[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




                                   

                         [H.A.S.C. No. 113-94]

                     INTERIM REPORT OF THE ADVISORY

                       PANEL ON THE GOVERNANCE OF

                    THE NUCLEAR SECURITY ENTERPRISE

                               __________

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON STRATEGIC FORCES

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             MARCH 26, 2014

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                                     

                              ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

87-857                         WASHINGTON : 2015 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
                          
                                     
  
  
  
  
  
  
  


                    SUBCOMMITTEE ON STRATEGIC FORCES

                     MIKE ROGERS, Alabama, Chairman

TRENT FRANKS, Arizona                JIM COOPER, Tennessee
DOUG LAMBORN, Colorado               LORETTA SANCHEZ, California
MIKE COFFMAN, Colorado               JAMES R. LANGEVIN, Rhode Island
MO BROOKS, Alabama                   RICK LARSEN, Washington
JOE WILSON, South Carolina           JOHN GARAMENDI, California
MICHAEL R. TURNER, Ohio              HENRY C. ``HANK'' JOHNSON, Jr., 
JOHN FLEMING, Louisiana                  Georgia
RICHARD B. NUGENT, Florida           ANDREE CARSON, Indiana
JIM BRIDENSTINE, Oklahoma            MARC A. VEASEY, Texas
                 Drew Walter, Professional Staff Member
                         Leonor Tomero, Counsel
                           Eric Smith, Clerk
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2014

                                                                   Page

Hearing:

Wednesday, March 26, 2014, Interim Report of the Advisory Panel 
  on the Governance of the Nuclear Security Enterprise...........     1

Appendix:

Wednesday, March 26, 2014........................................    27
                              ----------                              

                       WEDNESDAY, MARCH 26, 2014
 INTERIM REPORT OF THE ADVISORY PANEL ON THE GOVERNANCE OF THE NUCLEAR 
                          SECURITY ENTERPRISE
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Cooper, Hon. Jim, a Representative from Tennessee, Ranking 
  Member, Subcommittee on Strategic Forces.......................     2
Rogers, Hon. Mike, a Representative from Alabama, Chairman, 
  Subcommittee on Strategic Forces...............................     1

                               WITNESSES

Augustine, Norman, Cochairman, Advisory Panel on the Governance 
  of the Nuclear Security Enterprise.............................     2
Mies, ADM Richard W., USN (Ret.), Cochairman, Advisory Panel on 
  the Governance of the Nuclear Security Enterprise..............     5

                                APPENDIX

Prepared Statements:

    Augustine, Norman, joint with ADM Richard W. Mies............    33
    Rogers, Hon. Mike............................................    31

Documents Submitted for the Record:

    Background material submitted by Mr. Cooper..................    51

Witness Responses to Questions Asked During the Hearing:

    Ms. Sanchez..................................................    81

Questions Submitted by Members Post Hearing:

    Mr. Cooper...................................................    93
    Mr. Rogers...................................................    85
    Ms. Sanchez..................................................    98
 .
 INTERIM REPORT OF THE ADVISORY PANEL ON THE GOVERNANCE OF THE NUCLEAR 
                          SECURITY ENTERPRISE

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                          Subcommittee on Strategic Forces,
                         Washington, DC, Wednesday, March 26, 2014.
    The subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2118, Rayburn House Office Building, Hon. Mike Rogers 
(chairman of the subcommittee) presiding.

 OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE FROM 
      ALABAMA, CHAIRMAN, SUBCOMMITTEE ON STRATEGIC FORCES

    Mr. Rogers. This hearing of the Strategic Forces 
Subcommittee of the House Armed Services Committee will come to 
order.
    I want to thank everybody for being here and say hello to 
our witnesses. Appreciate you being here and taking the time to 
prepare for this hearing. I know this takes a lot of time, but 
it matters to us, it makes a big difference, and we appreciate 
you.
    Today's topic--well, our hearing is a topic that is very 
familiar to those who have followed the subcommittee's work 
over the past several years: governance and management problems 
at the Department of Energy [DOE] and specifically the National 
Nuclear Security Administration [NNSA]. Today we will hear 
about the ongoing work of the Advisory Panel on the Governance 
of the Nuclear Security Enterprise. This advisory panel was 
created by the fiscal year 2013 National Defense Authorization 
Act [NDAA] to take a look at the long-standing problems within 
our nuclear system--nuclear security enterprise's system of 
management and oversight.
    Our witnesses today are the distinguished cochairs of that 
panel, Admiral Richard Mies, U.S. Navy (retired), and Mr. 
Norman Augustine, former chairman and CEO of Lockheed Martin. I 
want to thank you both for your service and for being here. I 
understand that your testimony will focus on the panel's fact-
finding efforts to date and provide us with a comprehensive 
illustration of the challenges we are facing.
    This subcommittee has been looking into these problems for 
quite a long time, but I believe you will help us clarify and 
assess the problems and why efforts to remedy them have failed.
    In creating this advisory panel, Congress highlighted that, 
quote, ``There is a widespread recognition that the current 
system for governance, management, and oversight of the nuclear 
security enterprise is broken,'' close quote. As the fiscal 
year 2013 NDAA conferees stated, Congress believes, quote, 
``the status quo is not working and must not be continued,'' 
close quote, and that changes on the margins are not a 
solution.
    Recognizing that the nuclear security enterprise is broken 
and that previous efforts for the reform have failed, Congress 
looks to your panel's final report for innovative solutions to 
these long-standing problems. Importantly, such solutions must 
not be dependent upon personalities or individuals to be 
successful and must not repeat the mistakes of the past.
    For this hearing, let's ensure we all leave here with a 
full, clear understanding of the magnitude and complexity of 
the issues facing the enterprise as well as the national 
security imperative of getting this right.
    Thank you again to the witnesses, I look forward to your 
discussion.
    [The prepared statement of Mr. Rogers can be found in the 
Appendix on page 31.]
    Mr. Rogers. And with that, I would like to turn over the 
microphone to the ranking member, my friend from Tennessee, Mr. 
Cooper.

STATEMENT OF HON. JIM COOPER, A REPRESENTATIVE FROM TENNESSEE, 
        RANKING MEMBER, SUBCOMMITTEE ON STRATEGIC FORCES

    Mr. Cooper. Thank you so much, Mr. Chairman. I too would 
like to welcome our distinguished witnesses today. I appreciate 
their long service to our Nation and in particular their 
chairing of this very important commission to figure out how to 
improve the work of the NNSA.
    I have no opening statement, Mr. Chairman, but I would like 
to ask unanimous consent that I insert some background material 
for the hearing record.
    Mr. Rogers. Without objection, so ordered.
    [The information referred to can be found in the Appendix 
beginning on page 51.]
    Mr. Cooper. Thank you, appreciate it. Thank you, Mr. 
Chairman.
    Mr. Rogers. I would now ask each of our witnesses to make 
an opening statement. We will start with Admiral Mies. Oh, with 
Mr. Augustine. The microphone is yours, sir.

 STATEMENT OF NORMAN AUGUSTINE, COCHAIRMAN, ADVISORY PANEL ON 
       THE GOVERNANCE OF THE NUCLEAR SECURITY ENTERPRISE

    Mr. Augustine. Thank you, Mr. Chairman. I have an opening 
statement that runs about 8 or 9 minutes. If the 5-minute rule 
is in place, I can shorten it.
    Mr. Rogers. Go ahead, deliver the whole thing if you would 
like to.
    Mr. Augustine. Thank you very much, Mr. Chairman and 
ranking member.
    Mr. Rogers. Your microphone is not on.
    Mr. Augustine. I never was good at engineering.
    Thank you very much for the opportunity to present the 
findings to date of the Congressional Advisory Committee on the 
Governance of the Nuclear Security Enterprise. And, as you 
know, Admiral Rich Mies and I have served as the cochairmen. 
And Congress tasked our panel, to broadly examine the 
performance of the nuclear security enterprise and to consider 
alternatives.
    Let us state at the outset that the current viability of 
our nuclear deterrent is not in question. At the same time, the 
existing governance structures and practices are most certainly 
inefficient and in some instances ineffective, putting the 
entire enterprise at risk over the longer term.
    During the past 5 months the panel has focused attention on 
the National Nuclear Security Administration, or NNSA as we 
know it, both in the headquarters and the field, including the 
laboratories and production plants and the Nevada National 
Security Site. We have also examined the current situation from 
the perspective of the national leadership in the legislative 
and executive branches and from the perspective of customers 
such as the NNSA, the DOD [Department of Defense], State, 
Intelligence Community, Department of Homeland Security. We 
have benchmarked NNSA against proven management approaches used 
by high-performing, high-technology organizations, both in the 
private sector and in government.
    The panel's work has relied on our 12 members' decades of 
experience of a broad scope, dealing with nuclear enterprise 
issues. We have reviewed thousands of pages of previous 
studies, we have conducted on-site visits to numerous 
installations, and we have benefited from the testimony of 
dozens of expert witnesses, and we particularly appreciate the 
engagement of our colleagues on the panel as well as the candor 
of those that we have interviewed.
    Today we will summarize our panel's findings on the current 
health of the NNSA and the root cause of the challenges we will 
cite. We are only now beginning to formulate our 
recommendations that we will provide in our final report. 
Unfortunately, the unmistakable conclusion of our fact-finding 
is that, as implemented, the NNSA experiment involving creation 
of a semi-autonomous organization has failed. The current DOE-
NNSA structure has not established the effective operational 
system that Congress appears to have intended. This needs to be 
fixed as a matter of priority, and these fixes will not be 
simple or quick, and they need to recognize the systemic nature 
of the problem.
    Despite the flaws that we have found, there are numerous 
examples of successes in NNSA's endeavors. To date Science-
Based Stockpile Stewardship has succeeded in sustaining 
confidence in our nuclear deterrent. Unmatched technological 
innovation on the part of NNSA's scientists and engineers has 
produced a dramatically increased understanding of our aging 
nuclear weapons stockpile. The labs and plants are providing 
solid support to nonproliferation efforts and unique expertise 
to the Intelligence Community. NNSA's Naval Reactors 
organization continues to provide world-class performance in 
the development and the support of the most capable naval 
nuclear propulsion systems to be found in the world.
    But, NNSA as a whole continues to struggle to meet 
fundamental commitments. To the point, it has lost credibility 
and the trust of the national leadership and customers in DOD 
that it can deliver weapons and critical nuclear facilities on 
schedule and on budget. Simply stated, there is no plan for 
success with available resources. NNSA is on a trajectory 
towards crisis unless strong leadership arrests the current 
course and reorients its governance to better focus on mission 
priorities and deliverables.
    At the root of the challenges are complacency and a loss of 
focus of the nuclear mission by the Nation and its leadership 
following the end of the Cold War, and although the national 
leadership has provided strong policy statements and 
substantial sums of money to the enterprise, it is evident that 
follow-through has been insufficient. The Congress' current 
focus on the issue is a welcome development.
    Over the decades this changed situation has translated into 
the absence of a widely accepted understanding of and 
appreciation for, the role of nuclear weapons and nuclear 
technology in the 21st century, with the resultant well-
documented and atrophied conditions of plants and plans for our 
strategic deterrent future. That is it with DOD as well as in 
DOE. Within the nuclear enterprise, this has been reflected as 
a lack of urgency and a respect for the compelling mission that 
it faces.
    As earlier reviews have concluded and this panel endorses, 
this is no time for complacency about the nuclear deterrent. 
America's deterrent forces remain of the utmost importance. 
They provide the ultimate guarantee against major war and 
coercion. Further, our allies depend on these forces and 
capabilities for extended deterrence and could well pursue 
their own nuclear capabilities if they perceive that the U.S. 
commitment or competency is waning.
    Other countries carefully measure U.S. resolve and 
technological might, in making their own decisions about 
proliferation and nuclear force sizing. U.S. leadership in 
nuclear science is something we cannot afford to lose. We, 
along with our allies, are in a complex nuclear age, with 
several nuclear powers modernizing their arsenals, new nuclear 
technologies emerging, the potential new actors as well as 
regional challenges raising significant concerns. This would be 
a dangerous time to stumble.
    Furthermore, reform will be required to shape an enterprise 
that meets all of the Nation's needs and rebuilds the essential 
infrastructure that is required. But while the technical work 
is rocket science, the management and cultural issues are not. 
In the case of the latter, however, the situation is not easily 
rectified. What is needed, is to issue clear plans and provide 
sufficient resources for success, assign and align 
responsibility along with the necessary authority and 
consequences and provide strong, accountable leadership and 
management at all levels focused on the mission. The panel 
believes such reform is possible, but it will demand determined 
and sustained high-level leadership.
    The changes we will recommend undoubtedly will be difficult 
to implement, regardless of where the enterprise is located 
within the government structure, since the fundamental problems 
are cultural more than organizational. Organizational change, 
while not unimportant, is only a small portion, the easy 
portion of the revisions that must be made. Previous efforts to 
reform and previous studies calling for action have largely 
failed due to the lack of leadership follow-through, the lack 
of accountability for enacting change and, we might add, the 
lack of effective sustained top-level demand for change from 
the national leadership.
    The Department of Energy by itself would be challenged to 
oversee the radical steps that will be needed. Success is 
imaginable only with a strong and active engagement of a 
knowledgeable Secretary, supported by the White House and the 
Congress and a structure that removes impediments and that 
aligns to mission priority. The panel believes that the 
enterprise today benefits immensely from the political 
leadership of an engaged Secretary of Energy and the strong 
science and engineering of the national laboratory system.
    Each successive administration since that of President 
Eisenhower has reaffirmed the need to maintain a credible 
nuclear deterrent that is safe, secure, and reliable, but 
sustained national commitment and focus on the entirety of the 
mission of the enterprise charged with its execution has been 
lacking since the end of the Cold War, as evidenced by the 
condition in which the enterprise finds itself today.
    DOE and the NNSA have failed to act with a sense of urgency 
at obvious signs of decline in key areas. Five systemic 
disorders have taken root that we found to be at the heart of 
the program--problem.
    And with your permission, Mr. Chairman and members of the 
committee, Admiral Mies will briefly outline these issues.
    [The joint prepared statement of Mr. Augustine and Admiral 
Mies can be found in the Appendix on page 33.]
    Mr. Rogers. Thank you, Mr. Augustine.
    Admiral Mies, you are recognized.

   STATEMENT OF ADM RICHARD W. MIES, USN (RET.), COCHAIRMAN, 
   ADVISORY PANEL ON THE GOVERNANCE OF THE NUCLEAR SECURITY 
                           ENTERPRISE

