Department of Energy: Consistent Application of Requirements	 
Needed to Improve Project Management (11-MAY-07, GAO-07-518).	 
                                                                 
Since 1990, Department of Energy (DOE) contract management (which
includes project management) has been designated as a high-risk  
area for fraud, waste, abuse, and mismanagement. For years, GAO  
has reported on DOE's inadequate management and oversight of its 
contracts and projects. GAO has made dozens of recommendations on
steps that DOE could take to improve project management.	 
Furthermore, in 1999 The National Academies' National Research	 
Council developed a series of recommendations to address	 
weaknesses in DOE's project management. This GAO report discusses
(1) DOE's main efforts since 1999 to address project management  
weaknesses, (2) the extent to which DOE's project performance has
improved, and (3) the extent to which DOE's project management	 
guidelines have been consistently followed.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-518 					        
    ACCNO:   A69489						        
  TITLE:     Department of Energy: Consistent Application of	      
Requirements Needed to Improve Project Management		 
     DATE:   05/11/2007 
  SUBJECT:   Budgeting						 
	     Contract administration				 
	     Contract oversight 				 
	     Cost overruns					 
	     Energy industry					 
	     Energy policy					 
	     Performance appraisal				 
	     Performance measures				 
	     Program management 				 
	     Schedule slippages 				 
	     Strategic planning 				 
	     Policies and procedures				 
	     Executive agency oversight 			 
	     GAO High Risk Series				 

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GAO-07-518

   

     * [1]Results in Brief
     * [2]Background
     * [3]DOE Has Improved Its Approach to Managing and Overseeing Pro

          * [4]Project Management Policies and Guidance Now Incorporate Ind
          * [5]DOE Has Developed a Project Tracking Information System and
          * [6]DOE Is Strengthening Oversight by Providing Training to Enha

     * [7]DOE Has Not Demonstrated Improved Project Performance
     * [8]DOE Has Not Fully Implemented Its Project Management Improve

          * [9]DOE Has Not Fully Implemented Project Management Improvement
          * [10]DOE Has Not Consistently Followed Project Management Require

     * [11]Conclusions
     * [12]Recommendation for Executive Action
     * [13]Agency Comments and Our Evaluation
     * [14]Appendix I: Scope and Methodology
     * [15]Appendix II: Comments from the Department of Energy
     * [16]Appendix III: GAO Contact and Staff Acknowledgments

          * [17]GAO Contact
          * [18]Staff Acknowledgments

     * [19]Related GAO Products

          * [20]Order by Mail or Phone

Report to the Subcommittee on Energy and Water Development, Committee on
Appropriations, House of Representatives

United States Government Accountability Office

GAO

May 2007

DEPARTMENT OF ENERGY

Consistent Application of Requirements Needed to Improve Project
Management

GAO-07-518

Contents

Letter 1

Results in Brief 4
Background 7
DOE Has Improved Its Approach to Managing and Overseeing Projects 8
DOE Has Not Demonstrated Improved Project Performance 15
DOE Has Not Fully Implemented Its Project Management Improvement Efforts
or Ensured That Project Management Requirements Are Consistently Followed
19
Conclusions 22
Recommendation for Executive Action 23
Agency Comments and Our Evaluation 23
Appendix I Scope and Methodology 25
Appendix II Comments from the Department of Energy 27
Appendix III GAO Contact and Staff Acknowledgments 29
Related GAO Products 30

Figures

Figure 1: Percentage of Ongoing Line Item Construction Projects within 10
Percent of Cost and Schedule Baseline, October 2002 through September 2006
16
Figure 2: Percentage of Ongoing Office of Environmental Management
Operating Projects within 10 Percent of Cost and Schedule Baseline,
February 2004 through September 2006 18

Abbreviations

DOE Department of Energy
NNSA National Nuclear Security Administration

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separately.

United States Government Accountability Office
Washington, DC 20548

May 11, 2007

The Honorable Peter J. Visclosky
Chairman
The Honorable David L. Hobson
Ranking Member
Subcommittee on Energy and Water Development
Committee on Appropriations
House of Representatives

The Department of Energy (DOE), the largest civilian contracting agency in
the federal government, spends over 90 percent of its annual budget on
contracts to operate its laboratories, production facilities, and
environmental restoration sites. In fiscal year 2006, DOE spent about $23
billion on contracts to maintain the nation's nuclear weapons stockpile,
clean up radioactive and hazardous wastes, and conduct scientific research
activities. DOE's contractors generally carry out these missions by
managing the department's projects, and DOE program managers and federal
project directors oversee the contractors' efforts. As of September 2006,
DOE was managing 206 ongoing projects, costing $5 million or more, for a
total estimated cost of $205.6 billion. These projects can be funded
separately in the department's annual budget as a construction line item
or funded from annual operating funds, such as environmental cleanup
projects. The cost and complexity of these projects can vary greatly, such
as a $12-million project to demolish a surplus building at the Lawrence
Livermore National Laboratory in California or a multi-billion dollar
project at the Hanford site in Washington state to design and construct
one-of-a-kind facilities to treat high-level radioactive and hazardous
wastes. The Department of Energy (DOE), the largest civilian contracting
agency in the federal government, spends over 90 percent of its annual
budget on contracts to operate its laboratories, production facilities,
and environmental restoration sites. In fiscal year 2006, DOE spent about
$23 billion on contracts to maintain the nation's nuclear weapons
stockpile, clean up radioactive and hazardous wastes, and conduct
scientific research activities. DOE's contractors generally carry out
these missions by managing the department's projects, and DOE program
managers and federal project directors oversee the contractors' efforts.
As of September 2006, DOE was managing 206 ongoing projects, costing $5
million or more, for a total estimated cost of $205.6 billion. These
projects can be funded separately in the department's annual budget as a
construction line item or funded from annual operating funds, such as
environmental cleanup projects. The cost and complexity of these projects
can vary greatly, such as a $12-million project to demolish a surplus
building at the Lawrence Livermore National Laboratory in California or a
multi-billion dollar project at the Hanford site in Washington state to
design and construct one-of-a-kind facilities to treat high-level
radioactive and hazardous wastes.

