Nuclear Weapons: Opportunities Exist to Improve the Budgeting,
Cost Accounting, and Management Associated with the Stockpile
Life Extension Program (28-JUL-03, GAO-03-583).
As a separately organized agency within the Department of Energy
(DOE), the National Nuclear Security Administration (NNSA)
administers the Stockpile Life Extension Program, whose purpose
is to extend, through refurbishment, the operational lives of the
weapons in the nuclear stockpile. NNSA encountered significant
management problems with its first refurbishment. NNSA has begun
three additional life extensions. This study was undertaken to
determine the extent to which budgetary, cost accounting, and
other management issues that contributed to problems with the
first refurbishment have been adequately addressed.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-583
ACCNO: A07735
TITLE: Nuclear Weapons: Opportunities Exist to Improve the
Budgeting, Cost Accounting, and Management Associated with the
Stockpile Life Extension Program
DATE: 07/28/2003
SUBJECT: Nuclear weapons
Program management
Schedule slippages
Cost overruns
Budget activities
Financial management
Internal controls
B-2 Aircraft
B-52 Aircraft
F-15 Aircraft
F-16 Aircraft
Trident II Missile
W76 Warhead
W80 Warhead
W87 Warhead
B61 Bomb
NNSA Stockpile Life Extension Program
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-03-583
A
Letter
July 28, 2003 Congressional Requesters Nuclear weapons have been and
continue to be an essential part of the nation*s defense strategy.
However, the end of the Cold War has caused a dramatic shift in how the
nation maintains its planning and support for such weapons. Instead of
designing, testing, and producing new nuclear weapons, the strategy has
shifted to maintaining the existing nuclear weapons stockpile
indefinitely. To accomplish this goal, in January 1996, the Department of
Energy (DOE) created the Stockpile Life Extension Program. Now
administered by the National Nuclear Security Administration (NNSA), which
was created in October 1999 as a separately organized agency within DOE,
this program intends to use a standardized
approach for planning and conducting nuclear weapons refurbishment
activities to extend the weapons* operational lives. 1 While complete cost
data on the Stockpile Life Extension Program does not exist, NNSA
requested $476 million in fiscal year 2004 for life extension program
activities. Within NNSA, the Office of Defense Programs is responsible for
administering the Stockpile Life Extension Program. For those nuclear
weapons that are refurbished, this office must (1) determine which
components, such as the high explosives package, will need refurbishment
to extend each weapon*s life; (2) design and produce the necessary
components; (3) install the components in the weapons; and (4) certify
that the changes do not adversely affect the safety and reliability of the
weapons. Because research and development is needed to refurbish the
nuclear weapons, this program requires a coordinated effort among the
design laboratories and production facilities that comprise the nation*s
nuclear weapons complex.
As of May 1, 2003, according to NNSA officials, three nuclear weapons were
undergoing research and development activities prior to the commencement
of refurbishment production* the W- 80 warhead, the B- 61 bomb, and the W-
76 warhead. The W- 80 warhead is designed to be carried on a cruise
missile launched from an attack submarine or a B- 52 bomber 1 Though NNSA
is a separately organized agency within DOE, NNSA Policy Letter NAP- 1,
dated May 21, 2002, stipulates that DOE directives are applicable to NNSA
unless or until a NNSA policy letter is provided.
and its first unit is scheduled for refurbishment production beginning in
February 2006. The B- 61 bomb is designed to be carried on the B- 52 or B-
2 bomber. Its first unit is scheduled for refurbishment production
beginning in June 2006. The B- 61 also has a nonstrategic variation for
use on the F- 15 and F- 16 aircraft. The W- 76 warhead is designed to be
carried on the Trident II missile. Its first unit is scheduled for
refurbishment production beginning in September 2007.
One nuclear weapon already has begun refurbishment production* the W- 87
strategic warhead, which is designed to be carried on the land- based
Peacekeeper missile. In December 2000, we reported that the W- 87 had
experienced significant design and production problems that increased its
refurbishment costs by over $300 million and caused schedule delays of
about 2 years. 2 At the heart of many of the problems that contributed to
this outcome were an inadequate Office of Defense Programs management
process and unclear leadership, which prevented the Office from adequately
anticipating and mitigating the problems that arose. We reported that, for
the W- 87 refurbishment, there was no overall program
plan, cost and schedule baseline, or system to effectively oversee design
and production changes. Moreover, no one person was expressly accountable
for the W- 87, and leadership appeared to move around from one NNSA office
to another. As a result, we made a series of recommendations to improve
NNSA management, including that NNSA assign a manager who is responsible
and accountable for each life extension. In response to our
recommendations, NNSA took some actions to improve its management of the
Stockpile Life Extension Program including designating a program manager
for each life extension.
You asked us to determine the extent to which (1) the program*s budget
requests for fiscal years 2003 and 2004 were comprehensive and reliable;
(2) NNSA has a system for accumulating, tracking, and reporting program
costs; and (3) other program management problems exist at
NNSA. 2 Nuclear Weapons: Improved Management Needed to Implement Stockpile
Stewardship Program Effectively, GAO- 01- 48 (Washington, D. C.: Dec. 14,
2000).
Results in Brief While NNSA*s fiscal year 2003 congressional budget
request did not provide a clear picture of all activity necessary to
complete the Stockpile Life
Extension Program, NNSA has begun to take action to produce a more
comprehensive and reliable picture of the program for fiscal year 2004 and
beyond. With respect to fiscal year 2003, NNSA did not, for example,
include activities for high explosives work that is needed to support
three life extension efforts in an unclassified budget annex that provided
data for the program. NNSA developed its budget by broad function* such as
research and development* rather than by individual weapon system or
program activity such as the Stockpile Life Extension Program. In
addition, NNSA officials expressed concern that dissemination of more
detailed program budget information would encourage the Congress to cut
the most expensive weapon system or systems. Moreover, the numbers in
NNSA*s budget request for the program had not been validated* as required
by DOE directive. NNSA did not validate its fiscal year 2003 budget
because, according to a NNSA official, the agency was
implementing a new planning, programming, budgeting, and evaluation
process. For fiscal year 2004, a larger portion, but not all life
extensionrelated work, within NNSA*s budget request has been attributed to
the life extension program, resulting in a more comprehensive request.
NNSA officials indicated the agency decided not to implement further
budget
changes in fiscal year 2004 in order to ensure, for instance, that
classification concerns are resolved and contractors have time to modify
their accounting systems. NNSA officials also stated that a formal budget
validation process would be reintroduced for the fiscal year 2005 budget
cycle. Our report recommends that the NNSA Administrator further
improve the budgeting associated with the Stockpile Life Extension Program
by including this program as a formal and distinct part of NNSA*s budget
submission.
NNSA does not have a system for accumulating and tracking refurbishment
costs that comports with federal accounting standards. Specifically,
according to the Statement of Federal Financial Accounting Standards
Number 4, *Managerial Cost Accounting,* federal agencies should accumulate
and track the cost of their activities on a regular basis for management
information purposes. Such information is important to the Congress and
federal managers as they make decisions about allocating federal
resources, authorizing and modifying programs, and evaluating program
performance. To date, NNSA has not developed a managerial cost accounting
system that aligns with the program and its activities and provides the
full cost of the refurbishments. NNSA has several
mechanisms to track various portions of the refurbishment costs, but these
mechanisms are used for different purposes, include different types of
costs, and cannot be reconciled with one another. This report recommends
that the NNSA Administrator take steps to improve cost accounting
associated with the Stockpile Life Extension Program.
Finally, despite NNSA*s efforts at improvement, other program management
problems remain in the areas of planning, organization, and oversight of
cost and schedule for the Stockpile Life Extension Program. For instance,
NNSA does not yet have an adequate planning process to guide and fully
integrate the individual life extensions for each warhead into an overall
program. In this regard, NNSA has yet to establish the relative ranking of
the Stockpile Life Extension Program among the Office of Defense Programs*
priorities or to establish a consistent priority among the individual life
extension efforts. Absent a prioritization scheme that had been
disseminated and understood throughout the weapons complex, we identified
cases where NNSA field contractors unilaterally decided to
transfer funds from one refurbishment to another only to be formally
questioned by NNSA regarding those decisions. The contractor decisions
impacted NNSA*s ability to complete refurbishment work on schedule. With
respect to organization, despite a December 2002 overall reorganization,
NNSA still has not adequately fixed accountability and responsibility for
each life extension. In particular, the roles and
responsibilities between the individual life extension program and deputy
program managers and the site contractor project managers have not yet
been clearly defined. Finally, with respect to oversight of cost and
schedule, NNSA does not have an adequate process for reporting cost and
schedule changes against established baselines. Such a process would help
NNSA provide more comprehensive information to the Congress regarding the
program*s performance goals and accomplishments. Each of the three
ongoing refurbishments, we determined, has already experienced some cost
growth and schedule changes. For instance, the W- 76 refurbishment is
slightly behind schedule because of various missed commitments such as
deciding whether to reuse or remanufacture certain components. This reuse
or remanufacture decision did not occur on schedule, according to the W-
76 program manager, primarily because NNSA personnel neglected
to perform certain calculations as directed. The W- 76 refurbishment will
also need an additional $10.75 million in fiscal year 2004 to purchase
certain parts that were previously not authorized or budgeted for. NNSA
has recently completed or is in the process of completing various
management improvement actions, such as the implementation of an overall
planning, programming, budgeting, and evaluation process. While
those actions should help improve management to some degree, they will not
address all outstanding stockpile life extension program management
issues, such as clarifying the roles and responsibilities of those
officials associated with the program. Consequently, this report
recommends that the NNSA Administrator improve certain specific
management- related activities associated with the Stockpile Life
Extension Program, such as clarifying roles and responsibilities and
providing the program managers with the authority to properly manage the
refurbishments. We provided NNSA with a draft of this report for review
and comment. Overall, NNSA stated that it recognized the need to change
the way the
Stockpile Life Extension Program was managed and that it generally agreed
with the report*s recommendations. For instance, NNSA stated that it had
independently identified many of the same concerns, and, over the past 12
months, it had made significant progress in implementing plans, programs,
and processes to improve program management. NNSA indicated that while
full implementation of our management and budgeting recommendations will
take several years, NNSA is committed to meeting these objectives. NNSA
also provided some technical comments which it believed pointed out
factual inaccuracies. We have modified our report, where appropriate, to
reflect NNSA*s comments.
