Key Issues > High Risk > Department of Energy's Contract and Project Management for the National Nuclear Security Administration and Office of Environmental Management
High Risk Medallion

Department of Energy's Contract and Project Management for the National Nuclear Security Administration and Office of Environmental Management

The National Nuclear Security Administration (NNSA) has made progress in a number of areas. However, the Office of Environmental Management (EM) needs to take action to understand the root causes of its challenges and incorporate program and project management best practices into its policies.

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The Department of Energy (DOE) oversees a broad range of programs related to nuclear security, science, energy, and waste cleanup, among other areas. As the largest civilian contracting agency in the federal government, DOE relies primarily on contractors to carry out its programs.  DOE spends approximately 90 percent of its annual budget on contracts and acquiring capital assets. In fiscal year 2018, DOE’s budget was $34.5 billion.

In 1990, we designated DOE’s contract management—which has included both contract administration as well as project and program management—as a high-risk area because DOE’s record of inadequate management and oversight of contractors left the department vulnerable to fraud, waste, abuse, and mismanagement.

In January 2009, recognizing the progress at DOE’s Office of Science, we narrowed the focus of DOE’s high-risk designation to two DOE program elements—NNSA and EM. In February 2013, we further narrowed the focus of the high-risk designation to NNSA’s and EM’s contracts, as well as major projects—those with an estimated cost of $750 million or greater—to acknowledge progress made in managing nonmajor projects.

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

Since our 2017 High-Risk Report, DOE has made progress in the demonstrated progress criterion. Our assessment of the ratings for the four other criteria remains unchanged.

Leadership commitment: met. In September 2018, the Deputy Secretary of Energy issued a memorandum laying out a series of reforms to improve the department’s management of major contracts, including NNSA and EM. To ensure leadership engagement on major contracts, DOE plans to either expand the scope of the Energy Systems Acquisition Advisory Board or establish a second board to review them. This effort is recent, and we will follow DOE’s progress in implementing these reforms.

In addition, in September 2017, NNSA agreed to implement our recommendation to strengthen its program management by applying life-cycle cost and schedule management to one of its major programs. One of NNSA’s core offices, the Office of Defense Programs, strengthened program management by further implementing its Program Execution Instruction, which applies to the management of billions of dollars of nuclear weapons science and production efforts.

In July 2017, EM issued a new cleanup policy that requires EM senior leadership approval of any contracts for $200 million or more. In December 2017, DOE reorganized EM under the Office of Science—the third move for EM in 10 years. The Assistant Secretary for the Office of Environmental Management also announced an intention to develop a strategic plan to address EM’s large and growing environmental liabilities, as well as a new approach to contracting focused on accelerating the cleanup and closure of sites.

Capacity: not met. In August 2018, a statutorily required internal review of NNSA’s capacity identified unmet critical staffing needs, especially staffing to manage and oversee work on the agency’s uranium and plutonium missions, which are expected to grow. In addition, in June 2018, an Office of Personnel Management (OPM) study found that the agency was understaffed across all functions. The number of additional staff that OPM recommended in the study would exceed the statutory cap on NNSA’s full-time equivalent employees.

DOE revised its program and project management guidance in May 2016 to direct that capital asset acquisitions have adequate oversight staff. In recent years, NNSA has increased the number of oversight staff in some of its major project management offices, including for the Uranium Processing Facility in Tennessee and the Mixed Oxide Fuel Fabrication Facility in South Carolina. However, EM has not benefitted from this change because it does not follow DOE’s program and project management requirements for the majority of its cleanup activities. In addition, EM’s July 2017 cleanup policy does not sufficiently address the need for EM to have adequate staff for its work.

Action plan: partially met. The Deputy Secretary’s 2018 contract management reform memorandum lists several areas for improvement—including increasing capacity and improving performance measures—which, if realized, will strengthen DOE’s management of major contracts. After a comprehensive review of lessons learned from a multi-billion dollar warhead life extension program, NNSA has also implemented management reforms to support similar programs.

EM continues to need to identify the root causes of its contract and project management problems. DOE has conducted multiple studies over the years and closed many corrective actions plans as successful. However, these plans were not comprehensive, and their results were not linked to each other. In June 2017, EM initiated a 45-day review to identify decision-making priorities at each site, but this study was never finalized. In August 2018, EM initiated an ad-hoc root cause analysis—DOE’s fourth since 2008. EM officials stated that they are working on a continuous improvement plan based on the 2018 ad-hoc analysis, but this effort did not connect to DOE’s previously identified problems or previous corrective measures. Until EM takes steps to identify the root causes of its problems, developing an effective action plan will be challenging. Notably, EM’s 2017 cleanup policy does not direct EM to develop a root cause analysis and corrective action plan at either a program or project level when there is evidence that a cost or schedule baseline will not be met or there are cost overruns.

