Hanford Waste Treatment Plant: Contractor and DOE Management
Problems Have Led to Higher Costs, Construction Delays, and
Safety Concerns (06-APR-06, GAO-06-602T).
The Waste Treatment Plant Project at the Department of Energy's
(DOE) Hanford site in southeastern Washington state is a massive
effort to stabilize and prepare for disposal 55 million gallons
of radioactive and hazardous wastes currently held in underground
tanks. In 2000, DOE awarded an 11-year, $4.3 billion contract
project to Bechtel National, Inc. (Bechtel) to design and
construct the plant. Since then, numerous problems and changes
have occurred that will significantly increase the project's
final cost and completion date. This testimony discusses (1) how
and why the project's cost and schedule have changed since 2000;
(2) the status of DOE and Bechtel efforts to address these
problems and improve project management; and (3) our observations
on issues that need to be addressed in going forward. It is based
on previous GAO reports and ongoing work.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-602T
ACCNO: A51038
TITLE: Hanford Waste Treatment Plant: Contractor and DOE
Management Problems Have Led to Higher Costs, Construction
Delays, and Safety Concerns
DATE: 04/06/2006
SUBJECT: Contract performance
Cost analysis
Facility construction
Hazardous waste disposal
Performance measures
Program evaluation
Program management
Radioactive waste disposal
Schedule slippages
Toxic substances
Waste management
Waste treatment
Cost estimates
DOE Hanford Waste Vitrification Plant
Project
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GAO-06-602T
* Background
* Contractor Performance Problems, DOE Management Shortcomings
* Project Cost and Schedule Have Increased Significantly
* Bechtel and DOE Share Responsibility for the Main Causes of
* DOE and Bechtel Have Taken Several Steps to Strengthen Manag
* Slowing construction to address technical problems and advan
* Developing a more reliable project baseline
* Taking other steps to improve management and oversight
* Observations About Selected Issues DOE Will Need to Address
* The use of a fast-track, design-build approach to the projec
* The reliability of the revised project estimates
* The adequacy of project management and oversight
* Conclusions
* Recommendations
* Contacts and Acknowledgments
* GAO's Mission
* Obtaining Copies of GAO Reports and Testimony
* Order by Mail or Phone
* To Report Fraud, Waste, and Abuse in Federal Programs
* Congressional Relations
* Public Affairs
Testimony
Before the Subcommittee on Energy and Water Development and Related
Agencies, Committee on Appropriations, House of Representatives
United States Government Accountability Office
GAO
For Release on Delivery Expected at 10:00 a.m. EDT
Thursday, April 6, 2006
HANFORD WASTE TREATMENT PLANT
Contractor and DOE Management Problems Have Led to Higher Costs,
Construction Delays, and Safety Concerns
Statement of Gene Aloise, Director Natural Resources and Environment
GAO-06-602T
Mr. Chairman and Members of the Subcommittee:
I am pleased to appear before the Subcommittee today to discuss our work
on the Department of Energy's (DOE) Waste Treatment Plant Project (WTP)
under construction at DOE's Hanford site in southeastern Washington state.
The purpose of this massive project is to stabilize and prepare for
disposal large quantities of radioactive and hazardous wastes stored in
underground tanks. From the 1940s through most of the 1980s, 9 nuclear
reactors operated at the Hanford site, producing plutonium and other
special nuclear materials primarily for DOE's weapons program. Producing
these special nuclear materials generated large volumes of hazardous and
radioactive waste. Some of this waste was deposited directly into the
ground in trenches, injection wells, or other facilities designed to allow
the waste to disperse into the soil; and some was packaged into drums and
other containers and buried. The most dangerous waste was stored in 177
large underground storage tanks. DOE has managed this tank waste over the
years as high-level waste. The underground tanks currently hold more than
55 million gallons of this waste-enough to fill an area the size of a
football field to a depth of over 150 feet. DOE, the Environmental
Protection Agency (EPA), and the Washington state Department of
Ecology-have determined that stabilizing this waste is one of the most
urgent cleanup activities at the Hanford site.
The Hanford site occupies 586 square miles near the cities of Richland,
Pasco, and Kennewick, with a combined regional population of over 200,000.
The Columbia River-the second largest river in the United States and a
source for hydropower production, agricultural irrigation, drinking water,
and salmon reproduction-flows through the site for almost 50 miles.
Although the underground storage tanks are several miles from the river,
tank monitoring data and detection techniques have shown that some of the
tanks have leaked in the past. Because the contamination has reached the
groundwater under the tanks, officials are concerned that it is now making
its way to the Columbia River.
To stabilize the approximately 55 million gallons of waste remaining in
the tanks, Hanford's waste treatment project involves (1) designing,
constructing, and testing a waste treatment plant1 (the construction
project) and (2) operating this plant and others in subsequent years to
process and prepare the tank waste for permanent disposal (the operations
project). Schedule milestones for stabilizing the tank waste and preparing
it for disposal, as well as agreements on the technologies to be used, are
set forth in the Hanford Federal Facility Agreement and Consent Order
between DOE, Washington state's Department of Ecology, and EPA. This
agreement, commonly called the "Tri-Party Agreement," was signed in May
1989.
1The waste treatment plant consists of a pretreatment facility that
separates waste into high-level and low- activity waste, two facilities to
treat separated portions of the waste, one analytical laboratory, and a
variety of supporting facilities.
2U.S. General Accounting Office, Nuclear Waste: Challenges to Achieving
Potential Savings in DOE's High-Level Waste Cleanup Program, GAO-03-593
(Washington, D.C.: June 17, 2003); U.S. General Accounting Office, Nuclear
Waste: Absence of Key Management Reforms on Hanford's Cleanup Project Adds
to Challenges of Achieving Cost and Schedule Goals, GAO-04-611
(Washington, D.C.: June 9, 2004); and U.S. Government Accountability
Office, Nuclear Waste: Better Performance Reporting Needed to Assess DOE's
Ability to Achieve the Goals of the Accelerated Cleanup Program,
GAO-05-764 (Washington, D.C.: July 29, 2005).
In 2000, DOE awarded an 11-year, $4.3 billion contract for the
construction project to Bechtel National, Inc. (Bechtel). DOE plans to
solicit bids through a competitive process and award a separate contract
to operate the WTP once the construction project is completed.
Since the contract with Bechtel began in 2000, numerous problems with and
changes to the construction project have occurred, which has significantly
affected the project's final cost and completion date. My testimony will
discuss: (1) how the project's cost and schedule have changed since the
contract was awarded to Bechtel in December 2000, and the primary causes
for those changes; (2) the status of DOE and Bechtel efforts to address
these causes and establish effective management controls over the project;
and (3) our observations on issues that need to be addressed in going
forward on the project.
My testimony is based on our past reviews of DOE's Environmental
Management program and the Hanford project, especially our 2004 report on
the project,2 and our currently ongoing work for this Subcommittee.