Background The nation*s nuclear weapons stockpile remains a cornerstone of
U. S. national security policy. As a result of changes in arms control,
arms
reduction, and nonproliferation policies, the President and the Congress
in 1993 directed that a science- based Stockpile Stewardship Program be
developed to maintain the stockpile without nuclear testing. After the
establishment of that program, DOE, in January 1996, created the Stockpile
Life Extension Program. The purpose of this program is to develop a
standardized approach for planning nuclear weapons refurbishment
activities to enable the nuclear weapons complex to extend the operational
lives of the weapons in the stockpile well beyond their original design
lives.
Within NNSA, the Office of Defense Programs is responsible for the
stockpile. This responsibility encompasses many different tasks, including
the manufacturing, maintenance, refurbishment, surveillance, and
dismantlement of weapons in the stockpile; activities associated with the
research, design, development, simulation, modeling, and nonnuclear
testing of nuclear weapons; and the planning, assessment, and
certification of the weapons* safety and reliability. A national complex
of nuclear
weapons design laboratories and production facilities supports the Office
of Defense Programs* mission. This complex consists of three national
laboratories that design nuclear weapons: Lawrence Livermore National
Laboratory in California, Los Alamos National Laboratory in New Mexico,
and Sandia National Laboratories in New Mexico and California. The complex
also includes the Nevada test site and four production sites: the Pantex
plant in Texas, the Y- 12 plant in Tennessee, the Kansas City plant in
Missouri, and the Savannah River site in South Carolina.
NNSA refurbishes nuclear weapons according to a process called Phase 6. X,
which was jointly developed with the Department of Defense. This process
consists of the following elements:
Phase 6.1, concept assessment. This phase consists of studies to provide
planning guidance and to develop information so that a decision can be
made on whether or not to proceed to a phase 6.2.
Phase 6.2, feasibility study. This phase consists of developing design
options and studying their feasibility.
Phase 6.2A, design definition and cost study. This phase consists of
completing definition of selected design option( s) from phase 6.2 through
cost analysis.
Phase 6.3, development engineering. This phase consists of conducting
experiments, tests, and analyses to validate the design option and assess
its potential for production. Phase 6.4, production engineering. This
phase consists of making a
strong commitment of resources to the production facilities to prepare for
stockpile production.
Phase 6.5, first production. This phase consists of producing a limited
number of refurbished weapons and then disassembling and examining some of
them for final qualification of the production process.
Phase 6.6, full- scale production. This phase consists of ramping up to
full- production rates at required levels.
As of May 1, 2003, according to NNSA officials, four nuclear weapons were
undergoing phase 6.X refurbishment activities. The W- 80 warhead, the B-
61 bomb, and the W- 76 warhead are all in phase 6.3, development
engineering, while the W- 87 warhead is in phase 6.6, full- scale
production. 3 Prior to its budget submission for fiscal year 2001, the
Office of Defense Programs divided the operating portion of the Weapons
Activities account into two broad program activities* stockpile
stewardship and stockpile management. Stockpile stewardship was defined as
the set of activities needed to provide the physical and intellectual
infrastructure required to meet the scientific and technical requirements
of the (overall) Stockpile Stewardship Program. Stockpile management
activities included DOE*s historical responsibilities for surveillance,
maintenance, refurbishment, and dismantlement of the enduring stockpile.
However, each category was dominated by a single large activity known as
core stewardship and core management, which made it difficult to determine
precisely where funds were being spent. For example, in the Office of
Defense Programs* budget submission for fiscal year 2000, core stewardship
accounted for 48 percent of the stockpile stewardship activity*s budget
request, while core management accounted for 73 percent of the stockpile
management activity*s budget request. The lack of clarity associated with
this broad structure caused concern both at DOE and in the Congress.
In February 1999, the Deputy Assistant Secretary for Research,
Development, and Simulation, who manages the stockpile stewardship
activity, began to develop a new program activity structure to improve the
planning process for his program and more closely integrate the program
with the needs of the stockpile. The new structure was built around three
new program activities* Campaigns, Directed Stockpile Work, and Readiness
in Technical Base and Facilities.
Campaigns are technically challenging, multiyear, multifunctional
efforts conducted across the Office of Defense Programs* laboratories,
production plants, and the Nevada test site. They are designed to develop
and maintain the critical capabilities needed to enable
continued certification of the stockpile into the foreseeable future,
without underground testing. Campaigns have milestones and specific 3
Currently, the U. S. nuclear weapons stockpile consists of nine types of
bombs and missile
warheads, numbering several thousand devices, which are either stored at
strategic military locations or deployed on military aircraft, missiles,
or submarines.
end- dates or goals, effectively focusing research and development
activities on clearly defined deliverables.
Directed Stockpile Work includes the activities that directly support
specific weapons in the stockpile. These activities include the current
maintenance and day- to- day care of the stockpile, as well as planned
life extensions.
Readiness in Technical Base and Facilities includes the physical
infrastructure and operational readiness required to conduct Campaign and
Directed Stockpile Work activities at the production plants, laboratories,
and the Nevada test site. This includes ensuring that the infrastructure
and facilities are operational, safe, secure, compliant, and ready to
operate.
Within each of these three activities is a set of more detailed
subactivities. For example, within the Campaigns activity are individual
campaigns to study, among other things, the primary 4 in a nuclear weapon
or to develop a new capability to produce nuclear weapons pits. 5
Similarly, the Directed Stockpile Work activity includes subactivities to
conduct surveillance or produce components that need regular replacement
within nuclear weapons. Finally, the Readiness in Technical Base and
Facilities activity includes subactivities to capture the costs for the
operation of its facilities. In submitting its new program activity
structure to the Office of the Chief Financial Officer for review and
approval for use in the budget submission for fiscal year 2001, the Office
of Defense Programs believed that the new
structure would, among other things, better reflect its current and future
missions; focus budget justification on major program thrusts; and improve
the linkage between planning, budgeting, and performance evaluation.
Budget requests developed since fiscal year 2001 have been presented
using the Campaigns, Directed Stockpile Work, and Readiness in Technical
Base and Facilities activity structure.
4 The primary is the fission stage of a nuclear weapon. Detonation of the
primary produces the extremely high temperatures and pressures required to
produce fusion in the weapon*s secondary.
5 A pit is the initial, subcritical assembly of fissile material in a
nuclear weapon. In such an assembly, a fission chain reaction can be
sustained only by the addition of neutrons from an independent source.
Within the Office of Defense Programs, two organizations share the
responsibility for overall weapons refurbishment management. Those
organizations are the Office of the Assistant Deputy Administrator for
Research, Development, and Simulation and the Office of the Assistant
Deputy Administrator for Military Application and Stockpile Operations.
The first office directs funding to the laboratories for research and
development, while the second office directs funding for engineering
development and production to the laboratories and production sites.
According to NNSA*s Life Extension Program Management Plan, both
organizations also share responsibilities. Both oversee life extension
program execution; ensure that the life extension program baseline, if
successfully accomplished, will meet customer requirements; and provide
life extension program information to higher levels for review. The
management plan also stipulates that each life extension shall have one
program manager and one deputy program manager, with one being assigned
from each of the two aforementioned organizations, and that these two
individuals will share program management responsibilities.
NNSA Has Not While NNSA*s fiscal year 2003 budget request did not provide
a clear picture
Provided Congress of all activity necessary to complete the Stockpile Life
Extension Program,
NNSA has begun to take action to produce a more comprehensive and with a
Clear Picture of
reliable picture of the program for fiscal year 2004 and beyond. With the
Stockpile Life
respect to fiscal year 2003, NNSA did not develop a comprehensive
Extension Program
Stockpile Life Extension Program budget because historically it has
developed its budget by broad function* such as research and
Budget or Reliable development* rather than by individual weapon system or
program
Budget Figures activity such as the Stockpile Life Extension Program. NNSA
provided the
Congress with supplementary information in its fiscal year 2003 budget
request that attempted to capture the budget for the Stockpile Life
Extension Program; however, this information was not comprehensive because
it did not include the budget for activities necessary to successfully
complete the life extension efforts. For example, the budget for high
explosives work needed to support three life extension efforts was
shown in a different portion of NNSA*s budget request. Recently NNSA has
decided, after forming a task force to study the issue, to budget and
manage by weapon system beginning with its fiscal year 2004 budget
request, with this transition officially taking place with congressional
approval of the fiscal year 2005 budget request. As a result, NNSA*s
fiscal year 2004 budget request was more comprehensive because it
attributed a larger portion of the Defense Programs* budget to the life
extension program. NNSA*s fiscal
year 2003 and 2004 budget requests were also not reliable because the data
used to develop them had not been formally reviewed* through a process
known as validation* as required by DOE directive. Instead, NNSA relied on
more informal and less consistent analyses. NNSA officials have stated
that a formal budget validation process would be reintroduced for the
fiscal
year 2005 budget cycle. NNSA Developed Its Budget
NNSA*s congressional budget request for fiscal year 2003 did not contain a
Requests by Broad Function
comprehensive, reliable budget for the Stockpile Life Extension Program
Rather Than by Individual
or the individual weapon systems undergoing refurbishment. NNSA Weapon
System developed its budget by broad function* such as Campaigns, Directed
Stockpile Work, and Readiness in Technical Base and Facilities* rather
than by individual weapon system or program activity such as the Stockpile
Life Extension Program.
While the Congress has accepted previous NNSA budget submissions as
structured, it also has requested detailed information on NNSA*s stockpile
life extension efforts. Specifically, the fiscal year 2002 Energy and
Water
Development Appropriations Act conference report directed NNSA to include
detailed information by weapon system in the budget justification
documents for its fiscal year 2003 and subsequent presidential budget
requests to Congress. The conference report also indicated that the budget
should clearly show the unique and the fully loaded cost of each weapon
activity, including the costs associated with refurbishments, conceptual
study, and/ or the development of new weapons. NNSA responded to the
congressional requirement by providing an unclassified table in an annex
to its fiscal year 2003 budget that contained data on the budget request
for the four individual life extensions. This data, however, did not
contain budget funding for work outside the Directed Stockpile Work
program activity that is required to carry out the life extensions. For
example: The narrative associated with the High Explosives Manufacturing
and Weapons Assembly/ Disassembly Readiness Campaign indicates that $5.4
million, or an 80 percent funding increase, was needed in fiscal year
2003 to support the B- 61, W- 76, and W- 80 refurbishments. The narrative
did not provide a breakdown by individual refurbishment. However, NNSA*s
implementation plan for this campaign indicated that nearly $50 million
would be needed to support the three refurbishments over fiscal years 2002
through 2006.