    Admiral Mies. Chairman Rogers and Ranking Member Cooper, 
let me add my thanks as well for being here today.
    My remarks are intended to provide some specifics on the 
panel's findings within the context of my cochair's overall 
characterization of the health surrounding the enterprise.
    Our panel has identified five systemic disorders which 
result from the fundamental causes outlined in Norm's preceding 
testimony. The causes and the disorders are inseparable. Most, 
if not all, of these disorders can be traced back to national 
complacency, the lack of a compelling national narrative and a 
widely accepted understanding regarding the role of our nuclear 
deterrent in this century.
    Today I would like to offer a synopsis of our panel's key 
findings, specifically focusing on the five systemic disorders 
we have identified.
    First, a loss of sustained national leadership focus. Since 
the end of the Cold War we have experienced significant erosion 
in our abilities to sustain our nuclear deterrent capabilities 
for the long term. The atrophy of our capabilities has been 
well documented in numerous reports over the past decade. The 
fundamental underlying cause of this erosion has been a lack of 
attention to nuclear weapon issues by senior leadership, both 
civilian and military, across both past and present 
administrations and Congresses.
    This lack of attention has resulted in public confusion, 
congressional distrust, and a serious erosion of advocacy, 
expertise, and proficiency, in the sustainment of these 
capabilities. Absent strong national leadership, NNSA as well 
as the whole national security enterprise has been allowed to 
muddle through. First and foremost, we must consolidate and 
focus national level support.
    Second, a flawed DOE-NNSA governance model. The current 
NNSA governance model of semi-autonomy is fundamentally flawed. 
NNSA has not established effective leadership, policy, culture, 
or integrated decisionmaking. Indeed, the design and 
implementation of NNSA governance has led to numerous 
redundancies, confused authorities, and weakened 
accountability.
    Third, a lack of sound management principles. NNSA and the 
associated policy-setting and oversight organizations within 
DOE reflect few of the characteristics of successful 
organizations. An entrenched risk-averse bureaucracy lacks a 
shared vision for and unified commitment to mission 
accomplishment, and hence they don't act as a team. Both DOE 
and NNSA lack clearly defined and disciplined exercise of 
roles, responsibilities, authorities, and accountability 
aligned to NNSA's mission deliverables.
    Too many people can stop mission essential work for a host 
of reasons, and those who are responsible for getting the work 
done often find their decisions ignored or overturned. Chains 
of command are not well defined, and resources are 
micromanaged. Personnel management and development programs, 
issue resolution processes, and deliverable aligned budgets are 
deficient. Shortfalls in project management and cost estimating 
are well documented and acute.
    Fourth, there is a dysfunctional relationship between NNSA, 
the Federal workforce, and their management and operations 
[M&O] partners. The trusted partnership that historically 
existed between the laboratories and DOE-NNSA headquarters has 
eroded over the past two decades to an arm's length customer-
to-contractor adversarial relationship leading to a significant 
loss in the benefits of the federally funded research and 
development centers, the FFRDC model. The trust factor 
essential to this model and underscored by a recent National 
Academies study results from unclear accountability for risk, a 
fee structure and contract approach that invites detailed 
transactional compliance-based oversight rather than a more 
strategic approach with performance-based standards.
    Additionally, atomized budget and reporting lines also 
confound effective and efficient programmatic management and 
further erode any sense of trust, and additionally there is no 
enterprise-wide approach. While there are examples where the 
relationship has improved, such as the Kansas City Plant, 
overall, this government-to-M&O ``partnership'' remains highly 
inefficient and in many cases, severely fractured.
    Fifth and finally, there is uneven collaboration with NNSA 
customers. NNSA's relationship--this issue deals primarily with 
issues we have identified mainly with the DOD weapons 
customers. There is no affordable, executable joint DOD-DOE 
vision, plan, or program for the future of nuclear weapons 
capabilities.
    This is at once a cultural and communications divide, but 
there is also a fundamental lack of mechanisms to ensure that 
requisite collaboration and consensus to address core mission 
requirements. Other customers appear to be satisfied, but here 
too a more strategic approach could strengthen capabilities and 
the services that NNSA provides.
    In conclusion, lasting reform requires aggressive action 
and sustained implementation in all five of these areas, but 
national leadership engagement is really the common theme. 
Improvement is possible, but it will demand strong leadership 
and proactive implementation of the panel's recommendations by 
the President, the Congress, and an engaged Department of 
Energy Secretary.
    Thank you for your time, and we look forward to your 
questions.
    [The joint prepared statement of Admiral Mies and Mr. 
Augustine can be found in the Appendix on page 33.]
    Mr. Rogers. Thank you both for those remarks.
    Admiral, did you and your staff get the impression when 
they were interacting with folks at the various levels, that 
they have a morale problem? I get the impression that they 
have, they are cognizant that they have got problems, but has 
it affected morale in, in a serious way?
    Admiral Mies. Well, I think across the complex you see a 
number of morale problems, and that is reflected not just 
within NNSA and the M&O contractors, but you also see it on the 
DOD side in many cases. You are witnessing a, a number of 
investigations associated with morale problems within the ICBM 
[intercontinental ballistic missile] force.
    That clearly was not part of our charter, but, yes, I think 
certainly there are morale issues. We did receive a copy of a 
recent cultural study that was done within DOE and NNSA, and 
again that identified a number of morale and cultural issues 
that I think affect performance of the organization.
    Mr. Rogers. Mr. Augustine, you were the CEO of a very large 
corporation. If you were to give some advice to or if you were 
to take the reins of NNSA, what sort of initial actions should 
that new administrator employ, to demonstrate the seriousness 
of his or her approach to this new endeavor, that would send 
the message up and down the food chain within an organization 
that you are serious about changing the culture, which is what 
I am hearing from you all is it is really a cultural problem 
there. So give us an organizational lesson.
    Mr. Augustine. Well, Mr. Chairman, having spent 10 years in 
the government, let me say that it is much, much more difficult 
to manage in the government than it is the private sector, and 
nonetheless the same basic principles of management in my 
experience apply.
    People also watch the people at the top and how they 
behave. It is terribly important that the people at the top set 
an example of what is expected, they walk the talk. I think the 
first thing that needs to be done is to gather people and say, 
times have changed, things are different, and there will be 
some people who will view that as an opportunity, an exciting 
challenge, there will be those that say that we can live with 
that, and there will be those who will resist it, and somehow 
those people who resist it either have to find new work that 
they can deal with or be put aside so they don't interfere.
    And so I think that there need to be examples set very 
quickly that accountability is expected, and that were I to 
start out, I would have a conversation like that with the 
organization. I would travel the field for a few weeks. I would 
then make clear what our goals were, what our expectations 
were. I would do my very best to have our resources match those 
expectations. If there were people who weren't up to the job, 
they need to find something new to do.
    Mr. Rogers. Let me ask this, speaking about that, because I 
think you are exactly right: Do you think that whoever takes 
the reins at NNSA, assuming the Senate will soon confirm 
somebody, has the latitude to make those corrective changes in 
leadership personnel? For example, I was listening to Admiral 
Mies' five points, and he made the observation that the 
bureaucracy was risk averse, and a lot of the folks in middle 
management either don't want to make decisions or if they do, 
they are overruled by somebody.
    I am wondering how difficult it is to take a middle 
management person and replace them with somebody who is not 
risk averse. Did you even look at that or do you know?
    Mr. Augustine. We have looked at it. We have both 
experienced it, and many of the members of our group have 
served in government. And as you know very well, the civil 
service was set up to protect employees from political 
pressures. In so doing I think it in my view has leaned too far 
to make it difficult to remove people who are not up to their 
job.
    And I worked with many very, very capable people in 
government, particularly people in uniform. At the same time, I 
have encountered situations where people directly reporting to 
me were really not suited for the job they were in, and it is 
very, very difficult to do anything about that.
    Mr. Rogers. In the government sector?
    Mr. Augustine. In government, yes; I should have been 
clearer but----
    Mr. Rogers. Well, we just saw that in Y-12, you know, we 
have had that incident up there, and to my knowledge to this 
day nobody has been terminated.
    Mr. Augustine. Well, as you are aware--well, I know you are 
aware--I was one of three people the Secretary asked to do an 
investigation of Y-12, an independent investigation, and it is 
very hard to find out what actually happened to the government 
employees after that. We have tried very hard. But what is 
clear is that the three intruders went to jail.
    Mr. Rogers. Yeah.
    Mr. Augustine. The people working for the contractors--the 
contractor was fired, the contractor employees, some were 
fired, some were transferred, apparently laterally, and as best 
as I know, the people in government service were transferred 
laterally or no action was taken, and I qualify that with 
saying as best as we have been able to find out.
    Mr. Rogers. Yeah well, the head of their security did not 
get any--did not shoulder any responsibility for that, that is 
the thing I find most amazing.
    I do want to ask you all both, we heard your five 
systematic disorders. Would you both please provide some 
specific examples, if you can, of where we have seen the 
erosion of senior leadership attention to nuclear weapons 
issues and what impact that has had. Just if you can think of 
one or two specifics. If you can't, that is fine.
    Admiral Mies. Well, I would say at the height of the Cold 
War we had a very robust infrastructure that was capable of 
producing nuclear weapons in significant volumes, significant 
quantities. Today we are dealing with a very obsolescent 
footprint within the NNSA complex, 54 percent or somewhere 
around there of the infrastructure is over 40 years old. Much 
of it is a legacy of the Cold War, and there is a need to 
streamline it and modernize it. We are struggling right now 
with the lack of any significant pit production capability 
because we don't have two major facilities, a Chemical and 
Metallurgy Research Replacement [CMRR] Facility and a Uranium 
Processing Facility [UPF], which have been troubled, as you 
well know, by poor project management and deficient cost 
estimating. So, again, that is one significant example of an 
erosion of our infrastructure capabilities.
    Mr. Augustine. I will cite two quick examples. There are 
many. One is when the Nuclear Weapons Council met to approve 
what is known as the ``3+2'' plan, within a month of the time 
that was approved and widely agreed upon at a very high level, 
the NNSA came back and said we can't carry that out, and the 
system basically stopped at that point in terms of proceeding 
as planned at the higher levels.
    The second example is the facilities have been allowed to 
age. Even though the people working in them are well aware of 
that at the highest levels, there has been no action in many 
cases. Today, over 50 percent of the facilities within the NNSA 
are over 40 years old, over 25 percent are over 60 years old, 
and not only does some of that raise a safety issue, it 
certainly impacts morale that you asked about.
    Mr. Rogers. Thank you very much.
    The chair now recognizes the ranking member for any 
questions he may have.
    Mr. Cooper. I thank my good friend, the chairman of the 
subcommittee, and I most of all thank the witnesses for being 
here, for their long period of government and public sector 
service, and also for their expertise in leading this very 
important panel.
    I want to compliment members of the subcommittee here, not 
only on my side but across the aisle. It is great to have a 
senior member like Mr. Thornberry here who is even willing to 
sit below the salt in the subcommittee hearing to find out 
about the governance of the nuclear security enterprise, and 
this is, we should point out, probably one of the few hearings 
in which actually the attendance of the subcommittee compares 
very favorably with the attendance in the audience because the 
public has not tuned in to these issues as they should, and 
Congress, as you gentlemen point out, has not focused on these 
issues as we should, so hopefully this is the process that 
starts the correction.
    I know that this is just a preliminary report on your 
findings on the governance of the national security enterprise. 
Are you on track to deliver the final report sometime this 
summer?
    Admiral Mies. I believe we are, and we look forward to 
delivering a full and comprehensive report.
    Mr. Cooper. When I went through your testimony, I was 
struck because you can view things usually as a glass half full 
or glass half empty, and I would like for each of you to look 
at your testimony and for Mr. Augustine, for example, he starts 
off by saying the current viability of our nuclear deterrent is 
not in question, glass half full, and of course points out some 
qualifying things, we can improve existing governance 
structures because they are inefficient or ineffective, you 
know. We are not going to die from that. But later on in the 
testimony it is sharper. It says, quote, ``The NNSA experiment 
has failed.'' It needs to be fixed as a matter of priority, 
presumably national priority.
    And I thought Admiral Mies' testimony had a similar glass 
half full or glass half empty look at things. Admiral Mies 
starts off by saying there has been a significant erosion in 
our capabilities to sustain our nuclear deterrent capabilities, 
a lack of attention to weapons issues by senior leadership, 
both civilian and military.
    Again, we are not going to die from that. But later in your 
testimony I thought if there were to be a headline for this 
hearing, it would be this, a single sentence: Quote, ``there is 
no affordable, executable joint DOD-DOE vision, plan, or 
program for the future of nuclear weapons capabilities.'' Wow. 
That is a big sentence. That is a devastating sentence. So that 
would be in the glass half empty category.
    Now, I know you are just at the preliminary level, you have 
done fact-finding, the commission hasn't been able to formulate 
recommendations, but as we go through our hearings and we learn 
that just, you know, to sustain current capabilities is 
probably $355 billion, and that is assuming no further cost 
overruns or delays or erosion of scientific talent or bad 
relationships with contractors, whatever, and we are in an 
environment of sequestration. Like how are we going to do all 
this?
    So, this is a central challenge not only for Congress but 
for the Nation. Nuclear issues are not necessarily in fashion. 
It is easy to just dismiss them, or--but I hope that, as I say, 
this is the beginning of a process where we can focus in a 
mature way on sustaining and possibly even enhancing our 
capability because as the only great Nation on this Earth, that 
is our obligation.
    I also think it is important to put this in historical 
perspective because there has never been, you know, a perfect 
period for managing all this. If you read the history of the 
nuclear enterprise, there always are controversies and 
problems, and so the path has never been smooth. There is not 
one glory age, one Camelot, but hopefully we can do better than 
the NNSA has been doing because I agree with Mr. Augustine, the 
NNSA experiment has failed, and I look forward to your panel's 
recommendations on the fixes.
    Thank you, Mr. Chairman.
    Mr. Rogers. I thank the ranking member.
    The chair now recognizes my friend and colleague from 
Texas, Mac Thornberry, for any questions he may have.
    Mr. Thornberry. Well, thank you, Mr. Chairman, and thank 
you for letting me sit in.
    There is some advantage to having been involved in this 
issue for 20 years because one does see a progression of 
reports that largely reach the same conclusion you all do. 
There wasn't anything that you said this morning, I don't 
believe, that is new, and we have been grappling with it 
literally for 20 years. But I have got to say at the same time, 
I recently, as soon as Secretary Moniz was confirmed, I sent 
him a letter that said I have never been more concerned about 
the nuclear complex than I am now.
    And part of it is the morale, part of it is the lack of 
leadership at the top, part of it is the continued aging and 
deterioration of our weapons which we are not addressing, just 
a host of things. So I guess all that is a long way of saying I 
appreciate the efforts that you all are putting into this.
    I guess one question that keeps coming up in my mind is to 
what extent any recommendations are going to affect the culture 
and the basic leadership issues that you all identify. When we 
created the NNSA basically we took a report from some very 
distinguished people and the President's Foreign Intelligence 
Advisory Board and took the more conservative option. We didn't 
create an autonomous agency like the Nuclear Regulatory 
Commission. We tried to do the semi-autonomous. But even if you 
had an autonomous agency, if you don't have attention from the 
President, from the Secretary of Defense, I don't know, would 
it matter? How do you legislate cultural leadership focus, the 
number one issue that Admiral Mies identified?
    Mr. Augustine. Do you want to start on that one?
    Admiral Mies. I don't know where to start.
    Well, first, to the minority Member's concern about half 
full or half empty, I certainly think at the present time the 
glass is half full, but I think as we look to the longer term 
in the future, if dramatic action is not taken, then the 
concern is more a half empty view.
    I think you have to appreciate that there have been 
numerous studies, as you well know, that have done, that have 
preceded our panel. We have inherited about 50 past studies 
focused on the Department of Energy and to some degree NNSA, 
and all of those studies have reached similar findings 
regarding the cultural, personnel, organizational, policy, and 
procedural challenges that those organizations face right now, 
that exists within DOE and NNSA, and so many of our panel's 
findings I don't think are going to be necessarily new or 
original. But I think you have to appreciate that many of these 
problems existed before NNSA was created, and NNSA was created 
out of recognition that some of these problems existed and, 
frankly, the semi-autonomous model has not succeeded, and in a 
sense we view it as a failed experiment.
    From that standpoint I guess the change, the creation of 
NNSA was basically an organizational change, but organizational 
changes, as Norm indicated, are not the solution, the main 
solution to the problem. The main solution is cultural, not 
organizational, and you have to approach it from a DOE-wide 
basis, not just an NNSA basis, and I think we are very 
fortunate to have Secretary Moniz, who is very engaged, who has 
a passion and an understanding of the mission and clearly is 
committed to making some cultural changes. The challenge that I 
think he will face and we will all face is can you 
institutionalize those changes so that they endure long beyond 
his tenure.
    Mr. Augustine. Mr. Chairman, might I comment on Mr. 
Thornberry's question?
    First of all, I would strongly agree, you can't legislate 
culture, and even in a corporation you can't dictate changes by 
putting out memos. I think that what is required is to set an 
example of what the new culture is and to be totally intolerant 
of deviations from that. The firm I happened to work for, we've 
combined 17 different firms in 7 years--5 years to make it, to 
build it, and we had 17, sometimes I thought we had 18 
different cultures, and it came together very well because we 
were very intolerant of individuals who just couldn't deal with 
the new way of doing business.
    And I think as the Admiral says, we are fortunate today to 
have a Secretary of Energy that understands this. The chairman, 
Mr. Chairman, you mentioned at the outset that we need 
solutions that aren't personnel, human dependent, but we have 
got to have Secretaries of Energy who understand something 
about the nuclear enterprise, about management, and I think 
that is where it starts.
    Mr. Thornberry. Thank you, Mr. Chairman.
    Mr. Rogers. I thank the gentleman.
    The chair now recognizes the gentlelady from California, 
Ms. Sanchez. Is she still here?
    Mr. Cooper. She stepped out.
    Mr. Rogers. The gentleman from Georgia, Mr. Johnson, is 
recognized.
    Mr. Johnson. Thank you.
    I am just sitting here thinking. I am listening to you all, 
and I was preparing what I was going to ask and say, and let me 
first say that I appreciate the study that you all have 
conducted, and it is indeed sobering to think of all of that 
nuclear power that is in a dangerous state of maintenance and 
management.
    And so our nuclear enterprise has been eroded from years 
and years of lack of focus and a lack of sustained leadership 
is what you have said from both civilian and military sources, 
and it has taken place over quite a period of time, since the 
end of the Cold War, and I think that the erosion of this 
nuclear enterprise is illustrative of the morass that Congress 
finds itself in. We are still doing business the same way that 
we have done for centuries, and right now this body is not 
functioning, this body needs a study that would provide us with 
some guidance in terms of where we are and what we need to do 
to move forward. I would submit that this Congress, while it is 
great that we are looking at our deficiencies right now, I also 
think that we need to be looking at what our future direction 
should be. It is not to be assumed that we should go back and 
correct everything to sustain what we had.
    I think the discussion should be what do we need as we move 
forward. So in my mind the President having--and this 
President, like previous Presidents having worked on nuclear 
disarmament treaties and such, we would be, this Congress would 
be well advised, I think, to I don't want to say follow, but we 
should explore this disarmament issue.
    Of course, we can't unilaterally disarm, but the goal 
should be to have a world without nuclear weapons, and so if we 
start out from that premise and then work from that, I think we 
would do ourselves a whole lot of justice. $355 billion to get 
us back to where we need to be is unrealistic. I don't think 
that is going to happen, and so how much will it take for us to 
get where we need to be in order to continue our efforts to 
eradicate nuclear weapons from the face of the globe? I think 
that should be our, that should be something that Congress, 
through its committees and subcommittees, should be about, and 
we need to be about it quickly because we can't afford the 
status quo both from a security standpoint, especially from a 
security standpoint.
    So as we make sure that we don't allow other nations to 
acquire nuclear weapons, we need to be about this kind of 
study, but Admiral Mies, you in your statement, you said that 
several nuclear powers are modernizing their arsenals. Which 
ones are those? And what is--how much money are they spending 
to do that?
    Admiral Mies. Well, let me say that very clearly both 
Russia and China are modernizing their nuclear arsenals, and we 
have good indications of that. They are developing new 
capabilities. I do want to go back and reassure you, though, 
that despite our testimony and our comments about erosion in 
the enterprise, I want to reassure the subcommittee that 
because of the strength of the Stockpile Stewardship Program 
and the great science that is going on in our national 
laboratories, we still have a safe, secure, and reliable 
stockpile.
    That is not an issue today. It might be an issue for the 
future if we don't continue to invest and pay attention to 
those issues, but I think for the foreseeable future we have a 
safe, secure, and reliable stockpile, and I don't want to 
create the impression that that is a concern.
    Mr. Rogers. The gentleman's time has expired.
    The chair now recognizes the gentleman from Florida, Mr. 
Nugent.
    Mr. Nugent. Thank you, Mr. Chairman, and I appreciate this 
panel and what you are saying.
    It is a sobering thought because, you know, deterrence is 
about our ability to project force, and our adversaries, while 
I know in a perfect world we would love that we didn't have 
any, and that, you know, everybody loved each other and there 
would be no need for deterrence, but that is not the real 
world. We live in a place that is becoming actually more 
dangerous, not less dangerous.
    We see the actions of China and Russia, and particularly 
what we have just seen with Russia's incursion into the 
Ukraine, much less what they did in Georgia, and they are still 
there. So while it would be great to live in this fantasy 
world, what bothers me the most is the fact that one of the 
last sentences in your testimony was lasting reform requires 
aggressive action, sustained implementation of all five of 
these areas that were mentioned in the report, but national 
leadership engagement is the common theme.
    ``Improvement is possible, but it will demand strong 
leadership and proactive implementation of the panel's 
recommendations by the President, the Congress, and engaged DOE 
Secretary.'' I think that you have--at least from the Congress' 
standpoint, we have shown leadership, and we are trying to give 
direction, but everything that we have talked about here is 
about interpersonal skills, about the ability for management to 
make sure that people stay on task, and that starts at the 
highest level, you know.
    Evidently, you know, this has been going on for years. I 
have been here for 3 years, and it disturbs me the fact that we 
can't get administrators to actually do their job, and they are 
not held accountable, because in reading through all your 
testimony it is about accountability, and Mr. Augustine, you 
know, I was a sheriff and we had 500 employees, and I will tell 
you that we held people accountable. We had civil service, and 
there were ways to deal with those within the civil service 
system, but you had to hold people accountable, and you had to 
let people know what your mission was and what you would not 
tolerate.
    And in this particular endeavor, nuclear deterrence and the 
safety of the nuclear force that we have and the modernization 
really falls to those folks. You know, there is a whole bunch 
of other things going on, but that is their only mission. Their 
mission is very central.
    You mentioned that that takes rocket scientists to do this, 
but it takes managers and people to actually manage the 
systems. I don't have to know much about how to construct a 
nuclear weapon, but I do have to know about how do I construct 
a management team to get us across the goal line. I guess I am 
just 3 years up here, I am still baffled by the fact that we 
can have studies and commissions, and we do all the stuff, and 
it doesn't seem to get better.
    What does it really take? Does it take the President saying 
to you that, you know, DOE Secretary, you know, this is 
unacceptable, you have got to get this done? I mean, does it 
start there or where does it start?
    Mr. Augustine. I think you have said it exactly right. The 
President obviously is the principal person to provide 
leadership in this regard, the administration. Strong support 
from the Congress is required, and probably the most important 
individual is the, under today's organization is the Secretary 
of Energy, who in many cases in the past did not have a 
background at all within this arena.
    As you spoke, I was thinking that I had tried to figure out 
how I would summarize in one sentence what at least I think I 
have learned, and my sentence would be that with regard to the 
NNSA or the nuclear enterprise that the whole is less than the 
sum of the parts. There is some very, very capable people, some 
capable organizations, but the leadership to bring them 
together, to set goals, and you referred to the focus should be 
very clear what their job is.
    We went to one national, one of the laboratories within the 
nuclear enterprise where the contractor that runs the facility, 
they have an award fee; 80 percent of the award fee had nothing 
to do with the primary mission. It had to do with peripheral 
issues. Very important peripheral issues, I would emphasize 
that, but 20 percent had to do with producing nuclear weapons 
and maintaining the stockpile and so on.
    Mr. Nugent. As a citizen of the United States, people 
should be concerned. I think the message is that we expect our 
leaders to actually lead, not just hope things get better and 
hope that processes improve. We can have all the commissions 
that we want, but until there is actual leadership to force the 
issue, I don't see how this, Mr. Chairman, ever gets better.
    And I yield back.
    Thank you so very much.
    Mr. Rogers. I thank the gentleman, and I understand his 
concern, and I hope he is wrong.
    The lady from California, Ms. Sanchez, is now recognized 
for 5 minutes.
    Ms. Sanchez. Thank you, Mr. Chairman, and thank you 
gentlemen for--I really enjoyed reading your testimony, and as 
Mr. Cooper said, some real pearls of wisdom in there and also 
some real arrows at some very difficult problems that we need 
to solve.
    Of the 18 years that I have been here on this--in this 
Congress and in this full committee, 16 of those years have 
been spent on this committee, this subcommittee here, and I 
have seen a lot of interest and I have seen a lot of waning 
interest, not just, quite frankly, by people in the 
administration with respect to this issue, but also by members 
on this subcommittee over time, and so first of all I am really 
thrilled that so many have shown up today.
    Gentlemen, during the markup and conference of the fiscal 
year 2013 and fiscal year 2014 NDAA, the House bill, we 
considered several legislative provisions related to NNSA and 
its related authorities and oversights, and some of these 
provisions included significantly limiting the authority of the 
Secretary of Energy, changing health and safety oversight by 
the NNSA, and the independent Defense Nuclear Safety Board even 
as the Department of Labor paid over $10 billion in 
compensation to workers or to their families because they were 
either killed or injured by exposure to radiation or toxic 
materials by when they were working at the Department of Energy 
at their nuclear sites.
    These legislative provisions led to significant concern 
about weakening oversight at a time when the NNSA is overseeing 
an ambitious nuclear weapons modernization and sustainment plan 
and also building, of course, some of our facilities, one-of-a-
kind new facilities to handle plutonium and uranium operations. 
Considering that backdrop, do you see a role for independent 
oversight of safety and security and where would this come 
from? Who would we look to for that? And when the NNSA talks 
about priority missions, does this include--in your opinion 
does this include a serious commitment to safety and security?
    Mr. Augustine. Why don't you start and I will follow up.
    Admiral Mies. Let me try and answer your question in a 
number of ways.
    First of all, with respect to oversight, I don't think 
anybody on the panel wants to reduce the effectiveness of 
oversight, but I would say that in our review of the 
performance of the oversight function within NNSA and DOE, 
despite a large number of people at each of the field offices, 
we have really evolved over time into a transactional, 
compliance checklist-based kind of culture which, frankly, is 
both inefficient and not very effective, and so the issue is 
not more oversight or less oversight in terms of bodies as much 
as it is better oversight, and are there better ways to do 
oversight, and really----
    Ms. Sanchez. I guess that would be my question----
    Admiral Mies. And really----
    Ms. Sanchez. How would we go about really getting to the 
oversight that we need?
    Admiral Mies. Well, to some degree I think if you look at 
the current performance elements today, a lot of the 
