: Closed - Not Implemented

    Comments: DOE disagreed with the recommendaton that major cost transfers between capital and operating funds took place. Therefore, it will take no action.

    Recommendation: The Secretary of Energy should identify and report to Congress the magnitude of major cost transfers between capital and operating funds and major changes in project scope during the past 2 years.

    Agency Affected: Department of Energy

  7. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should ensure that all regional offices develop and implement guidelines on the preparation and review of cost estimates.

    Agency Affected: Department of Energy

  8. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Energy should direct the DOE Chicago Operations and Regional Office to require complete documentation of major revisions to the cost estimate to ensure traceability.

    Agency Affected: Department of Energy

 

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