The narrative associated with an expansion project at the Kansas City
plant within the Readiness in Technical Base and Facilities program
activity indicated that $2.3 million was needed in fiscal year 2003 and
$27.9 million was needed in the outyears to support the B- 61, W- 76, and
W- 87 refurbishments. The narrative also indicated that this expansion was
required in order to meet first production unit schedules associated with
the refurbishments.
In addition, a significant portion of the funding in the annex table was
not assigned to any specific refurbishment but rather was included under a
budget line item termed *multiple system.* NNSA officials told us they did
not ask field locations to break down the multiple system funding by
individual refurbishment because this funding was for *general capability*
activities that would continue to be required even if a weapon system were
cut. Further, they said that there was currently no good allocation
scheme, so a breakdown by weapon system would be inaccurate and,
therefore, serve no useful purpose. However, NNSA officials provided us no
information indicating that NNSA had ever studied possible allocation
schemes or showing that allocation was not feasible. Moreover, according
to the DOE*s chief financial officer, NNSA can and should break out the
multiple system funding by weapon system. This official indicated that
doing so would put the budget in line with presidential guidance and
Office of Management and Budget objectives that advocate presenting a
budget by product rather than by process. In commenting on our report,
NNSA stated
that DOE*s chief financial officer had no basis for making any assertions
about whether NNSA should break out the multiple system funding by weapon
system. However, the chief financial officer has responsibility for
ensuring the effective management and financial integrity of DOE*s
programs.
More broadly, because NNSA provided the Congress with a table by weapon
system in a budget annex and in Nuclear Weapon Acquisition Reports, the
agency questioned the need for further identification of the Stockpile
Life Extension Program in the fiscal year 2003 budget. 6 Agency officials,
including the Deputy Administrator for Defense Programs, told us 6 Nuclear
Weapon Acquisition Reports are intended to provide a comprehensive look at
program progress by providing information on past performance, anticipated
changes, and variances from planned cost, schedule, and performance
estimates from program inception to completion, regardless of the
program*s stage of development. In our report, NNSA: Nuclear Weapon
Reports Need to Be More Detailed and Comprehensive, GAO- 02- 889R
(Washington, D. C.: July 3, 2002), we commented on the adequacy of these
reports.
that NNSA was reluctant to budget by weapon system because it would like
to retain the *flexibility* the current budget structure affords the
agency in responding to unanticipated demands and shifting priorities in
the Stockpile Stewardship Program. Officials expressed concern that
dissemination of more detailed Stockpile Life Extension Program
information would encourage the Congress to cut the most expensive weapon
system or systems. Furthermore, they asserted that eliminating a weapon
system would not save all of the funds associated with that weapon system,
because a certain portion would be fixed costs that would have to be
transferred to the remaining users.
During the course of our work, however, NNSA has begun to take action to
produce a more comprehensive budget for the Stockpile Life Extension
Program. Specifically, NNSA decided, after forming a task force to study
the issue, to begin budgeting and managing by weapon system in the fiscal
year 2004 budget. Starting with that budget, the agency supplied to the
Congress a classified annex that allocated more of the costs that were in
the multiple system line item to individual weapon systems. In addition,
NNSA officials said that more than $100 million that had been included in
the Readiness in Technical Base and Facilities activity was moved to the
Directed Stockpile Work activity. However, for fiscal year 2004, no
refurbishment- related work in the Campaigns activity has been moved.
NNSA officials said that during the fiscal year 2005 budget cycle the
agency will review the Readiness Campaigns activity to determine which
portion of that activity could also be attributed to weapon systems. NNSA
officials indicated the agency decided not to implement all budget changes
in fiscal year 2004 in order to ensure that classification concerns are
resolved, contractors have time to modify their accounting systems as
needed, and NNSA has time to fully understand the costs and
characteristics of managing, budgeting, and reporting by weapon system.
NNSA Plans to Resume NNSA*s budget requests for fiscal years 2003 and 2004
were not reliable
Activities to Validate because the data used to develop the budgets have
not been formally
Program Budget Estimates reviewed* through a process known as validation*
as required by DOE
directive. Instead, NNSA has relied on a review that has become more
informal and less consistent.
Specifically, DOE Order 130.1, on budget formulation, requires budget
requests to be based on estimates that have been thoroughly reviewed and
deemed reasonable by the cognizant field office and headquarters program
organization. The order further requires field offices to conduct
validation
reviews and submit documentation and to report any findings and actions to
headquarters. A proper validation, as described by DOE*s Budget
Formulation Handbook, requires the field office to review budget data
submissions in detail, sampling 20 percent of the submissions every year
such that 100 percent would be evaluated every 5 years.
NNSA officials indicated that no formal validation has been done with
respect to refurbishment research and development funding. With respect to
refurbishment production funding, NNSA officials described their
validation review as a *reasonableness* test regarding the budget*s
support of a program*s needs based on a historical understanding of
appropriate labor, materials, and overhead pricing estimates. NNSA
officials acknowledged that, in recent years, the agency has not fulfilled
the budget validation requirement as specified in DOE Order 130.1, and
that the validation review that has been used has become increasingly less
formal and less consistent. Prior to this reduction in the quality of the
review process, the DOE Albuquerque Operations Office performed formal
validation reviews at production plant locations through fiscal year 1996.
Since then, the Albuquerque office has relied on a pilot project by which
the four contractors directly under its jurisdiction* Sandia National
Laboratories, Los Alamos National Laboratory, Kansas City plant, and the
Pantex plant* submitted self- assessments for Albuquerque*s review. For
the fiscal year 2003 and 2004 budgets, however, NNSA officials said
headquarters no longer requested field validation as the agency commenced
implementation of a new planning, programming, budgeting, and evaluation
process. One NNSA field office, we found, still chose to perform
validation reviews
of the contractors under its jurisdiction. Specifically, the Oakland
office performed a validation review of the Lawrence Livermore National
Laboratory. However, other locations, such as the Kansas City plant, the
Y- 12 plant, and the Savannah River site did not have their budgets
reviewed
by any NNSA field office. We also were informed by NNSA officials that
NNSA headquarters staff did not review the validation reports that were
done, as required by DOE Order 130.1, before transmitting the fiscal year
2003 and 2004 budgets to DOE*s budget office, which then submitted them to
the Office of Management and Budget.
NNSA*s director of the Office of Planning, Programming, Budgeting, and
Evaluation said that her office plans to introduce a formal validation
process for the fiscal year 2005 budget cycle, adding that such a process
was not used for the fiscal year 2004 budget cycle because of time
constraints. NNSA documentation regarding the validation process to be
used specifies that validation teams will be led by field federal staff
elements working with headquarters program managers; the Office of
Planning, Programming, Budgeting, and Evaluation staff; and others.
However, NNSA documentation is silent on how the validation process will
be conducted. Therefore, it is unclear if the validation process will be
performed thoroughly and consistently across the weapons complex and if
the process will be formally documented, as required by DOE Order 130.1.
NNSA Does Not Have a Once a budget is established, having reliable
information on the cost of System for Tracking
federal programs is crucial to the effective management of government
operations. Such information is important to the Congress and to federal
Refurbishment Costs
managers as they make decisions about allocating federal resources, by
Weapon System
authorizing and modifying programs, and evaluating program performance.
The Statement of Federal Financial Accounting Standards (SFFAS) Number 4,
*Managerial Cost Accounting Standards,* establishes the framework under
which such cost information is gathered. In particular, the standard
states that federal agencies should accumulate and report the costs of
their activities on a regular basis for management information purposes.
The standard sees measuring costs as an integral part of measuring the
agency*s performance in terms of efficiency and costeffectiveness. The
standard suggests that such management information can be collected
through the agency*s cost accounting system or through specialized
approaches* known as cost- finding techniques. Regardless of the approach
used, SFFAS Number 4 states that agencies should report the full costs of
the outputs they produce. However, under Federal Acquisition Regulations
and SFFAS Number 4, NNSA*s contractors do have the flexibility to develop
the managerial cost accounting methods that are best suited to their
operating environments.
NNSA does not have a system for accumulating and tracking stockpile life
extension program costs. Similar to its approach in the budget arena, NNSA
currently does not collect cost information for the stockpile life
extension program through the agency*s accounting system. This is because
NNSA has defined its programs and activities, and thus the cost
information it collects, at a higher level than the stockpile life
extension program. Specifically, DOE collects cost information to support
its Defense mission area. 7 The Defense mission area includes the types of
broad activities mentioned earlier, such as Campaigns, Directed Stockpile
Work, and Readiness in Technical Base and Facilities. Moreover, DOE*s
current accounting system does not provide an adequate link between cost
and performance measures. Officials in DOE*s Office of the Chief Financial
Officer recognize these shortcomings and are considering replacing the
agency*s existing system with a system that can provide managers with cost
information that is better aligned with performance measures.
Moreover, NNSA does not accumulate life extension program cost information
in the agency*s accounting system because NNSA does not require its
contractors to collect information on the full cost of each life extension
by weapon system. Full costs include the costs directly associated with
the production of the item in question* known as direct
costs* as well as other costs* known as indirect costs, such as overhead*
that are only indirectly associated with production. SFFAS Number 4 states
that entities should report the full cost of outputs in its
general- purpose financial reports. General- purpose financial reports are
reports intended to meet the common needs of diverse users who typically
do not have the ability to specify the basis, form, and content of the
reports they receive.
Direct costs are captured within NNSA*s Directed Stockpile Work activity
and include such things as research and development or maintenance.
However, NNSA*s Directed Stockpile Work activity also includes indirect
costs that benefit more than one weapon system or life extension. Examples
of indirect costs within Directed Stockpile Work include evaluation and
production support costs. Indirect costs are also found within Campaigns
and Readiness in Technical Base and Facilities activities. Specifically,
as noted earlier, NNSA*s budget justification identifies certain
Campaign activities, which represent an indirect cost, that support 7 DOE
has defined its goals according to four mission areas, which are Energy,
Defense, Science, and Management.
individual life extensions. A portion of both of these sources of indirect
costs could be allocated to individual weapon systems; however, NNSA does
not currently require such an allocation by its contractors.
It is important to recognize that under SFFAS Number 4, NNSA*s contractors
do have the flexibility to develop the cost accounting methodologies that
are best suited to their operating environments. The contractors involved
in the life extension program are structured differently and have
different functions. For example, Lawrence Livermore National Laboratory
is run by the University of California and conducts mostly research that
may or may not produce a tangible product. In contrast, the production
plants are run by private corporations which produce parts, as is the case
at the Kansas City or Y- 12 plants, or assemble the parts into a completed
weapon, as is done at the Pantex plant. As a result, even if NNSA required
contractors to report the full cost of individual refurbishments, some
differences in the data, which reflects the contractor*s different
organizations and operations, would still exist.