For years, GAO has reported on DOE's inadequate management and oversight
of its contracts and projects and on its failure to hold contractors
accountable for results. The poor performance of DOE's contractors has led
to schedule delays and cost increases for many of the department's major
projects. Such problems led us to designate DOE's contract
management--defined broadly to include both contract administration and
project management--as a high-risk area for fraud, waste, abuse, and
mismanagement in 1990. Since that time, we have issued numerous reports
and made dozens of recommendations to DOE identifying specific steps that
would improve project management across all parts of the department's
organization. For example, in June 2004, we For years, GAO has reported on
DOE's inadequate management and oversight of its contracts and projects
and on its failure to hold contractors accountable for results. The poor
performance of DOE's contractors has led to schedule delays and cost
increases for many of the department's major projects. Such problems led
us to designate DOE's contract management--defined broadly to include both
contract administration and project management--as a high-risk area for
fraud, waste, abuse, and mismanagement in 1990. Since that time, we have
issued numerous reports and made dozens of recommendations to DOE
identifying specific steps that would improve project management across
all parts of the department's organization. For example, in June 2004, we
found that DOE's failure to implement project management guidelines at the
initiation of a major cleanup project at its Hanford site led to about a
one-third increase in the project cost and added about 16 months to the
estimated construction schedule.^1 We recommended, among other things,
that DOE follow project management guidelines more closely. In addition,
in March 2005, we recommended that the department take steps to strengthen
contract management throughout its organization to more effectively
control cost increases and schedule delays that were occurring on many of
the department's major projects.^2 Several years later, we found that
organizational conflicts between the National Nuclear Security
Administration (NNSA) and DOE were inhibiting the effective management of
the nuclear weapons complex and recommended, among other things, that NNSA
take actions to strengthen management of its projects.^3 In April 2006, we
testified before this subcommittee on the technical and management
problems with the Hanford Waste Treatment Plant, a project to construct
facilities to treat and prepare for disposal of 55 million gallons of
high-level radioactive waste.^4 The estimated costs of this project had
increased from about $4.3 billion to over $12 billion, with an 8-year
delay in completing the facilities. Many of the problems with the project
resulted from poor contractor performance and poor DOE oversight of the
contractor's activities. Ultimately, in January of this year, we concluded
that despite DOE's efforts to address contract and project management
weaknesses, performance problems continued to occur on DOE's major
projects, and DOE contract management remained at high-risk for fraud,
waste, abuse, and mismanagement.^5

In addition to GAO, others have reported problems with DOE's management
and oversight of its projects. Specifically, the conference report
accompanying DOE's fiscal year 1998 Energy and Water Development
Appropriations Act directed the department to obtain an independent review
of its project management capabilities. The National Academies' National
Research Council issued its first report from this review in 1999.^6 The
National Research Council reported that DOE's construction and
environmental cleanup projects took much longer and cost about 50 percent
more than comparable projects by other federal agencies or projects in the
private sector. The council concluded that DOE's project management
practices fell short of industry best practices in three key areas--the
adequacy of its project management policies and guidance, consistent and
objective performance information on the cost and schedule of projects,
and the quality and adequacy of federal oversight. The National Research
Council developed a series of recommendations to improve DOE's framework
for managing projects and noted that improved performance on projects
would require an organizational and cultural change within the department.
Both the National Research Council and DOE acknowledged that implementing
these recommendations and changing the organization and culture within the
department would be a major initiative and that it could take years to
complete the implementation activities and to improve the cost and
schedule performance of DOE's projects.

^1GAO, Nuclear Waste: Absence of Key Management Reforms on Hanford's
Cleanup Project Adds to Challenges of Achieving Cost and Schedule Goals,
[21]GAO-04-611 (Washington, D.C.: June 9, 2004).

^2GAO, Department of Energy: Further Actions Are Needed to Strengthen
Contract Management for Major Projects, [22]GAO-05-123 (Washington, D.C.:
Mar. 18, 2005).

^3GAO, National Nuclear Security Administration: Additional Actions Needed
to Improve Management of the Nation's Nuclear Programs, [23]GAO-07-36
(Washington, D.C.: Jan. 19, 2007).

^4GAO, Hanford Waste Treatment Plant: Contractor and DOE Management
Problems Have Led to Higher Costs, Construction Delays, and Safety
Concerns, [24]GAO-06-602T (Washington, D.C.: Apr. 6, 2006).

^5GAO, High-Risk Series: An Update, [25]GAO-07-310 (Washington, D.C.:
January 2007).

Therefore, you asked us to evaluate DOE's efforts to improve management of
its projects since the 1999 National Research Council report and to
identify other steps DOE could take to strengthen its project management
practices. In response, we undertook two separate reviews. One report
issued in March 2007 discusses cost and schedule performance on 12 of
DOE's major construction projects, and the factors contributing to any
cost increases or schedule delays.^7 This is the second report that
discusses (1) DOE's main efforts since 1999 to address weaknesses in the
management of its projects, (2) the extent to which DOE's project
performance has improved, and (3) the extent to which DOE has implemented
its improvement efforts and consistently followed its project management
guidelines.

^6National Research Council, Improving Project Management in the
Department of Energy (Washington, D.C.: June 1999).

^7GAO, Department of Energy: Major Construction Projects Need a Consistent
Approach for Assessing Technology Readiness to Help Avoid Cost Increases
and Delays, [26]GAO-07-336 (Washington, D.C.: Mar. 27, 2007).

To determine DOE's main efforts since 1999 to address weaknesses in its
project management, we reviewed and analyzed DOE's policies and guidance
on managing projects, and DOE efforts to improve its management processes.
We also interviewed senior DOE headquarters officials to identify
improvement efforts that the department had taken or had in process. We
focused our review of actions taken by DOE's program offices on the
department's three largest elements by percentage of the annual
budget--NNSA and the Offices of Environmental Management and Science. To
determine the extent to which performance on DOE's projects has improved
since 1999, we reviewed and analyzed DOE's monthly status reports on
projects and related supporting documentation. Since we have expressed
concern about the reliability of the data in DOE's project tracking and
reporting system, we did not develop our conclusions or findings based on
information generated from that system. However, we did determine that the
data were sufficiently reliable to present trends in DOE's ability to meet
its performance goals. To determine the extent to which DOE's improvement
efforts have been fully implemented and its project management guidelines
consistently followed since 1999, we reviewed and analyzed prior GAO
reports and reports from DOE's Office of Inspector General and The
National Academies' National Research Council. These reports discussed
weaknesses in DOE's project management, contractor performance, and
federal oversight of individual projects, as well as DOE's efforts to
improve management of contracts and associated performance measures. A
more detailed description of our scope and methodology is presented in
appendix I. On October 12, 2006, we briefed your staff on our results to
date, and this report documents information presented in that briefing. We
conducted our work from June 2006 to April 2007 in accordance with
generally accepted government auditing standards.

Results in Brief

DOE has improved its approach to project management by addressing
weaknesses in three key areas, as recommended by the National Research
Council in 1999-- strengthening project management policies and guidance,
developing consistent and objective performance information on ongoing
projects, and improving the quality of federal oversight of contractors
and projects.

           o To strengthen project management policies and guidance, DOE
           began revising its policies and guidance in 2000 to incorporate
           industry practices and requirements and increase the focus on
           early planning. Specifically, to improve contract planning, DOE
           issued new guidance on factors to consider in selecting the
           appropriate contract type for a project, given the work to be
           performed and the associated risks. DOE also revised its policies
           and guidance to require the use of an integrated project team for
           planning, to help ensure that the program office considers legal,
           contracting, and safety issues in the early phases of a project.
           In addition, the revised guidance required senior management
           approval at critical decision points during a project, such as
           when starting construction for a new facility.
           o To develop consistent, objective performance information on the
           progress of its ongoing projects, DOE required its contractors to
           implement an "earned value" management system. Earned value
           management, commonly used in private industry, relates the actual
           cost and schedule for accomplishing work on a project to the
           planned cost and schedule, and provides an objective measure of
           performance. DOE also developed a project tracking and reporting
           system to routinely gather and make available to its managers the
           earned value performance information, and began summarizing and
           reporting performance data from this system in fiscal year 2003.
           To help ensure the consistency and reliability of the data in its
           project tracking system, in 2005 DOE began reviewing and
           certifying the earned value management systems used by its
           contractors. The purpose of this review was to determine whether
           the systems used by contractors to develop and report project cost
           and schedule information complied with the industry standards for
           an earned value management system, and could be relied upon to
           produce consistent and objective performance information.
           o To improve oversight of projects, DOE took two main actions--it
           developed a training and certification program for its federal
           project directors, and it required independent reviews of projects
           at key decision points. Specifically, in 2003, DOE established a
           project management career development program, which defined the
           training and experience necessary for federal project directors.
           As of May 2006, all DOE employees responsible for oversight of its
           projects had met the training and experience requirements to
           become certified federal project directors. In addition, to
           increase confidence in its ongoing projects, DOE required
           independent reviews from outside the responsible program office,
           at the initiation of a project to validate the mission need and
           before the project baseline is approved to validate the cost and
           schedule estimates.