laboratories and the sites are graded on nonmission-related 
functions.
    Norm previously mentioned that one organization had 80 
percent of their award fee associated with nonmission-related 
issues. Again, there has to be a greater, stronger focus on 
mission. I would just give you one example to illustrate the 
point, Y-12. We have approximately 100 people at Y-12 doing 
oversight, and yet for whatever reason despite that large 
number of people doing oversight, the problem with the high 
level of frequency of false and nuisance alarms at the 
facility, the complacency that ultimately set in with the guard 
force over a long period of time, which ultimately contributed 
to the lack of a very effective and efficient response when the 
nun and her accomplices actually tripped some alarms.
    To me you have to ask yourself, with that many people doing 
oversight, why wasn't there a recognition that this culture of 
complacency had kind of set in because of the large number of 
false and nuisance alarms and why wasn't there attention given 
to fix it and address it? And, again, preceding the Y-12 
incident, Y-12 had received an inspection with respect to their 
safety and security, and they were held up as----
    Ms. Sanchez. An example.
    Admiral Mies [continuing]. An exemplar of good security, so 
you have to ask yourself is the current type of oversight that 
we are doing really successful in achieving what you really 
want from a mission standpoint.
    Now, there is, has been one prototype test within the 
Department of Energy, within NNSA, the Kansas City model, where 
Kansas City transitioned to really exemption from a large 
number of DOE orders and regulations, and they were allowed to 
move toward industrial standards, accepted industrial 
standards, and ISO certifications, and that enabled Kansas City 
to reduce the number of Federal overseers, and at the same time 
significantly reduce the cost, but improve performance as well.
    Now, Kansas City is unique in that it doesn't have a lot of 
nuclear functions, and so you can't just transplant that model 
to some of the other elements of the site, but I certainly 
think it is a good example that we ought to look hard at, 
particularly for nonnuclear functions that are performed across 
the complex to see if there are opportunities where you can 
move to independent oversight or change the oversight model in 
a way that provides much more effective oversight.
    Mr. Rogers. The lady's time has expired.
    Ms. Sanchez. Thank you, Mr. Chairman.
    I have some other questions that I would like to submit for 
the record, and if Mr. Augustine has any comments, I would like 
to have them submitted from him also. I think this is an 
incredibly important topic that we have been struggling with.
    Thank you.
    [The information referred to can be found in the Appendix 
on page 81.]
    Mr. Rogers. I agree.
    The chair now recognizes the gentleman from Arizona, Mr. 
Franks, for any questions he may have.
    Mr. Franks. Thank you, Mr. Chairman.
    Thank you gentlemen both for being here.
    Mr. Augustine, for your commitment to the administration.
    And Admiral Mies, I want you to know I was impressed by the 
candor of your opening statement, and I think you are a credit 
for your uniform, or the one you used to wear, and am grateful 
to people like you that make it possible for all of us to sit 
here and have a peaceful conversation.
    I am convinced that our nuclear deterrent, our nuclear 
capabilities, are one of our most important elements of our 
entire arsenal of freedom. And yet it is important to remember 
that that deterrent is--essentially has its substance in two 
things, and that is the capacity that we are really here 
talking about today is our ability to know that we have a 
reliable capability, that capacity, and also intent.
    Now, I apologize for--ask you for diplomatic immunity. I 
don't know of anybody but God that could figure out the intent 
of this administration. Okay? But the capacity here is what we 
are talking about today, and I am beginning to be concerned 
that there is some questions about that. And I think that is 
extremely dangerous in the kind of world that we live in if an 
enemy somehow feels like maybe our capacity or our intent is 
not up to par that it may potentially drag us into something 
that would be very scary.
    So with that, Mr. Augustine, I will turn and ask you the 
tough question, if I can do that. And you are--I'm still under 
diplomatic immunity here, if you don't mind.
    Plutonium facility in New Mexico, around a billion dollars 
spent. Nothing built with no intention to ever to build it. The 
uranium facility in Tennessee, over $1.2 billion spent, with 
nothing built. NNSA is studying alternatives and is unlikely to 
build the design that has cost them $1.2 billion so far.
    The mixed oxide facility in South Carolina, over $3 billion 
spent. The concrete structure complete, but the NNSA has 
announced that with their fiscal year 2015 budget request that 
it is putting the project in, quote, ``cold standby.'' The W76 
LEP [life extension program] is delayed 2 years. The B61 LEP 
delayed 3 years. The IW-1 LEP is delayed 5 years. And, you 
know, I will try to cut this short here. But it is not a really 
a positive situation.
    And the testimony here about the loss of sustained national 
leadership focus I think is spot-on, and I could not agree with 
you more, and find the administration's lack of leadership and 
care for this nuclear deterrent that we have been talking 
about, I would call it shameful, but it is more terrifying than 
that. And I think those delays highlight that.
    This committee has been pulling in its--is pulling its 
collective hair out, really, trying to get the White House and 
the Office of Management and Budget to put attention on the 
nuclear security enterprise. And I know you folks would like to 
see that as well without, you know, putting any of my own 
commentary in your mouth. We passed packages of reforms out of 
the House the last 2 years in the NDAA, only to see the 
administration, quote, ``strongly object'' or even threaten to 
veto them. But the administration has offered no real reforms 
of its own. Nothing, no answer to these problems.
    And so I guess I have to ask you, and I will make it to 
both of you. Mr. Augustine, I will let you go first, if you 
don't mind. Has the White House engaged with your advisory 
panel and do you think--I shouldn't say that. Does it 
understand the major problems that exist in the nuclear 
security enterprise? And do you think the President understands 
it, the gravity of it?
    Mr. Augustine. That is a difficult question----
    Mr. Franks. It sure is.
    Mr. Augustine [continuing]. Mr. Franks, for us to answer. 
Clearly, as a nation, not just this administration, but over a 
period of years we have gradually let our nuclear capability 
degrade. I would come back to your initial remarks that 
deterrence is in the eye of beholder, as you know, and when 
other nations come to the conclusion whether our deterrent is 
not what we say it is, then we are in great danger. And one of 
the worst things we could do of course, is to state we have 
plans that we don't provide the resources and the management 
capability to carry them out. If we can't afford more, then we 
need to change the plan. But to have plans that don't match the 
resources is probably the worst of all worlds.
    Once again, as we--we have visited in great detail the 
programs you have cited. There are a lot of examples of poor 
management. It has less to do with in this case the capability 
of the people in the system; most of the people we talk to are 
very capable, and very dedicated, and I might add, very 
frustrated. They know the problems. Probably better than we do. 
It comes down to leadership at all levels. I'm trying to be as 
candid as I can.
    Mr. Franks. I couldn't agree with you more, Mr. Augustine. 
I don't want to cut you short, but I am out of time and I 
wonder if we could give Admiral Mies--but I certainly 
appreciate your candor and your response.
    Admiral Mies. Separate from the White House and Congress 
and national-level leadership, I think there is a lot that the 
Department of Energy can do within itself. You spoke about 
several projects that have--we have already expended a 
significant amount of national treasure on, and we have yet to 
see a facility. A lot of that stems from a number of cultural 
issues and technical competence within the Department of Energy 
itself. There is a need for stronger cost-estimating 
capability, a much more rigorous analysis of alternatives up-
front before you commit to a certain program, and also real 
strong, robust program management expertise.
    And I think those three elements to a certain degree are 
lacking within NNSA, have historically been lacking within 
NNSA. You don't need the White House or Congress to fix those 
things. I think the Secretary has the ability to take on some 
cultural reforms to really make the organization more efficient 
to better utilize the resources that have already been given to 
the organization.
    Mr. Rogers. Gentleman's time has expired.
    I do want to thank the Admiral for his comment. But I would 
say that Secretary Moniz, who I agree is a good man and 
prepared for that job, has his hands tied, to an extent, that 
we, going back to Thornberry's question, we could legislate 
loosening up his hands a little.
    Jim. I got my thought process going over there. Mr. 
Langevin is recognized for 5 minutes.
    Mr. Langevin. Thank you, Mr. Chairman. I would thank our 
witnesses for being here today. I have a couple specific 
questions I would like to ask, but first of all let me start 
off more broadly.
    Is the NNSA and the nuclear security enterprise under the 
current construct fixable or do we need to move in a totally 
new direction? If it is fixable, where would you start? If it 
is not, what would you do?
    Mr. Augustine. Well, under the current structure, at least 
as it is being carried out, it is clear that it doesn't work, 
and is probably going to be very difficult to fix.
    What new structure one needs as a starting point is 
something that the committee is very much involved in trying to 
decide. The list of options is not great.
    You want to add anything to that, Admiral?
    Admiral Mies. Again I think organizational change is 
needed, but it is the lesser fix in the sense that cultural 
reform is, is far, far the greater priority. And you can move 
the organizational boxes around all you want, but if you don't 
fix the cultural problem, those organizational shifts will be 
meaningless. So you really have to address some of these 
cultural issues, and that is the Secretary's challenge.
    Mr. Langevin. Well, I concur that changing an 
organizational culture is very difficult to do and in many ways 
is very--it is two specific things: A, you either have to 
incentivize and get buy-in from the people there to change the 
culture and have them be a part of the solution, or you just 
got to start all over, and that is a very daunting prospect if 
that is what it comes to.
    Let me just turn to a couple of specific questions. 
President Obama made clear in his Prague 2009 speech and the 
Nuclear Posture Review identified, the priority of 
strengthening nonproliferation, making progress on nuclear arms 
control, and sustaining a strong deterrent. Is there adequate 
national leadership below the President and above the NSA--NNSA 
level, to focus political support on these priorities?
    Mr. Augustine. In my mind, the part of the government you 
pointed at is the head of the Department of Energy. And I think 
today that is true, there is that capability. But the 
capability will need strong backing because there is always 
resistance to change. If one gets into various management 
levels within the Department of Energy, I think there are some 
cases that one would question whether we have got people in the 
job that are up to it. On the other hand, there are a lot of 
people there that are very good. This is a case-by-case issue.
    Mr. Langevin. Admiral.
    Admiral Mies. I would only add that you can't really 
separate the nonproliferation mission entirely from the nuclear 
weapons stockpile surveillance and maintenance mission. The two 
are inextricably linked in that a large volume of our expertise 
in our weapons program is what contributes to our understanding 
and knowledge of what other countries are doing and how they 
are developing, and all that plays into our nonproliferation 
initiative. So I think they are inextricably tied together and 
both very critical.
    Mr. Langevin. Thank you, Admiral.
    Let me move to this. After the disastrous Y-12 security 
incident, the Department of Energy Inspector General and the 
Government Accountability Office have stated that NNSA had an 
eyes-on, hands-off approach to oversight. It appears that NNSA 
officials did not have or use the authority to second-guess the 
contractor practices on security. Has this major deficiency 
been addressed within NNSA? And, more generally, does NNSA have 
the necessary expertise to evaluate performance and proposals 
from the M&O contractors?
    Mr. Augustine. Yeah, I think with regard to the first part 
of your question, the answer is, no, the capability doesn't 
exist today.
    One of the things that has happened is that the 
responsibility for carrying out a mission, the mission within 
NNSA, has been separated from many other important supportive 
functions. The person in charge of producing a weapon should 
also have as part of their job, produce the weapon, but do it 
safely, do it environmentally responsibly, and so on. Securely.
    But today the staff functions have taken over those latter 
issues. And that should be embraced by the person who has the 
line-management responsibility and the authority. So today you 
have a separately--a separation of responsibilities, and that 
leads to great bureaucracy, delay, and ineffectiveness.
    Admiral Mies. I would only add that although we haven't 
seen significant changes in the way oversight is done in that 
it is still pretty much a transactional compliance base, there 
is a major initiative underway to reduce the number of 
performance element factors that the fees are awarded upon and 
focus more on mission elements rather than nonmission-related 
elements. I think it is too early to say how successful that 
initiative will be. But clearly there is initiative to change 
the performance elements standards.
    Mr. Rogers. Gentleman's time has expired.
    Mr. Langevin. Thank you, Mr. Chairman.
    I thank our witnesses for their testimony. We obviously 
have a daunting task ahead of us, and I appreciate your work 
and look forward to continuing to work with you.
    Thank you. I yield back, Mr. Chairman.
    Mr. Rogers. I thank the gentleman.
    Chair now recognizes Mr. Wilson from South Carolina for 5 
minutes.
    Mr. Wilson. Thank you, Mr. Chairman, and thank you for 
having this hearing, and thank you for your commitment to our 
country. And I look forward to reading the report and any way 
that we can be helpful.
    And, in fact, the issues that we are dealing with, even 
going back 14 years ago, there was a report by the House Armed 
Services Committee Special Oversight Panel in regard to the 
Department of Energy reorganization, and it was ably chaired by 
soon-to-be chairman Mac Thornberry. And in this report, he said 
that the central purpose of the new organization, the National 
Nuclear Security Administration, NNSA, is to correct the 
confused lines of authority and responsibility within the DOE 
nuclear weapons complex that contributed to the mismanagement 
and security problems at the Department and to provide a clear 
mission focus and accountability for DOE personnel involved in 
the nuclear weapons program.
    It also said there was the intended effect is to provide a 
substantial degree of independence but not total independence 
from the Department of Energy.
    And, Admiral, you have already touched on this. But with 
the 2012 break-in at the Y-12 facility, do we still have 
confused levels of authority? And, additionally, for each of 
you, that would be one question. The other: Do you think that 
your recommendations would resolve the confused lines of 
authority?
    Admiral Mies. Well, separate from the Y-12 incident, I 
think just the fact that you have a semi-autonomous NNSA has 
created the growth of a number of redundant organizations 
within DOE and NNSA which have duplicative functions and hence 
there are conflicting and confused lines of authority. I think 
in many ways the creation of a semi-autonomous organization may 
have worsened the problem, not helped it.
    So that is why I think we think it is a--we consider at 
this point a failed experiment.
    Norm, do you want to----
    Mr. Augustine. I would just add that, as implemented, the 
semi-autonomous approach has clearly not worked. One of the 
things that leads to that, you touched on it, is the line 
management has been balkanized such that responsibility for 
many important functions, such as safety, security, health, 
environmental responsibility, and so on, is separate. It has 
major power of the organization such that at the lower levels 
of management decisions take forever to get up to the top 
between the staff and the line management. Somebody has to be 
put in charge and held responsible, and that just hasn't 
happened.
    Admiral Mies. I would only add that this goes back to what 
we said earlier about basic successful management organizations 
that clearly define roles, responsibilities, authority, and 
accountability in many cases are lacking. And because of that, 
you find instances where too many people appear to be--believe 
they are authorized to say no and prevent actions from going 
forward.
    And to some degree a lot of that decisionmaking is not 
embedded in line management, who should be in the best position 
to make a risk-informed decision. Again to accomplish the 
mission safely, securely, and environmentally safe.
    Mr. Wilson. Well both of you have such experience. So I--we 
appreciate your insight.
    The mixed oxide fuel fabrication facility, the MOX facility 
in South Carolina, this is in accordance with the nuclear 
nonproliferation agreement that we have with the Russian 
Federation to process high-level weapons-grade plutonium, 
convert it to be used in nuclear reactors, and the cost 
overruns or cost growth has been gruesome. But it is 61 percent 
completed.
    And, Mr. Augustine, as you were talking about capable and 
dedicated personnel, they are right there and making every 
effort to complete this facility. But it is being put on cold 
standby. It concerns me, obviously, having weapons-grade 
plutonium in our State. Is there any alternative to the 
existent to this?
    Mr. Augustine. I think there is no alternative to producing 
a facility that can do what we have committed to do. Whether 
there is an alternative to specific design or not, I am not in 
a position to say.
    Mr. Wilson. Thank you very much.
    Thank both of you.
    Mr. Rogers. I thank the gentleman.
    Mr. Augustine, earlier you made a reference to the fact 
that you were in an organization where you took 17 smaller 
organizations and had to put them together and get them to act 
like one. And that one of the reasons you were successful is 
that you were very intolerant of folks who weren't on the team.
    And, obviously, in the private sector, you had the ability 
to help somebody get on the road to finding something else to 
do if they didn't want to be on the team.
    And I know, Admiral Mies, when he was in service, if he had 
a senior officer, even a junior officer that wasn't on the 
team, he could help them find something else to do.
    I am not sure Secretary Moniz has that. And my question is 
if we were--could we go back to Mr. Thornberry's comment about 
could we legislate. The only thing I think we could legislate 
that would help Secretary Moniz would be, give him termination 
authority, at least within NNSA. Maybe not throughout the 
Department of Energy. But at least within NNSA. So that if he 
does have some people in his organizational effort, or the new 
administrator, that need to either get on the team or move on, 
do you think that would be a significant piece of legislative 
authority that we could implement? Or would it really not be 
critical?
    Mr. Augustine. As a preface, I should say that what you 
alluded to in industry, I didn't do alone; I had a terrific 
leadership team, and that, that is essential.
    I think what you suggested to give the Secretary 
termination authority would be a very useful step. I think it 
would also be very useful to give him greater authority in 
terms of hiring. It would be useful to give him the opportunity 
to have people who stay for a specific number of years, to put 
people in a job long enough to be responsible.
    I can remember years ago testifying beside Dave Packard at 
the Defense Department about this very topic, and people come 
and go so fast that really nobody is accountable. So I think 
those would be very useful steps. Obviously, they would be very 
difficult steps.
    Mr. Rogers. Let me ask you, it has been 16 months, we have 
had a series of acting administrators, as you know, General 
Klotz has been waiting for months now for action by the Senate. 
How important--and so in your review so far--is it that we get 
somebody confirmed by the Senate in the position as a permanent 
administrator?
    Mr. Augustine. In my opinion, it is very important.
    Admiral Mies. Mine as well. I think one of the concerns we 
have seen, and it's not just with the director, but it's a lack 
of leadership stability and continuity at the senior leadership 
levels within NNSA. It is vitally important if you want to make 
cultural changes and move on.
    I would just like to go back to your question. I think it 
is important, as Norm I think said, that you can't legislate 
cultural reform, which I think is the biggest issue. And if you 
are going to legislate certain initiatives, I would just 
encourage you work very, very closely with the Secretary to 
ensure there is close alignment there.
    One of the issues that we are looking at, and we haven't 
reached any conclusion on it, is, is the issue of exempted 
service positions within NNSA, whether there might be value in 
that or not. And we haven't come to any conclusion. But again, 
how do you develop that technical competence, people with 
professional qualifications and certifications to really 
effectively manage the enterprise?
    Mr. Rogers. Well, to that point, Mr. Cooper and I have been 
meeting with Secretary Moniz and asking him specifically what 
we could do to be helpful. We have got to get our colleagues to 
help us, outside of just me and Mr. Cooper.
    Lastly, you all made very various thought-provoking 
comments. But another one you made a little while ago was 
talking about how Secretary Moniz is the right guy, right now, 
because he has experience in the subject matter and there have 
been historically a lot of people in that position who didn't.
    What do we do--Secretary Moniz is a good guy and he has got 
the right background, but nothing is to say that the person 
that follows him is going to have competence in the subject 
matter area.
    What would you all recommend--and you all may want to put 
it in your report, I don't know but--that Congress do to try to 
make sure that we at least urge a certain type of person be 
viewed for that position? Or do you think that is even 
necessary for Congress to address?
    Mr. Augustine. We are acutely aware of that issue and spent 
a good deal of time discussing it and don't really have a 
recommendation. We have a few, a few thoughts. But I think one 
thing, Congress does confirm people to Secretarial positions, 
and the Congress has a great deal of authority in seeing what 
kind of qualifications an individual has.
    And, this is particularly difficult job because it goes all 
the way from windmills to photocells on the one hand, to 
nuclear deterrence on the other. But there are people who have 
that mantle. Secretary Moniz happens to be one.
    I think one of the most important thing Congress could do 
is to be sure successive leaders, whatever organization one 
happens to choose, are qualified to deal with this issue.
    Mr. Rogers. Okay. Thank you very much.
    Chair now recognizes Mr. Cooper for any comments he wants 
to make.
    Mr. Cooper Thank you, Mr. Chairman. Thank the witnesses 
again for an excellent hearing.
    Anybody in Congress should hesitate about giving anyone 
else management advice, because Lord knows this institution is 
not run properly.
    But it worries me, two things that have come out in this 
hearing. One is the universal tendency of anybody in Congress 
to blame the administration, and Congress has been blaming the 
administration ever since George Washington was President. And 
last I checked, you don't get a magic wand or halo any time you 
are elected to office, in either to the executive or the 
legislative branch. So it is important to realize that--and I 
think you have it in your testimony, it is not highlighted as 
perhaps it should be.
    There is something remarkable going on even within the NNSA 
today. In fact, there are several remarkable things. One of 
those is the Naval Reactors program, which has been largely 
exempt from any publicity or scrutiny because they do a darn 
good job. So you don't have to blame the administration about 
that. And they have been able to survive different kinds of 
administrations.
    And another common thing has been, well, you can't 
legislate culture, and that is probably true. But you can 
legislate an environment in which it is easier to create a good 
culture.
    And somehow Naval Reactors [NR] has been able to do that. 
Their ability, for example, to actually have contracting 
officers who know what they are talking about. You know, 
imagine that. Their scrutiny of expenditures, anything over $10 
million, as opposed to the usual $100 million threshold. They 
know what is going on. Wouldn't that be nice?
    So, to me, when we are looking for bright spots here, and 
we need to find some bright spots, extending that culture would 
be a very valuable thing. And, but part of it is avoiding the 
limelight, avoiding the publicity, avoiding the political back 
and forth so they can do their jobs.
    So, I worry that this institution has a tendency to do the 
usual thing, press conferences, publicities, express outrage. 
We have got to do better than that. And, so as you look at new 
models, there is a pretty good one right there at your 
fingertips, and I know the admiral is extremely familiar with 
this already.
    But thank you for your service. Thank you. We look forward 
to this report, and look forward to even more than that, to 
progress.
    Admiral Mies. I would just comment that we certainly have 
formed a benchmarking team to go out and look at what we 
thought were very successful examples of high performance 
organizations, and NR was clearly one of those. And we have 
certainly looked at a lot of the attributes that Naval Reactors 
has to try and see if those can be adopted by NNSA.
    Mr. Rogers. Thank the gentleman.
    Chair now recognizes the gentleman from Texas, Mr. 
Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman, and I again 
appreciate you and Mr. Cooper allowing me to sit in.
    The only thought I would offer on Naval Reactors is they 
have had their own problems here recently with some cheating 
on--down in their school, and somewhat similar to what we see 
with the ICBM force. And maybe it is an isolated incident, 
maybe it is not a bigger problem. But you do worry that the 
problems that we have been talking about here are, are 
extending.
    The other thought is, for Naval Reactors, in a way, they 
report both to DOE and DOD. It is a unique sort of institution, 
started by an admiral who had a very strong culture, that has 
been able to be continued over the years, and has been able to 
maintain largely that culture over time.
    I am not sure what that tells us. It was exactly, as the 
gentleman suggested, one of the things we looked at in creating 
NNSA is to look at Naval Reactors and why they are successful 
and what we can, we can duplicate. I think there are still more 
lessons there. I agree. But there are some worrisome signs.
    Admiral Mies, the only other thought is, as you were 
talking, talking about duplicative organizations within DOE and 
NNSA. Partly, that is by design. Because what happened before 
was everybody in DOE wanted a piece of NNSA. I don't know if--I 
can't remember the number.
    What percentage of DOE's budget is NNSA right now? Do you 
know off the top of your head? Isn't it about 40 percent.
    Mr. Rogers. 40 percent.
    Mr. Augustine. 40 percent is about right.
    Mr. Thornberry. So you have got 40 percent of the budget. 
That means everybody at DOE wants a piece of it. And that goes 
back to what you were talking about earlier, the people 
responsible for getting the weapons out, were second-guessed by 
all these folks who wanted to justify their existence in DOE by 
getting a piece of it. So the idea was, you do separate, 
insulate NNSA from all those other people except the Secretary. 
He can do whatever he wants to.
    And, the last thought is, if the Secretary is the answer, 
and setting aside the increased authorities that the chairman 
was talking about, but if he is the answer, why hasn't he been 
doing it? I had the exact same high hopes that everybody else 
had. But there hasn't been much happening now. He is waiting on 
a confirmee from the Senate, I realize.
    I guess that is just a long way of saying, we have got to 
remember the problems that this was intended to create--to fix. 
I completely agree. It has not fixed them. But I don't want to 
go backwards to those days either. Because it was a, quote, 
``dysfunctional bureaucracy, incapable of reforming itself.'' I 
am not sure it is much better, but I don't want to go back and 
be worse.
    So, any comments, I would welcome. But I appreciate you all 
letting me harangue.
    Mr. Augustine. I would be very brief. I think that future 
Secretaries of Energy, or whomever this organization reports 
to, have got to be qualified at the subject at hand, and have 
got to be strongly committed. And without that, I don't think 
anything we propose is going to matter.
    Admiral Mies. Beyond duplicative functions, I do think the 
semi-autonomy has created a bureaucratic seam between NNSA and 
other elements of the Department of Energy, particularly the 
Office of Science and the other DOE science labs, and when you 
look at those laboratories, there really is a need for close 
collaboration between the NNSA labs and the Office of Science 
labs because many of them work on nonproliferation issues, and 
have nuclear expertise and nuclear forensics in other areas.
    So, so again to some degree the semi-autonomy has created 
an impediment to hinder closer collaboration than you maybe 
would desire, and so, it just isn't the duplicative functions, 
but it is also the issue associated with collaboration.
    I would only add too that we have had several meetings with 
the Secretary, and he has moved out and is making a number of 
DOE-wide organizational changes to address what I perceive are 
some of the cultural issues that he recognizes.
    Mr. Rogers. I thank the gentleman.
    Mr. Garamendi, did you have anything you wanted to ask 
before we close it up?
    Mr. Garamendi. First of all, my apologies, we have a Coast 
Guard hearing, and being a ranking member, I was tied up there.
    I want to thank the witnesses and the commission for their 
work.
    I will catch most of the testimony and from the staff.
    I understand that one issue that was not covered--perhaps 
this is correct, from the 30-second briefing--is the issue of 
the Savannah River MOX facility. Did the commission look at 
this issue at all? And, if so, what did you determine?
    Admiral Mies. We haven't looked at it in great detail. It 
clearly falls in the same example as the UPF facility in 
Tennessee and the CMRR, the plutonium facility in New Mexico. 
And in our analysis, in general, of those facilities and some 
of the other major projects within NNSA and the Department of 
Energy, is that they suffered from three elements that I talked 
earlier about: A lack of robust, real strong program 
management; a lack of a real rigorous analysis of alternatives 
up front, before you decide to embark on a path; and a lack of 
a, again a robust cost-estimating capability to really 
understand how much resources will be required to complete some 
of these major projects. And I think those three elements have 
contributed to the situation we find ourselves in today.
    Mr. Garamendi. I really want to apologize to the committee 
and the witnesses for not being here. Those issues are of great 
interest to me, and I really want to get into it, but it is not 
really appropriate now. I will circle back around at some 
point. I want to take this up in the NDAA, particularly with 
the Savannah River, and try to meet some of the issues there.
    Mr. Rogers. Very important. Thank you, sir.
    And I want to thank the witnesses. I very much want to 
remind you, and I know you are cognizant of it, when your 
advisory panel was established the specific report request was 
that, quote, ``conferrees believe changes at the margins are 
not a solution,'' close quote, and I know you all realize that. 
So be bold.
    We appreciate you. We look forward to getting your report 
this summer and hopefully having you come back this fall with 
some final thoughts. With that, we are adjourned.
    [Whereupon, at 11:35 a.m., the subcommittee was adjourned.]
?