While the agency*s accounting system does not accumulate and report costs
for the Stockpile Life Extension Program or its individual refurbishments,
NNSA has developed several mechanisms to assist the Congress and program
managers who oversee the life extension effort. Specifically:
In previous years, NNSA has requested that its contractors provide
supplemental data on actual costs by weapon system. These data have been
used to respond to congressional information requests. However, similar to
the way NNSA addresses its budget request, NNSA has not
required its contractors to allocate the supplemental cost information in
the multiple system category to individual refurbishments. In addition,
also similar to the way it approached its budget presentation, NNSA has
not required its contractors to include the costs for supporting
activities, such as Campaigns and Readiness in Technical Base and
Facilities in the reports.
Some life extension program managers require their contractors to
provide them with status reports on the individual refurbishments they are
overseeing. However, these reports are prepared inconsistently or are
incomplete. For example, while the W- 76 program manager requires monthly
reports, the B- 61 program manager requires only quarterly reports. In
contrast, the W- 80 and W- 87 program managers do not require any routine
cost reporting. NNSA is trying to develop a
consistent method for its life extension program managers to request cost
information; however, NNSA officials have stated that NNSA has to first
define what its needs are. Similar to the supplemental cost data
described above, these status reports do not contain all of the costs for
supporting activities, such as Campaigns and Readiness in Technical Base
and Facilities.
Finally, as part of the production process, NNSA*s contractors prepare a
report known as the Bill of Materials. The Bill of Materials accumulates
the materials, labor, and manufacturing costs of the production of a
weapon, starting with an individual part and culminating in the final
assembly of a complete weapon. NNSA uses the resulting Master Bill of
Materials to record* capitalize* the production costs of each weapon
system in its accounting system. However, the costs accumulated by the
Bill of Materials include only production costs and do not include costs
such as related research and development costs or costs associated with
Campaigns and Readiness in Technical Base and Facilities.
Finally, despite the importance of reliable and timely cost information
for both the Congress and program managers, similar to the situation we
found with the budget, life extension program costs are not independently
validated either as a whole or by individual weapon system. Specifically,
neither the DOE Inspector General nor DOE*s external auditors specifically
audit the costs of the life extension program. While both parties have
reviewed parts of the life extension program* for example, the Inspector
General recently reviewed the adequacy of the design and implementation of
the cost and schedule controls over the W- 80 refurbishment* their work
has not been specifically intended to provide assurance that all life
extension program costs are appropriately identified and attributed to the
life extension program as a whole or to the individual refurbishments.
Management Problems The management of critical programs and projects has
been a longstanding
Remain Despite NNSA problem for DOE and NNSA*s Office of Defense Programs.
According to NNSA*s fiscal year 2001 report to the Congress on
Improvements construction project accomplishments, management costs on DOE
projects are nearly double those of other organizations, and DOE projects
take approximately 3 years longer to accomplish than similar projects
performed elsewhere. As a result, NNSA has repeatedly attempted to improve
program and project management. For instance, in September 2000, the
Office of Defense Programs initiated an improvement campaign to develop
solutions to its project management problems and to enact
procedural and structural changes to the Defense Programs* project
management system. Later, in August 2002, the Office of Defense Programs
established a project/ program management reengineering team. As the basis
for assembling that team, its charter noted that NNSA does not
manage all projects and programs effectively and efficiently. However,
despite these NNSA attempts at improvement, management problems associated
with the stockpile life extension program persist. NNSA Does Not Have an
Front- end planning is, in many ways, the most critical phase of an
activity Adequate Planning Process
and the one that often gets least attention. The front- end planning
process to Guide the Individual Life
defines the activity. The decisions made in this phase constrain and
Extensions and the Overall support all the actions downstream and often
determine the ultimate
Program success or failure of the activity. NNSA, we found, does not have
an
adequate planning process to guide the individual life extensions and the
overall program. Specifically, NNSA has not (1) established the relative
priority of the Stockpile Life Extension Program against other defense
program priorities, (2) consistently established the relative priority
among the individual refurbishments, (3) developed a formalized list of
resource and schedule conflicts between the individual refurbishments in
order to systematically resolve those conflicts, and (4) finalized the
individual refurbishment project plans on a timely basis. Priority ranking
is an important decision- making tool at DOE. It is the
principal means for establishing total organizational funding and for
making tradeoffs between organizations. DOE uses such a ranking at the
corporate level to make departmental budget decisions. To perform that
ranking, DOE formally requires each of its organizational elements to
annually submit to the DOE Office of Budget reports that provide a budget
year priority ranking and a ranking rationale narrative. In discussing
this matter with an NNSA budget official, we found that NNSA had not
submitted these priority- ranking reports for fiscal years 2002, 2003, and
2004, and this official was also unable to explain why. NNSA officials, in
commenting on our report, indicated that NNSA is not required to follow
the DOE requirement regarding priority budget ranking; however, these
officials could not provide us with any policy letter supporting their
position that NNSA has been officially exempted from this requirement.
Prioritization is also an important part of NNSA*s strategic planning
process. According to that process, priorities must be identified in an
integrated plan developed by each major NNSA office. This integrated plan
links sub- office program plans, such as the plan for refurbishing the B-
61,
to NNSA*s strategic plan. With respect to the Office of Defense Programs,
however, we found that this office has not finalized an integrated plan.
According to an NNSA official, Defense Programs developed a draft plan in
January 2002 but has not completed that plan and has instead devoted
itself
to working on the sub- office program plans. Absent a finalized integrated
plan, it is unclear how sub- office program plans could be developed and
properly linked to NNSA*s strategic plan.
According to the director of Defense Programs* Office of Planning, Budget,
and Integration, prioritizing Defense Programs activities is essential.
This is because the priorities of Defense Programs, its contractors, and
the Department of Defense, which is Defense Programs* customer for life
extension refurbishments, may not necessarily be the same. In this
official*s view, the issue of setting priorities needs to be addressed.
This
official indicated that the Office of Defense Programs developed a draft
list of activities in August 2001, but did not prioritize those
activities. Included among those activities were efforts to continue
stockpile surveillance activities and to complete planned refurbishments
on schedule. For fiscal years 2003 and 2004, according to this official,
Defense Programs published
budget- related guidance regarding priorities, but he did not believe the
guidance was specific enough. This official added that, for fiscal year
2005, the guidance would have sufficient detail.
While prioritizing work among Office of Defense Programs activities such
as stockpile surveillance and refurbishment is important, it is also
important to prioritize work within those activities. In the competition
for budget funds, the Office of Defense Programs must continually ask
which of the three refurbishments undergoing research and development work
is a higher priority and should be given funding preference. However, NNSA
has not taken a consistent position on prioritizing the life extensions.
For instance, in October 2002, NNSA indicated by memorandum that, because
of the continuing resolution for fiscal year 2003, the priority order for
the three refurbishments would be the W- 76, followed by the B- 61,
followed by the W- 80. In November 2002, however, NNSA indicated by
memorandum that the three refurbishments had the same priority. In neither
memorandum did NNSA identify the criteria or reasons for these two
contradictory decisions. According to NNSA officials, no priority criteria
have been developed, and each of the three refurbishments is equal in
priority.
This lack of a definitive decision on the priority of the three
refurbishments has caused confusion. For example, the Los Alamos National
Laboratory
decided in early calendar year 2002 to unilaterally transfer funds from
the W- 76 refurbishment to the B- 61 because Los Alamos believed that the
B- 61 work was more important. As a result of that decision, the W- 76 had
to slip a research reactor test from fiscal year 2002 to fiscal year 2003.
Although this test was not on the critical path for completing the W- 76
refurbishment, NNSA had identified the reactor test as a fiscal year 2002
metric for measuring the refurbishment*s progress. In February 2002, NNSA
questioned Los Alamos regarding its decision. In its March 2002 reply, Los
Alamos indicated that it had found a mechanism to fully fund the W- 76
refurbishment. However, because the reactor test had been cancelled, Los
Alamos indicated that it was no longer possible to complete the test in
fiscal year 2002, as planned. Therefore, Los Alamos stated that its goal
was to begin this test in the first part of fiscal year 2003. In another
case, the Y- 12 plant decided to suspend or not initiate four projects at
the beginning
of fiscal year 2003 in support of the W- 76 refurbishment because Y- 12
believed that these projects were a lower priority than other work to be
conducted. In a November 2002 memorandum, NNSA questioned this decision.
NNSA indicated that these projects were integrated with another project,
which was needed to ensure a complete special material manufacturing
process capability in time to support the W- 76 refurbishment.
Accordingly, NNSA stated that it was providing $2.9 million in unallocated
funds so that work on the projects could resume as soon as possible to
support the refurbishment schedule.
While these examples represent only two documented funding conflicts,
according to each of the refurbishment program managers, additional
resource and schedule conflicts exist among the three refurbishments.
Specifically, the refurbishment program managers agreed that conflicts, or
areas of competition, existed on many fronts, including budget resources,
facilities, and testing. For example, the three refurbishments compete for
certain testing facilities at Los Alamos National Laboratory and at the
Sandia National Laboratories, and for the use of certain hardware at the
Y- 12 plant. Additional conflicts are also present that may affect only
two of
the three refurbishments. Those identified included such activities as
campaign support, research, and development at the Los Alamos National
Laboratory, and use of hardware production at the Y- 12 plant. The Deputy
Assistant Administrator for Military Application and Stockpile Operations
confirmed that the areas of competition identified by the individual
refurbishment program managers represented a fair portrayal of the
conflicts that exist between the refurbishments. He indicated that while
no formalized list of resource and schedule conflicts exist, the subject
of refurbishment conflicts is routinely discussed at each refurbishment
program review meeting. These meetings are held monthly to discuss one of
the refurbishments on a rotating basis.
Finally, fundamental to the success of any project is documented planning
in the form of a project execution plan. With regard to the Stockpile Life
Extension Program, NNSA has had difficulty preparing project plans on a
timely basis. In its report on the lessons learned from the W- 87
refurbishment, NNSA noted that one cause of the W- 87*s problems was that
the project plan was prepared too late in the development cycle and was
not used as a tool to identify problems and take appropriate actions. 8 As
to the W- 76, W- 80, and B- 61 refurbishments, we found that NNSA had not
completed a project plan on time and with sufficient details, as
stipulated in NNSA guidance for properly managing the reburbishments.