Regarding our ongoing work, in order to understand how the project's cost
and schedule estimates have changed, the reasons for those changes, and
efforts to address any problems, we obtained and analyzed project
documents and records developed by DOE and Bechtel as well as evaluations
of various aspects of the project conducted by the U.S. Army Corps of
Engineers and other independent reviews. We also interviewed DOE and
Bechtel project and technical managers about the main causes of the cost
increases and schedule delays and steps they are taking to address the
problems. We also toured the construction site to observe the actual
condition of the facilities. A more complete discussion of our scope and
methodology is presented in appendix II. We conducted our review from June
through September 2005 and from January through April 2006 in accordance
with generally accepted government auditing standards. We are continuing
our work on this project and plan to issue a final report in October 2006.
In summary, we found the following:
The Hanford waste treatment plant construction project's estimated cost
has increased over 150 percent to about $11 billion since 2000, and the
completion schedule has been extended by 6 years to at least 2017. There
are three main causes for these results-contractor performance problems,
DOE management shortcomings, and difficulties addressing various technical
challenges encountered during design and construction.
Regarding the contractor's performance:
o Bechtel has performed poorly on several aspects of the project.
For example, Bechtel significantly underestimated the price of
steel and how much engineering effort would be needed to complete
facility designs. These mistakes, and others like them, have added
about $2 billion to project costs. Bechtel also continues to need
increased contingency funding for unexpected problems. Adjusting
for additional contingency funding added over $2 billion to the
cost estimate. Importantly, Bechtel failed on several occasions to
ensure that nuclear safety requirements were being met, including
allowing design changes to be made without following nuclear
safety procedures and failing to detect serious construction flaws
in tanks that will hold radioactive material in the facilities.
Regarding DOE management:
o DOE has followed an approach to constructing the project known
as "fast-track," design-build -- where design, construction, and
technology development occur simultaneously. However, this
approach is not recommended for designing and constructing
one-of-a-kind, complex nuclear facilities because, among other
things, it increases the risk of encountering problems that can
adversely affect a project's cost and schedule. DOE also did not
establish project management requirements and DOE headquarters
staff was not involved in evaluating the project or the
contractor's performance.
Regarding technical challenges:
o Bechtel and DOE have encountered many technical problems with
facility design and equipment that are taking considerable more
time and money than expected to address and correct. These
problems include reengineering plant facilities to withstand
earthquakes; correcting design and operation problems with waste
mixing pumps; and preventing flammable hydrogen gas from building
up to unsafe levels in tanks and pipes. Although final cost
estimates are not yet available, as of April 2005, these technical
challenges have added about $1.4 billion to project cost
estimates.
To address project cost and schedule problems, DOE and Bechtel
have focused on three main areas- slowing down construction while
addressing technical and safety problems; establishing new project
cost and schedule estimates; and strengthening project management
and oversight. For example, DOE directed Bechtel to slow down or
stop construction activities on the two facilities affected by
changing earthquake protection requirements-the pretreatment
facility and the high-level waste treatment facility. Slowing the
pace of construction will allow more time to address technical and
safety problems and make any needed design changes before
construction is restarted. DOE also directed Bechtel to develop a
new project cost and schedule baseline starting with an analysis
of material and labor quantities and costs, and incorporating more
contingency funding to address future uncertainties. DOE's project
management improvements have included developing a headquarters
oversight board that includes several senior DOE executives and
funding independent reviews of (1) the new project baseline by the
Corps of Engineers and (2) the technical feasibility of the
treatment project by a panel of outside experts. These initiatives
are ongoing. Bechtel has focused on improving its project
performance information, implementing several management and
organizational changes, and strengthening safety and quality
assurance practices.
Despite the steps DOE and Bechtel have taken to address technical,
safety, and other management problems on the construction project,
we have continuing concerns about the current strategy for going
forward. Our main concerns include: (1) the continued use of a
fast-track, design-build approach for the remaining work on the
construction project; (2) the reliability of the revised project
cost and schedule estimates, and whether there is enough
flexibility in the revised schedule to address remaining project
uncertainties during the construction and commissioning phases;
and (3) the adequacy of management actions taken to ensure
effective project management and oversight. DOE is continuing with
the fast-track approach to try and stay as close as possible to
milestone dates agreed to in the Tri-Party Agreement and to keep
costs down. However, the technical, safety, and management
problems on the project make it clear that a fast-track approach
is not appropriate. In our view, proceeding with a project
construction plan more closely aligned with nuclear industry
guidelines, which suggest completing at least 90 percent of the
design before restarting construction provides a better chance of
successfully completing the project and controlling the cost and
completion date. Furthermore, the cost and schedule baseline is
being revised before all of the technical issues are understood
and the cost and time needed to address them is known. For
example, it is not clear whether DOE has allowed sufficient time
for testing of all the facilities during the commissioning phase
of the project. Also, in our view, the revised cost estimate
should contain cost and schedule contingencies that are sufficient
to ensure that no further re-baselining of the project will be
needed in the future. Finally, regarding overall project
management, it is unclear whether the actions taken by DOE and
Bechtel are adequate to bring the project under control and create
greater overall accountability for results. Specifically, it is
unclear how DOE will modify contractor incentives once the cost
and schedule baselines are finalized. The current contract
incentives are no longer meaningful because the current cost and
schedule goals are no longer achievable and are being revised.
However, modifying the contract to provide new incentives could be
viewed as rewarding Bechtel's past performance. It remains to be
seen whether DOE can establish a combination of project incentives
and management controls that will lead to the successful
completion of the construction project.
We are recommending that the Secretary of Energy take steps to
prevent further use of a fast-track, design-build approach to the
project; ensure that facility design or facility component design
have reached at least 90 percent completion and that technical and
safety problems have been satisfactorily addressed before
restarting construction; and take other management actions to help
ensure that the new project baseline will be reliable and that
controls and accountability are such that Bechtel will safely and
effectively complete the project.
On April 4, we met with DOE officials, including the Assistant
Secretary for Environmental Management, to obtain oral comments on
this testimony. DOE generally agreed with the testimony findings
and conclusions and two of the three recommendations. DOE agreed
with our recommendations to ensure that the new project baseline
fully reflects all remaining uncertainties on the project and to
strengthen management controls over the project. However,
regarding our recommendation that DOE not restart construction
until facility design has reached 90 percent and the project's
major technical and safety problems have been satisfactorily
addressed, DOE only partially agreed. DOE said that it would
discontinue using a fast-track, design-build approach to
completing the project and acknowledged that use of this approach
has led to increased costs and schedule delays on the project.
DOE's Assistant Secretary for Environmental Management said that
DOE has already taken some initial steps to discontinue the
fast-track approach by widening the gap between facility design
and construction to at least one year or longer. However, the
Assistant Secretary expressed concern about delaying construction
of WTP facilities until the facility design has reached at least
90 percent completion and the project's major technical and safety
problems have been satisfactorily addressed. He said that DOE has
not studied the extent to which such a delay in restarting
construction could potentially increase the overall cost of the
project. Accordingly, we modified our recommendation to ensure
that DOE evaluates the feasibility of completing at least 90
percent of the facility design or facility component design, and
that major technical and safety issues have been satisfactorily
addressed before restarting construction.