           Despite these considerable efforts, overall performance on DOE's
           projects has not substantially improved to this point. DOE set a
           performance goal of having 90 percent of its ongoing projects
           being managed within a 10 percent variance of cost and schedule
           baseline targets. However, since October 2002, when DOE began
           reporting monthly project performance data, the department has
           achieved its performance goals for line item construction projects
           (generally funded separately in the government's annual budget)
           only about one third of the time. Also, starting in February 2004,
           DOE began reporting performance information separately for cleanup
           activities funded by the Office of Environmental Management annual
           operating funds rather than as individual line item construction
           projects. Prior to that time, these "operating" projects were
           included with the line item construction projects. Since February
           2004, these "operating" projects met cost and schedule performance
           goals only about 21 percent of the time. DOE officials said that,
           although performance goals are not consistently being met,
           improvements in project planning, independent project reviews at
           critical decision points, and stronger federal oversight should
           result in improved project performance in the future.

           DOE has not fully implemented its project management improvement
           efforts or ensured that project management requirements are
           consistently followed. One of DOE's improvement efforts has been
           to review and certify contractors' earned value management systems
           used to develop and report information on the cost and schedule
           performance of DOE's projects. DOE has completed the review and
           certification of eight contractor earned value management systems
           used on 40 of 96 ongoing DOE projects. DOE has established annual
           targets for the number of contractor systems to be reviewed, but
           it could be several years before DOE has certified substantially
           all of the contractors' earned value management systems. Of
           greater concern is that DOE has not ensured that its project
           management requirements are consistently followed. For example,
           DOE officials initially did not require the contractor to follow
           all project management requirements on a project to demonstrate an
           alternative waste treatment technology at DOE's Hanford site.
           Therefore, the project was initiated without using key project
           management tools, such as an independent review of the cost and
           schedule baseline. After the project experienced significant
           schedule and technical problems and the estimated cost more than
           tripled to about $230 million, DOE began requiring that the
           project be managed consistent with its project management
           requirements. In addition, we reported in January 2007 that cost
           and schedule status information on four NNSA projects, estimated
           to cost over $100 million each, was not being reported into DOE's
           project tracking system, and therefore, the projects were not
           receiving senior management oversight.

           To help strengthen management of DOE's projects and to better
           ensure that projects are completed on time and within budget, we
           are recommending that DOE take steps to ensure that project
           management requirements are consistently followed and that any
           exceptions to following the requirements are carefully reviewed
           and approved by senior management.

           In its comments on a draft version of the report, DOE agreed with
           our recommendation and outlined steps that the department is
           taking or will take to strengthen project management.
		   
		   Background

           DOE relies on its contractors to operate its sites and carry out
           its diverse missions, including developing, maintaining, and
           securing the nation's nuclear weapons capability; cleaning up the
           nuclear and hazardous wastes resulting from more than 50 years of
           weapons production; and conducting basic energy and scientific
           research, such as mapping the human genome. This mission work is
           carried out under the direction of NNSA and DOE's program offices,
           including the Offices of Environmental Management and Science. At
           the end of fiscal year 2006, DOE had fewer than 11,000 employees
           to provide oversight for work performed under contract by over
           95,000 contractor employees.^8

           DOE's contractors generally carry out the department's missions by
           managing its projects. DOE defines a project as "a unique effort
           that supports a program mission having defined points for starting
           and ending, undertaken to create a product, facility, or system
           and containing interdependent activities planned to meet a common
           objective or mission." A project is individually planned,
           approved, and managed in support of a program objective. Projects
           can include such diverse efforts as construction of multi-billion
           dollar facilities to treat radioactive and hazardous wastes,
           decontamination and demolition of excess facilities, or technology
           development activities.

           DOE's Office of Engineering and Construction Management
           establishes policies and guidance for planning and managing
           projects. DOE's Office of Procurement and Assistance Management
           and NNSA's Office of Acquisition and Supply Management establish
           policies and guidance for awarding and administering the contracts
           under which the department's projects are carried out. Officials
           from DOE's programs, such as NNSA and the Offices of Environmental
           Management and Science, provide oversight to ensure that the
           contractors are managing projects to support DOE's missions. In
           addition to the oversight of projects provided by the Office of
           Engineering and Construction Management, DOE's three largest
           program elements--NNSA and the Offices of Environmental Management
           and Science--established project management support offices within
           their organizations. These project management support offices
           coordinate efforts within the program, provide additional
           oversight of projects, and conduct more detailed reviews of
           individual projects.
		   
^8At the end of fiscal year 2006, DOE had a total of about 15,000
full-time equivalent employees. Since over 4,000 of those employees worked
for one of the department's four power marketing administrations, they are
not included in the number available to provide oversight of contractors'
efforts.

           DOE Has Improved Its Approach to Managing and Overseeing Projects

           Since 1999, DOE has worked to improve its approach to managing
           projects in three key areas of concern identified by the National
           Research Council--strengthening project management policies and
           guidance, developing consistent and objective performance
           information on ongoing projects, and improving the quality of
           federal oversight.
		   
		   Project Management Policies and Guidance Now Incorporate Industry
		   Practices

           The first key area that DOE focused on was strengthening its
           project management policies and guidance to incorporate industry
           practices as recommended by the National Research Council. In its
           1999 report, the council found that DOE lacked comprehensive
           project management policies and guidance and that there was little
           emphasis on early planning for projects.

           To incorporate industry practices into its project planning and
           management, DOE implemented a new project management order and
           guidelines that established a systematic process commonly used in
           private industry for managing and overseeing projects, from
           identification of need through project completion. DOE issued its
           project management order in October 2000^9 and in March 2003,
           issued a project management manual, containing supplemental
           information and guidance on applying the order to individual
           projects. In July 2006, DOE revised the order to, among other
           things, reflect lessons learned since October 2000, including how
           to improve the quality of the documentation supporting project
           decisions.^10 Furthermore, the July 2006 order clarified how the
           project management guidelines should be applied both to
           environmental management cleanup projects and to information
           technology projects.
		   
^9DOE Order 413.3, issued October 13, 2000.

^10DOE Order 413.3A, issued July 28, 2006.


           The project management order provided a much more specific
           framework for planning, managing, and overseeing a project. For
           example, prior to 2000, DOE's previous order on the acquisition of
           capital assets had a stated objective of managing physical assets
           in a safe and cost effective manner to meet the DOE mission.^11 In
           contrast to that more general objective, the stated objective in
           the October 2000 project management order was to provide project
           management direction with the goal of delivering projects on
           schedule, within budget, and fully capable of meeting standards
           for mission performance, and safeguards and security, as well as
           environmental, safety, and health standards.