Monitoring: partially met. NNSA continues to make progress, most notably in managing contracts. For example, as it renews or recompetes contracts, NNSA has taken steps to include new contract clauses that strengthen management oversight and reporting of management information. NNSA has also taken steps to more actively monitor and address contract performance that does not meet expectations, for example, by recompeting one multibillion-dollar contract early after two instances of poor performance. In addition, NNSA has taken steps to implement our recommendation to re-establish a process for reviewing the effectiveness of field offices' contractor oversight by conducting four peer reviews as of October 2018, with more planned.

NNSA has also taken action to manage all contract documentation in a central recordkeeping system, as we recommended in August 2018. However, we reported in February 2019 that cost performance information was not a significant performance measure in NNSA’s review and monitoring of some types of contract evaluations. NNSA agreed with our recommendation that it should include quality cost information in its contractor performance evaluations to enable better performance assessments.

In contrast to NNSA’s progress, EM’s monitoring continues to face challenges. In February 2019, we found that EM’s 2017 cleanup policy does not follow most selected best practices for program or project management. For example, the policy does not require that DOE offices outside EM conduct independent project reviews, as is the case for capital asset projects over $50 million. We also found that the data and metrics EM uses to monitor its work do not accurately reflect cleanup performance, leaving decision makers without adequate information about what EM is achieving with its funding. EM agreed with our recommendations that it incorporate program and project management leading practices—especially by directing independent monitoring and oversight of its cleanup operations—into its 2017 cleanup policy, and generally agreed that it should integrate its data and metrics to provide a clear picture of performance.

DOE generally concurred with our March 2017 recommendation to implement leading practices for managing its risk of fraud and other improper payments but has not taken sufficient steps to implement it. The Deputy Secretary’s 2018 contract management reform memorandum, which commits DOE to using objective performance measures, including cost controls, indicates that the agency plans to take steps to improve its future monitoring.

Demonstrated progress: partially met. Through its Office of Cost Estimating and Program Evaluation, NNSA has enhanced its capability to estimate costs and schedules, and to assess alternatives, for programs and projects, among other things. NNSA also made progress by implementing best practices in several areas, such as those for estimating costs and schedules in nuclear weapons refurbishment activities and capital asset acquisitions. For example, we determined that DOE’s revised cost estimate of $17.2 billion to construct a Mixed Oxide Fuel Fabrication Facility to dispose of surplus, weapons-grade plutonium substantially met best practices—providing assurance that the estimated costs could be considered reliable. This finding contributed to DOE’s reevaluation of the project and ultimate termination, in October 2018, in favor of a potentially less costly disposal approach.

However, NNSA’s cost estimates for a new uranium enrichment capability—an effort that could cost billions of dollars—did not fully meet best practices. Also, while NNSA has taken steps to implement statutorily required common financial reporting across the nuclear security enterprise, we found in January 2019 that NNSA’s plan for this effort does not follow leading project management practices—including having a detailed schedule and budget for implementing the project. NNSA generally agreed with our recommendations that it should follow leading practices in its approach to planning and implementing common financial reporting.

EM is close to completing one major cleanup project—the River Corridor Closure Project in Washington. However, another major EM cleanup project continues to face significant cost and schedule challenges. In particular, construction of the Waste Treatment and Immobilization Plant (WTP) at the Hanford site in Washington has faced persistent challenges, including quality assurance problems that have delayed it by decades and increased costs well beyond its last total program cost estimate of $17 billion. Six years after major nuclear safety and quality issues were discovered, we found in April 2018 that the contractor has not fully implemented all planned corrective measures.

Furthermore, EM has not ensured that all WTP quality assurance problems—such as engineering errors and construction deficiencies—have been identified and some previously identified problems are recurring. DOE generally agreed with our recommendations that it require the contractor to determine the extent of problems in WTP structures, systems, and components, and order work stops when problems recur. Even so, in December 2018, DOE announced that EM had increased its estimate of the total costs to clean up the Hanford site by $82 billion—to a total of $242 billion—with part of that increase attributed to WTP construction and operating costs.

Fifty-one recommendations were open as of December 2018; 15 recommendations were made since the last high-risk update in February 2017. DOE, including NNSA and EM, should implement our recommendations to use sound contract, program, and project management practices to enhance oversight and reduce the risk of fraud, waste, and abuse.

Congressional Actions Needed

Congress should consider working with NNSA to ensure that the statutory cap on staffing is re-examined and consistent with NNSA’s human capital needs, as evaluated in two recent studies.

Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
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    • David Trimble
    • Director, Natural Resources and Environment
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    • Allison Bawden
    • Director, Natural Resources and Environment
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