DOE carries out its high-level waste cleanup program at Hanford
under the auspices of the Assistant Secretary for Environmental
Management and in consultation with a variety of stakeholders. The
EPA and the Washington State Department of Ecology provide
regulatory oversight of cleanup activities at the site. The
Defense Nuclear Facilities Safety Board (Safety Board) also
oversees DOE's operations. The Safety Board was created by the
Congress in 1988 to provide an independent assessment of safety
conditions and operations at defense nuclear facilities, including
DOE's Hanford site. Other stakeholders involved in the Hanford
cleanup project include county and local governmental agencies,
citizen groups, advisory groups, and Native American tribes. These
stakeholders advocate their views through various processes,
including site-specific advisory boards. DOE manages the tank
waste at Hanford through its Office of River Protection, which
Congress directed DOE to establish in 1998. The office has a staff
of about 110 DOE employees and a fiscal year 2006 budget of about
$1 billion. It manages Hanford's tank waste through two main
contracts: a tank farm operations contract with CH2M Hill Hanford
Group3 to maintain safe storage of the waste and to prepare it for
retrieval, and a construction contract with Bechtel to design,
construct, and commission the operation of a waste treatment
plant. For additional information on Hanford's tank wastes, see
appendix I.
The Hanford waste treatment construction project includes the
construction of three primary processing facilities, a large
analytical laboratory, and 23 supporting buildings on a 65 acre
site. The three primary processing facilities are:
o the pretreatment facility, which receives the waste from the
tank farms and separates it into its low-activity and high-level
waste components;
o the high-level waste facility that immobilizes high-level waste
for offsite disposal through a process known as vitrification,
which mixes nuclear waste with molten glass;4 and
o the low-activity waste facility, which vitrifies the
low-activity waste for onsite disposal.
The waste treatment plant facilities are large and complex. For
example, Bechtel estimates that the completed project will contain
almost 270,000 cubic yards of concrete and nearly a million linear
feet of piping. The largest building, the pretreatment facility,
has a foundation the size of four football fields and is expected
to be 12-stories tall.
In just over 5 years, the estimated cost of the project has
increased more than 150 percent to about $11 billion and the
schedule has been extended from an 11-year project to a 17-year
project. Three main factors were responsible for the cost and
schedule increases: (1) poor contractor performance in developing
project estimates and implementing nuclear safety and other
requirements, (2) management weaknesses in DOE's approach to and
oversight of the project, and (3) technical challenges that have
been more difficult than expected to address.
Since DOE awarded the contract to Bechtel in 2000, both the
contract price and the completion date have increased
significantly. In 2000, the contract price was $4.3 billion,
including contractor fee and project contingencies. In 2003,
Bechtel revised the estimate to $5.7 billion, based on changes DOE
wanted to make in plant capacity and to correct for estimating
errors and other problems that were already occurring on the
project. Since then, the cost estimate has continued to climb. For
example, Bechtel's December 2005 estimate of the cost to complete
the project, an estimate that DOE has not yet approved, totals
about $10.5 billion plus contractor fee, a significant increase
from the initial estimate in 2000. Bechtel is still revising its
estimate of the project costs, and the final estimate will very
likely be higher. For example, in a February 2006 hearing before
the Senate Armed Services Committee, the Secretary of Energy said
that the final cost for the project could be nearly $11 billion.
Figure 1 shows this progression of cost estimates for the
construction project.
Figure 1: Progression of Cost Estimates for WTP Construction
Project.
aThese cost estimates do not include contractor performance fees.
Note: This comparison is based on dollar values that were not
adjusted for inflation which was about 15 percent over this time
period.
The estimated completion date has also been extended. In 2000, the
estimated date to complete the construction of the waste treatment
project was 2011. This date corresponded to the work schedule
agreed to by DOE in the Tri-Party Agreement under which DOE was to
begin operating the waste treatment facilities by 2011. However,
Bechtel's latest estimate, not yet approved by DOE, is that the
construction project will be completed by 2017 or later, at least
a 6-year extension and a 50 percent increase in the project's
schedule.
Furthermore, the revised cost and schedule estimates Bechtel
developed in December 2005 are not final and will likely increase
further. At least through the rest of 2006, DOE and Bechtel will
continue to address identified technical and safety issues and
incorporate additional design changes into its estimates. For
example, Bechtel is currently reviewing several technical issues
recently raised by a panel of experts DOE invited to study the
project.5 Bechtel plans to incorporate changes resulting from the
review into a new cost estimate. This revised estimate is expected
to be complete in late May 2006. Once that estimate is available
and DOE has completed its review of the estimate, DOE and Bechtel
will need to agree on a revised contract price that incorporates
any changes made to the project, including any changes to the fee
that Bechtel can potentially earn. DOE officials do not expect to
have these activities completed until late 2006.
In our view, Bechtel and DOE both share in the responsibility for
the problems with the Hanford waste treatment plant.6
Contractor performance. Poor contractor performance in the areas
of developing and revising cost estimates and adhering to nuclear
safety and other requirements contributed to cost and schedule
increases.
Bechtel made a number of miscalculations on a broad range of
activities when developing and revising its cost estimates for the
project. Specifically, we found that Bechtel:
o underestimated by more than 50 percent the engineering hours
needed to design the facilities (a small portion of this increase
was due to changes in seismic design criteria). The current
estimate for design hours is now over 14 million hours.
o underestimated the cost of key commodities like steel. Steel
prices climbed sharply once project construction started.
o incorrectly assumed that it could obtain an exception to the
fire code and avoid applying a protective coating on some of the
structural steel used in the facilities and instead use a less
expensive sprinkler system.
In April 2005, Bechtel estimated that the estimating errors
collectively added about $845 million to the estimated contract
price.
Additionally, Bechtel also incorrectly estimated the amount of
contingency funds that would be needed to account for project
uncertainties. In 2000, Bechtel estimated that $500 million in
contingency was needed. However, in its December 2005 estimate,
Bechtel proposed that a total of $2.8 billion in contingency be
allocated to the project. The $2.8 billion in contingency funds
included $1.76 billion to address technical and programmatic risks
outside the current scope of the project and an additional reserve
of about $1 billion for potential future problems not yet
identified.
Finally, Bechtel was ineffective at ensuring that the completed
facilities would meet nuclear safety requirements. In March 2006,
DOE's Office of Enforcement issued a report documenting a number
of different safety problems with the construction project,
including a failure to (1) include safety requirements in design
documents, (2) identify and use the correct design codes and
safety standards, and (3) track design changes to ensure purchased
materials and supplies were consistent with those changes.7 These
failures led to significant problems. For example, Bechtel ordered
approximately 70 tanks with incorrect structural specifications to
ensure the quality of their welds. These tanks, that will be
located in inaccessible areas of the waste treatment plant, were
in various stages of fabrication. Had this problem not been
identified, the quality of welds for all of these tanks could have
been flawed. One tank had already been installed using these
incorrect specifications before the problem was discovered. The
tank was installed because neither the supplier nor Bechtel had
performed the required weld inspection. Furthermore, when the
welds were first repaired the subcontractor used incorrect welding
rods, requiring more rework to repair the repairs.