           In addition, the October 2000 order required a far more structured
           process for carrying out a project. Specifically, the order
           established major milestones--or critical decision points--that
           span the life of a project. For example, critical decision points
           for a construction project include (1) approving mission need, (2)
           approving the selection of the alternative and cost range, (3)
           approving the performance baseline (cost, schedule, and scope),
           (4) approving the start of construction, and (5) approving the
           start of operations or project completion. The order specifies the
           requirements that must be met, with the documentation necessary to
           move past the decision point. In addition, DOE senior management
           must review the supporting documentation and approve the project
           at each critical decision point.^12

           Overall, the revised policies and guidance provide more structure,
           discipline, and control over the management of DOE's projects, and
           more information on projects is available for review and approval.
           For example, for the decision point when an alternative is
           selected and the cost range for the project is identified, the
           program office needs to document why it selected the preferred
           approach from the various alternatives considered, develop an
           acquisition strategy, and develop a range of estimated costs to
           complete the project. Senior DOE management must review and
           approve the planned approach before the project can proceed. Under
           the previous order, there was more limited review in the early
           phases of a project, and it was not until later in the project
           that the program office documented the mission need and a range of
           estimated costs. In addition, the previous order did not
           specifically require senior management review in the early phases
           of a project.
		   
^11The order provided little additional information on how to do this.

^12DOE's project management order also establishes the level of approval
authority required for projects depending on the total project cost. For
example, in the July 2006 revision, generally the approval authority is
the Secretarial Acquisition Executive for major projects with a total
project cost over $750 million, an undersecretary for projects with a
total project cost between $100 million and $750 million, and a program
secretarial officer for projects less than $100 million.

           Another way in which the order strengthens project planning and
           management is by requiring and emphasizing the use of integrated
           project teams. These teams, led by the federal project director,
           bring together expertise from the program office, along with the
           knowledge, skills, and abilities from other program and staff
           offices within the department, such as the Office of General
           Counsel, to support the federal project director in successfully
           executing a project. The integrated project team generally
           includes members who can provide legal and contracting expertise,
           in addition to helping the project director comply with safety,
           security, and environmental requirements. The previous order did
           not specifically require the use of an integrated project team for
           planning and carrying out a project.

           In 2004, DOE's Office of Procurement and Assistance Management
           initiated a separate but related effort to strengthen DOE's
           contracting practices by issuing new guidance intended to
           strengthen contract planning and management.^13 The guidance
           included information on

           o how to select an appropriate contract type for a project and the
           factors to consider for each type of contract, taking into account
           the scope and complexity of the work to be performed, and the
           business, technical, and regulatory risks;
           o how to provide incentives for contractors to complete projects
           on time and within budget;
           o how to develop a contract management plan once the contract is
           awarded, including describing how the contracting officer and
           program managers will monitor contractor performance to ensure
           that the requirements of the contract will be met and that the
           contractor will be held accountable for results; and
		   
^13U.S. Department of Energy, Office of Procurement and Assistance
Management, Acquisition Guide: A DOE Guide to the Award and Administration
of Contracts (Washington, D.C.: Revised August 2006).

           o how to develop effective, results-oriented performance measures
           and incorporate incentives into contracts that will encourage
           meeting cost and schedule goals on projects.

           In the past, we have recommended other actions DOE could take to
           strengthen contract management for its major projects.
           Specifically, in March 2005, we recommended that DOE develop new
           guidance on structuring and managing contracts.^14 In June 2005,
           DOE issued this new guidance, which covers such topics as how to
           incorporate project management requirements into contracts and the
           importance of having reliable project performance data to manage
           contracts.
		   
		   DOE Has Developed a Project Tracking Information System and Is
		   Improving the Quality of Project Performance Data

           The second key area where DOE focused was developing more
           consistent, objective performance information on its ongoing
           projects, as the National Research Council recommended. Before
           1999, DOE policies and guidance did not require systematic
           reporting of cost and schedule status on projects into a
           centralized project tracking system. In its 1999 report, the
           National Research Council found that DOE had no consistent system
           for objectively tracking progress on its projects, identifying the
           potential for cost and schedule overruns, or providing status
           information to DOE senior management. As a result, the types of
           information contractors developed and reported and the frequency
           of those reports varied across DOE's program offices and field
           locations.

           In response to these concerns about the reliability of project
           performance information, DOE required its contractors to implement
           a uniform way of tracking and reporting a project's status. This
           way of measuring project cost and schedule performance--called an
           earned value management system--is commonly used in private
           industry. At any point in time during a project, an earned value
           system relates the actual cost and actual schedule for
           accomplishing work to the planned cost and schedule. Generally,
           for DOE projects with a total project cost of $20 million or more,
           the contractor must have an earned value management system in
           place.^15 To make the earned value performance data reported by
           the contractors available to DOE senior management, in 2001 DOE
           established a project tracking and reporting system. Each month
           DOE federal project directors report the status of their projects
           into the system, including the contractors' earned value
           management system performance data.^16
		   
^14 [27]GAO-05-123 .

^15DOE requires that the contractor have the earned value management
system in place by the decision point that establishes the approved
performance baseline for the project.

^16Although DOE established the project tracking and reporting system in
2001, it took until October 2002 for the contractors and federal project
directors to provide information on all ongoing projects so that DOE could
begin to summarize and report performance data from the system.

           In March 2005, we questioned the accuracy and completeness of the
           performance data in DOE's project tracking and reporting system
           and recommended that the department assess the reliability of the
           contractors' earned value management systems used to report
           project cost and schedule information.^17 In 2005 DOE began
           reviewing the earned value management systems used by its
           contractors. The purpose of these reviews is to determine if the
           contractor has an earned value management system that complies
           with the standards specified by the department. DOE uses a team
           approach to conduct the reviews, with the team including
           representatives from DOE's Office of Engineering and Construction
           Management and the program offices. During the course of the
           review, the team may determine that the contractor's system does
           not fully comply with DOE guidelines for earned value management
           systems. In such cases, the team generates a corrective action
           request, and the contractor must develop a corrective action plan
           to address any deficiencies. Once the corrective actions have been
           taken and verified, DOE certifies the contractor's system, which
           may provide data on several ongoing projects. As of September
           2006, DOE had certified earned value management systems for eight
           of its contractors, which manage a combined total of 40 of DOE's
           96 ongoing projects.
		   
		   DOE Is Strengthening Oversight by Providing Training to Enhance
		   the Skills of Federal Project Directors and Conducting More
		   Frequent Reviews of Ongoing Projects

           The third key area DOE focused on was strengthening federal
           oversight of projects through improving the skills of federal
           project directors and increasing the frequency of reviews of
           ongoing projects. In its 1999 report, the National Research
           Council cited DOE's failure to develop the project management
           skills of its personnel as a fundamental cause of poor performance
           on projects. The council also found that DOE did not consistently
           review its ongoing projects to identify and address problems
           before there was a significant impact on project performance.
		   
		   ^17 [28]GAO-05-123 .