According to NNSA*s June 2001 Life Extension Program Management Plan, a
final project plan is to be completed at the end of Phase 6.2A activities
(design definition and cost study). The Life Extension Program Management
Plan offers numerous guidelines detailing the elements that should be
included in the project plan. Those elements include, among others, team
structure and the roles of each team and individual members; an integrated
program schedule identifying all tasks to be accomplished for the success
of the project; life cycle costs; and a documentation of the facility
requirements needed to support all portions of the refurbishment. This
management plan was issued as guidance, rather than as a formally
approved requirements document, pending the resolution of role and
responsibility issues within NNSA.
Of the three refurbishments, only the B- 61 has completed its project plan
on schedule. According to NNSA documentation, the B- 61 reached the end of
phase 6.2A in October 2002. We confirmed that a project plan had been
completed at that time, but the project plan did not include all life
cycle costs, such as Campaign costs and Readiness in Technical Base and
Facilities costs. In this regard, DOE*s project management manual defines
life cycle costs as being the sum total of the direct, indirect,
recurring, nonrecurring, and other related costs incurred or estimated to
be incurred in the design, development, production, operation,
maintenance, support, and final disposition of a project.
8 Preliminary Lessons Learned Report for the W- 87 Life Extension Program,
Sept. 23, 2001.
Conversely, an assessment of the W- 76 refurbishment indicates that the
project plan for that refurbishment is 3 years late and also does not
include all life cycle costs. According to NNSA documentation, the W- 76
reached the end of phase 6.2A in March 2000. As of July 2003, a final
project plan
had not yet been completed. The W- 76 project manager told us that he has
been using a working draft of a project plan dated August 2001. He
indicated that he did not finalize the project plan because the Life
Extension Program Management Plan published in June 2001 had yet to be
issued as a formal requirement. With the reissuance of the management plan
as a requirement in January 2003, an NNSA official said that a finalized
project plan should be completed by the end of fiscal year 2003. Likewise,
an assessment of the W- 80 refurbishment indicates that the project plan
for that refurbishment is more than 2 years late and also does not include
all life cycle costs. According to NNSA documentation, the W- 80 reached
the end of phase 6.2A in October 2000. As of July 2003, a
complete project plan had not been prepared. According to the W- 80
program manager, the refurbishment does not yet have an integrated project
schedule as described in the Life Extension Program Management Plan. The
W- 80 program manager said that a finalized project plan with this
integrated schedule, which shows all tasks associated with the
refurbishment as well as all linkages, should be completed by mid- to-
late summer 2003. The W- 80 program manager added that this integrated
schedule was not completed earlier because of personnel changes on this
refurbishment.
NNSA Does Not Yet Have an DOE*s portfolio of projects demands a
sophisticated and adaptive
Adequate Management management structure that can manage project risks
systematically; Structure that Fixes Roles,
control cost, schedule, and scope baselines; develop personnel and other
Responsibilities, and
resources; and transfer new technologies and practices efficiently from
one Authority for Each Life
project to another, even across program lines. With respect to the
Stockpile Life Extension Program, NNSA does not have an adequate Extension
management structure which ensures rigor and discipline, fixes roles,
responsibilities, and authority for each life extension, or develops key
personnel. Specifically, NNSA has not (1) defined the life extensions as
projects and managed them accordingly, (2) clearly defined the roles and
responsibilities of those officials associated with the Stockpile Life
Extension Program, (3) provided program managers with sufficient authority
to carry out the refurbishments, or (4) given program and deputy program
managers proper project/ program management training.
DOE projects commonly overrun their budgets and schedules, leading to
pressures for cutbacks that have resulted in facilities that do not
function as intended, projects that are abandoned before they are
completed, or
facilities that have been delayed so long that, upon completion, they no
longer serve any purpose. 9 The fundamental deficiency for these problems
has been a DOE organization and culture that has failed to embrace the
principles of good project management. The same can be said for NNSA*s
view of the individual life extension refurbishments. Specifically, NNSA
has not established that the individual refurbishments are projects and
managed them accordingly. According to the DOE directive, a project is a
unique effort that, among other things, supports a program mission and has
defined start and end points. Examples of projects given in the DOE
directive include planning and execution of construction, renovation, and
modification;
environmental restoration; decontamination and decommissioning efforts;
information technology; and large capital equipment or technology
development activities. To the extent that an effort is a project, the DOE
directive dictates that the project must follow a structured acquisition
process that employs a cascaded set of requirements, direction, guidance,
and practices. This information helps ensure that the project is completed
on schedule, within budget, and is fully capable of meeting mission
performance and environmental, safety, and health standards.
According to the Deputy Assistant Administrator for Military Application
and Stockpile Operations, the individual life extension refurbishments are
projects but have not been officially declared so. This official indicated
that the primary reason for the lack of such a declaration is an
organizational culture, including those working at NNSA laboratories,
which often does not grasp the benefits of good project management. This
official also said that the organization is moving in the direction of
embracing project management but is doing so at an extremely slow pace.
If NNSA declared the individual life extension refurbishments to be
projects, many useful project management tools would become available to
the NNSA program mangers who are overseeing the refurbishments. Those
tools include, for example, conducting an independent cost estimate, which
is a *bottom- up* documented, independent cost estimate that has
9 Improving Project Management in the Department of Energy, National
Research Council, 1999.
the express purpose of serving as an analytical tool to validate,
crosscheck, or analyze cost estimates developed by the sponsors of the
project. Another tool is the use of earned value reporting, which is a
method for
measuring project performance. Earned value compares the amount of work
that was planned at a particular cost with what was actually accomplished
within that cost to determine if the project will be completed
within cost and schedule estimates. A further tool is the reporting of
project status on all projects costing over $20 million to senior DOE and
NNSA management using DOE*s Project Analysis Reporting System. NNSA
refurbishment program managers with whom we spoke indicated that
management of the refurbishments would be improved if tools such as
independent cost estimates and earned value reporting were used.
With respect to roles and responsibilities, clearly defining a project*s
organizational structure up front is critical to the project*s success. In
a traditional project management environment, the project manager is the
key player in getting the project completed successfully. But other
members of the organization also play important roles, and those roles
must be clearly understood to avoid redundancy, miscommunication, and
disharmony. With respect to the Stockpile Life Extension Program, NNSA has
yet to clearly define the roles and responsibilities of all parties
associated with the program. NNSA*s Life Extension Program Management Plan
dated June 2001 was the controlling document for defining refurbishment
roles and responsibilities from its issuance through calendar year 2002.
Our review of that plan, however, found a lack of clarity regarding who
should be doing what. For instance, the plan is unclear on which NNSA
office is responsible for each phase of the 6. X process. Illustrating
that point, refurbishment program managers with whom we spoke generally
said there is confusion as to which NNSA office* either the Office of
Research, Development, and Simulation or the Office of Military
Application and Stockpile Operations* has the primary responsibility when
the refurbishment moves to phase 6.3 (development engineering) of the 6. X
process. In addition, according to the plan, the program manager and
deputy program manager have identical responsibilities. The plan states
that the program manager and deputy program manager shall discuss
significant aspects of the refurbishment with each other and should reach
consensus concerning important aspects of the scope, schedule, and cost.
The plan further states that absent consensus on an issue, the program
manager may decide; however, any unresolved conflicts between the two can
be addressed to senior management for resolution. Further, the plan is
silent on the roles and
responsibilities of the NNSA program and deputy program managers versus
the project manager at a laboratory or at a production plant site. What
actions the laboratory or plant project managers can take on their own,
without NNSA review and concurrence, are not specified in the plan.
Instead, the plan simply states that laboratory and plant project managers
provide overall management of life extension refurbishment activities at
their facilities.
In January 2003, NNSA reissued the Life Extension Program Management plan
after making only minor changes to the document. The reissued management
plan indicates that the program manager*s role will transition from the
NNSA Office of Research, Development, and Simulation to the NNSA Office of
Military Application and Stockpile Operations during phase 6. 3. However,
the reissued plan does not specify when, during phase 6.3, this transition
will occur. In addition, the reissued plan does not further clarify the
roles and responsibilities between the program and deputy program managers
and the project manager at a laboratory or at a production plant site.
In addition to clear roles and responsibilities, project managers must
have the authority to see the project through. Regarding project
management, authority is defined as the power given to a person in an
organization to use resources to reach an objective and to exercise
discipline. NNSA*s lessons learned report on the W- 87 refurbishment noted
that there was an air of confusion in resolving issues at the Kansas City
plant because project leaders were not formally assigned and provided with
the tools (authority, visibility, and ownership) necessary to properly
manage the effort. 10 Our
report on the W- 87 refurbishment prepared in calendar year 2000 found
similar problems regarding the lack of authority. 11 With respect to the
Stockpile Life Extension Program, NNSA has still not yet given the program
managers the authority to properly manage the refurbishments.
10 Preliminary Lessons Learned Report for the W- 87 Life Extension
Program, Sept. 23, 2001. 11 Nuclear Weapons: Improved Management Needed to
Implement Stockpile Stewardship Program Effectively, GAO- 01- 48
(Washington, D. C.: Dec. 14, 2000).
Five of the six program or deputy program managers associated with the B-
61, W- 76, and W- 80 refurbishments believed they had not been given the
authority to properly carry out the refurbishments. 12 For instance, one
program manager said he has neither the control nor the authority
associated with his refurbishment. He added that the program managers
ought to be given the authority so that the laboratories report directly
to them. As the situation currently stands, the laboratories will go over
the heads of the program manager to senior NNSA management to get things
done the laboratories* way. According to a deputy program manager on
another refurbishment, the program managers do not have enough authority
and should have control of the refurbishments* budgets. He
elaborated by explaining how one laboratory unilaterally decided to take
funds away from one refurbishment and give it to another without
consulting with any of the program managers. In this deputy program
manager*s view, if funds need to be transferred from one refurbishment to
another, then the laboratories should be required to get the concurrence
of NNSA management. A program manager on another refurbishment stated that
he does not have sufficient authority because he lacks control of the
budget. He indicated that funds for his refurbishment are allocated to the
various laboratory and plant sites, but he is not included in the review
and concurrence loop if the sites want to transfer funds from one activity
to another.