In addition, in September 2005, Bechtel discovered errors that had
been made in structural steel calculations for the laboratory
facility. These potentially serious errors included design
specifications that were incorrect and discrepancies between
engineering calculations and design drawing specifications, which
led to replacing steel already purchased and correcting hundreds
of engineering drawings. Of significant concern, a 2005
DOE-sponsored survey found that some construction and engineering
employees were reluctant to raise safety concerns to Bechtel
management, fearing reprisal. Bechtel is now developing a strategy
for cultivating a more rigorous culture of safety among its
workforce that it expects to complete by June 2006.
DOE management. In our view, DOE's management of the project has
been flawed, as evidenced by (1) adopting a fast-track approach to
design and construction activities that both created and
exacerbated problems and (2) failing to exercise adequate and
effective oversight of contractor activities, both of which
contributed to cost and schedule increases.
DOE's decision to pursue a fast-track, design-build approach under
which technology development, facility design, and construction
activities were carried out concurrently has proven to be
regrettable. DOE adopted the fast-track approach because of
commitments made under the Tri-Party Agreement to have facilities
operating by 2011, and to treat all of the tank waste by 2028.
However, using a fast-track approach for nuclear facilities is
considered "high risk," and is not recommended for designing and
constructing one-of-a-kind, or first-of-a-kind complex nuclear
facilities. DOE's own project management guidance cautions against
using this approach for complex facilities. For example, DOE Order
413.3 cautions that a design-build approach should only be used in
limited situations, such as when work scope requirements are well
defined, projects are not complex, and technical risks are
limited.
Furthermore, the project approach included optimistic assumptions
that virtually every major safety, technology, regulatory, and
nuclear material acquisition uncertainty could be resolved while
facilities were being constructed at an unusually fast pace for
the largest, most complex, first-of-a-kind, nuclear waste
treatment plant in the United States.8 Less than one year after
construction began, DOE was already experiencing problems with
construction activities outpacing design, technology problems that
were affecting the critical path of the construction project,
contractor safety control inadequacies, and outdated facility
seismic criteria. Despite these problems, DOE insisted on
continuing its fast-track design-build approach under its
accelerated cleanup plan until early 2005. At that point, the
effect of these and other unresolved issues, contractor
performance problems, and signs of significant cost growth and
schedule delays caused DOE to direct Bechtel to significantly slow
construction, rework the design, and reevaluate safety, seismic,
and regulatory requirements.
The impact of many of these problems could have been lessened if
facility design had been more complete before construction began.
Under nuclear industry guidance, which recommends that facility
design be essentially complete before construction begins, major
environmental, technological, and regulatory issues can be
resolved in advance of construction.9 The benefit of this process
is that most uncertainties are resolved before major capital is at
risk, and the potential for project delay is significantly
reduced. On this project, under the fast track approach, actual
schedule delays of more than two years have occurred, contributing
to more than 1,000 workers being laid off, and work on the two
largest waste treatment facilities coming to a halt.
GAO, the Safety Board, and others have criticized DOE in the past
for using the fast-track approach for large, complex
first-of-a-kind nuclear cleanup facilities. We issued reports in
1993, and again in 1998, that were critical of DOE for using an
approach that differs so significantly from nuclear industry
guidelines for constructing complex nuclear facilities. The Safety
Board cautioned in June 2002, and again in March 2004, that a
fast-track, design-build approach could lead to expensive plant
modifications or to the acceptance of increased public health and
safety risks. In June 2004, we recommended that DOE avoid using a
fast-track approach to designing and constructing its complex
nuclear facilities. The department accepted this recommendation,
but apparently believes that it does not apply to this project. At
the time of our 2004 report, the department could not identify a
single instance where it had successfully used the approach to
construct a large, complex nuclear cleanup facility. Despite the
fact that DOE has never been successful with this approach on any
complex nuclear cleanup project, Bechtel reported in its most
recent cost and schedule estimate that a "fast-track engineering,
procurement, and construction" approach is a standard commercial
approach for large projects and the best approach for a
schedule-driven project.
DOE's lack of oversight of Bechtel's activities has also been
unfortunate. DOE did not ensure adherence to normal project
reporting requirements and, as a result, status reports provided
an overly optimistic assessment of progress on the project. For
example, in January 2005, DOE's project status report indicated
that costs and scheduled work to date were proceeding as planned.
However, Bechtel was not providing accurate information. The
project almost always appeared to be on schedule because Bechtel
adjusted the project baseline schedule to match actual project
results. In addition, DOE headquarters oversight officials were
generally unaware of the full extent of the problems with the
project.
Finally, DOE has not prevented significant safety problems from
occurring on the project. DOE is responsible for ensuring that its
activities follow nuclear safety requirements and generally
receives no outside regulatory oversight of nuclear safety.
However, the department was not fully effective in ensuring that
nuclear safety requirements were being met. Contributing to the
problem, DOE's internal safety oversight had been significantly
reduced since 2000. Furthermore, key responsibilities to ensure
quality control of contractors were placed under the
responsibility of the DOE project manager who also had primary
responsibility for meeting project cost and schedule targets. In
late 2003, DOE began recognizing some of the nuclear safety
problems on the project but many of these problems dated back to
2002, or earlier. Finally, in 2005 and 2006, according to the WTP
project manager, DOE withheld a total of $800,000 in performance
fee from Bechtel for industrial and nuclear safety problems, but
problems continued. In 2006, DOE assessed a civil penalty of
$198,000 for a number of nuclear safety violations. DOE also
recently increased the number of staff assigned to oversee safety
activities.
Technical challenges. Constructing the waste treatment plant at
the Hanford site is a massive, highly complex and technically
challenging project. Problems in addressing these technical
challenges have contributed to cost and schedule increases.
A number of technical problems have continued to plague the
project, including:
o changing seismic standards that resulted in substantial
re-engineering of the facility design;
o problems with "pulse jet mixers" needed to keep waste
constituents uniformly mixed while in various tanks in the
facilities;
o the potential buildup of flammable hydrogen gas in the waste
treatment plant tanks and pipes; and
o problems with radioactive and hazardous wastes plugging
treatment plant piping systems during operations.
Bechtel estimated, in December 2005, that collectively these
technical problems could add nearly $1.4 billion to the project's
estimated cost.
In 2002, the Safety Board began expressing concerns that the
seismic standards used to design the facilities were not based on
the most current ground motion studies and computer models, and
were not based on geologic conditions present directly under the
construction site. After more than 2 years of analysis and
discussion, DOE contracted for a new seismic analysis that
confirmed the Safety Board's concerns that the seismic criteria
were not "sufficiently conservative" for the two largest treatment
facilities-the high-level waste facility and the pretreatment
facility. Revising the seismic criteria caused Bechtel to
recalculate thousands of engineering estimates and to rework
thousands of design drawings to ensure that tanks, piping, cables,
and other equipment in these facilities were adequately anchored.
Bechtel determined that the portions of the building structures
already constructed were sufficiently robust to meet the new
seismic requirements. By December 2005, however, Bechtel estimated
that engineering rework and other changes to tanks and other
equipment resulting from the more conservative seismic requirement
would increase project costs by about $750 million to $900 million
and result in a 26 month schedule delay.