           To enhance the skills of federal project directors, in 2003 DOE
           established a project management career development program. This
           program defined the necessary combination of training and
           experience to obtain certification as a DOE federal project
           director. It also established four levels of certification and
           required increasing amounts of training and experience for each
           succeeding level.^18 The training curriculum includes earned value
           management systems, acquisition strategy and planning, and cost
           and schedule estimating. In addition to the training courses and
           work experience requirements, federal project directors seeking
           the top two levels of certification must also successfully
           complete an interview with DOE's certification review board.^19
           This board includes representatives from the Office of Engineering
           and Construction Management, and DOE's three largest component
           organizations (NNSA and the Offices of Environmental Management
           and Science). Once federal project directors have obtained
           certification from the review board, they must also meet
           continuing education requirements to maintain their certification.
           As of May 2006, DOE met its goal of having all 96 of its active
           federal project directors at least at the first level of
           certification.

           DOE has also taken steps to strengthen project oversight by
           requiring independent reviews at critical decision points. The
           independent reviews typically occur at the first three critical
           decision points on a project and are performed either by a team of
           DOE officials from outside the sponsoring program office, by DOE's
           Office of Engineering and Construction Management, or by outside
           organizations. Specifically, these reviews include:

           o At the first critical decision point, approving mission need,
           DOE requires an independent review of major projects (those with
           an estimated total project cost over $750 million) to validate the
           mission need and the cost range. For projects below the major
           project dollar threshold, the approval authority reviews the
           mission need statement and cost range as part of the supporting
           documentation at this critical decision point.
		   
^18For example, a federal project director with level-1 certification can
be responsible for a project with a total project cost up to $20 million,
while a project with a total project cost over $400 million requires a
level-4 certification.

^19The board's main purpose is to review the qualifications of federal
project directors applying for certification.

           o At the second critical decision point, approving the selection
           of the alternative and the estimated cost range, DOE requires an
           independent review of (1) the acquisition strategy, including the
           rationale for selecting the preferred alternative; (2) design and
           construction plans for high-risk, high-hazard nuclear facilities
           to ensure that safety and security requirements are effectively
           integrated into the facility; and (3) design specifications to
           ensure that the facility will meet operational requirements.
           o At the third critical decision point, approving the performance
           baseline, DOE requires an independent review of the estimated
           costs and schedule associated with the project, to provide
           reasonable assurance that the project can be successfully carried
           out.

           In addition to the independent reviews at critical decision
           points, DOE also required quarterly progress reviews on all
           ongoing projects having a total estimated cost of $5 million or
           more. These quarterly reviews are conducted by senior program
           officials, representatives from the Office of Engineering and
           Construction Management, and other departmental organizations as
           appropriate. The purpose of these progress reviews is to identify
           potential problems and concerns and develop corrective action
           plans that will help ensure successful project completion.

           As a further step to improve the quality of federal oversight, in
           an August 2005 memorandum to all DOE senior managers, the
           Secretary of Energy stressed the importance of following project
           management policies and guidance. The Secretary stated that all
           program managers, federal project directors, and contracting
           officers should be held accountable for meeting cost, schedule,
           and performance targets on their projects.
		   
		   DOE Has Not Demonstrated Improved Project Performance

           Despite DOE efforts to improve project management and strengthen
           oversight of its contractors, overall project performance has not
           improved. Starting in fiscal year 2003, DOE set a performance goal
           of having 85 percent of its ongoing projects within a 10 percent
           variance of approved cost and schedule baseline targets, and
           starting in fiscal year 2004, DOE increased the goal to 90 percent
           of projects.^20 Although we have expressed concern about the
           reliability of the data in DOE's project tracking system, the
           summary performance data reported by the department are useable to
           show trends.^21

           DOE began summarizing and reporting monthly project performance
           data in October 2002.^22 Since October 2002, DOE has achieved its
           performance goals for line item construction projects (generally
           funded separately in the government's annual budget) only about
           one third of the time. As figure 1 below shows, the percentage of
           line item construction projects meeting DOE's performance goal has
           been relatively steady, seldom falling below 80 percent or
           exceeding 90 percent.

^20Starting in November 2005, DOE included these project performance goals
in its action plan to improve results in contract and project management,
an area designated by GAO since 1990 as being at high-risk for fraud,
waste, abuse, and mismanagement. This plan was developed in response to a
request by the Office of Management and Budget for federal agencies with
areas on the GAO high-risk list to demonstrate how the agencies would
address program weaknesses and improve results. Starting in fiscal year
2007, in response to comments from GAO and the Office of Management and
Budget on its action plan, DOE developed three separate performance goals
for its ongoing projects, depending on the total project cost. The goal is
85 percent for projects with a total project cost less than $750 million,
and the goal is 50 percent for projects with a total project cost more
than $750 million.

^21Although in a past report ( [29]GAO-05-123 ) we expressed concerns with
the accuracy and completeness of the data in DOE's project tracking
system, we have determined that the data are sufficiently reliable to
present trends in meeting DOE's performance goals. See appendix I.

^22DOE collects and summarizes performance information only on those
projects that have passed the critical decision point for an approved cost
and schedule performance baseline. For example, as of September 2006, DOE
had 206 ongoing projects, but over half of those were in the early
planning phases of the project.

Figure 1: Percentage of Ongoing Line Item Construction Projects within 10
Percent of Cost and Schedule Baseline, October 2002 through September 2006

Note: In October 2003, DOE changed the goal (percentage of ongoing
projects within 10 percent of cost and schedule baseline) from 85 percent
to 90 percent.

In part, because of concerns about the accuracy and timeliness of the
project data shown above, when assessing the overall status of an ongoing
project, DOE's Office of Engineering and Construction Management uses the
earned value management information (cost and schedule performance
indicators) in concert with other information. Specifically, for each
ongoing project, DOE also considers information such as the results of
project reviews carried out by the program offices, information on
emerging issues and concerns raised at quarterly progress reviews,
discussions with program managers and federal project directors, the
status of certification of the contractor's earned value management
system, and any safety concerns raised by the Defense Nuclear Facilities
Safety Board or other outside organizations.

Taking these other sources of information into account can affect DOE's
determination of whether a project is likely to meet cost and schedule
performance targets. For example, the Office of Science is constructing a
facility at the Stanford Linear Accelerator Center in California that will
be used to produce a light source that is 10-billion times greater than
any existing man-made light source and will use the high-brightness light
in experiments in chemical, material, and biological sciences. This
project, with a total cost of $379 million, had earned value management
cost and schedule indicators in September 2006 that were within the
acceptable range for meeting cost and schedule performance targets.
However, the earned value indicators reflect only the current status of
the project and may not accurately depict future events or predict future
performance. On this project, when DOE's Office of Engineering and
Construction Management took into account other sources of information,
such as discussions with the federal project director, DOE determined that
some of the construction bids had come in significantly higher than
estimated. Therefore, until DOE could determine the extent of the cost
increases and the potential impact on the total cost of the project, the
monthly status report listed this project as one at risk for breaching its
cost and schedule performance baseline.

In February 2004, DOE began reporting performance information separately
for cleanup projects funded by the Office of Environmental Management
using annual operating funds, rather than using line item construction
funding. Prior to February 2004, performance information on these
"operating projects" had been included with the line item construction
projects. Since February 2004, considering only these "operating"
projects, as shown in figure 2, DOE met the cost and schedule performance
targets only about 21 percent of the time.