      
=======================================================================




                            A P P E N D I X

                             March 26, 2014

=======================================================================


              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 26, 2014

=======================================================================

 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     
   
      
=======================================================================


                   DOCUMENTS SUBMITTED FOR THE RECORD

                             March 26, 2014

=======================================================================

  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
      
   
      
=======================================================================


              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             March 26, 2014

=======================================================================

      
             RESPONSE TO QUESTION SUBMITTED BY MS. SANCHEZ

    Mr. Augustine. Lasting reform will require aggressive action and 
sustained implementation across the federal government. The changes 
needed undoubtedly will be difficult to implement regardless of where 
the enterprise is located within the government's structure, since the 
fundamental problems are cultural more than organizational. 
Organizational change, while not unimportant, is only a small portion--
the easy portion--of the revisions that must be made to facilitate 
success. Previous efforts to reform and previous studies calling for 
action have largely failed due to lack of leadership follow-through, a 
lack of accountability for enacting change, and the lack of effective, 
sustained top-level demand for change from national leadership. The 
Department of Energy by itself would be challenged to oversee the 
radical steps that will be needed. Success is imaginable only with the 
strong and active engagement of a knowledgeable Secretary, supported by 
the White House and Congress, and a structure that removes impediments 
and that aligns to mission priorities.
    Previous efforts to reform and previous studies calling for action 
have largely failed due to lack of leadership follow-through, a lack of 
accountability for enacting change, and the lack of effective, 
sustained top-level demand for change from national leadership.   [See 
page 17.]
?

