National Nuclear Security Administration:

Additional Actions Needed to Collect Common Financial Data

GAO-19-101: Published: Jan 31, 2019. Publicly Released: Jan 31, 2019.

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The National Nuclear Security Administration uses contracts to manage its labs, production facilities, and test sites.

Contractors track and report costs in their own ways—using lists of components like labor or material at a certain level of detail. One contractor may break down the components differently from another contractor—even for work on the same program. This makes it hard for NNSA to compare and manage contract costs.

NNSA is required to implement a common financial reporting system for its contractors. The effort has started, but we identified problems with the approach. We made 7 recommendations to address the problems we found.

 

The Department of Energy

The Department of Energy

Additional Materials:

Contact:

Allison Bawden
(202) 512-3841
bawdena@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The National Nuclear Security Administration (NNSA)—a semiautonomous agency within the Department of Energy (DOE)—and Consolidated Nuclear Security, LLC (CNS)—the management and operating (M&O) contractor for the Y-12 National Security Complex (Y-12) in Tennessee and the Pantex Plant (Pantex) in Texas—implemented a consolidated business system for the two sites. CNS, NNSA, and DOE generally followed DOE guidance as well as leading project management and information technology investment practices for three areas of project management that may be useful in identifying problems that can arise after a system is implemented. Specifically, they (1) developed required plans and documents to support critical decisions on information technology projects, (2) generally followed leading practices for risk management, and (3) initiated a review by the investment review board during the system's operations and maintenance phase.

With regard to NNSA's broader effort to implement common financial reporting across its eight sites, GAO found that NNSA's progress on seven key implementation steps has varied (see table). For example, NNSA is not pursuing an important step to implement a common work breakdown structure—a method of dividing a project into successive levels of detail—as required by the National Defense Authorization Act for Fiscal Year 2017 (the act). All of NNSA's program offices had not accepted a common work breakdown structure, in part because program office leaders do not agree one is needed. According to GAO leading practices, not doing so causes difficulty in comparing costs across programs and contractors, which is the purpose of common financial reporting. Without pursuing this approach, the effort may not result in reliable, enterprise-wide financial data that meets the needs of Congress and improves NNSA's ability to report the total costs of its programs.

NNSA Progress toward Implementing Common Financial Reporting, as of December 2018

Steps

Progress

Identify an approach and develop a tool

Completed

Develop a policy

Not yet completed

Establish common cost elements and definitions

Completed

Identify and report costs for programs of record and base capabilities

Not yet completed

Implement a common work breakdown structure

Not pursuing

Collect financial data from M&O contractors

Not yet completed

Publish and analyze data

Not yet completed

Source: GAO analysis of NNSA documents and interviews with NNSA officials.| GAO-19-101

In addition, NNSA generally has not followed six project management leading practices, including one that emphasizes the importance of collecting and documenting stakeholder requirements to define project scope. NNSA officials said the act included the basic requirements and project scope, and therefore stakeholders only needed to provide input on how to meet requirements in the act rather than identify their own; this input was not documented. However, the act did not provide specific or detailed requirements. Without collecting and documenting stakeholder requirements, NNSA will not have assurances that data will meet stakeholder needs, which could limit the effectiveness of the effort.

Why GAO Did This Study

GAO has identified challenges in determining and comparing costs across NNSA's eight sites. Congress needs this information to carry out its oversight responsibilities and make budgetary decisions. The National Defense Authorization Act for Fiscal Year 2017 required NNSA to implement a common financial reporting system across all sites. Separately, in 2013, NNSA awarded a single M&O contract for the Y-12 and Pantex sites, which included a requirement to consolidate the two sites' business systems.

An explanatory statement accompanying the act included a provision for GAO to review the agency's progress. This report examines (1) the status of the effort to consolidate the business systems at Y-12 and Pantex and the extent to which CNS and NNSA followed guidance and leading practices, and (2) the steps NNSA has taken in implementing common financial reporting across all eight sites and the extent to which this effort follows leading practices. GAO reviewed documentation for both efforts and compared it with leading practices, and interviewed NNSA officials and M&O contractors.

What GAO Recommends

GAO is making seven recommendations, including that NNSA should implement a common work breakdown structure and should follow leading practices to collect and document requirements to define project scope. NNSA generally agreed with six recommendations and neither agreed nor disagreed with one. GAO maintains that the recommendations are valid.