The Assistant Deputy Administrator for Military Application and Stockpile
Operations said he recognized the program manager*s concerns and has
advocated giving the program managers greater authority. He also indicated
that greater authority might eventually be granted. However, he explained
that at the moment, the Office of Defense Programs is focused
on a recently completed NNSA reorganization. After that matter is
sufficiently addressed, greater authority for the program managers may
result.
Turning to the issue of training, competent project management
professionals are essential to successful projects. Other federal agencies
and the private sector realized long ago that project management is a
professional discipline that must be learned and practiced. To ensure that
projects are well planned and properly executed, DOE created in 1995 a
competency standard for project management personnel. According to
12 The sixth individual, a deputy program manager on one of the
refurbishments, was not available to us for discussions due to an illness.
this standard, it is applicable to all DOE project management personnel
who are required to plan and execute projects in accordance with
departmental directives regarding project management. The standard
identifies four categories of competencies that all project management
personnel must attain and states that attainment must be documented. The
categories are (1) general technical, such as a knowledge of mechanical,
electrical, and civil engineering theories, principles, and techniques;
(2) regulatory, such as a knowledge of applicable DOE orders used to
implement the department*s project management system; (3) administrative,
such as a knowledge of the project reporting and assessment system as
outlined in DOE orders; and (4) management,
assessment, and oversight, such as a knowledge of DOE*s project management
system management roles, responsibilities, authorities, and organizational
options.
Of the six program and deputy program managers assigned to the W- 76, B-
61, and W- 80 refurbishments, NNSA records indicate that only one of the
six (the program manager for the W- 76) has achieved 100 percent
attainment of the aforementioned standards. Regarding the other five, NNSA
records indicate that the deputy program manager for the B- 61 has
achieved 30 percent attainment of the required competencies contained in
the standard, while the remaining four are not enrolled under the
qualification standards program. According to one of the three program
managers with whom we spoke, the problems with the W- 87 refurbishment
were caused, in part, because the assigned program manager was not
qualified to perform all required tasks. NNSA records confirm that that
particular W- 87 program manager was also not enrolled in the project
management qualification program.
Whereas NNSA program managers are required to meet qualifications
standards to discharge their assigned responsibilities, contractor project
management personnel we contacted are not required to meet any project
management standards. According to W- 76, B- 61, and W- 80 refurbishment
project managers at the Sandia National Laboratories, Lawrence Livermore
National Laboratory, and Los Alamos National Laboratory, their respective
laboratories have no requirements that must be met before a person becomes
a project manager, and none of the managers had attained project
management certification through their previous work assignments and
experiences. NNSA officials also acknowledge that neither DOE nor NNSA
orders require contractor project management personnel to be properly
trained and certified.
NNSA Does Not Have an Effective oversight of project performance is
dependent on the systematic
Adequate Process for and realistic reporting of project performance data.
Senior management
Overseeing Life Extension need such data to be able to detect potentially
adverse trends in project
Program Costs and progress and to decide when intervention is necessary.
With respect to the
Stockpile Life Extension Program, NNSA does not have an adequate Schedules
process for reporting life extension changes and progress, despite the
fact that cost growth and schedule slippage are occurring.
In July 2002, the Office of Defense Programs issued program review
guidance to enable advance planning, provide consistency, set clearer
expectations, and establish a baseline process on which to improve life
extension, program reviews. Various review meeting formats were
articulated including a full program review of each refurbishment to be
conducted monthly on a rotating basis. The goals and objectives of the
full program review were to inform management of project status, convince
management that the refurbishment is well managed, gain management*s
assistance in resolving issues that require its involvement, and identify
management decision points and obtain authority to execute risk mitigation
plans.
Our review of the most recent program review reports prepared on the
individual refurbishments showed that they contained limited information
regarding cost growth and schedule changes against established baselines.
These reports, which are prepared for senior NNSA management, show
whether the respective refurbishment is on track to spend all fiscal year
funding, but not whether the actual work completed has cost more or less
than planned. For example:
According to W- 76 program review reports presented in November 2002 and
February 2003, the refurbishment was on track to spend all funding
allocated for fiscal year 2003. In addition, the refurbishment was
slightly behind schedule but manageable and within budget. On the other
hand, the presentations gave no specifics on how much the refurbishment is
behind schedule or how well the refurbishment was progressing against a
life cycle cost baseline. Specifically, costs associated with certain
procurements, Campaign costs, Readiness in Technical Base and Facilities
costs, construction costs, and transportation costs which make up the life
cycle costs of the refurbishment were not included. The presentations also
showed that the refurbishment had not met at least two commitments during
fiscal year 2002.
According to the W- 80 program review report presented in December 2002,
the refurbishment was on track to spend all funding allocated for fiscal
year 2003. In addition, the refurbishment was within cost and within
scope, but behind schedule. On the other hand, the report gave no
specifics on how much the refurbishment was behind schedule or how well
the refurbishment was progressing against a life cycle cost baseline. The
presentation further mentioned that the refurbishment had high risks
because, for instance, the Air Force was currently not funding certain
work that must be performed in order to meet the established first
production unit date of February 2006.
As opposed to the above reports, the B- 61 program review reports
presented in January and March 2003 made no summary statements regarding
the refurbishment*s cost and schedule status against established
baselines. The presentations also indicated that the refurbishment is on
schedule to spend all funding allocated for fiscal year 2003. On the other
hand, the presentations showed that the refurbishment has already not met
several commitments for fiscal year 2003, suggesting that the
refurbishment may be behind schedule.
Absent the periodic reporting of specific cost growth and schedule
information to senior NNSA management, we interviewed cognizant NNSA
officials to document any cost growth and schedule changes associated with
the individual refurbishments. These officials recognized that certain
cost growth and schedule changes had occurred for each of the
refurbishments. These officials added that cost growth and schedule
changes are routinely discussed during meetings on the refurbishments.
According to the W- 76 program manager, this refurbishment is slightly
behind schedule. In particular, the W- 76 did not conduct certain
activities on schedule, such as deciding whether to reuse or remanufacture
certain components, conduct a certain reactor test at Los Alamos National
Laboratory, and construct certain facilities at the Y- 12 plant. The
reasons why these activities were late varied. For instance, the decision
to reuse or remanufacture certain components did not occur on schedule,
according to the W- 76 program manager, primarily because the NNSA person
assigned to do the necessary calculations neglected to perform that task.
Conversely, the reactor test at the Los Alamos National Laboratory did not
occur on schedule because the laboratory unilaterally transferred funds
from the W- 76 refurbishment to the B- 61. As to cost growth, the W- 76
will need
about $10.75 million in additional funding in fiscal year 2004. The
funding
is necessary to purchase certain commercial off- the- shelf parts that
were previously not authorized or budgeted for. According to NNSA field
and Sandia National Laboratory officials, it is unlikely that the W- 80
will meet its scheduled first production unit delivery date. Echoing those
sentiments, according to the NNSA program manager, the W- 80 was scheduled
to enter phase 6.4 (production engineering) on October 1, 2002. Now,
however, it is hoped that phase 6.4 will commence in 2003. The NNSA
program manager indicated that the W- 80 has been impacted by a lack of
funding for the refurbishment from the Air Force.
This lack of funding, the NNSA program manager said, has occurred because
of a disconnect in planning between the 6. X process and the Department of
Defense budget cycle. The Air Force had made no plans to allocate money
for the W- 80 in either its fiscal year 2001 or 2002 budgets. Therefore,
several important joint NNSA and Air Force documents have
not been completed. Certain ground and flight tests also lack funding and
have been delayed. In addition, the W- 80 will need an additional $8
million to $9 million in fiscal year 2003 to buy certain commercial off-
the- shelf parts that had been planned but not budgeted for. According to
the Air Force*s Lead Program Officer on the W- 80, the Air Force, because
of an oversight, had no money for the W- 80 in its fiscal years 2001 and
2002
budgets. As a result, he anticipated that the first production unit
delivery date will need to be slipped. He also indicated that he was
working on a lessons learned report due in early 2003 to document the
situation with the W- 80 and help ensure that a similar funding problem
does not occur with future refurbishments. This Air Force official added
that in December 2002 the Air Force finally received the funding necessary
to support the W- 80
refurbishment. According to the NNSA director of the nuclear weapons
stockpile, the W- 80 will need to slip its first production unit date from
February 2006 to April 2007. As a result, NNSA was rebaselining the W- 80
refurbishment. As of July 2003, cost data submitted to NNSA headquarters
from contractor laboratory and production site locations indicate that the
cost to refurbish the W- 80 may increase by about $288 million. NNSA
officials were in the process of determining whether this cost increase
was due to schedule slippage or other factors, such as the sites
underestimating costs in the past.
Finally, certain schedule slippage has already occurred for the B- 61.
According to NNSA*s June 2001 Life Extension Program Management Plan, the
original first production unit delivery date was September 2004. Now,
according to the B- 61 program manager, the new delivery date is June
2006. The program manager indicated that this change was made because NNSA
determined that the September 2004 date was not attainable. As it is, the
B- 61 program manager said, the June 2006 date represents an acceleration
of the phase 6. X process where activities within phases 6.3 (design
definition and cost study) and 6.4 (development engineering) will be
conducted concurrently. Because of that, certain risks are involved. For
instance, some design development will not be fully completed before
production must be initiated to keep the refurbishment on schedule. The B-
61 program manager indicated that the commencement date for phase 6.3 has
already changed from August 2002 to December 2002 because of the Air
Force*s lack of timely action in reviewing certain documentation. As to
cost changes, a decision needs to be made regarding the production of a
particular material. Two NNSA locations, which differ in cost, are being
considered. If the location with the higher cost is selected, then an
additional $10 million will be needed in fiscal year 2004 and beyond.
To gauge the progress of the refurbishments within the Stockpile Life
Extension Program, NNSA, like all federal agencies, uses performance
measures. Performance measures, which are required by the Government
Performance and Results Act of 1993, are helpful to senior agency
management, the Congress, and the public. Performance measures inform
senior agency management as to whether progress is being made toward
accomplishing agency goals and objectives. They are also used by the
Congress to allocate resources and determine appropriation levels.
Performance measures are further used by American taxpayers as a means
for deciding whether their tax funds are being well spent. Unfortunately,
NNSA has not developed performance measures with sufficient specificity to
determine the progress of the three refurbishments that we reviewed. As
mentioned earlier, the agency*s current accounting system does not provide
an adequate link between cost and performance measures.
NNSA identifies performance measures for the W- 80, B- 61, and W- 76 in
three separate and distinct documents. 13 One document is the narrative
associated with NNSA*s fiscal year 2004 budget request for the Directed
Stockpile Work account. Another is the combined program and implementation
plans for the stockpile maintenance program for fiscal years 2002 through
2008. A third is the Future Years Nuclear Security Plan. Performance
measures used in these documents do not identify variance from cost
baselines as a basis for evaluating performance.