      
=======================================================================


              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             March 26, 2014

=======================================================================

      
      

                   QUESTIONS SUBMITTED BY MR. ROGERS

    Mr. Rogers. Mr. Augustine and Admiral Mies, from your testimony and 
the dozens of reports over the past decades on problems at DOE and NNSA 
it is obvious that the problems facing the nuclear security enterprise 
are as complex as they are numerous. Many of them are cultural, and we 
all know that cultures don't change easily. And I think you've hit the 
nail on the head when you call the problems ``systemic.'' Leadership 
will be key to fixing these problems, and leadership is always about 
individuals and personalities. But I'm concerned about relying too much 
upon individual personalities, because the term of any senior leader in 
government is, inherently, limited. To provide the sustained leadership 
and effectively see-through cultural and other difficult reforms, don't 
we need buy-in across multiple administrations, multiple leadership 
teams? How do we address this?
    Mr. Augustine and Admiral Mies. Lasting reform will require 
aggressive action and sustained implementation across the federal 
government. The changes needed undoubtedly will be difficult to 
implement regardless of where the enterprise is located within the 
government's structure, since the fundamental problems are cultural 
more than organizational. Organizational change, while not unimportant, 
is only a small portion--the easy portion--of the revisions that must 
be made to facilitate success. Previous efforts to reform and previous 
studies calling for action have largely failed due to lack of 
leadership follow-through, a lack of accountability for enacting 
change, and the lack of effective, sustained top-level demand for 
change from national leadership. The Department of Energy by itself 
would be challenged to oversee the radical steps that will be needed. 
Success is imaginable only with the strong and active engagement of a 
knowledgeable Secretary, supported by the White House and Congress, and 
a structure that removes impediments and that aligns to mission 
priorities. [Question #1, for cross-reference.]
    Mr. Rogers. Admiral Mies and Mr. Augustine, in 2009 the bipartisan 
Strategic Posture Commission devoted a chapter of its final report to 
the challenges within the nuclear security enterprise system. In your 
opinion, why did this report, and the dozens of others like it, have no 
effect? Why have we seen little or no action to fix these longstanding 
problems?
    Mr. Augustine and Admiral Mies. Previous efforts to reform and 
previous studies calling for action have largely failed due to lack of 
leadership follow-through, a lack of accountability for enacting 
change, and the lack of effective, sustained top-level demand for 
change from national leadership.
    In addition, robust, formal mechanisms to evaluate findings, assess 
underlying root causes, analyze alternative courses of action, 
formulate appropriate corrective action, gain approval, and effectively 
implement and institutionalize change are weak to non-existent within 
DOE/NNSA.
    Mr. Rogers. Admiral Mies and Mr. Augustine, ultimately, the 2009 
Strategic Posture Commission recommended creating an independent agency 
to take on NNSA's responsibilities and mission. I won't ask whether you 
or the panel agree with this or any other recommendation because your 
panel hasn't gotten there yet, but I'd like you to comment on some of 
the findings. These include: ``The NNSA was formed to improve 
management of the weapons program and to shelter that program from what 
was perceived as a welter of confusing and contradictory DOE 
directives, policies, and procedures. Despite some success, the NNSA 
has failed to meet the hopes of its founders. Indeed, it may have 
become part of the problem, adopting the same micromanagement and 
unnecessary and obtrusive oversight that it was created to eliminate.'' 
Do you agree? Why or why not?
    a. Another finding from the Strategic Posture Commission: ``NNSA's 
problems will not vanish simply by implementing a new reporting 
structure. A major driver of micromanagement and excessive regulation 
is the attitude of the Federal workforce reflected in both unreasonable 
regulations and excessive oversight in implementing them.'' Do you 
agree? Why or why not?
    Mr. Augustine and Admiral Mies. As implemented, the NNSA Act has 
actually been counter-productive. The problems fall into three main 
areas.
      Overlapping DOE Headquarters and NNSA Staff 
Responsibilities
    The parallel DOE headquarters and NNSA staff structures increase 
bureaucracy, cloud decision-making authority, and add to the number of 
people without clear authority and accountability who can stop or delay 
decisions. As one field representative put it, ``We suffer in a 
regulatory framework where there are no clear lines of appeal or 
decision-making and no integrated place for the cost-benefit analysis 
to be done. For example, regarding facility safety and operational 
infrastructure, I get direction from the Office of Acquisition and 
Project Management, the Defense Programs leadership, the leadership for 
infrastructure management, DOE headquarters, and the Defense Nuclear 
Facilities Safety Board. How am I to do my job when getting direction 
from five different organizations?''
      A Deepened Divide between Line Management and Mission-
Support Responsibilities
    Under the existing parallel staff structure, DOE headquarters 
staffs continue to exercise their mission-support oversight of NNSA, 
but they do not have the countervailing pressures to accomplish the 
mission. This structure skews incentives at the DOE headquarters level. 
These factors create strong and counter-productive incentives to 
eliminate all risks--large and small--rather than seeking to 
effectively manage the most important ones. Because many officials in 
the DOE headquarters have lacked a compelling interest in mission 
execution (as many outside observers have noted), the staff 
conservatism is not challenged by the department's leadership.
      Ineffective and Inefficient DOE Orders, Directives, and 
Rulemaking Processes
    Because of the diversity of DOE operations, orders are often 
written broadly to apply to both non-nuclear and nuclear activities 
even though the latter may demand special considerations. Consequently, 
DOE orders for ES&H and security often lack the precision, consistency, 
and clear implementing guidance necessary to translate the order's 
intent into practice. Not all sites have the same version of DOE orders 
for ES&H and security policy reflected in their contract. Indeed, there 
are sites that have both NNSA and DOE orders in their contract covering 
the exact same ES&H topic; although these orders may be similar, they 
can contain subtle, but crucial, differences.
    a. As noted in the second bullet above:
    Under the existing parallel staff structure, DOE headquarters 
staffs continue to exercise their mission-support oversight of NNSA, 
but they do not have the countervailing pressures to accomplish the 
mission. This structure skews incentives at the DOE headquarters level. 
These factors create strong and counter-productive incentives to 
eliminate all risks--large and small--rather than seeking to 
effectively manage the most important ones. Because many officials in 
the DOE headquarters have lacked a compelling interest in mission 
execution (as many outside observers have noted), the staff 
conservatism is not challenged by the department's leadership. 
[Question #3, for cross-reference.]
    Mr. Rogers. Admiral Mies and Mr. Augustine, is the mission of the 
nuclear security enterprise likely to succeed in the long-term under 
the current governance structure?
    Mr. Augustine and Admiral Mies. The current viability of the U.S. 
nuclear deterrent is not in question. The panel finds, however, that 
the existing governance structures and practices are most certainly 
inefficient, and in some instances ineffective, putting the entire 
enterprise at risk over the long term.
    Mr. Rogers. Admiral Mies and Mr. Augustine, with hindsight, what 
are the strengths and weaknesses of the NNSA Act?
    a. Was the intent of the ``separately organized'' and ``semi-
autonomous'' nature of NNSA clear?
    b. Do you believe there was agreement from all stakeholders--
particularly within DOE and NNSA--regarding what these terms should 
mean and how they should be implemented?
    c. The 2009 Strategic Posture Commission stated that ``NNSA was 
formed to improve management of the weapons program and to shelter that 
program from what was perceived as a welter of confusing and 
contradictory DOE directives, policies, and procedures.'' Do you 
believe this intent was achieved?
    d. Do you believe the letter and spirit of the NNSA Act has 
actually been implemented?
    Mr. Augustine and Admiral Mies. One unmistakable conclusion of the 
panel's fact finding is that, as implemented, the ``NNSA experiment'' 
in governance reform has failed. The current DOE/NNSA structure of 
``semi-autonomy'' within DOE has not established the effective 
operational system that Congress intended.
    Despite the intent of the NNSA Act to create a separately organized 
NNSA within DOE, the NNSA has not established autonomous leadership 
authorities, a policy framework, distinct culture, or integrated 
decision-making mechanisms.
    Except for Naval Reactors, the NNSA Act does not provide a blanket 
exemption of NNSA from DOE orders and directives. NNSA decisions and 
initiatives remain subject to DOE headquarters staffing processes prior 
to consideration for Secretarial approval. For instance, the 
department's directive program (DOE O 251.1C) requires policies, 
orders, notices, guides, and technical standards to be reviewed by a 
Directives Review Board chaired by the Director of the Office of 
Management.\1\ Senior representatives from the three Under Secretarial 
offices, the Office of General Counsel, and the Office of Health, 
Safety and Security all serve as members whose concurrence is needed 
before final issuance. Should the review board be unable to reach 
consensus, the Deputy Secretary decides whether to overturn the 
position of the directive's originating office.
---------------------------------------------------------------------------
    \1\ U.S. Department of Energy, Departmental Directives Program, DOE 
O 251.1C (Washington, DC: Office of Management, January 15, 2009).
---------------------------------------------------------------------------
    DOE's implementation of the NNSA Act has produced parallel, 
intertwined NNSA and DOE headquarters staffs in many functional areas, 
rather than truly separate or independent DOE and NNSA staff offices. 
Parallel staffs exist in areas such as General Counsel, Human Capital 
Office, Public Affairs, Legislative Liaison, Chief Financial Officer, 
Environmental, Safety and Health (ES&H), Security, and Chief 
Information Office. Members of both the DOE headquarters and NNSA 
staffs point to the inefficiencies this creates. [Question #5, for 
cross-reference.]
    Mr. Rogers. The 1999 Rudman Report, which in many ways Congress 
used as a guide for the NNSA Act, recommended that Congress create 
either: (1) a new, completely independent agency with sole 
responsibility for the nuclear weapons program; or (2) what it termed a 
``semi-autonomous'' agency within DOE in which the bureaucratic 
interactions between the new agency and broader DOE would be minimized. 
The Rudman Report explained that this term, ``semi-autonomous,'' would 
mean that the agency would be ``strictly segregated from the rest of 
the department''--which would be ``accomplished by having the agency 
director report only to the Secretary.'' The Rudman Report said that 
DOE was ``a dysfunctional bureaucracy incapable of reforming itself.'' 
Has this definition of the term ``semi-autonomous'', as described by 
the Rudman Report, been put into practice at DOE/NNSA? Could a 
``separately organized'' and ``semi-autonomous'' NNSA, if implemented 
well, be effective and efficient?
    Mr. Augustine and Admiral Mies. As noted in the answer to question 
5:
    Despite the intent of the NNSA Act to create a separately organized 
NNSA within DOE, the NNSA has not established autonomous leadership 
authorities, a policy framework, distinct culture, or integrated 
decision-making mechanisms. (page 11)
    Except for Naval Reactors, the NNSA Act does not provide a blanket 
exemption of NNSA from DOE orders and directives. NNSA decisions and 
initiatives remain subject to DOE headquarters staffing processes prior 
to consideration for Secretarial approval. For instance, the 
department's directive program (DOE O 251.1C) requires policies, 
orders, notices, guides, and technical standards to be reviewed by a 
Directives Review Board chaired by the Director of the Office of 
Management.\2\ Senior representatives from the three Under Secretarial 
offices, the Office of General Counsel, and the Office of Health, 
Safety and Security all serve as members whose concurrence is needed 
before final issuance. Should the review board be unable to reach 
consensus, the Deputy Secretary decides whether to overturn the 
position of the directive's originating office.
---------------------------------------------------------------------------
    \2\ U.S. Department of Energy, Departmental Directives Program, DOE 
O 251.1C (Washington, DC: Office of Management, January 15, 2009).
---------------------------------------------------------------------------
    DOE's implementation of the NNSA Act has produced parallel, 
intertwined NNSA and DOE headquarters staffs in many functional areas, 
rather than truly separate or independent DOE and NNSA staff offices. 
Parallel staffs exist in areas such as General Counsel, Human Capital 
Office, Public Affairs, Legislative Liaison, Chief Financial Officer, 
Environmental, Safety and Health (ES&H), Security, and Chief 
Information Office. Members of both the DOE headquarters and NNSA 
staffs point to the inefficiencies this creates.
    Could a ``separately organized'' and ``semi-autonomous'' NNSA, if 
implemented well, be effective and efficient?
    The panel's interim report is critical of the ``separately 
organized'' structure as implemented:
    Despite the intent of the NNSA Act to create a separately organized 
NNSA within DOE, the NNSA has not established autonomous leadership 
authorities, a policy framework, distinct culture, or integrated 
decision-making mechanisms.\3\ The panel concludes that the 
relationships among NNSA, the Secretary of Energy, and the DOE 
headquarters staffs are fundamentally broken and must change.
---------------------------------------------------------------------------
    \3\ ``. . . NNSA and DOE have not fully agreed on how NNSA should 
function within the department as a separately organized agency. This 
lack of agreement has resulted in organizational conflicts that have 
inhibited effective operations.'' Government Accountability Office 
(GAO), National Nuclear Security Administration: Additional Actions 
Needed to Improve Management of the Nation's Nuclear Programs 
(Washington DC: GAO, 2007).
---------------------------------------------------------------------------
    The panel's interim report does not provide a judgment on the 
relative efficacy of the organizational alternatives, including whether 
a well implemented structure within DOE could work well. The report's 
observations on this subject are provided in the conclusion:
    The panel's interim findings indicate that fundamental reform will 
be required to reshape an enterprise that is capable of meeting all of 
the nation's needs. The changes will be difficult regardless of where 
the enterprise is located within the government, since the fundamental 
problems are cultural more than organizational. Organizational change, 
while not unimportant, is only a small portion of the changes that must 
be made. The panel believes lasting improvements are possible, but they 
will demand strong and sustained leadership and proactive support from 
Congress, the White House, and engaged Departmental Secretaries.
    Mr. Rogers. Admiral Mies and Mr. Augustine, several reports have 
noted that semi-autonomous agencies in other cabinet departments have 
met with considerable success. For instance, the FBI in the Justice 
Department, and the NRO in the DOD. The Rudman Panel suggested the NRO 
is a small, agile, ``semi-autonomous'' organization that has had 
significant (but not unblemished) success in managing very large 
contracts to build and operate surveillance satellites. What, if 
anything, can we learn from this and other semi-autonomous agencies 
that might apply to NNSA?
    Mr. Augustine and Admiral Mies. The panel's benchmarking activities 
identified a number of proven management characteristics common to 
successful high-risk, high technology operations. (See Table 2.) 
Prominent among these are a shared vision and mission priorities to 
chart the path ahead; the clear definition and disciplined exercise of 
roles, responsibilities, authorities, and accountability aligned to 
mission priorities; a technically competent workforce with the right 
skill mix and capabilities; clear plans with careful analysis of the 
resources needed to succeed; structured decision-making processes, with 
an emphasis on timely resolution of issues; and a structure and budget 
aligned to focus on customer deliverables.