In 2003, potential problems with the pulse jet mixers caused
project construction delays. Bechtel initially planned to rely on
computer modeling to confirm that the mixer would successfully
keep the tank waste uniformly mixed. However, because these mixers
were designed to be placed in "black cells" in the pretreatment
facility where they could not be repaired or modified after
operations began because of the high levels of radiation in the
cells, mixer failure was considered high risk. Given this risk, in
April 2003, just 9 months before the design configuration for the
mixers was to be completed, Bechtel decided to conduct laboratory
tests of the mixers to ensure that they would successfully mix the
tank waste. Based on laboratory performance testing, Bechtel found
that the mixers did not adequately work. Consequently, the mixers
had to be re-designed. The tanks that were to house the mixers
also had to be redesigned with greater structural support to
accommodate more forceful mixing pumps and other modifications.
DOE spent about two years addressing problems with the pulse jet
mixers. According to DOE's project manager, Bechtel has completed
the testing and design modifications for the mixers. As of May
2005, this problem had contributed more than $300 million to the
project's cost growth.
In June 2004, we reported on the possibility of hydrogen gas
building up in the plant's tanks, vessels, and piping systems, and
noted that the buildup of flammable gas in excess of safety limits
could cause significant safety and operational problems. Although
DOE and Bechtel have been aware of this problem since 2002, the
problem has not been fully resolved. As of March 2006, Bechtel
continued to assess how to resolve this technical problem but has
not identified final solutions. In April 2005, Bechtel estimated
that this problem contributed about $90 million to the project's
cost growth.
In March 2006, an external technology review identified another
technological problem called "line plugging," involving the
potential that solid and liquid radioactive and hazardous wastes
could plug waste treatment facility piping systems during
treatment operations.10 Described as the most serious problem the
external group identified, the report emphasized that unless
corrected, this flaw could prevent the plant from operating
successfully. The review concluded that the treatment plant's
piping systems could begin plugging within days to a few weeks of
operational start up. The external review did not estimate the
potential cost and schedule impact of correcting this problem, but
concluded that DOE identify and consider the corrective actions
needed to resolve the problem. Bechtel plans to address these
actions in its final cost and schedule estimate due in late May
2006.
To address underlying causes contributing to cost and schedule
growth on the construction project, DOE and Bechtel have
undertaken three main initiatives: (1) slowing construction to
allow time to address technical and safety problems and to advance
design activities further ahead of construction activities, (2)
developing a more credible cost and schedule baseline, and (3)
improving project management and oversight.
Because of the scope of the technical problems on the project,
especially the need to apply more conservative seismic standards
to the pretreatment and high-level waste facilities, in December
2004, DOE directed Bechtel to slow construction on these
facilities. This allowed Bechtel to focus on addressing the
technical problems and to advance plant design further ahead of
construction activities. According to the DOE project manager, as
of March 2006, the design for the waste treatment plant was about
60 percent complete. DOE's project manager told us that once
construction starts again, he expects to have a gap of about one
year between completing the design of specific building components
and beginning construction of those components. Slowing the
construction of project facilities has also allowed DOE and
Bechtel to resolve some of the technical issues that contributed
to cost and schedule growth. For example, according to DOE's WTP
project manager, seismic criteria have been revised and are being
incorporated into facility design. The Corps is reviewing
Bechtel's design rework to ensure that it meets the revised
criteria. These criteria are scheduled to be confirmed by the
Corps in early 2007. Similarly, DOE's WTP project manager said
that problems with tank waste mixing pumps have apparently been
resolved and changes are being incorporated into the revised
design. However, issues involving the potential for hydrogen gas
to build up in the waste treatment plant tanks and piping systems
have not yet been resolved, according to DOE's project manager.
Bechtel and DOE have taken steps to develop estimates they believe
will better reflect the project's true cost. Bechtel has been
conducting a more detailed review of cost and schedule elements
than occurred in developing previous baselines. In the past,
Bechtel relied more on estimating techniques to develop the
baseline because the design was not sufficiently mature to more
accurately estimate material and labor costs. Bechtel's December
2005 baseline estimate of $10.5 billion was based on using
detailed design drawings and a better understanding of the actual
material and labor costs. According to Bechtel's deputy project
manager, the new estimate better defines risk on the project and
assigns a more realistic contingency value to that risk. Bechtel
also brought in outside experts and conducted two major corporate
reviews of the estimates in April and December 2005. Bechtel is
expected to submit a final revised cost and schedule estimate by
the end of May 2006.
In addition to Bechtel's efforts, DOE has hired two external teams
to review the revised estimates. First, DOE contracted with the
Corps of Engineers to review the reasonableness of various aspects
of Bechtel's estimate. DOE expects the Corps of Engineers to
validate such things as the revised ground motion criteria and
other geophysical data, whether the ground motion criteria has
been adequately incorporated into the plant design, and the
reasonableness of material and labor cost estimates, including the
amount of contingency funds needed for the project. DOE expects
the Corps of Engineers to complete its review by July 2006.
Second, DOE directed Bechtel to hire an independent review team of
experts from industry and academia to review the technical, cost,
and schedule aspects of the project. The team's preliminary report
concluded that the project's cost estimate should be increased to
$11.3 billion, plus contractor fee.11
In our view, while these reviews are a step in the right
direction, given the Department's past history in developing a
credible project baseline, it is too soon to tell whether these
reviews will assist DOE and Bechtel in providing reliable cost and
schedule estimates.
Both Bechtel and DOE have undertaken several other actions to
improve management and oversight of the project. Bechtel's actions
include (1) improving its cost and schedule performance tracking
system, (2) making management and organizational changes, and (3)
taking steps to improve quality and safety on the project.
Regarding the cost and schedule performance tracking
system-referred to as an earned value system-DOE requires that a
contractor's system be certified to comply with industry
standards. However, DOE had not certified Bechtel's earned value
system. Bechtel is now working to have its earned value management
system certified by September 2006. In addition, to improve its
management of the project, Bechtel has reorganized to provide
greater control and oversight of facilities engineering work and
greater standardization in purchasing material and supplies.
According to Bechtel's deputy project manager, the new
organizational structure, along with selected personnel changes
will strengthen oversight of this work. Finally, following a March
2006 nuclear safety enforcement action by DOE, Bechtel is in the
process of developing a nuclear safety and quality culture change
initiative. This includes holding meetings to emphasize quality
and safety, implementing new training requirements, and conducting
employee focus groups to promote greater awareness of safety
requirements.
DOE has also taken steps to strengthen its management and
oversight. To address organizational and staffing oversight
issues, DOE formed a special headquarters task force, in late
2005, to study various aspects of the Hanford project and to
advise the Secretary and the DOE project manager as the project
goes forward. In addition, the Assistant Secretary for
Environmental Management directed the DOE site manager to hire at
least eight additional contracting staff to help administer the
project, including a director of procurement, a procurement
attorney, two senior contracting officers, two senior contract
specialists, and two contract specialists. DOE expects to fill
these positions by spring 2006. DOE also established a new
headquarters office-the Office of Project Recovery-to focus
greater attention on projects, such as the waste treatment plant
project, that have performance problems. This office, which
reports directly to the Assistant Secretary for Environmental
Management, is intended to work with field officials to help get
projects in trouble back on track.