Figure 2: Percentage of Ongoing Office of Environmental Management
Operating Projects within 10 Percent of Cost and Schedule Baseline,
February 2004 through September 2006

However, the performance data shown in figure 2 does not represent all of
the Environmental Management operating projects. In November 2005, DOE
began reporting on the performance of operating projects only if the cost
and schedule baselines of the projects had been independently validated.
Therefore, in November 2005, although DOE's Office of Environmental
Management had a total of 77 operating projects, only 16 had validated
baselines and were included in the performance reporting. DOE determined
that the remaining 61 operating projects--those with baselines that had
not been independently validated-- had cost and schedule targets that
could be overly optimistic, and therefore including those projects would
distort the performance trends.

Anecdotal evidence also indicates that cost increases and schedule delays
continue to occur on individual DOE projects. In March 2007, we reported
that our review of 12 of the department's major projects showed that 9 of
the 12 exceeded their original cost or schedule estimates, principally
because of ineffective DOE project oversight and poor contractor
management.^23 Specifically, 8 of the 12 projects experienced cost
increases ranging from $79 million to $7.9 billion, and 9 of the 12
projects were behind schedule by 9 months to more than 11 years.

Nevertheless, senior DOE officials in both the Office of Management and
program offices said they believe the department has made real progress in
putting improved project management tools in place and emphasizing the
importance of effective federal oversight of projects. They added that the
improvements made in project planning, independent reviews at critical
decision points, and a greater emphasis on federal oversight should result
in improved project performance in the future.

DOE Has Not Fully Implemented Its Project Management Improvement Efforts or
Ensured That Project Management Requirements Are Consistently Followed

DOE could further strengthen management of its projects by completing
implementation of its project management improvement efforts and ensuring
that all of the department's component organizations consistently follow
the project management requirements.

DOE Has Not Fully Implemented Project Management Improvement Efforts

DOE has not fully implemented two of its improvement efforts--reviewing
and certifying contractors' earned value management systems and issuing
revised guidance to supplement the July 2006 project management order.
However, the department is making progress in these two areas and has a
plan for completing these efforts.

One improvement effort not fully implemented has been to review and
certify contractors' earned value management systems, which are used to
develop and report on the cost and schedule performance of DOE's projects.
DOE uses this information, along with other information obtained from
federal project directors and program managers, to determine whether
ongoing projects are on target to meet cost and schedule performance
goals. Furthermore, DOE also factors in this information when calculating
the amount of any incentive fees paid to the contractors under
performance-based contracts. Therefore, the accuracy and reliability of
the data produced by the earned value management systems is crucial to
DOE's oversight of both individual projects and its contractors.

^23 [30]GAO-07-336 .

DOE began its efforts to review and certify the contractors' earned value
management systems in fiscal year 2005. As of September 2006, DOE had
reviewed and certified contractor earned value management systems for 8 of
29 contractors. These 8 contractors manage 40 of DOE's 96 projects that
require an earned value management system. In March 2005, we had
recommended that DOE develop a schedule for assessing the reliability of
its contractors' earned value management systems.^24 In response to that
recommendation and as part of DOE's action plan to address the high-risk
area of contract and project management, DOE established annual targets
for the number of contractor systems to be reviewed. For example, the
target for fiscal year 2006 was to review and certify 10 contractor
systems.

Another improvement effort not fully implemented is the development of new
project management guidance to provide supplemental information to the
July 2006 revised project management order. These implementation guides
are being developed by teams led by a program office and assisted by the
Office of Engineering and Construction Management, other DOE program
offices as appropriate, and representatives from a DOE contractor working
group. The implementation guides will cover such topics as safeguards and
security, risk management, and how to apply the project management
guidelines to Office of Environmental Management's operating projects or
information technology projects. One of the implementation guides--further
explaining how a tailoring strategy should be developed for a project--has
an estimated issue date of May 2007. According to the charter for the team
developing this guide, tailoring the processes in the project management
order may be appropriate for smaller, less complex, lower risk projects,
but tailoring does not imply omitting any essential steps in the project
planning and execution processes. Completing development of these
implementation guides will clarify requirements and may help DOE's program
offices be more consistent in planning and executing projects. According
to the current schedule, the last of the implementation guides is expected
to be issued in September 2008. However, since the guidance will be
subject to DOE's internal review procedures and concurrence by DOE's
program offices, it may take longer.

^24 [31]GAO-05-123 .

DOE Has Not Consistently Followed Project Management Requirements

DOE also has not ensured that its component organizations have
consistently followed project management requirements. Even though the
project management requirements have been in place since October 2000,
there are still instances where projects are initiated or carried out
without fully complying with the processes and controls contained in DOE's
policies and guidance. Examples include:

           o In our April 2006 report on the Hanford Waste Treatment Plant,
           we reported that the estimated costs of this project to construct
           facilities to treat and prepare for disposal 55 million gallons of
           high-level radioactive waste had increased significantly. ^25
           Since the contract was awarded in 2000, estimated costs have
           increased from about $4.3 billion to over $12 billion and the
           completion date has been extended from 2011 to 2019, 8 years later
           than the milestone included in DOE's agreement with its
           regulators. We found that one of the contributing factors to the
           cost increases and schedule delays was DOE's lack of oversight and
           its failure to ensure adherence to normal project reporting
           requirements. Specifically, the contractor had been adjusting the
           project performance baseline to match actual results, which masked
           the full extent of the problems with the project.
           o In December 2005, DOE's Office of Inspector General reported on
           the status of a project to construct a facility at the Savannah
           River site in South Carolina to dispose of surplus plutonium by
           converting it into fuel for commercial nuclear power plants.^26
           The report stated that although construction of the facility had
           not started, significant cost growth had already occurred, in part
           because of weaknesses in project management. Specifically, the
           Office of Inspector General found that DOE had not given adequate
           attention to establishing a performance baseline or ensuring that
           reporting mechanisms to monitor progress and track costs were
           effective. Furthermore, DOE officials had not provided adequate
           oversight of the project to ensure that contractor performance
           problems were identified in a timely manner.
		   
^25 [66]GAO-06-602T .