                   Table 2. Criteria for Success in High Reliability, High Tech Organizations
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
General                  Universally understood and accepted purpose
                         Effective culture developed over many years by transformative leadership and
                         maintained by indoctrinating carefully selected personnel
                         Adequate visibility with external stakeholders
----------------------------------------------------------------------------------------------------------------
Structure                Clearly established, codified, and reinforced lines of authority,
                         responsibility, and accountability
                         Formal, inclusive, decisive, prompt, and documented decision-making processes
                         Deliberative body, such as a Board of Directors or Management Council, which
                         obliges the organization to collectively engage in risk-based resource allocation
                         decisions to accomplish mission
                         Separation of program/mission functions from institutional/support functions
----------------------------------------------------------------------------------------------------------------
Personnel                Long-tenured director and/or senior leadership with extensive experience
                         Technically proficient and accomplished staff
                         Exceptional candidates recruited early to instill and sustain culture
                         Professional development programs emphasizing problem identification/solving,
                         continuous learning, leadership, and the socialization of best practices
----------------------------------------------------------------------------------------------------------------
Communications           Mission priorities aligned with purpose and frequently communicated by senior
                         leadership
                         Information flows freely and quickly up and down the organization, and
                         decisions are made at the appropriate levels
                         Few if any obstacles (people or processes) prevent bad news from moving up the
                         chain of command
                         Mechanisms exist for field oversight offices and site managers to communicate
                         regularly and directly with the head of the organization
----------------------------------------------------------------------------------------------------------------
Planning and             Single strategic planning reference document guides all decisions
Budget                   Unwavering adherence to a disciplined planning and budget process, which is
                         comprehensive and detailed
----------------------------------------------------------------------------------------------------------------
Program Management       In a government operation, government program managers oversee efforts, but
                         contractors execute the work within established policies
                         Lean and authoritative site offices have sufficient technical and operational
                         expertise to effectively oversee the work
                         Stakeholders are included early in project life cycle and strive to understand
                         all requirements and regulations upfront
                         Technical and financial elements of programs are scrutinized in order to
                         validate efforts and control costs
                         The more hazardous the operation, the more safety is considered part and parcel
                         of mission performance
                         Specialized ES&H and security standards are used only when more generally
                         accepted standards (e.g., industrial standards, OSHA standards) are shown to be
                         inadequate or unclear
----------------------------------------------------------------------------------------------------------------
Contracts                Contracts focused and evaluated on costs and mission performance, not award
                         fees related to aspects other than meeting the mission
                         Contracts consolidated where appropriate to achieve economies of scale
                         Contracts competed Cost Plus Fixed Fee (very low) with no incentive/bonus
                         awards or Fixed Price Incentive (based on mission performance), depending on the work
                         being done
----------------------------------------------------------------------------------------------------------------


