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

The Department of Energy (DOE) spends billions of dollars each year on contracts to manage and operate laboratories and sites, construct facilities, and clean up nuclear waste. However, it also has a record of inadequate management and oversight of its contractors.

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DOE is the largest civilian contracting agency in the federal government. It spends about 90 percent of its annual appropriations, which total about $30 billion, on contracts to manage and operate its scientific laboratories, nuclear weapon engineering and production facilities, clean up waste from past nuclear weapons work, and  construct facilities. Many of these contracts are multiyear and include performance-based incentives such as award fee (fee that is earned based in part on a contractor’s evaluated performance) and award term (where a contractor earns additional time on a contract for achieving objectives).

However, contract management at DOE has been on the High Risk List since 1990 due to DOE's record of inadequate management and oversight of its contractors. Improvements in DOE’s oversight of smaller projects and those within its Office of Science narrowed the focus of the high-risk designation to contracts and major projects—those over $750 million—within DOE's two largest offices, the National Nuclear Security Administration (NNSA) and the Office of Environmental Management (EM). These offices still need to improve execution of major projects by improving policies and guidance, collection and utilization of information to oversee contractor performance, and cost estimating and other planning for projects.

Department of Energy Management and Operating (M&O) Contract Sites by Program Office, as of February 2017

Department of Energy  Management and Operating Contract Sites by Program Office, as of February 2017

Note: Total spending amounts presented in the interactive graphic are in nominal dollars.
aWhile the Savannah River Site M&O contract is an Office of Environmental Management contract, NNSA evaluates performance for its activities at the site separately.
bThree contracts include operations at multiple sites: the Strategic Petroleum Reserve Office includes sites in Louisiana and Texas; one NNSA contract includes the Bettis Atomic Power Laboratory (West Mifflin, Pennsylvania) and the Knolls Atomic Power Laboratory (Niskayuna and West Milton, New York); and the NNSA Production Office Sites include the Y-12 National Security Complex (Oak Ridge, Tennessee) and Pantex Plant (Amarillo, Texas).
cSandia National Laboratories has other locations, including in Livermore, California.

Improve execution of major programs and projects by improving requirements and policies. In recent years, NNSA has improved its program management requirements and policies, which has contributed to progress in the management of major programs—such as those to refurbish or replace aging nuclear weapon components. DOE could help improve the success of future major capital asset projects, however, by developing requirements for project staff to document and share lessons learned. Additionally, EM’s cleanup policy does not follow leading practices for program and project management that could help keep cleanup work on schedule and control costs, and it continues to face challenges in executing major cleanup projects. For example, we found that the Waste Treatment and Immobilization Plant in Hanford, Washington, has faced technical and management challenges that have delayed it for decades and more than tripled its costs.

Improve collection and utilization of information to better oversee contractor performance. NNSA has taken steps to include new contract clauses that strengthen management oversight and has improved its efforts to monitor and address contract performance that does not meet expectations—such as by reducing the fee earned by the contractor operating Los Alamos National Laboratory in 2014 after an improperly packed waste canister exploded. However, its contractor evaluations do not include useful information about whether contractors are performing their work cost-effectively. Moreover, NNSA and DOE, including EM, did not ensure that contractors had audited more than $3.4 billion in subcontract costs as required—some of which was already past the 6-year statute of limitations to recover if the cost was determined to be fraudulent or improperly charged. EM also continues to face challenges in monitoring contractor performance. For example, the performance measures that 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.

Annual Fee Earned by the National Nuclear Security Administration's Management and Operating (M&O) Contractors, Fiscal Years 2006-2016

Annual Fee Earned by the  National Nuclear Security Administration’s Management and Operating  Contractors, Fiscal Years 2006-2016

Note: Amounts are presented in nominal dollars
aTwo sites with separate contracts—the Y-12 National Security Complex in Tennessee and Pantex Plant in Texas—were combined into the National Nuclear Security Administration Production Office Sites contract for fiscal years 2015 and 2016.
bWhile the Savannah River Site M&O contract is an Office of Environmental Management contract, the National Nuclear Security Administration evaluates performance for its activities at the site separately.

Improve the quality of cost estimates and other early stage planning for projects. NNSA has 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, the revised cost estimate for the Mixed Oxide Fuel Fabrication Facility substantially met best practices—which  contributed to DOE's decision to terminate the project in favor of a less costly option. However, NNSA's cost estimates and early stage planning to build a new uranium enrichment facility did not fully meet best practices, which GAO found could impact the reliability of their cost estimates to build such a facility. Additionally, EM continues to face challenges in estimating the costs for its cleanup projects. For example, in December 2018, DOE announced that EM had increased its estimate of the total costs to clean up the total Hanford site by $82 billion—to a total of $242 billion—with part of that increase attributed to construction and operating costs for the Waste Treatment and Immobilization Plant.

The Waste Treatment and Immobilization Plant (WTP) and Other Planned Facilities, Hanford, Washington

The Waste Treatment and Immobilization Plant  and Other Planned Facilities, Hanford, Washington

Source: Department of Energy.  |  GAO-8-241
Note: The Low Activity Waste Pretreatment System and the Tank Waste Characterization and Staging Facility are not part of the WTP, but these facilities may be needed to transport waste from the tanks to the WTP.

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