^26U.S. Department of Energy, Office of Inspector General, Status of the
Mixed Oxide Fuel Fabrication Facility, DOE/IG-0713 (Washington, D.C.: Dec.
21, 2005).

           o In January 2007, we reported that about 16 percent of NNSA's
           projects were in jeopardy of breaching their cost baseline,
           schedule baseline, or both, and recommended actions that NNSA
           could take to strengthen its management of projects.^27 In
           addition, we found that cost and schedule status information on
           four of NNSA's projects, estimated to cost over $100 million each,
           was not being reported into DOE's project tracking and reporting
           system. As a result, these projects were not receiving senior
           management oversight.
           o DOE's project to demonstrate an alternative technology to treat
           low-activity radioactive waste at DOE's Hanford site involved
           building a pilot plant to demonstrate the technology and treat
           waste from one of the underground waste storage tanks. The
           original estimated cost of the project was about $62 million and
           was to be carried out over a 2-year period. DOE officials
           initially did not require the contractor to follow all project
           management requirements, and therefore, the project was initiated
           without using key project management tools, such as an acquisition
           strategy or independent reviews of the cost and schedule baseline.
           According to DOE officials, even though the estimated cost of the
           project met the criteria for following the project management
           requirements (total project cost was in excess of $20 million),
           they decided to accelerate the project's schedule and therefore
           decided that the project did not need to follow the project
           management requirements. Within the first 2 years, the project
           experienced significant schedule and technical problems and the
           estimated cost more than tripled to about $230 million. DOE then
           assigned a federal project director and began requiring that the
           project be managed consistent with its project management
           requirements.^28
		   
           Conclusions

           DOE relies primarily on contractors to carry out its environmental
           cleanup, scientific research, nuclear weapons management, and
           other missions vital to safety, security, and the nation's energy
           supply. Because these contractors also frequently construct and
           operate complex, one-of-a-kind facilities to carry out these
           missions, it is crucial that the department manage and oversee
           these projects to successful completion. Over the years, we have
           issued numerous reports on the challenges that the department
           faces in overseeing such projects and have made a series of
           recommendations on steps DOE could take to strengthen management
           and oversight of its projects. Although DOE has made progress in
           addressing its project management weaknesses, such as by
           incorporating industry best practices into its policies and
           guidance, to date overall performance in achieving cost and
           schedule goals has not substantially improved. Furthermore, DOE
           has yet to fully implement all of its project management
           improvement efforts, such as reviewing and certifying contractors'
           earned value management systems that provide critical cost and
           schedule performance information, and continued attention is
           needed to better ensure that the improved project management
           policies and guidance are consistently followed. As DOE goes
           forward with efforts to strengthen management of its projects,
           including implementing our previous recommendations, consistent
           application of the project management requirements, accurate and
           reliable project performance data, and strong oversight are key to
           obtaining and demonstrating improved performance. Without
           addressing these areas, cost overruns on projects could continue
           to drain the department's resources, and excessive schedule delays
           could affect the department's ability to effectively carry out its
           missions.
		   
^27 [67]GAO-07-36 .

^28A forthcoming GAO report will provide greater detail on the management
of this project.

           Recommendation for Executive Action

           To help strengthen management of DOE's projects and to enhance
           accountability for completing projects on time and within budget
           in all of DOE's component organizations, we recommend that the
           Secretary of Energy ensure that project management requirements
           are consistently and rigorously followed by all of the
           department's component organizations, and that any exceptions to
           following the requirements are allowed only after senior
           management has ensured that the exceptions are appropriate and has
           approved them.
		   
		   Agency Comments and Our Evaluation

           We provided a draft of this report to DOE for review and comment.
           In written comments, the Director of the Office of Management
           agreed with our findings and accepted our recommendation. DOE
           acknowledged that the department can further strengthen project
           management and stated that it recognizes that the results of
           implementing project management improvements will have a gradual
           impact on project performance.

           DOE recommended that we modify the draft report to clarify the
           distinction between project management guidelines and
           requirements. We agree and have revised the report accordingly.
           DOE's comments on our draft report are included in appendix II.

           We are sending copies of this report to the Secretary of Energy,
           the Director of the Office of Management and Budget, and
           appropriate congressional committees. We will also make copies
           available to others on request. In addition, the report will be
           available at no charge on the GAO Web site at
           http://www.gao.gov .

           If you or your staff have any questions on this report, please
           contact me at (202) 512-3841 or [email protected] . Contact
           points for our Offices of Congressional Relations and Public
           Affairs may be found on the last page of this report. GAO staff
           who made major contributions to this report are listed in appendix
           III.

           Gene Aloise
		   Director, Natural Resources and Environment
		   
		   Appendix I: Scope and Methodology

           To determine DOE's main efforts since 1999 to address weaknesses
           in its project management, we reviewed and analyzed prior and
           current DOE policies and guidance on managing projects and
           administering contracts. We also reviewed and analyzed DOE efforts
           to improve its management processes, including those in response
           to the President's Management Agenda and those that were part of a
           plan DOE developed in response to an Office of Management and
           Budget request that agencies with activities on GAO's high-risk
           list develop an action plan for improvement. In addition, we
           interviewed senior DOE headquarters officials to identify
           improvement efforts that the department had taken or had in
           process. We focused our review of actions taken by DOE's program
           offices on the department's three largest elements by percentage
           of the annual budget--NNSA and the Offices of Environmental
           Management and Science. These three offices represent about 80
           percent of the department's annual budget.

           To determine the extent to which performance on DOE's projects has
           improved, we reviewed and analyzed DOE's monthly status reports on
           projects and related supporting documentation. Since we have
           expressed concerns about the reliability of the data in DOE's
           project tracking and reporting system in a prior report, we did
           not develop our conclusions or findings based on information
           generated from that system.^1 However, we did determine that the
           data were sufficiently reliable to present trends in meeting DOE's
           performance goals over time, and have described our concerns with
           the accuracy and completeness of the performance data in this
           report. As DOE reviews and certifies the remaining earned value
           management systems used by its contractors, the accuracy and
           completeness of the data may improve. However, there are still
           other limitations to the data in DOE's project tracking and
           reporting system, such as that data on projects are reported at an
           aggregate project level, rather than at a more detailed level
           showing key milestones and critical activities. We also reviewed
           and analyzed prior GAO reports and recommendations on DOE project
           management to identify anecdotal information concerning
           performance of individual DOE projects.

           To determine the extent to which DOE's improvement efforts have
           been fully implemented or consistently followed, we reviewed and
           analyzed previous GAO reports and reports from DOE's Office of
           Inspector General and the four reports on improving project
           management in the Department of Energy from the National Research
           Council. These reports discussed weaknesses in DOE project
           management, contractor performance and federal oversight of
           individual projects, and DOE's efforts to improve management of
           contracts and associated performance measures. In addition, we
           reviewed the status of previous GAO recommendations to determine
           if they had been implemented. We also reviewed and analyzed
           reports from DOE's Office of Engineering and Construction
           Management on the status of certifying contractors' earned value
           management systems and the schedule for developing supplemental
           guidance to the July 2006 revised project management order.
		   
^1 [68]GAO-05-123 .

           On October 12, 2006, we briefed your staff on our results to date,
           and this report documents information presented in that briefing.

           We conducted our work from June 2006 to April 2007 in accordance
           with generally accepted government auditing standards.
		   
		   Appendix II: Comments from the Department of Energy
		   
		   Appendix III: GAO Contact and Staff Acknowledgments
		   
		   GAO Contact

           Gene Aloise (202-512-3841) or [email protected]
		   
		   Staff Acknowledgments

           In addition to the individual named above, Bill Swick, Assistant
           Director; Carole Blackwell, Ryan Coles, Heather Dowey, Doreen
           Feldman, Amanda Miller, and Alison O'Neill made key contributions
           to this report.
		   
		   Related GAO Products

           Department of Energy: Major Construction Projects Need a
           Consistent Approach for Assessing Technology Readiness to Help
           Avoid Cost Increases and Delays. [35]GAO-07-336 . Washington,
           D.C.: March 27, 2007.

           National Nuclear Security Administration: Additional Actions
           Needed to Improve Management of the Nation's Nuclear Program.
           [36]GAO-07-36 . Washington, D.C.: January 19, 2007.