To address project management and reporting concerns, DOE is
improving the use of its earned value information-data DOE uses to
monitor cost and schedule performance on its projects. DOE is also
requiring Bechtel to comply with DOE's project management
requirements, as defined in DOE Order 413.3. In our June 2004
report on the Hanford waste treatment project,12 we found that DOE
awarded the original contract in December 2000, without putting in
place these key project management requirements. We noted that
this approach added significantly to project risk. Additionally,
the Assistant Secretary for Environmental Management directed
DOE's Office of Engineering and Construction Management to provide
more frequent assessments of the waste treatment project and, if
necessary, initiate more external reviews of the project.
To address continuing problems in nuclear safety and quality, DOE
recently initiated an enforcement action, including a civil
penalty of $198,000, against Bechtel for the continuing recurrence
of quality and safety violations. In its March 16, 2006
Preliminary Notice of Violation letter, DOE listed several areas
where Bechtel had violated nuclear safety requirements, including
non-adherence to procedures, inadequate training for staff, and
emphasizing meeting cost and schedule requirements over quality
and safety. In its March 16 letter, DOE noted that past actions by
Bechtel to correct these long-standing problems had not been
effective. DOE plans to meet with Bechtel in June 2006 to discuss
the contractor's progress in improving nuclear safety on the
project and determine what additional steps will be necessary to
ensure safety and quality on the project.
Despite the actions taken by DOE and Bechtel to address technical,
safety, and other management problems on the project, we have
continuing concerns about the current strategy for going forward.
Our main concerns include:
o the continued use of a fast-track, design-build approach to the
remaining work on the construction project,
o the reliability of the project baseline and whether it will
fully account for remaining uncertainties, and
o the adequacy of project incentives and management controls for
ensuring effective project management and oversight.
It is unclear whether DOE plans to go forward with the fast-track
approach and allow Bechtel to work concurrently on technology,
design, and construction activities. Although design and
construction activities will be less "close-coupled" than before,
the work schedule will still not fully comply with nuclear
industry guidelines to complete at least 90 percent of the design
before constructing the facilities. DOE is continuing with this
fast-track, design-build approach to try and stay as close as
possible to milestone dates agreed to in the Tri-Party Agreement,
and because DOE believes that doing so will help to control costs
on the project. However, the myriad of technical, safety, and
management problems that have already occurred on the project make
it clear that a more systematic approach to the project is needed.
Indeed, many of those problems have not yet been fully resolved.
Continuing with a fast-track, design-build approach under these
conditions increases the risk that the completed facilities may
require major rework to operate safely and effectively, which
could further increase costs. In our view, proceeding with a
project construction plan more closely aligned with nuclear
industry guidelines for complex nuclear facilities will provide
the best chance of successfully completing the project and
controlling the final cost and completion date.
None of the estimates Bechtel has developed so far have been
reliable. Estimates of material and labor costs have been
inadequate and Bechtel has not included sufficient contingencies
in the project baseline to account for the high risk, technical
complexities, and managerial challenges it has faced. As DOE's
project management guidance states, the key is to develop a
project baseline estimate that is fully achievable. Re-baselining
the project is a time-consuming and costly effort. Bechtel's
December 2005 baseline proposal is contained in a roughly 44,000
page document that according to Bechtel's deputy project manager
required the efforts of about 200 staff over a 6-month period and
cost about $10 million to develop. Furthermore, outside reviews
and baseline validations have cost DOE an additional $20 million
since 2003.
Bechtel has indicated that the project's revised cost and schedule
estimates will be comprehensive enough to account for known
uncertainties, such as what it might take to address the problem
of hydrogen gas building up in facility pipes as well as any less
predictable unknowns that might occur, such as a shortage of a key
commodity. While we are encouraged that Bechtel is taking a more
systematic approach to developing the project estimates, we have
some remaining concerns. In particular, the project estimate must
not only account for constructing the facilities but also
commissioning--when DOE and Bechtel will demonstrate that the
facilities are safe and ready to operate. In the past, to try and
achieve milestone dates agreed to for beginning facility
operations, DOE and Bechtel reduced the amount of time in the
baseline schedule allocated to facility commissioning and testing
activities from about 58 months to 42 months. In our June 2004
report, we expressed a concern that shortening the commissioning
schedule may affect the reliability of the completed facilities.
We also contacted former DOE and contractor officials and industry
technology development managers who told us that the commissioning
approach in the 2003 baseline could result in significant problems
being overlooked.
Under Bechtel's most recent proposal, the timeframe for
commissioning and testing activities has been increased to about
46 months, including about 21 months of component testing before
commissioning with simulated and actual waste begins. However,
Bechtel does not yet have a detailed plan for the commissioning
activities that demonstrates a 46 month period is adequate.
Furthermore, one independent review has concluded that the
commissioning phase will be the most difficult aspect of the
entire construction project.13 Given the nuclear safety problems
Bechtel has encountered so far on the project, and the complexity
and size of the waste treatment plant, the commissioning phase
portion of the schedule will need to be long enough to allow full
testing of the facilities and sufficient time to identify and
address any remaining problems before operations begin.
One of the remaining management uncertainties is how DOE will
modify contract incentives once the new baseline is finalized. Due
to cost increases and schedule delays that have occurred, the
incentive fees in the current contract are no longer meaningful.
Those incentives included more than $300 million for meeting cost
and schedule goals or construction milestones, and about $111
million for building a plant that operates effectively. This
greater focus on cost and schedule milestones may help explain why
DOE has found a less than adequate concern for nuclear safety on
the project. Another issue, however, is that modifying the
contract to provide new incentives could be viewed as rewarding
Bechtel's past performance. Overall, it remains to be seen whether
DOE can finally put in place a combination of performance
incentives and management controls that will support the
successful treatment of the Hanford tank wastes over the next few
decades.
By just about any measure, the Hanford waste treatment project is
in disarray, as evidenced by ever-increasing cost estimates,
construction delays, and more recently, safety concerns. In our
view, what is happening is uncharacteristic of a well-planned and
well-managed construction project. Project costs are increasing
rapidly and we do not know what the facilities will ultimately
cost or when they will be operational. Of great concern to us is
the fact that many nuclear safety and other technical problems
have occurred on the project. We believe that it is imperative
that Bechtel and DOE discover any and all safety problems and
immediately address them. In going forward, it is unclear whether
DOE plans to continue using a fast-track approach that we have
found is inappropriate for this unique, complex nuclear facility.
We believe that DOE needs to follow nuclear industry construction
guidelines and take a more conservative approach to design and
construction activities that avoids carrying out these activities
concurrently. Furthermore, the revised baseline must be robust
enough to adequately address remaining uncertainties and allow
sufficient time for testing the facilities during the
commissioning phase. Unless the revised baseline fully reflects
all remaining uncertainties, especially problems that may occur
during facility commissioning, DOE will be unable to ensure that
no further re-baselining of the project will be necessary.
Furthermore, it is unclear how DOE will modify contract incentives
or carry out its revised plan for overseeing the project. We
believe that DOE needs to develop contract incentives that better
balance cost and schedule incentives and incentives to ensure that
the facilities operate safely and effectively as well as improve
the department's management and oversight of contractor
activities. In our view, if DOE takes these actions the project
will have a better chance of being successfully completed.