13 NNSA also prepares a Selected Acquisition Report on an annual basis on
each of the refurbishments, but these reports do not contain performance
measures.
Performance measures identified in NNSA*s fiscal year 2004 budget request
are general in nature and provide no details regarding cost performance.
According to that budget request, for instance, a performance measure
listed for the B- 61, W- 76, and W- 80 is to complete 100 percent of the
major milestones scheduled for fiscal year 2004 to support the
refurbishments* first production unit date. None of the performance
measures listed in the budget request mention adherence to cost baselines.
Performance measures identified in the combined program and implementation
plans for the Directed Stockpile Work maintenance program dated September
3, 2002, are equally minimal, vague, and nonspecific regarding
refurbishment work. These plans identify performance measures at three
levels* level 1, the Defense Program level,
which is the highest level of actions/ milestones/ deliverables; level 2,
which is the supporting level of actions/ milestones/ deliverables on the
path toward achieving level 1 measures; and level 3, which is the site
level of actions/ milestones/ deliverables on the site path toward
achieving level 2 measures. According to these plans, there are no level 1
performance measures associated with the three refurbishments. For levels
2 and 3, the plans specify that the three refurbishments should meet all
deliverables as identified in other NNSA documents. These plans, we noted,
do not discuss adherence to cost baselines as a deliverable.
Performance measures identified in the Future Years Nuclear Security Plan
are also vague and nonspecific. This plan describes performance targets
that NNSA hopes to achieve in fiscal years 2003 through 2007, but the plan
does not associate funding levels with those targets. Some of the
performance targets apply to the Stockpile Life Extension Program in
general or to particular refurbishments. Regarding the latter, for
example,
in fiscal year 2003, NNSA intends to commence production engineering work
(phase 6.4) for the B- 61, W- 76, and W- 80 refurbishments, and to
eliminate W- 76, W- 80, and W- 87 surveillance backlogs. The plan,
however,
does not associate funding estimates with these performance targets.
According to the Assistant Deputy Administrator for Military Application
and Stockpile Operations, the refurbishment performance measures contained
in the three aforementioned documents are admittedly not very good. He
indicated that the Office of Defense Programs is moving toward linking key
performance measures to appropriate NNSA goals, strategies, and strategic
indicators. The Assistant Deputy Administrator stated that he hoped that
the performance measures for fiscal year 2005 would provide a
better basis for evaluating the refurbishments* progress in adhering to
cost baselines.
NNSA Has Various While NNSA management problems are many and long-
standing, so too
Actions Underway to have been NNSA attempts to effect improvement. NNSA
has repeatedly
studied and analyzed ways to ensure that mistakes made in the past Fix Its
Management
regarding the safety of nuclear weapons, the security of nuclear
facilities, Problems
and the protection of nuclear secrets are not repeated in the future.
Accordingly, NNSA has various actions underway to fix its management
problems. Foremost of those actions has been the December 2002 completion
of a reorganizational transformation campaign. In announcing this
reorganization, the NNSA administrator said the reorganization follows the
principles outlined in the President*s Management Agenda, which strives to
improve government through performance and results. The new reorganization
will reportedly streamline NNSA by eliminating one layer of management at
the field office level. It will also improve organizational discipline and
efficiency by requiring that each element of the NNSA workforce will
become ISO 9001 certified by December 31, 2004. ISO 9001 is a quality
management standard that has been recognized around the world. The
standard applies to all aspects necessary to create a quality
work environment, including establishing a quality system, providing
quality personnel, and monitoring and measuring quality.
In concert with NNSA*s overall reorganization has been the creation of a
program integration office in August 2002. This new office will be working
to create better coordination and cooperation between NNSA Office of
Defense Program elements. The new office is composed of three divisions:
one that will be performing strategic planning and studies; one that will
be looking at the strategic infrastructure; and one that will be doing
planning, budgeting, and integration work. The implementation plan for
this new office, as of July 2003, had not yet been approved and
disseminated because of a major personnel downsizing that is underway.
Nonetheless, this new office has already embarked on various initiatives.
One initiative is to decide on a cost baseline for the Stockpile Life
Extension Program. According to the Director of Defense Programs* Office
of Planning, Budgeting and Integration, a completion date for this work
has not yet been set. A second initiative is to develop an integrated
master schedule for the Stockpile Life Extension Program that will help
identify
and resolve schedule and resource conflicts. The director indicated that
such a schedule should be available at the end of calendar year 2003. A
third initiative is to develop consistent criteria for reporting schedule
activities and critical milestones. The director indicated that without
such criteria there is no assurance that consistent information is being
reported on the individual refurbishments. The director indicated that
these criteria would be developed during the summer of 2003.
Of no less importance to the organizational changes, NNSA has implemented
an overall planning, programming, budgeting, and evaluation process. The
goal of this process is to obtain and provide the best mix of resources
needed to meet national nuclear security objectives within fiscal
restraints. Through planning, the process will examine alternative
strategies, analyze changing conditions and trends, identify risk
scenarios, assess plausible future states, define strategic requirements,
and gain an understanding of the long- term implications of current
choices. Through programming, the process will evaluate competing
priorities and mission
needs, analyze alternatives and trade- offs, and allocate the resources
needed to execute the strategies. Through budgeting, the process will
convert program decisions on dollars into multiyear budgets that further
refine the cost of the approved 5- year program. Through evaluation, the
process will apply resources to achieve program objectives and adjust
requirements, based on feedback. This process was partially rolled out for
the fiscal year 2004 budget cycle, with full implementation scheduled for
fiscal year 2005.
A separate effort has been the establishment of a project/ program
management reengineering team in August 2002. According to the team*s
charter, NNSA does not manage all its programs effectively and
efficiently. Therefore, the mission of this team was to develop a program
management
system, including policies, guides, procedures, roles, responsibilities,
and definitions that would enable NNSA to achieve excellence in program
management. The observations of the team, as of September 2002, were that
the state of health of the NNSA program management processes is very poor,
and this condition significantly affects the ability of NNSA to achieve
its missions effectively and efficiently. In the words of the team, many
essential elements of an effective program management system do not exist.
Examples given included no documented roles and responsibilities and no
documented overarching process for program management. According to the
team leader, an implementation plan to improve NNSA
program management was submitted to the administrator for approval in
October 2002. As of July 2003, the implementation plan had not been
approved. According to the Director of Defense Programs* Office of Program
Integration, no action has been taken on this implementation plan while
NNSA has been addressing its recent reorganization. It is now hoped,
according to this official, that project/ program improvement actions can
be identified and implemented by the start of fiscal year 2004.
Conclusions Extending the life of the weapons in our nation*s nuclear
stockpile represents one of the major challenges facing NNSA. It will
demand a
budget of hundreds of millions of dollars annually for the next decade.
Considerable coordination between the design laboratories and the
production facilities will be necessary as the four life extensions
compete for scarce resources. Where conflicts occur, trade- offs will be
required* trade- offs that must be made by federal managers, contractors,
and, ultimately, the Congress. All of these things cannot occur without
sound
budgeting. Likewise, all parties involved in the oversight of the
Stockpile Life Extension Program must be able to determine the true cost
to complete the life extensions throughout the refurbishment process,
identify cost overruns as they develop, and decide when intervention in
those cost overruns is necessary. This cannot occur without sound cost
accounting. Finally, the life extensions must be properly managed because
the consequences of less than proper management are too great. Those
consequences, as seen on the W- 87 life extension, include potential cost
overruns in the hundreds of millions of dollars and refurbishment
completion occurring beyond the dates required for national security
purposes. To avoid these consequences, the life extensions must have
adequate planning; a clear leadership structure which fixes roles,
responsibilities, and authority for each life extension; and an adequate
oversight process. While NNSA has begun to put in place some improved
budgeting and management processes, additional action is necessary if it
is to achieve the goal of a safe and reliable stockpile that is
refurbished on cost and on schedule.
Recommendations for To improve the budgeting associated with the Stockpile
Life Extension
Executive Action Program, we recommend that the Secretary of Energy direct
the NNSA
Administrator to include NNSA*s stockpile life extension effort as a
formal and distinct
program in its budget submission and present, as part of its budget
request, a clear picture of the full costs associated with this program
and
its individual refurbishments by including the refurbishment- related
costs from Campaigns, Readiness in Technical Base and Facilities, and
multiple system work, and
validate the budget request in accordance with DOE directives. To
improve cost accounting associated with the Stockpile Life Extension
Program, we recommend that the Secretary of Energy direct the NNSA
Administrator to
establish a managerial cost accounting process that accumulates, tracks,
and reports the full costs associated with each individual refurbishment,
including the refurbishment- related costs from Campaigns, Readiness in
Technical Base and Facilities, and multiple system work.
To improve the management of the Stockpile Life Extension Program, we
recommend that the Secretary of Energy direct the NNSA Administrator to:
With respect to planning finalize the Office of Defense Programs*
integrated program plan and, within that plan, rank the Stockpile Life
Extension Program against
all other defense program priorities, establish the relative priority
among the individual life extension refurbishments, and disseminate the
ranking across the nuclear weapons complex so that those within that
complex know the priority of the refurbishment work;
develop a formalized process for identifying resource and schedule
conflicts between the individual life extension efforts and resolve those
conflicts in a timely and systematic manner; and
finalize individual refurbishment project plans. With respect to
management structure establish the individual refurbishments as projects
and manage them
according to DOE project management requirements; clearly define the
roles and responsibilities of all parties associated
with the Stockpile Life Extension Program;
provide the life extension program managers with the authority and
visibility within the NNSA organization to properly manage the
refurbishments; and
require that life extension program managers and others involved in
management activities receive proper project/ program management training
and qualification. With respect to oversight of cost and schedule
institute a formal process for periodically tracking and reporting
individual refurbishment cost, schedule, and scope changes against
established baselines, and
develop performance measures with sufficient specificity to determine
program progress.
Agency Comments We provided NNSA with a draft of this report for review
and comment. Overall, NNSA stated that it recognized the need to change
the way the Stockpile Life Extension Program was managed and that it
generally agreed with the report*s recommendations. For instance, NNSA
stated that it had independently identified many of the same concerns,
and, over the past 12 months, had made significant progress in
implementing plans, programs, and processes to improve program management.