    Mr. Rogers. Admiral Mies and Mr. Augustine, in a 2007 report, GAO 
said ``management problems continue, in part, because NNSA and DOE have 
not fully agreed on how NNSA should function within the department as a 
separately organized agency. This lack of agreement has resulted in 
organizational conflicts that have inhibited effective operations.'' 
What were some of the organizational conflicts? How did they inhibit 
effective and efficient operations? Do you believe this problem has 
been resolved?
    Mr. Augustine and Admiral Mies. The panel's observations are 
consistent with those of the GAO study, and in fact, that study is 
cited in the panel's interim report:
    Despite the intent of the NNSA Act to create a separately organized 
NNSA within DOE, the NNSA has not established autonomous leadership 
authorities, a policy framework, distinct culture, or integrated 
decision-making mechanisms.\4\
---------------------------------------------------------------------------
    \4\ ``. . . NNSA and DOE have not fully agreed on how NNSA should 
function within the department as a separately organized agency. This 
lack of agreement has resulted in organizational conflicts that have 
inhibited effective operations.'' Government Accountability Office 
(GAO), National Nuclear Security Administration: Additional Actions 
Needed to Improve Management of the Nation's Nuclear Programs 
(Washington DC: GAO, 2007).
---------------------------------------------------------------------------
    The answer to question 3 describes three major factors that inhibit 
effective and efficient operations. In summary these factors are:
      Overlapping DOE Headquarters and NNSA Staff 
Responsibilities
      A Deepened Divide between Line Management and Mission-
Support Responsibilities
      Ineffective and Inefficient DOE Orders, Directives, and 
Rulemaking Processes
    Mr. Rogers. Admiral Mies and Mr. Augustine, many studies and 
reports over the past ten years, including the 2009 Strategic Posture 
Commission, recommend eliminating duplicative NNSA and DOE regulation 
of any lab functions that are already regulated by external bodies--
such as health and occupational safety by the Occupational Health and 
Safety Administration (OSHA)--and letting these external bodies 
regulate and oversee those regulations. Do you agree? What cost savings 
might be realized by such a move?
    Mr. Augustine and Admiral Mies. Beginning in 2005, DOE exempted the 
Kansas City Plant from DOE orders in areas where there were relevant 
commercial or industrial standards. The reforms moved the Kansas City 
Plant under industrial best practice standards (e.g., International 
Organization for Standardization (ISO) standards) with validation from 
external expert bodies. Kansas City Plant officials estimate that this 
initiative reduced the DOE-specific regulatory requirements on the 
facility by about 55 percent. These changes, coupled with internal 
business process improvements, have generated steady increases in 
workplace performance along with reduced mission-support costs. The 
plant reports that its safety record has improved under the reformed 
regulatory regime, and is about six times better than U.S. industry 
averages.\5\ A 2008 independent audit following the reforms estimated 
an overall personnel savings of about 12 percent.\6\ In parallel, the 
NNSA site office was able to reduce its staff by 20 percent, from fifty 
to forty staff.
---------------------------------------------------------------------------
    \5\ In 2012, the total reportable cases of workplace injuries for 
the Kansas City Plant were .4, for the weapons complex .9, and for U.S. 
industry 2.4. (Total reportable case rate = cases per 100 full-time 
employee work years (200,000 work hours)).
    \6\ J.W. Bibler and Associates, ``Kansas City Site Office Oversight 
Plan: Assessment of Implementation Cost Savings'' (January 2008). More 
recently, the plant management reported to the panel that the headcount 
of ES&H specialists in the M&O was reduced by 81 percent (between 1995 
and 2012).
---------------------------------------------------------------------------
    An internal NNSA Enterprise Re-Engineering Team concluded that the 
``Kansas City model'' of relying on applicable industrial standards 
could be much more widely applied for non-nuclear functions within the 
enterprise, and targeted an initial expansion for Sandia and the Nevada 
National Security Site. However, initiatives to adopt elements of the 
``Kansas City model'' at these sites have thus far been denied by DOE/
NNSA headquarters staff. Nonetheless, this remains a significant 
governance reform opportunity. [Question #9, for cross-reference.]
    Mr. Rogers. Admiral Mies and Mr. Augustine, many agencies with 
national security functions operate outside the bounds of the general 
civil service system. All Federal positions in these agencies are 
``excepted service''. Has the advisory panel explored this concept? 
What benefits might result from applying it to this problem? Would this 
be a way to ensure NNSA Federal employees have the appropriate skills 
and quality needed to govern and oversee the nuclear security 
enterprise?
    Mr. Augustine and Admiral Mies. The NNSA has not taken the steps 
necessary to build a cohesive culture that instills accountability for 
customer deliverables, nor has it instituted the personnel programs 
needed to build a workforce with the necessary technical and managerial 
skills for operations. The purposeful development of leaders, managers, 
and staffs is essential to any governance system. The effective 
organizations benchmarked for this study focus on personnel management 
to create a reinforcing virtuous cycle: proven leaders emerge from 
careful selection and decades of experience involving careful 
development and screening. Such leaders make a system work well. They 
also attract and inspire other high-caliber people to join and stay in 
their organizations.\7\ As one example, the current Director of Navy 
Strategic Systems Programs (SSP) started his career within that 
organization as a junior officer, and almost all of his subsequent 
assignments have been in the command. In addition to deep familiarity 
resulting from a long career with the same organization, long command 
tours provide needed continuity and allow the Director to promulgate 
and sustain the desired culture. Recently, the tenure of the SSP's 
Director was extended from about four years to eight years to 
strengthen this benefit.
---------------------------------------------------------------------------
    \7\ At benchmark organizations, the new entrants are carefully 
screened and selected, in part based on suitability for long-term 
careers within the organization. Employees tend to spend long careers 
within the organization. Promotion to the most senior levels (other 
than a political appointee) is usually from within, and these 
organizations favor those with broad-based career experience within the 
organization.
---------------------------------------------------------------------------
    A key staffing issue for the NNSA is the lack of operational 
experience in headquarters. In the peak years of the nuclear weapons 
program, the operational core of the nuclear enterprise was located in 
the Albuquerque Operations Office. Albuquerque synchronized the cycle 
of design-test-build throughout the Cold War, until 1992, when the 
production of new weapons was suspended. Albuquerque was officially 
disbanded ten years later, in 2002. NNSA headquarters assumed 
Albuquerque's operating functions (which were greatly diminished by 
then since the U.S. had ceased producing warheads), and decades of 
operational experience, knowledge, and technical expertise within the 
Albuquerque staff was lost in the reorganization.
    Now, as the United States embarks on an intensive series of warhead 
life extension programs covering the entire stockpile, a leadership 
team with deep experience and continuity (such as the team in the 
Albuquerque Operations Office) would be an enormously valuable asset 
for governing the enterprise. Creating and sustaining a personnel 
management system to build the needed culture, skills, and experience 
is a vital component of governance reform.
    The panel has also noted that greater use of excepted service 
positions is a potential tool for building a more technically and 
professionally competent workforce. [Question #10, for cross-
reference.]
    Mr. Rogers. Admiral Mies and Mr. Augustine, the NNSA labs are 
operated as federally funded research and development corporations 
(FFRDCs). The FFRDC construct was created to allow the Federal 
Government to broadly determine ``what'' work needed to be done while 
the FFRDC determines ``how'' to accomplish the work. Do you believe 
NNSA's current management and governance model for the labs operates in 
the spirit and intent of the FFRDC model? Why or why not?
    a. Is it appropriate, under the Federal Acquisition Rules governing 
FFRDCs, for NNSA to have a long-term relationship and contract with an 
entity managing and operating one of its labs? Under what circumstances 
should NNSA seek to recompete such a contract?
    Mr. Augustine and Admiral Mies. The FFRDC model for the NNSA labs 
has been [seriously impaired]. Historically, the Federally Funded 
Research and Development Centers the laboratories have played a key 
strategic role as trusted advisors in informing the government 
regarding effective execution of the mission. The historic, 
statutorily-defined relationship between the FFRDC and its sponsor 
includes \8\
---------------------------------------------------------------------------
    \8\ Source: Defense Acquisition University.
---------------------------------------------------------------------------
      Comprehensive knowledge of sponsor needs--the mission, 
culture, expertise, and institutional memory regarding issues of 
enduring concern to the sponsor
      Adaptability--the ability to respond to emerging needs of 
their sponsors and anticipate future critical issues
      Objectivity--the ability to produce thorough, independent 
analyses to address complex technical and analytical problems
      Freedom from conflicts of interest and dedication to the 
public interest--independence from commercial, shareholder, political, 
or other associations
      Long-term continuity--uninterrupted, consistent support 
based on a continuing relationship
      Broad access to sensitive government and commercial 
proprietary information--absence of institutional interests that could 
lead to misuse of information or cause contractor reluctance to provide 
such information
      Quick response capability--the ability to offer short-
term assistance to help sponsors meet urgent and high-priority 
requirements
    [Misguided contract requirements] reinforce the transactional 
nature of the relationship and undermine the FFRDC partnership with the 
NNSA laboratories. Significant award fees combined with mission-
support-oriented performance evaluation criteria are troublesome in 
that they reinforce DOE/NNSA's emphasis both at headquarters and in the 
field on functional compliance and not mission performance.
    . . . performance evaluation criteria that focus incentives on 
compliance do little to encourage building a strong M&O leadership 
team. The recent transition to Strategic Performance Evaluation Plans 
could help catalyze the shift away from transactional oversight, but 
this transition will require a sweeping cultural change at NNSA and its 
Field Offices and a redesign of the weighting of the performance 
objectives to better capture M&O contributions to mission priorities.
    The benefit of the FFRDC relationship is that an FFRDC can function 
as an independent, long term trusted advisor and honest broker. Any 
decision to re-compete an FFRDC contract should be based upon 
contractor performance and weighed against the value of continuity and 
a long standing relationship.
    Mr. Rogers. Admiral Mies and Mr. Augustine, NNSA conducted a pilot 
program at its Kansas City Plant to determine if near-total elimination 
of normal NNSA and DOE oversight policies and practices could be 
replaced with higher level contractor assurance systems--while still 
ensuring mission effectiveness. The pilot study was assessed by an 
outside consultant and found it lead to major cost savings, and the 
Strategic Posture Commission recommended it be expanded across the full 
nuclear security enterprise. Has the advisory panel examined this 
study? Do you believe it was successful? What should we learn from this 
pilot program?
    Mr. Augustine and Admiral Mies. The panel has reviewed the Bibler 
study, and cites the findings of that external review in the panel's 
interim report, as described in the answer to question 9. As noted in 
that answer, the panel's interim report finds that
    . . . this [the KC Plant model] remains a significant governance 
reform opportunity.
    Mr. Rogers. Admiral Mies and Mr. Augustine, has DOD's closer-
engagement with NNSA and its budget and programs in the past few years 
been beneficial for ensuring NNSA focuses on and executes the parts of 
its mission that are critical to the military?
    Mr. Augustine and Admiral Mies. Although there is currently some 
agreement between DOD and DOE/NNSA on the long-term [``3 plus 2 
concept''] for modernizing the stockpile, they have not converged on a 
long-term resource plan, nor have they converged on near-term mission 
and budget priorities. There remain fundamental differences in views on 
the appropriate composition of the weapon life extension program and 
the timing of deliverables. Additionally, coordination suffers from the 
departments' differing resource management systems, the lack of joint 
program reviews, and the lack of coordination in the timing of their 
budget submissions. Lastly, their coordination mechanism the Nuclear 
Weapons Council lacks enforcement authority for the agreements reached 
within its deliberations. There are also significant process issues 
that need to be addressed. The Nuclear Weapons Council process has been 
unable to achieve the integrated teamwork and staffing required before 
decisions are prepared for Council meetings, despite many attempts at 
establishing disciplined staff processes and follow up. Representatives 
of customer organizations designated to facilitate communication with 
the NNSA testify that they often are unable to obtain consistent 
answers from their NNSA counterparts, prior to briefings at the Nuclear 
Weapons Council.
    Mr. Rogers. Admiral Mies and Mr. Augustine, in the course of many 
hearings and briefings over the past three years, this subcommittee has 
discussed the dozens of reports from the 1980s and 1990s that led to 
creation of NNSA. They all offer clear descriptions of the problems at 
DOE, including recurring security problems and gross mismanagement. 
Senior DOE leadership even embarked on several reform initiatives in 
the 1990s--but none were effective. Why was senior DOE leadership 
unable to reform the organization? Why did it require Congress to step 
in and try to fix a problem (by creating NNSA) that was so widely 
recognized?
    Mr. Augustine and Admiral Mies. The panel's interim report notes 
that successful reform will require a government-wide effort. As noted 
in the answer to question 1:
    Lasting reform will require aggressive action and sustained 
implementation across the federal government. The changes needed 
undoubtedly will be difficult to implement regardless of where the 
enterprise is located within the government's structure, since the 
fundamental problems are cultural more than organizational. 
Organizational change, while not unimportant, is only a small portion--
the easy portion--of the revisions that must be made to facilitate 
success. Previous efforts to reform and previous studies calling for 
action have largely failed due to lack of leadership follow-through, a 
lack of accountability for enacting change, and the lack of effective, 
sustained top-level demand for change from national leadership. The 
Department of Energy by itself would be challenged to oversee the 
radical steps that will be needed. Success is imaginable only with the 
strong and active engagement of a knowledgeable Secretary, supported by 
the White House and Congress, and a structure that removes impediments 
and that aligns to mission priorities.
    Mr. Rogers. Admiral Mies and Mr. Augustine, I sincerely hope that 
the final report and recommendations of this panel are not left on a 
shelf and ignored, as so many previous reports on this topic. Can you 
assure the subcommittee that you and your fellow panel members will 
take the time and effort to advocate for changes to both Congress and 
the administration, after your final report is released? We need your 
knowledge and advocacy to move our government to finally address these 
critical problems.
    Mr. Augustine and Admiral Mies. As noted in the panel's interim 
report, reform will not be easy. As the co-chairmen, we are committed 
to providing recommendations that are actionable and following through 
to ensure our recommendations are known to and understood by the 
responsible parties. As noted in the interim report, the real focus of 
the reform effort must be within the federal government:
    The panel believes lasting improvements are possible, but they will 
demand strong and sustained leadership and proactive support from 
Congress, the White House, and engaged Departmental Secretaries.
    Mr. Rogers. Admiral Mies and Mr. Augustine, do you believe 
contractor assurance systems, if appropriately implemented and 
overseen, can be used effectively in the governance of the nuclear 
security enterprise?
    Mr. Augustine and Admiral Mies. Contractor assurance systems were 
not specifically addressed in the panel's interim report. But based on 
our professional experience, yes, if appropriately designed and 
implemented. Relevant to the purpose and design of contractor assurance 
systems, the panel's interim report notes that the focus of the 
relationship should be on the safe, secure execution of the mission, 
not on detailed compliance checklists or data. The panel found that:
    Contract incentives reinforce the transactional nature of the 
relationship and undermine the FFRDC partnership with the NNSA 
laboratories. Significant award fees combined with mission-support-
oriented performance evaluation criteria are troublesome in that they 
reinforce DOE/NNSA's emphasis both at headquarters and in the field on 
functional compliance and not mission performance.
    Witnesses note that the focus on compliance checklists can actually 
divert attention from the substance of safe and secure mission 
performance.
    Excessive and uncoordinated inspections, audits and data calls fuel 
inefficiencies and generate little value added; in fact, they may 
detract from the desired safety or security outcome
    Mr. Rogers. Admiral Mies and Mr. Augustine, how do we strike the 
correct balance between appropriate oversight without micromanaging the 
management and operating contractors of the NNSA labs and plants?
    Mr. Augustine and Admiral Mies. The interim report does not provide 
recommended solutions. The situation, as observed in the panel's 
interim report, identifies the issues in the relationship that need to 
be addressed.
    In effective organizations, the government sponsor decides what is 
needed and the M&O partner, in particular the Federally Funded Research 
and Development Center, decides how to meet that need. . . . Put in the 
simplest terms, the government should identify the work to be done; 
identify the best performer to do the work; provide adequate resources; 
and hold the performer accountable. Under this construct, a competent 
M&O partner is relied upon to provide the expertise, corporate culture 
and leadership sufficient to execute the work, and meet the 
government's operating standards.
    Over the decades, the changes in mission priorities from design and 
production to stewardship, and heightened regulatory oversight, 
overturned accepted priorities within the nuclear weapons program and 
radically altered the well-understood relationships between line 
managers and mission-support functions within the government as well as 
between the government and the M&O contractors.
    The resulting tension in defining the roles of the M&O contractors 
and the Federal mission-support officials has created significant 
friction in the government-M&O relationships, especially at the 
laboratories. DOE/NNSA has increasingly moved toward detailed direction 
and regulation of the M&Os. . . . A 2012 National Resource Council of 
the National Academies study concluded there is little trust in the 
relationship between the laboratories and NNSA. NNSA has lost 
confidence in the ability of the laboratories to ``maintain operation 
goals such as safety, security, environmental responsibility and fiscal 
integrity.'' \9\ The panel finds that this lack of trust is manifested 
in three ways: NNSA's use of increasingly inflexible budgets and 
milestones to control work at the operating sites, the continued 
reliance on transactional regulation and oversight to enforce behavior, 
and the exclusion of M&O executives from NNSA headquarters 
deliberations in setting strategic direction. This management approach 
is costly, unwieldy, and counterproductive as further discussed in sub-
section D. It creates a high degree of management complexity, puts 
detailed decisions in the hands of headquarters personnel who lack a 
complete understanding of field operations or technical requirements, 
undermines accountability, creates incentives to focus attention on 
administrative matters over program substance, and incurs excessive 
costs in administering the relationship.
---------------------------------------------------------------------------
    \9\ National Research Council, Managing for High-Quality Science 
and Engineering at the NNSA National Security Laboratories, 5.
---------------------------------------------------------------------------
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. COOPER
    Mr. Cooper. Do you believe that NNSA has been successful in setting 
clear requirements?
    Mr. Augustine and Admiral Mies. One form in which requirements may 
be set is by establishing a clear long-term plan for the enterprise. As 
noted in the panel's interim report:
    Lacking strong leadership that unifies priorities, there has been 
no mechanism for the NNSA, its customers, and the national leadership 
to converge on a credible resource-loaded plan to chart the path ahead. 
The President's annual Nuclear Weapons Stockpile Memorandum and the 
Nuclear Weapons Council evolving ``baseline'' plan, for instance, 
provide important direction, but they do not provide programmatic 
guidance. As discussed in Section 5 on NNSA's collaboration with its 
customers, the Nuclear Weapons Council and the Mission Executive 
Council for interagency customer coordination continue to struggle in 
setting priorities, defining the enterprise's needs, and identifying 
resources to support those needs. And, of course, planning efforts have 
been seriously undermined by the turbulent national budget environment 
as well as by NNSA's inability to accurately estimate costs.
    At the level of the government-industry relationship, the panel's 
interim report observes:
    In effective organizations, the government sponsor decides what is 
needed and the M&O partner, in particular the Federally Funded Research 
and Development Center, decides how to meet that need. . . . Put in the 
simplest terms, the government should identify the work to be done; 
identify the best performer to do the work; provide adequate resources; 
and hold the performer accountable. Under this construct, a competent 
M&O partner is relied upon to provide the expertise, corporate culture 
and leadership sufficient to execute the work, and meet the 
government's operating standards.
    Over the decades, the changes in mission priorities from design and 
production to stewardship, and heightened regulatory oversight, 
overturned accepted priorities within the nuclear weapons program and 
radically altered the well-understood relationships between line 
managers and mission-support functions within the government as well as 
between the government and the M&O contractors.
    The resulting tension in defining the roles of the M&O contractors 
and the Federal mission-support officials has created significant 
friction in the government-M&O relationships, especially at the 
laboratories. DOE/NNSA has increasingly moved toward detailed direction 
and regulation of the M&Os. . . . A 2012 National Resource Council of 
the National Academies study concluded there is little trust in the 
relationship between the laboratories and NNSA. NNSA has lost 
confidence in the ability of the laboratories to ``maintain operation 
goals such as safety, security, environmental responsibility and fiscal 
integrity.'' \10\ The panel finds that this lack of trust is manifested 
in three ways: NNSA's use of increasingly inflexible budgets and 
milestones to control work at the operating sites, the continued 
reliance on transactional regulation and oversight to enforce behavior, 
and the exclusion of M&O executives from NNSA headquarters 
deliberations in setting strategic direction. This management approach 
is costly, unwieldy, and counterproductive as further discussed in sub-
section D. It creates a high degree of management complexity, puts 
detailed decisions in the hands of headquarters personnel who lack a 
complete understanding of field operations or technical requirements, 
undermines accountability, creates incentives to focus attention on 
administrative matters over program substance, and incurs excessive 
costs in administering the relationship.
---------------------------------------------------------------------------
    \10\ National Research Council, Managing for High-Quality Science 
and Engineering at the NNSA National Security Laboratories, 5.
---------------------------------------------------------------------------
    Mr. Cooper. Does NNSA have the necessary expertise to evaluate 
performance and proposals from the M&O contractors?
    Mr. Augustine and Admiral Mies. The NNSA has not taken the steps 
necessary to build a cohesive culture that instills accountability for 
customer deliverables, nor has it instituted the personnel programs 
needed to build a workforce with the necessary technical and managerial 
skills for operations. The purposeful development of leaders, managers, 
and staffs is essential to any governance system. The effective 
organizations benchmarked for this study focus on personnel management 
to create a reinforcing virtuous cycle: proven leaders emerge from 
careful selection and decades of experience involving careful 
development and screening. Such leaders make a system work well. They 
also attract and inspire other high-caliber people to join and stay in 
their organizations.\11\ As one example, the current Director of Navy 
Strategic Systems Programs (SSP) started his career within that 
organization as a junior officer, and almost all of his subsequent 
assignments have been in the command. In addition to deep familiarity 
resulting from a long career with the same organization, long command 
tours provide needed continuity and allow the Director to promulgate 
and sustain the desired culture. Recently, the tenure of the SSP's 
Director was extended from about four years to eight years to 
strengthen this benefit.
---------------------------------------------------------------------------
    \11\ At benchmark organizations, the new entrants are carefully 
screened and selected, in part based on suitability for long-term 
careers within the organization. Employees tend to spend long careers 
within the organization. Promotion to the most senior levels (other 
than a political appointee) is usually from within, and these 
organizations favor those with broad-based career experience within the 
organization.
---------------------------------------------------------------------------
    A key staffing issue for the NNSA is the lack of operational 
experience in headquarters. In the peak years of the nuclear weapons 
program, the operational core of the nuclear enterprise was located in 
the Albuquerque Operations Office. Albuquerque synchronized the cycle 
of design-test-build throughout the Cold War, until 1992, when the 
production of new weapons was suspended. Albuquerque was officially 
disbanded ten years later, in 2002. NNSA headquarters assumed 
Albuquerque's operating functions (which were greatly diminished by 
then since the U.S. had ceased producing warheads), and decades of 
operational experience, knowledge, and technical expertise within the 
Albuquerque staff was lost in the reorganization.
    Now, as the United States embarks on an intensive series of warhead 
life extension programs covering the entire stockpile, a leadership 
team with deep experience and continuity (such as the team in the 
Albuquerque Operations Office) would be an enormously valuable asset 
for governing the enterprise. Creating and sustaining a personnel 
management system to build the needed culture, skills, and experience 
is a vital component of governance reform.
    Mr. Cooper. Have the customers of NNSA services and products been 
satisfied with the FY15 budget request for nuclear weapons sustainment 
and non-proliferation programs?
    Mr. Augustine and Admiral Mies. The panel's interim report did not 
specifically evaluate the FY15 budget proposal, nor did the panel 
solicit the customers' views on the proposal. However, there are two 
relevant observations from the panel's interim report:
    A rough estimate, based on assessments by DOD's Cost Assessment and 
Program Evaluation Office and the Congressional Budget Office, is that 
the aggregate NNSA program, as was structured in its 2014 Stockpile 
Stewardship and Management Plan, was at least $10 billion under-funded 
over the coming decade.\12\ The recently released 2015 Stockpile 
Stewardship and Management Plan reduces projected funding over the next 
decade and proposes significant delays in the delivery of several major 
life extension programs and nuclear facilities.\13\ Without commitment 
to an executable plan, NNSA has reacted and adjusted to funding as it 
is doled out year-to-year, or month-to-month. Large construction 
projects, Life Extension Programs (LEP), and infrastructure 
modernization investments are managed with incremental funding. This 
creates significant inefficiency. In each area the enterprise routinely 
incurs program slips, delivery delays, program suspensions, and 
accumulations of deferred maintenance--all leading to increased long-
term costs.
---------------------------------------------------------------------------
    \12\ OSD Office of Cost Assessment and Program Evaluation, ``NNSA 
Governance Discussions: Briefing to the Advisory Panel'' (Washington, 
DC: DOD, December, 2013); Congressional Budget Office (CBO), Projected 
Cost of U.S. Nuclear Forces, 2014 to 2023 (Washington, DC: CBO, 
December 2013).
    \13\ U.S. Department of Energy (DOE), FY2015 Stockpile Stewardship 
and Management Plan (Washington, DC: DOE, April 2014).
---------------------------------------------------------------------------
    In addition, some specific observations touch on the DOD-DOE 
relationship: First, a general finding:
    There is a lack of effective joint planning and budget coordination 
because of a fundamental lack of mechanisms to ensure requisite 
collaboration and consensus to address core mission requirements. As a 
consequence, DOD customers lack trust in NNSA's ability to modernize 
facilities and execute warhead life extension programs.
    Second, a finding on recent working relationships:
    NNSA and DOD staffs spent much of 2012 working to achieve a common 