We recommend that the Secretary of Energy take the following three
actions:
1. Discontinue using a fast-track, design-build
approach to completing the project and consider the
feasibility of completing at least 90 percent of the
facility design or facility component design before
restarting construction, and ensure that the
project's major technical and safety problems have
been addressed before restarting construction.
2. Develop a revised project baseline that fully
reflects the remaining uncertainties, including
potential problems that may be encountered during the
commissioning phase, before presenting it as a
reliable estimate of the project's cost and schedule.
3. Establish improved management controls, including
revising contract incentives and strengthening
accountability for performing oversight activities.
Thank you, Mr. Chairman and Members of the Subcommittee. That
concludes my testimony. I would be pleased to respond to any
questions that you may have.
For further information on this testimony, please contact Mr. Gene
Aloise at (202) 512-3841. Individuals making key contributions to
this testimony included Chris Abraham, John Delicath, Nancy
Kintner-Meyer, Jeff Larson, Tom Perry, and Bill Swick.
DOE has a vast complex of sites across the nation dedicated to the
nuclear weapons program, but the high-level waste stemming from
reprocessing spent nuclear fuel to produce weapons material such
as plutonium and uranium has been limited mainly to three
sites-the Savannah River site, South Carolina; the Idaho National
Laboratory near Idaho Falls, Idaho; and the Hanford site near
Richland, Washington.1 The underground storage tanks that store
the high-level waste at the Hanford site consist of 149 single
shell steel tanks and 28 double shell tanks encased in concrete.
Most of these tanks have already exceeded their design life. DOE
has concluded, based on tank monitoring data and other techniques
used to detect contamination in soil under the tanks, that 67 of
the single shell tanks have leaked about 1 million gallons of
high-level waste into the soil. DOE does not believe that the
double shell tanks have leaked any waste.
The waste in these tanks contains radioactive components that emit
dangerously intense radiation. Because of the intense radiation
emitted from high-level waste, the waste must be isolated and
handled remotely behind heavy shielding such as a layer of
concrete in order to protect humans and the environment. In
addition to intense radioactivity, some radioactive components are
highly mobile in the environment and can quickly migrate to
contaminate the soil and groundwater if not immobilized. In
addition to radioactive components, DOE's high-level waste also
generally contains hazardous components added during the process
of dissolving used nuclear fuel to remove plutonium and other
nuclear materials or to stabilize the waste for storage. These
hazardous components include solvents, acids, caustic sodas, and
toxic heavy metals such as chromium and lead. Radioactive waste
components, when combined with hazardous components, are referred
to as "mixed wastes."
High-level waste generally exists in a variety of physical forms
and layers inside the underground tanks, depending on the physical
and chemical properties of the waste components. The waste in the
tanks takes three main forms:
o Sludge: The denser, water insoluble components generally settle
to the bottom of the tank to form a thick layer known as sludge,
which has the consistency of peanut butter.
o Saltcake: Above the sludge may be water-soluble components such
as sodium salts that crystallize or solidify out of the waste
solution to form a moist sand-like material called saltcake.
o Liquid: Above or between the denser layers may be liquids
comprised of water and dissolved salts called supernate.
The treatment and disposal of high-level waste produced at DOE
facilities is governed by a number of federal laws, including laws
that define the roles of DOE and the Nuclear Regulatory Commission
(NRC) in waste management. The Atomic Energy Act of 1954 (AEA) and
the Energy Reorganization Act of 1974 established responsibility
for the regulatory control of radioactive materials including
DOE's high-level wastes. Under amendments the Federal Facility
Compliance Act of 1992 made to the Resource Conservation and
Recovery Act of 1976 (RCRA), DOE generally must develop waste
treatment plans for its sites that contain mixed wastes.2 These
plans are approved by states, including the state of Washington,
that EPA has authorized to administer RCRA or by EPA in those
states that have not been so authorized.
To determine how costs and schedule for DOE's waste treatment
plant located at the Hanford site near Richland, Washington have
changed, and the primary causes for those changes since the
contract was awarded in 2000, we reviewed previous GAO reports on
the project from 1993 to 2005. In addition we reviewed several
internal and external reports addressing cost, schedule,
technology, and other issues on the project, including two studies
by the Army Corps of Engineers, and a study conducted for DOE by
LMI Government Consulting-a private engineering consulting firm.
We also reviewed both the April and December 2005 Estimates at
Completion prepared by Bechtel and two March 2006 reports prepared
by external review teams to assess the impact of a variety of
technical issues on the project and Bechtel's estimated cost
estimate for completing the project. Both of these reports were
prepared under the direction of the department's Office of
Environmental Management. While we did not independently verify
the accuracy of the data presented in these reports, based on our
review of much of the supporting documentation cited in the
reports, we determined the data to be of sufficient reliability
use in our report. To assist in evaluating these reports and other
technical issues on the project, we obtained assistance from our
technical consultant, Dr. George Hinman, who has a Ph. D. in
physics and serves as Professor Emeritus at Washington State
University. Dr. Hinman has extensive nuclear energy experience in
industry, government, and academia.
We also discussed the problems and underlying causes of cost and
schedule growth with DOE and contractor officials at the site as
well as DOE officials in its Office of Environmental Management,
Office of Engineering and Construction Management, and Office of
Budget. We discussed the project's cost and schedule changes with
outside experts, including officials from the Defense Nuclear
Facilities Safety Board. To document the primary causes for
changes in the cost and schedule estimates, we relied on these
documents as well as interviews with key project and program
officials. We quantified the cost impact of each of the main
causes for cost growth and schedule increases from information
provided in Bechtel's April 2005 estimate and the Corps of
Engineers' May 2005 report. These estimates were based on an
estimated contract price of $9.3 billion. However, even though
Bechtel updated its cost and schedule estimates to reflect a
potential contract price of nearly $11 billion as of December
2005, it does not plan to finalize its estimate until late May
2006. As a result, we were not able to quantify the impact of each
of the main causes we cited for cost and schedule changes to
reflect the most recent cost estimate.
To determine the steps DOE and Bechtel are taking to improve
management and oversight of the project, we reviewed several
documents, including a letter by the Assistant Secretary for
Environmental Management directing that a number of management
improvements be made. We reviewed DOE policy and procedure
documents, and discussed DOE's strategy to manage the project with
DOE headquarters officials in its Office of Environmental
Management. We also discussed management improvement initiatives
with senior Bechtel officials. In reviewing the role of fast track
on the project, we obtained information from the nuclear industry
to update current guidance on designing, licensing, and building
nuclear facilities that may be equivalent in size, scope, and
complexity to the Hanford waste treatment plant.
To develop information on nuclear safety issues at the waste
treatment plant and DOE's enforcement action, we obtained numerous
documents from DOE and Bechtel describing safety problems that had
been identified over the years, analyses of the causes, and
proposed actions to correct the problems. We discussed nuclear
safety issues with DOE's Director of Environmental Safety and
Quality at Hanford as well as Bechtel's Quality Assurance Manager
and Price-Anderson Amendments Act Coordinator. To understand the
significance of safety violations raised in DOE's March 17, 2006
enforcement action, we discussed the Proposed Notice of Violation
with the Director of the Office of Enforcement in DOE's Office of
Environmental Safety and Health. We also discussed safety concerns
with officials from the Defense Nuclear Facilities Safety Board
and with state regulators.