For more information, contact Allison Bawden at (202) 512-3841 or bawdena@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Priority recommendation

    Comments: In May 2019, NNSA decided to assess the feasibility of implementing a common work breakdown structure across all of the program offices. In fiscal year 2020, NNSA plans to collect the management and operating (M&O) contractors' financial data using the common work breakdown structure for all program offices and for the Offices of Safety, Infrastructure and Operations and Defense Nuclear Nonproliferation--the programmatic work breakdown structures. In March 2020, NNSA plans to make a decision on whether to implement a common work breakdown structure across all of the program offices. GAO will continue to monitor whether NNSA implements a common work breakdown structure.

    Recommendation: The NNSA Administrator should implement a common work breakdown structure across NNSA program offices in the nuclear security enterprise, standardized at a high level to allow for program office customization but also to allow for the collection of total program costs. (Recommendation 1)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  2. Status: Open

    Comments: As of October 2019, NNSA has not yet collected or documented requirements for the common financial reporting effort. The program director for financial integration stated that, due to the decision to assess the feasibility of implementing a common work breakdown structure, NNSA needs additional time to define project scope and objectives. GAO will continue to monitor whether NNSA collects and documents requirements for common financial reporting.

    Recommendation: The Program Director for Financial Integration should collect and document requirements to define project scope and meet project objectives. These requirements should be updated periodically throughout the life of the project. (Recommendation 2)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  3. Status: Open

    Comments: As of October 2019, NNSA established a schedule with key milestones for assessing the feasibility of implementing a common work breakdown structure in fiscal year 2020. However, the program director for financial integration stated that NNSA needs additional time to develop a detailed project schedule for the common financial reporting effort. GAO will continue to monitor whether NNSA has a detailed project schedule that is provided to Congress.

    Recommendation: The Program Director for Financial Integration should develop a detailed project schedule. The detailed schedule should be documented as part of the annual report to Congress required in the National Defense Authorization Act for Fiscal Year 2017. (Recommendation 3)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  4. Status: Open

    Comments: As of October 2019, NNSA plans to develop an estimate of the future costs of the common financial reporting effort that includes their assumptions and limitations. It is not clear whether the estimates will result in a budget that includes all costs for implementing common financial reporting, such as federal human resources costs. GAO will continue to monitor whether NNSA develops a project budget that includes the human resources needed to implement common financial reporting.

    Recommendation: The Program Director for Financial Integration should develop a project budget that includes information on the human resources needed to implement common financial reporting. (Recommendation 4)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  5. Status: Open

    Comments: NNSA has made progress in developing a method to collect and report information on the costs associated with implementing common financial reporting. The program director for financial integration stated that NNSA has collected data on its M&O contractors' costs, federal contractor costs, and an estimated cost for implementing a common work breakdown structure. However, the data NNSA provided to GAO in June 2019 is incomplete. Specifically, the data do not include federal employee salaries for time spent on the common financial reporting effort because it is difficult to calculate those costs. GAO will continue to monitor whether NNSA includes information on federal employee salaries into its reported costs for common financial reporting.

    Recommendation: The Program Director for Financial Integration should develop a method to collect and report information on the costs associated with implementing common financial reporting. (Recommendation 5)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  6. Status: Open

    Comments: As of October 2019, NNSA has made some progress in identifying and documenting risks to the common financial reporting effort, and planning how to minimize risk exposure, but has not established a formal process to do so. For example, NNSA plans to assess the feasibility of implementing a common work breakdown structure in fiscal year 2020 to mitigate any risks to the program offices that use the data collected through their programmatic work breakdown structures to oversee their programs. GAO will continue to monitor how NNSA identifies and documents risks and how the agency plans to mitigate those risks.

    Recommendation: The Program Director for Financial Integration should develop a formal process to identify risks, document those risks, and plan how to minimize risk exposure. (Recommendation 6)

    Agency Affected: Department of Energy: National Nuclear Security Administration

  7. Status: Open

    Comments: As of October 2019, the program director for financial integration has engaged with project stakeholders on common financial reporting. NNSA plans to meet with stakeholders after the first quarter of fiscal year 2020 data collection to ensure that the common financial reporting effort aligns with their expectations. We will continue to monitor NNSA's approach to engaging with stakeholders during the fiscal year 2020 data collection effort.

    Recommendation: The Program Director for Financial Integration should develop an approach to effectively engage with all project stakeholders that incorporates their expectations into project decisions. (Recommendation 7)

    Agency Affected: Department of Energy: National Nuclear Security Administration

 

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