resource plan for the enterprise that would be geared to meeting DOD's 
needs. This effort led to a tentative agreement in early 2013 on an 
NNSA program and budget that would be in line with the ``3+2 Concept,'' 
and DOD agreed to contribute additional funding to execute the program 
in FY14. In total, DOD has agreed to transfers of nearly $12 billion 
over multiple years in budget authority to DOE.
    During this period, a series of NNSA budget shortfalls were 
reported. These resulted most significantly from significant cost 
growth in the DOE programs. Other contributing factors included 
reductions in the overall NNSA budget due to Continuing Resolutions, 
congressional marks, the Budget Control Act, and the effects of 
sequestration.
    DOD has been frustrated by these continuing shortfalls, delays in 
agreed-upon programs, and requests for additional funding. DOD 
officials also have been frustrated by the limited budget and cost 
information provided by DOE/NNSA, and they have pressed for information 
on budgeting and program management processes in order to track the 
execution of the transferred funds. A satisfactory degree of visibility 
has not been achieved. Although these transfers were included in the 
President's Budget, visibility of the funds was lost during the 
Congressional appropriations process. It appears the net effect of the 
transfer is that DOE budgets have increased by less than the amount by 
which DOD budgets have decreased.
    The cycle of DOD-NNSA engagement continues through the Nuclear 
Weapons Council, with additional attempts to reach convergence on 
realistic program and infrastructure plans that can guide NNSA budgets. 
There remain significant procedural issues that will need to be 
resolved to repair this relationship. Considerable work remains to be 
done: the Nuclear Weapons Council has a central role to play in 
creating an executable plan for the future stockpile agreed on by the 
two departments. This responsibility will require an orderly process 
for the Nuclear Weapons Council's working groups to serve its 
principals and greater transparency between the two departments.
    Mr. Cooper. When NNSA talks about priority mission, does this 
include a serious commitment to safety and security?
    Mr. Augustine and Admiral Mies. The panel's main focus has been on 
the efficacy of the governance mechanisms for achieving safe, secure 
operations. The interim report's findings focus on how an improved 
governance system might achieve equal or better safety with practices 
that have proven effective in successful organizations. As implemented 
in NNSA, transactional oversight has proven to be expensive and 
counterproductive. More oversight does not necessarily equate to better 
oversight--or improved performance. Some specific observations include:
    Transactional oversight is expensive and counterproductive.
    Excessive and uncoordinated inspections, audits and data calls fuel 
inefficiencies and generate little value added; in fact, they may 
detract from the desired safety or security outcome.
    Witnesses note that the focus on compliance checklists can actually 
divert attention from the substance of safe and secure mission 
performance.
    Mr. Cooper. Has the NNSA Stockpile Stewardship and Management Plan 
been helpful to NNSA's planning process and setting requirements?
    Mr. Augustine and Admiral Mies. Although there is currently some 
agreement between DOD and DOE/NNSA on the long-term concept for 
modernizing the stockpile, they have not converged on a long-term 
resource plan, nor have they converged on near-term mission and budget 
priorities. There remain fundamental differences in views on the 
appropriate composition of the weapon life extension program and the 
timing of deliverables.
    . . . Lacking strong leadership that unifies priorities, there has 
been no mechanism for the NNSA, its customers, and the national 
leadership to converge on a credible resource-loaded plan to chart the 
path ahead. The President's annual Nuclear Weapons Stockpile Memorandum 
and the Nuclear Weapons Council evolving ``baseline'' plan, for 
instance, provide important direction, but they do not provide 
programmatic guidance. As discussed in Section 5 on NNSA's 
collaboration with its customers, the Nuclear Weapons Council and the 
Mission Executive Council for interagency customer coordination 
continue to struggle in setting priorities, defining the enterprise's 
needs, and identifying resources to support those needs. And, of 
course, planning efforts have been seriously undermined by the 
turbulent national budget environment as well as by NNSA's inability to 
accurately estimate costs.
    Mr. Cooper. In FY14 NNSA achieved $80 million of efficiencies, $240 
million short of its $320M goal. NNSA has not identified any 
efficiencies goals in FY15. Do you believe NNSA adequately taking a 
close look at efficiencies?
    Mr. Augustine and Admiral Mies. The panel's interim report does not 
address the specific NNSA efficiency initiatives. However, the panel's 
discussion of the inefficiencies of transactional oversight described 
in the answer to question 38, and the discussion of the potential 
benefits of adopting the Kansas City model for employing industrial 
standards, where feasible, suggests areas where potential improvements 
are evident.
    In addition, the panel notes that substantial improvements in the 
execution of programs for customer deliverables, and major construction 
projects are needed. These, too, may represent important targets for 
efficiency improvements. Some relevant observations from the interim 
report include:
    Program and project management is not supported at the staffing and 
funding levels that the private sector and other agencies have 
demonstrated are necessary to assure success, especially in the field, 
for the duration of major projects. Funding levels for reserves and 
contingencies are not even close to levels that have been demonstrated 
as necessary for major projects, especially recognizing the unique 
technical nature of many of the NNSA's projects. When projects or 
programs proceed from design stages to production stages, there is not 
adequate configuration control of designs and too many unnecessary 
subsequent changes are allowed.
    The management practices for infrastructure upgrades and major 
facilities construction are also problematic. DOE's guidance for such 
projects is contained in DOE Order 413, which aligns with the 
management practices prescribed in OMB Circular A-11 for Capital 
Acquisition projects.\14\ However, Order 413 is offered and viewed as 
guidance and not as required practice, so adherence and enforcement are 
weak. For instance, rigorous planning processes at the front end of a 
project, such as Analyses of Alternatives, are lacking. Circular A-11 
covers everything from roles and functions to legal framework to the 
actual transmission of White House policy in the budgeting process. OMB 
requires agencies to establish a disciplined capital programming 
process that addresses project prioritization between new assets and 
maintenance of existing assets; risk management and cost estimating to 
improve the accuracy of cost, schedule and performance provided to 
management; and the other difficult challenges posed by asset 
management and acquisition. In establishing its Acquisition and Project 
Management Office, NNSA is trying to bring such discipline to NNSA 
project management.
---------------------------------------------------------------------------
    \14\ Office of Management and Budget (OMB), Preparation, 
Submission, and Execution of the Budget, Circular A-11 (Washington, DC: 
Executive Office of the President, July 2013).
---------------------------------------------------------------------------
    Mr. Cooper. GAO has issued reports overseeing NNSA management and 
programs since 1995. In a February 2012, providing another independent 
perspective, GAO stated that: ``Laboratory and other officials have 
raised concerns that federal oversight of the laboratories' activities 
has been excessive. With NNSA proposing to spend tens of billions of 
dollars to modernize the nuclear security enterprise, it is important 
to ensure scarce resources are spent in an effective and efficient 
manner'' and that ``In many cases, NNSA has made improvements to 
resolve these safety and security concerns, but better oversight is 
needed to ensure that improvements are fully implemented and sustained. 
GAO agrees that excessive oversight and micromanagement of contractors' 
activities are not an efficient use of scarce federal resources, but 
that NNSA's problems are not caused by excessive oversight but instead 
result from ineffective departmental oversight.''
    In a 2013 testimony before the Strategic Forces Subcommittee of the 
House Armed Services Committee, GAO stated that:
    ``NNSA continues to experience major cost and schedule overruns on 
its projects, such as research and production facilities and nuclear 
weapons refurbishments, principally because of ineffective oversight 
and poor contractor management (. . .) GAO continues to believe, as it 
concluded in its January 2007 report, that drastic organizational 
change to increase independence is unnecessary and questions whether 
such change would solve the agency's remaining management problems.'' 
Do you agree?
    Mr. Augustine and Admiral Mies. A capability for independent cost 
estimates for major acquisition programs, coupled with a disciplined 
cost reporting system, is essential to effective program scoping and 
initiation, resource planning, source selection, and contract oversight 
and management. NNSA lacks expertise, data, and tools for independent 
costing, requirements evaluation, and program planning. Initial cost 
estimates for major NNSA programs have been found to be off not by 20-
30 percent but by factors of nearly two to six:
      B61 LEP: An initial estimate (2010) assumed that the cost 
would be comparable to that of the W76 LEP in the range of $4 billion. 
However, lab experts, when engaged by NNSA, concluded that the B61 LEP 
would be much more complex than the W76. When the final B61 LEP cost 
report was completed, the estimate rose to $8 billion.
      Los Alamos CMRR facility (the Chemistry and Metallurgy 
Research Replacement): An initial estimate (2005) placed the ceiling at 
$975 million; by 2010 this ceiling had risen to $5.8 billion, with a 
three to seven year delay. Now, the project is being deferred five 
years, and the design is being reconsidered.
      Y-12 highly enriched uranium processing facility (UPF): 
An initial estimate (2004) placed the maximum at $1.1 billion; this was 
raised to $3.5 billion (2007), and then to $6.5 billion (2010). An 
independent review by the Army Corps of Engineers placed the maximum 
cost at $7.5 billion (2011). Recently discovered design flaws (the 
ceiling is too low) add an additional $0.5 billion. Now, the project is 
being delayed and the design is being reconsidered.
      Savannah River plutonium disposition facility (the Mixed-
Oxide Fuel Fabrication Facility, or MOX): DOE approved a cost estimate 
of $4.8 billion (2007) and start of operations in September 2016. 
Although construction began in August 2007, NNSA subsequently increased 
the estimate to $7.7 billion (2012) with the start of operations 
delayed to November 2019. Now the project is in a strategic pause as 
DOE evaluates other options for plutonium disposition.
    NNSA's poor track record of planning for and estimating the costs 
of these and other major projects is a major source of dissatisfaction 
among the national leadership and customers, and further undermines 
NNSA's credibility. Both NNSA and DOE are engaged in initiatives to 
create needed independent cost estimating capabilities, including the 
development of the requisite staffs, tools, and data. Success with 
these initiatives will help repair its damaged credibility, and will be 
an essential precondition for NNSA to regain trust with its critics.
    Mr. Cooper. What would you recommend to improve contractor 
accountability?
    Mr. Augustine and Admiral Mies. The panel's interim report has 
focused primarily on diagnosing the current situation. Our 
recommendations will come in the final report. The interim report 
observes that current contracting arrangements place too little 
emphasis on mission performance, and too much emphasis on complying 
with administrative requirements. The major findings in the interim 
report are as follows:
    A. Misguided Contract [Requirements]
    [Misguided contract requirements] reinforce the transactional 
nature of the relationship and undermine the FFRDC partnership with the 
NNSA laboratories. Significant award fees combined with mission-
support-oriented performance evaluation criteria are troublesome in 
that they reinforce DOE/NNSA's emphasis both at headquarters and in the 
field on functional compliance and not mission performance.
    Contractual arrangements also can limit the contributions of the 
M&O contractor parent organizations. At some sites, the parent 
organization is exerting a strong influence: the Kansas City Plant 
offers an example in which the parent company is aggressively driving a 
proven corporate culture into the workplace. However, several issues 
that have hindered the broader realization of these objectives need to 
be considered in clarifying future roles....
    Last, and most important, performance evaluation criteria that 
focus incentives on compliance do little to encourage building a strong 
M&O leadership team. The recent transition to Strategic Performance 
Evaluation Plans could help catalyze the shift away from transactional 
oversight, but this transition will require a sweeping cultural change 
at NNSA and its Field Offices and a redesign of the weighting of the 
performance objectives to better capture M&O contributions to mission 
priorities.
    Mr. Cooper. Have you found the Department of Energy needs new or 
additional hiring or firing authorities, or authority to influence 
contractor employee hiring or firing?
    Mr. Augustine and Admiral Mies. The panel's interim report does not 
provide recommendations, but the panel will address this question in 
its final report. The panel's findings suggest significant action is 
needed to address skill needs. The panel's findings (as also noted in 
the answer to question 10) are as follows:
    The NNSA has not taken the steps necessary to build a cohesive 
culture that instills accountability for customer deliverables, nor has 
it instituted the personnel programs needed to build a workforce with 
the necessary technical and managerial skills for operations. The 
purposeful development of leaders, managers, and staffs is essential to 
any governance system. The effective organizations benchmarked for this 
study focus on personnel management to create a reinforcing virtuous 
cycle: proven leaders emerge from careful selection and decades of 
experience involving careful development and screening. Such leaders 
make a system work well. They also attract and inspire other high-
caliber people to join and stay in their organizations.\15\ As one 
example, the current Director of Navy Strategic Systems Programs (SSP) 
started his career within that organization as a junior officer, and 
almost all of his subsequent assignments have been in the command. In 
addition to deep familiarity resulting from a long career with the same 
organization, long command tours provide needed continuity and allow 
the Director to promulgate and sustain the desired culture. Recently, 
the tenure of the SSP's Director was extended from about four years to 
eight years to strengthen this benefit.
---------------------------------------------------------------------------
    \15\ At benchmark organizations, the new entrants are carefully 
screened and selected, in part based on suitability for long-term 
careers within the organization. Employees tend to spend long careers 
within the organization. Promotion to the most senior levels (other 
than a political appointee) is usually from within, and these 
organizations favor those with broad-based career experience within the 
organization.
---------------------------------------------------------------------------
    A key staffing issue for the NNSA is the lack of operational 
experience in headquarters. In the peak years of the nuclear weapons 
program, the operational core of the nuclear enterprise was located in 
the Albuquerque Operations Office. Albuquerque synchronized the cycle 
of design-test-build throughout the Cold War, until 1992, when the 
production of new weapons was suspended. Albuquerque was officially 
disbanded ten years later, in 2002. NNSA headquarters assumed 
Albuquerque's operating functions (which were greatly diminished by 
then since the U.S. had ceased producing warheads), and decades of 
operational experience, knowledge, and technical expertise within the 
Albuquerque staff was lost in the reorganization.
    Now, as the United States embarks on an intensive series of warhead 
life extension programs covering the entire stockpile, a leadership 
team with deep experience and continuity (such as the team in the 
Albuquerque Operations Office) would be an enormously valuable asset 
for governing the enterprise. Creating and sustaining a personnel 
management system to build the needed culture, skills, and experience 
is a vital component of governance reform.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MS. SANCHEZ
    Ms. Sanchez. Independent Safety oversight: Has independent safety 
oversight helped maintain safety as a priority across the nuclear 
enterprise?
    Mr. Augustine and Admiral Mies. The panel's interim report does not 
address the independent role of the DNFSB. The report did find:
    The internal weaknesses in DOE's regulatory apparatus also have 
significantly weakened the DOE/NNSA's ability to engage effectively 
with the Defense Nuclear Facilities Safety Board. Congress chartered 
the DNFSB to provide independent oversight, by identifying safety 
concerns and raising issues with respect to the DOE's implementation of 
its own orders. At the same time Congress has recently stated that, 
``it is incumbent upon the Secretary to reject or request modifications 
to DNFSB recommendations if the costs of implementing the 
recommendations are not commensurate with the safety benefits gained.'' 
\16\ Given the statutory role of the DNFSB as an independent oversight 
arm for public safety, and the lack of a DOE analytical capability to 
effectively evaluate options to respond to its recommendations, the 
DNFSB exerts a dominant influence over DOE's risk management in nuclear 
safety policies and programs, which at times leads to actions that do 
not reflect prudent risk management or safety concerns.
---------------------------------------------------------------------------
    \16\ ``Joint Explanatory Statement to Accompany the National 
Defense Authorization Act for Fiscal Year 2014,'' Congressional Record 
159: 176 (December 12, 2013), H7968.
---------------------------------------------------------------------------
    Ms. Sanchez. Cost estimates: Concern about the effectiveness of 
NNSA governance of the nuclear security enterprise has been increasing, 
in the context of several failures. These failures include all major 
NNSA projects significantly increasing in cost and incurring delays, 
including billion dollar increases in the cost estimates for the B61 
life extension program, the uranium facility at Y-12 (Tennessee), the 
plutonium facility (at Los Alamos), and the MOX facility (at the 
Savannah River Site, SC).
    Is NNSA equipped with the expertise and processes to provide 
accurate cost estimates? Are they taking advantage of DOD CAPE Office 
which has significant experience in this area?
    Mr. Augustine and Admiral Mies. The Panel met with CAPE officials 
as well as the NNSA official responsible for establishing cost 
estimating and resource analysis capabilities in NNSA. CAPE was heavily 
involved in the joint activities of 2012 cited in the panel's interim 
report. It appears this involvement has ceased. The relevant interim 
report findings are as follows:
    NNSA's unreliable planning and cost estimating, combined with its 
lack of openness, has engendered significant distrust within the DOD. 
Beginning in 2010, the DOD has worked with DOE/NNSA to transfer funds 
from DOD's proposed budget to the NNSA account for weapons activities 
essential for sustaining deterrence capabilities--including LEPs, 
stockpile surveillance, Chemical and Metallurgy Research Replacement 
(CMRR), and UPF.
    NNSA and DOD staffs spent much of 2012 working to achieve a common 
resource plan for the enterprise that would be geared to meeting DOD's 
needs. This effort led to a tentative agreement in early 2013 on an 
NNSA program and budget that would be in line with the ``3+2 
Strategy,'' and DOD agreed to contribute additional funding to execute 
the program in FY14. In total, DOD has agreed to transfers of nearly 
$12 billion over multiple years in budget authority to DOE.
    During this period, a series of NNSA budget shortfalls were 
reported. These resulted most significantly from significant cost 
growth in the DOE programs. Other contributing factors included 
reductions in the overall NNSA budget due to Continuing Resolutions, 
congressional marks, the Budget Control Act, and the effects of 
sequestration.
    DOD has been frustrated by these continuing shortfalls, delays in 
agreed-upon programs, and requests for additional funding. DOD 
officials also have been frustrated by the limited budget and cost 
information provided by DOE/NNSA, and they have pressed for information 
on budgeting and program management processes in order to track the 
execution of the transferred funds. A satisfactory degree of visibility 
has not been achieved. Although these transfers were included in the 
President's Budget, visibility of the funds was lost during the 
Congressional appropriations process. It appears the net effect of the 
transfer is that DOE budgets have increased by less than the amount by 
which DOD budgets have decreased.
    The cycle of DOD-NNSA engagement continues through the Nuclear 
Weapons Council, with additional attempts to reach convergence on 
realistic program and infrastructure plans that can guide NNSA budgets. 
There remain significant procedural issues that will need to be 
resolved to repair this relationship. Considerable work remains to be 
done: the Nuclear Weapons Council has a central role to play in 
creating an executable plan for the future stockpile agreed on by the 
two departments. This responsibility will require an orderly process 
for the Nuclear Weapons Council's working groups to serve its 
principals and greater transparency between the two departments.
    Ms. Sanchez. Non-proliferation: There is significant pressure on 
NNSA to deliver nuclear weapons sustainment programs on time and on 
budget. Do you see the same pressure to prioritize nuclear non-
proliferation?
    Mr. Augustine and Admiral Mies. The interim report did not address 
the priorities for the non-proliferation program. The panel's findings 
relating to non-proliferation and other mission areas are as follows:
    Given the overall success of the interagency projects, the panel 
did not focus deeply on the enterprise's relationships with its 
interagency customers. Nevertheless, experts identified several issues 
for the panel's consideration. One is the tactical approach taken by 
many customers: much of this work for external sponsors is accomplished 
using annual task orders with no long-term commitment. There is also a 
range of areas where working relationships could be simplified and 
improved:
      Interagency tasks are typically quite small and each 
laboratory manages hundreds of such tasks. (For example, LLNL reported 
it manages about 800 interagency tasks, many providing a few tens of 
thousands of dollars in support.)
      Approval processes are needlessly cumbersome. Tasks are 
reviewed and approved individually. Even small, routine contracts 
require multiple levels of approval and can take weeks.
      Delays are not uncommon in the movement of funds from 
sponsors to the labs. In some cases, technical efforts may be put on 
hold pending arrival of funds.
      Year-to-year uncertainty in funding makes it difficult to 
forecast demand and manage professional staffs.
      Recapitalization of scientific and other physical capital 
is not addressed. While external funding covers the overhead costs 
immediately associated with the work being accomplished, it does not 
cover the cost of refurbishing and replacing the unique lab capital 
equipment and facilities used in some tasks.
    Some customers have found ways to resolve some of these challenges 
by employing interagency agreements with DOE/NNSA in which the external 
funding organization makes a standing commitment to funding support at 
a specified level of effort.\17\ While necessarily subject to the 
availability of annual appropriations, this eliminates most of the 
uncertainty, enabling the nuclear weapon labs to better align and 
manage professional staffs and plan and conduct technical work. Capital 
investments to develop needed capabilities for interagency customers 
are a more difficult challenge, but they too have been overcome in 
limited cases. NNSA has had to approach this challenge on a facility-
by-facility basis.
---------------------------------------------------------------------------
    \17\ Homeland Security Act of 2002, Sec. 309, authorizes DHS use of 
DOE national laboratories and sites via joint sponsorship, direct 
contract, or ``work for others.'' Labs and sites perform such work on 
an equal basis to other missions at the laboratory and not just on a 
noninterference basis. DHS does not pay costs of DOE or its contractors 
in excess of the amount that the DOE pays. DHS' position is that it 
strongly prefers using authorities given it in law to allow it to work 
across the DOE complex in response to proposals.
---------------------------------------------------------------------------
    Ms. Sanchez. Please provide for the record a list of those who have 
testified or made presentations before the full panel, and those that 
the panel subcommittees have met with.
    Mr. Augustine and Admiral Mies. The attached list, which is an 
annex to the interim report, identifies the individuals and 
organizations consulted by the panel. The general approach is outlined 
in the interim report as follows:
    Recognizing that there has already been extensive examination of 
the enterprise, the panel reviewed thousands of pages produced by 
studies and reviews conducted both before and since the creation of the 
NNSA. The members heard from many experts, both inside and outside of 
the enterprise.\18\ This included past and present senior leadership in 
the Department of Energy (DOE), NNSA, and Department of Defense (DOD), 
Field Office managers, Management and Operating (M&O) executives and a 
cross-section of personnel at each site, Laboratory Directors, chairmen 
of previous studies of the enterprise, Congressional staff, 
representatives from the customer communities (DOD, Intelligence 
Community, the Federal Bureau of Investigation, Department of State, 
Department of Homeland Security), the Defense Nuclear Facilities Safety 
Board (DNFSB), the Government Accountability Office, and the British 
nuclear weapons program.
---------------------------------------------------------------------------
    \18\ A full list of those who provided not-for-attribution 
testimony to the panel may be found in Appendix A.
---------------------------------------------------------------------------
    The panel divided its field investigative work into four fact-
finding groups as follows:
      The National Leadership group focused on the perspectives 
of the Executive branch (National Security Council Staff, Office of 
Management and Budget (OMB), and Office of Science and Technology 
Policy); the Legislative branch (both the Senate and the House of 
Representatives, and both the appropriations and authorization 
committees); Department of Energy headquarters; and the Nuclear 
Regulatory Commission, the DNFSB and other national-level stakeholders 
such as the Occupational Safety and Health Administration (OSHA) and 
the American Federation of Labor and Congress of Industrial 
Organizations (AFL-CIO).
      The NNSA group interviewed leadership personnel within 
NNSA headquarters and also conducted site visits to the three 
laboratories (Los Alamos National Laboratory (LANL), Lawrence Livermore 
National Laboratory (LLNL), and Sandia National Laboratory (SNL)), the 
four production plants (Kansas City Plant, Pantex, Savannah River Site, 
and Y-12 National Security Complex), and the Nevada National Security 
Site (NNSS). These visits incorporated discussions with the Field 
Offices (including the Albuquerque Complex) and the M&O contractor 
leadership as well as tours of some of each site's important 
facilities.
      The Customer group obtained perspectives of the clients 
of the enterprise to include DOD, the Intelligence Community, 
Department of State, Department of Homeland Security, the Federal 
Bureau of Investigation, and the British nuclear weapons program.
      The Benchmarking group examined successful high-risk, 
high technology organizations to identify potential processes and 
structures that might be adopted by the enterprise. Among these 
organizations were Naval Reactors, Navy Strategic Systems Programs, 
National Aeronautics and Space Administration (NASA), representatives 
from the civil nuclear power industry, DOE's Office of Science, the 
Centers for Disease Control, the Federal Aviation Administration, and 
the British nuclear weapons program.
    Ms. Sanchez. Do the M&O contractors have the correct incentives to 
support NNSA's mission and deliver products on time and on budget? The 
Sandia National Laboratory contract has been extended at least two 
years, after a previous 2-year extension, while other contracts are 
going on 10 years. Is there adequate competition? Has the promise of 
added competition and cost savings, which was the goal of privatizing 
the nuclear enterprise, materialized? Has this model worked?
    Mr. Augustine and Admiral Mies. Contract incentives reinforce the 
transactional nature of the relationship and undermine the FFRDC 
partnership with the NNSA laboratories. Significant award fees combined 
with mission-support-oriented performance evaluation criteria are 
troublesome in that they reinforce DOE/NNSA's emphasis both at 
headquarters and in the field on functional compliance and not mission 
performance.
    . . . performance evaluation criteria that focus incentives on 
compliance do little to encourage building a strong M&O leadership 
team. The recent transition to Strategic Performance Evaluation Plans 
could help catalyze the shift away from transactional oversight, but 
this transition will require a sweeping cultural change at NNSA and its 
Field Offices and a redesign of the weighting of the performance 
objectives to better capture M&O contributions to mission priorities.
    It is clear that the recent acting NNSA Administrator recognized 
the problems with the government-M&O relationships. He has been working 
to clarify roles and responsibilities, focusing on the relationships 
among the NNSA Administrator, the Field Office Managers, and the M&O 
executives. In the field, there is evidence of improved communication 
and collaboration between the M&Os and the NNSA Field Offices, 
especially at the plants. They have demonstrated a willingness to share 
information and otherwise communicate and collaborate, embracing the 
concept that they are a team ultimately working toward the same 
purpose. Much more attention to clarifying and managing these 
relationships will be needed.

                                  [all]