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Background
3CH2M Hill Group is a limited liability corporation of the CH2MHill
Company.
4DOE currently is evaluating the suitability of Yucca Mountain in Nevada
as the site of the repository for the high-level waste canisters.
Contractor Performance Problems, DOE Management Shortcomings, and Technical
Challenges Have Resulted in Significantly Higher Cost Estimates and Longer
Completion Dates for the Construction Project
Project Cost and Schedule Have Increased Significantly
Bechtel and DOE Share Responsibility for the Main Causes of the Cost Increases
and Schedule Delays
5"Comprehensive Review of the Hanford Waste Treatment Plant Estimate at
Completion-Preliminary Draft," Assessment Conducted by an Independent Team
of External Experts, at the direction of the U.S. Department of Energy,
Office of Environmental Management (Washington, D.C.: Mar. 20, 2006).
6Between 2000 and 2003, cost increases estimated at $1.2 billion occurred
because of engineering problems, estimating errors, and contingency
funding increases. Cost increases occurring between 2003 and May 2005,
based on Bechtel's April 2005 estimate and the Corps of Engineers' May
2005 review of Bechtel's estimate, show that Bechtel underestimated costs
by an additional $845 million, ongoing technical problems added an
additional $1.15 billion to costs, and an additional $1.45 billion was
added to the project's estimated contingency. These estimates were based
on a revised contract price of $9.3 billion. These analyses have not yet
been updated to document the current cost increases based on the latest
estimated contract price estimate of nearly $11 billion. DOE expects
Bechtel to complete its current cost and schedule estimate in late May
2006.
7No estimate is available for how problems in meeting nuclear safety
requirements specifically affected project cost estimates.
8The Corps of Engineers reported in May 2004 that DOE did not properly
account for cost increases that should have been expected from the overall
complexity of nearly every aspect of the project-including the variety of
tank wastes; the required technology integration; the design,
construction, and commissioning of the plant; and the regulatory climate.
See U.S. Army Corps of Engineers, Independent Cost and Schedule Baseline
Review Summary Report, (Walla Walla, Washington, May 28, 2004).
910 CFR 52.47(b)(1) for certification of a nuclear power plant design,
calls for facility design to be "essentially complete" to resolve safety
issues before starting construction. According to the director of new
plant deployment at the Nuclear Energy Institute, for a first-of-a-kind
plant, the commercial nuclear power industry's goal is to achieve 90
percent completion of final detailed design before construction begins. In
addition, DOE's own Order 413.3 states that facility design should be
"essentially complete" and all environmental and safety criteria met when
the project is ready to begin construction.
10Comprehensive Review of the Hanford Waste Treatment Plant Flowsheet and
Throughput-Prepublication," Assessment conducted by an Independent Team of
External Experts, at the direction of the U.S. Department of Energy,
Office of Environmental Management (Washington, D.C.: Mar. 17, 2006).
DOE and Bechtel Have Taken Several Steps to Strengthen Management and Oversight
of the Project
Slowing construction to address technical problems and advance the design work
Developing a more reliable project baseline
11"Comprehensive Review of the Hanford Waste Treatment Plant Estimate at
Completion-Preliminary Draft," Assessment Conducted by an Independent Team
of External Experts, at the direction of the U.S. Department of Energy,
Office of Environmental Management (Washington, D.C.: Mar. 20, 2006).
Taking other steps to improve management and oversight
Observations About Selected Issues DOE Will Need to Address in Going Forward on
the Project
12U.S. General Accounting Office, Nuclear Waste: Absence of Key Management
Reforms on Hanford's Cleanup Project Adds to Challenges of Achieving Cost
and Schedule Goals, GAO-04-611 (Washington, D.C.: June 9, 2004).
The use of a fast-track, design-build approach to the project
The reliability of the revised project estimates
The adequacy of project management and oversight
13LMI Government Consulting, Hanford Waste Treatment and Immobilization
Plant Project: After-Action Fact Finding Review, January 2006.
Conclusions
Recommendations
Contacts and Acknowledgments
Appendix I: Additional Information on Hanford's Tank Wastes
1DOE also agreed to clean up high-level waste at another site-the West
Valley Demonstration Project at West Valley, New York-where the state
sponsored reprocessing of both commercial and DOE spent nuclear fuel. DOE
completed treatment and preparation of this waste for disposal in
September 2002.
242 U.S.C. 6939c(b).
Appendix II: Scope and Methodology
(360665)
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Highlights of GAO-06-602T , a testimony to the Subcommittee on Energy and
Water Development and Related Agencies, Committee on Appropriations, House
of Representatives
April 2006
HANFORD WASTE TREATMENT PLANT
Contractor and DOE Management Problems Have Lead to Higher Costs,
Construction Delays, and Safety Concerns
The Waste Treatment Plant Project at the Department of Energy's (DOE)
Hanford site in southeastern Washington state is a massive effort to
stabilize and prepare for disposal 55 million gallons of radioactive and
hazardous wastes currently held in underground tanks. In 2000, DOE awarded
an 11-year, $4.3 billion contract project to Bechtel National, Inc.
(Bechtel) to design and construct the plant. Since then, numerous problems
and changes have occurred that will significantly increase the project's
final cost and completion date.
This testimony discusses (1) how and why the project's cost and schedule
have changed since 2000; (2) the status of DOE and Bechtel efforts to
address these problems and improve project management ; and (3) our
observations on issues that need to be addressed in going forward. It is
based on previous GAO reports and ongoing work.
What GAO Recommends
GAO recommends that DOE (1) consider the feasibility of completing 90
percent of facility design or facility component design before restarting
construction; (2) ensure that the revised project baseline fully reflects
remaining uncertainties; and (3) improve management controls.
DOE generally agreed, but was concerned about the costs of delaying
construction to complete design activities.
Since the waste treatment plant construction contract was awarded in 2000,
the project's estimated cost has increased more than 150 percent to about
$11 billion, and the completion date has been extended from 2011 to 2017
or later. There are three main causes for the increases in the project's
cost and completion date: (1) the contractor's performance shortcomings in
developing project estimates and implementing nuclear safety requirements,
(2) DOE management problems, including inadequate oversight of the
contractor's performance, and (3) technical challenges that have been more
difficult than expected to address.
To address the causes of the cost and schedule increases and regain
management control of the project, DOE and Bechtel have taken steps to
develop a more reliable cost and schedule baseline; slow down or stop
construction activities on some of the facilities to allow time to address
technical and safety problems and to advance design activities farther
ahead of construction activities; and strengthen both project management
and project oversight activities.
Despite these actions, we have continuing concerns about the current
strategy for going forward on the project. Our main concerns include: (1)
the continued use of a fast-track, design-build approach for the remaining
work on the construction project, (2) the historical unreliability of cost
and schedule estimates, and (3) inadequate incentives and management
controls for ensuring effective project management and oversight.
Progression of Cost Estimates on the WTP Project
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