NNSA indicated that full implementation of our management and budgeting
recommendations will take several years; however, NNSA is committed to
meeting these objectives. NNSA also provided some technical comments which
it believed pointed out factual inaccuracies. We have modified our report,
where appropriate, to reflect NNSA*s comments. NNSA*s comments on our
draft report are presented in appendix I.
Scope and We performed our work at DOE*s and NNSA*s headquarters and
Sandia
Methodology National Laboratories, Los Alamos National Laboratory, and the
Kansas
City plant from July 2002 through July 2003 in accordance with generally
accepted government auditing standards. To determine the extent to which
the Stockpile Life Extension Program*s budget requests for fiscal years
2003 and 2004 were comprehensive and reliable, we reviewed those requests
as well as NNSA supporting documentation, such as guidance issued to
develop those requests, information related to NNSA*s planning,
programming, budgeting, and evaluation process, and budget validation
reports. We also discussed those budget requests with DOE and NNSA budget
officials and an official with the Office of Management and Budget. To
determine the extent to which NNSA has a system for accumulating,
tracking, and reporting program costs, we identified how cost data is
tracked in DOE*s information systems and in selected contractors* systems
by interviewing key DOE, NNSA, and contractor officials responsible for
the overall Stockpile Life Extension Program and the individual
refurbishments and by reviewing pertinent documents. We also identified
how DOE and NNSA ensure the quality and comparability of cost and
performance data received from contractors by interviewing DOE and NNSA
officials, DOE Office of Inspector General officials, and selected
contractors* internal auditors, and by reviewing pertinent documents
including previously issued GAO and DOE Office of Inspector General
reports. To determine the extent to which other management problems
related to the Stockpile Life Extension Program exist at NNSA, we reviewed
pertinent NNSA documentation, such as NNSA*s Strategic Plan, the Office of
Defense Programs* draft integrated plan, the Life Extension Program
Management Plan, and project plans and variance reports required by the
Life Extension Program Management Plan for the B- 61, W- 76, and W- 80
refurbishments. We also interviewed key DOE, NNSA, and
contractor officials involved with the Stockpile Life Extension Program,
and, in particular, the program and deputy program managers of the B- 61,
W- 76, and W- 80 refurbishments. Finally, we attended the NNSA quarterly
program review meetings on each of the refurbishments.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 10 days
after the date of this letter. At that time, we will send copies of the
report to the Secretary of Energy, the Administrator of NNSA, the Director
of the Office of Management and Budget, and appropriate congressional
committees. We will make copies available to others on request. In
addition, the report will also be available at no charge on the GAO Web
site at http:// www. gao. gov.
If you or your staff have any questions about this report, please call me
at (202) 512- 3841. Major contributors to this report are listed in
appendix II.
Robin M. Nazzaro Director, Natural Resources and Environment
List of Congressional Requesters
The Honorable David L. Hobson Chairman, Energy and Water Development
Subcommittee House Committee on Appropriations The Honorable Peter J.
Visclosky Ranking Minority Member, Energy and Water Development
Subcommittee House Committee on Appropriations The Honorable Terry Everett
Chairman, Subcommittee on Strategic Forces House Committee on Armed
Services The Honorable Silvestre Reyes Ranking Minority Member,
Subcommittee on Strategic Forces House Committee on Armed Services
Appendi xes Comments from the National Nuclear Security
Appendi x I Administration
Appendi x II
GAO Contact and Staff Acknowledgments GAO Contact James Noel (202) 512-
3591 Acknowledgments In addition to the individual named above, Sally
Thompson, Mark Connelly,
Mike LaForge, Tram Le, Barbara House, and Stephanie Chen from our
Financial Management and Assurance mission team and Robert Baney,
Josephine Ballenger, and Delores Parrett from our Natural Resources and
Environment mission team were key contributors to this report.
(360195)
Report to Congressional Requesters
July 2003 NUCLEAR WEAPONS Opportunities Exist to Improve the Budgeting,
Cost Accounting, and Management Associated with the Stockpile Life
Extension Program
GAO- 03- 583
Contents Letter 1
Results in Brief 3 Background 5 NNSA Has Not Provided Congress with a
Clear Picture of the
Stockpile Life Extension Program Budget or Reliable Budget Figures 9 NNSA
Does Not Have a System for Tracking Refurbishment Costs by Weapon System
14
Management Problems Remain Despite NNSA Improvements 17 NNSA Has Various
Actions Underway to Fix Its Management
Problems 33 Conclusions 35 Recommendations for Executive Action 35 Agency
Comments 37 Scope and Methodology 37
Appendixes
Appendix I: Comments from the National Nuclear Security Administration 41
Appendix II: GAO Contact and Staff Acknowledgments 43 GAO Contact 43
Acknowledgments 43
Abbreviations
DOE Department of Energy GAO General Accounting Office NNSA National
Nuclear Security Administration SFFAS Statement of Federal Financial
Accounting Standards
This is a work of the U. S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
a
GAO United States General Accounting Office
GAO found that NNSA*s budget for the Stockpile Life Extension Program has
not been comprehensive or reliable. For instance, the fiscal year 2003
budget for this program was not comprehensive because it did not include
all activities necessary to successfully complete each of the
refurbishments. As a result, neither NNSA nor the Congress was in a
position to properly evaluate the budgetary tradeoffs among the
refurbishments in the program.
NNSA does not have a system for tracking the full costs associated with
the individual refurbishments. Instead, NNSA has several mechanisms that
track a portion of the refurbishment costs, but these mechanisms are used
for different purposes, include different types of costs, and cannot be
reconciled with one another. As a result, NNSA lacks information regarding
the full cost of the refurbishment work that can help identify cost
problems
as they develop or when management intervention in those cost problems may
be necessary.
Finally, NNSA does not have an adequate planning, organization, and cost
and schedule oversight process. With respect to planning, NNSA has not,
for instance, consistently developed a formalized list of resource and
schedule conflicts between the individual refurbishments in order to
systematically resolve those conflicts. Regarding organization, NNSA has
not, for example, clearly defined the roles and responsibilities of those
officials associated with the refurbishments or given the refurbishments*
managers proper project/ program management training required by DOE
standards. Finally, NNSA has not developed an adequate process for
reporting cost and schedule changes or developed performance measures with
sufficient specificity to determine the progress of the three
refurbishments that GAO reviewed. As a result, NNSA lacks the means to
help ensure that the refurbishments will not experience cost overruns
potentially amounting to hundreds of millions of dollars or encounter
significant schedule delays.
B- 61 Bombs to be Refurbished Source: NNSA.
As a separately organized agency within the Department of Energy (DOE),
the National Nuclear Security Administration (NNSA) administers the
Stockpile Life Extension Program, whose purpose is to extend, through
refurbishment, the operational lives of the weapons in the nuclear
stockpile. NNSA encountered significant management problems with its first
refurbishment. NNSA has begun three additional life
extensions. This study was undertaken to determine the extent to which
budgetary, cost accounting, and other management issues that contributed
to problems with the first refurbishment have been adequately addressed.
GAO recommends that NNSA
undertake a number of actions to improve the budgeting, cost accounting,
and management associated with the Stockpile Life Extension Program. Those
actions are, among other things (1) including the Stockpile Life
Extension Program as a formal program in NNSA*s annual budget; (2)
establishing a cost accounting
process that accumulates, tracks, and reports the full costs of each
refurbishment; and (3)
implementing a series of management actions related to improving planning,
organization, and oversight of cost and schedule. NNSA recognized the need
to change how the program is managed and agreed with GAO*s
recommendations.
www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 583. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Robin N. Nazzaro at (202) 512- 3841 or nazzaror@ gao.
gov. Highlights of GAO- 03- 583, a report to
Congressional Requesters
July 2003
NUCLEAR WEAPONS
Opportunities Exist to Improve the Budgeting, Cost Accounting, and
Management Associated with the Stockpile Life Extension Program
Page i GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 1 GAO- 03- 583 Improving the Stockpile Life Extension Program United
States General Accounting Office Washington, D. C. 20548
Page 1 GAO- 03- 583 Improving the Stockpile Life Extension Program
A
Page 2 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 3 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 4 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 5 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 6 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 7 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 8 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 9 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 10 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 11 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 12 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 13 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 14 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 15 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 16 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 17 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 18 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 19 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 20 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 21 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 22 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 23 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 24 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 25 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 26 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 27 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 28 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 29 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 30 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 31 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 32 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 33 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 34 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 35 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 36 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 37 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 38 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 39 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 40 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 41 GAO- 03- 583 Improving the Stockpile Life Extension Program
Appendix I
Appendix I Comments from the National Nuclear Security Administration Page
42 GAO- 03- 583 Improving the Stockpile Life Extension Program
Page 43 GAO- 03- 583 Improving the Stockpile Life Extension Program
Appendix II
GAO*s Mission The General Accounting Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities
and to help improve the performance and accountability of the federal
government for the American people. GAO examines the use of public funds;
evaluates federal programs and policies; and provides analyses,
recommendations, and other assistance to help Congress make informed
oversight, policy, and funding decisions. GAO*s commitment to good
government is reflected in its core values of accountability, integrity,
and reliability.
Obtaining Copies of GAO Reports and Testimony
The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO*s Web site (www. gao. gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as *Today*s Reports,* on its
Web site daily. The list contains links to the full- text document files.
To have GAO e- mail this
list to you every afternoon, go to www. gao. gov and select *Subscribe to
e- mail alerts* under the *Order GAO Products* heading. Order by Mail or
Phone The first copy of each printed report is free. Additional copies are
$2 each. A check
or money order should be made out to the Superintendent of Documents. GAO
also accepts VISA and Mastercard. Orders for 100 or more copies mailed to
a single address are discounted 25 percent. Orders should be sent to:
U. S. General Accounting Office 441 G Street NW, Room LM Washington, D. C.
20548 To order by Phone: Voice: (202) 512- 6000 TDD: (202) 512- 2537 Fax:
(202) 512- 6061
To Report Fraud, Waste, and Abuse in Federal Programs
Contact: Web site: www. gao. gov/ fraudnet/ fraudnet. htm E- mail:
fraudnet@ gao. gov Automated answering system: (800) 424- 5454 or (202)
512- 7470
Public Affairs Jeff Nelligan, Managing Director, NelliganJ@ gao. gov (202)
512- 4800 U. S. General Accounting Office, 441 G Street NW, Room 7149
Washington, D. C. 20548
United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300 Address Service Requested
Presorted Standard Postage & Fees Paid
GAO Permit No. GI00
*** End of document. ***