           Nuclear Cleanup of Rocky Flats: DOE Can Use Lessons Learned to
           Improve Oversight of Other Sites' Cleanup Activities.
           [37]GAO-06-352 . Washington, D.C.: July 10, 2006.

           DOE Contracting: Better Performance Measures and Management Needed
           to Address Delays in Awarding Contracts. [38]GAO-06-722 .
           Washington, D.C.: June 30, 2006.

           Hanford Waste Treatment Plant: Contractor and DOE Management
           Problems Have Led to Higher Costs, Construction Delays, and Safety
           Concerns. [39]GAO-06-602T . Washington, D.C.: April 6, 2006.

           Yucca Mountain: Quality Assurance at DOE's Planned Nuclear Waste
           Repository Needs Increased Management Attention. [40]GAO-06-313 .
           Washington, D.C.: March 17, 2006.

           Department of Energy: Improved Guidance, Oversight, and Planning
           Are Needed to Better Identify Cost-Saving Alternatives for
           Managing Low-Level Radioactive Waste. [41]GAO-06-94 . Washington,
           D.C.: October 31. 2005.

           Department of Energy: Further Actions Are Needed to Strengthen
           Contract Management for Major Projects. [42]GAO-05-123 .
           Washington, D.C.: March 18, 2005.

           Nuclear Waste: Absence of Key Management Reforms on Hanford's
           Cleanup Project Adds to Challenges of Achieving Cost and Schedule
           Goals. [43]GAO-04-611 . Washington, D.C.: June 9, 2004.

           Nuclear Waste Cleanup: DOE Has Made Some Progress in Cleaning Up
           the Paducah Site, but Challenges Remain. [44]GAO-04-457 .
           Washington, D.C.: April 1, 2004.

           Department of Energy: Mission Support Challenges Remain at Los
           Alamos and Lawrence Livermore National Laboratories.
           [45]GAO-04-370 . Washington, D.C.: February 27, 2004.

           Nuclear Weapons: Opportunities Exist to Improve the Budgeting,
           Cost Accounting, and Management Associated with the Stockpile Life
           Extension Program. [46]GAO-03-583 . Washington, D.C.: July 28,
           2003.

           Contract Reform: DOE's Policies and Practices in Competing
           Research Laboratory Contracts. [47]GAO-03-932T . Washington, D.C.:
           July 10, 2003.

           Nuclear Waste: Challenges to Achieving Potential Savings in DOE's
           High-Level Waste Cleanup Program. [48]GAO-03-593 . Washington,
           D.C.: June 17, 2003.

           Department of Energy: Status of Contract and Project Management
           Reforms. [49]GAO-03-570T . Washington, D.C.: March 20, 2003.

           Contract Reform: DOE Has Made Progress, but Actions Needed to
           Ensure Initiatives Have Improved Results. [50]GAO-02-798 .
           Washington, D.C.: September 13, 2002.

           Nuclear Waste: Technical, Schedule, and Cost Uncertainties of the
           Yucca Mountain Repository Project. [51]GAO-02-191 . Washington,
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           Department of Energy: Fundamental Reassessment Needed to Address
           Major Mission, Structure, and Accountability Problems.
           [52]GAO-02-51 . Washington, D.C.: December 21, 2001.

           Department of Energy: Follow-Up Review of the National Ignition
           Facility. [53]GAO-01-677R . Washington, D.C.: June 1, 2001.

           Nuclear Cleanup: Progress Made at Rocky Flats, but Closure by 2006
           Is Unlikely, and Costs May Increase. [54]GAO-01-284 . Washington,
           D.C.: February 28, 2001.

           National Ignition Facility: Management and Oversight Failures
           Caused Major Cost Overruns and Schedule Delays.
           [55]GAO/RCED-00-271 . Washington, D.C.: August 8, 2000.

           Department of Energy: Uncertainties and Management Problems Have
           Hindered Cleanup at Two Nuclear Waste Sites. [56]GAO/T-RCED-00-248
           . Washington, D.C.: July 12, 2000.

           Nuclear Waste: Observations on DOE's Privatization Initiative for
           Complex Cleanup Projects. [57]GAO/T-RCED-00-215 . Washington,
           D.C.: June 22, 2000.

           Nuclear Waste: DOE's Advanced Mixed Waste Treatment Project:
           Uncertainties May Affect Performance, Schedule, and Price.
           [58]GAO/RCED-00-106 . Washington, D.C.: April 28, 2000.

           Nuclear Waste Cleanup: DOE's Paducah Plan Faces Uncertainties and
           Excludes Costly Cleanup Activities. [59]GAO/RCED-00-96 .
           Washington, D.C.: April 28, 2000.
		   
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www.gao.gov/cgi-bin/getrpt?GAO-07-518 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Gene Aloise, 202-512-3841, [email protected].

Highlights of [70]GAO-07-518 , a report to the Subcommittee on Energy and
Water Development, Committee on Appropriations, House of Representatives

May 2007

DEPARTMENT OF ENERGY

Consistent Application of Requirements Needed to Improve Project
Management

Since 1990, Department of Energy (DOE) contract management (which includes
project management) has been designated as a high-risk area for fraud,
waste, abuse, and mismanagement. For years, GAO has reported on DOE's
inadequate management and oversight of its contracts and projects. GAO has
made dozens of recommendations on steps that DOE could take to improve
project management. Furthermore, in 1999 The National Academies' National
Research Council developed a series of recommendations to address
weaknesses in DOE's project management. This GAO report discusses (1)
DOE's main efforts since 1999 to address project management weaknesses,
(2) the extent to which DOE's project performance has improved, and (3)
the extent to which DOE's project management guidelines have been
consistently followed.

[71]What GAO Recommends

GAO recommends that DOE enhance accountability by ensuring that project
management requirements are consistently followed by all of the
department's component organizations and that any exceptions to following
the requirements are allowed only after senior management's review and
approval. In commenting on a draft of the report, DOE agreed with the
recommendation.

Since 1999, DOE has improved itsapproach to project management by
addressing weaknesses in three key areas, as recommended by the National
Research Council--strengthening project management policies and guidance,
developing consistent and objective performance information on ongoing
projects, and improving the quality of federal oversight of contractors
and projects. DOE revised its policies and guidance to, among other
things, require senior management approval at critical decision points. To
develop consistent, objective performance information for ongoing
projects, DOE required its contractors to implement an "earned value"
management system, commonly used in private industry. DOE also developed a
project tracking and reporting system to routinely make the earned value
performance information available to managers. To help ensurethe
consistency and reliability of performance data, DOE is reviewing and
certifying the contractors' earned value management systems. To improve
the quality of federal oversight, DOE developed a training and
certification program for federal project directors and required
independent reviews of projects at critical decision points.

Nevertheless, performance on DOE's projects has not substantially
improved. DOE set a performance goal of having 90 percent of its ongoing
projects being managed within a 10 percent variance of cost and schedule
baseline targets. Since October 2002, when DOE began reporting monthly
project performance data, DOE has achieved its 90 percent performance 
goal only about one third of the time. The percentage of projects meeting
the performance goal has been relatively steady, seldom falling below 80
percent or exceeding 90 percent. DOE officials said that, although
performance goals are not consistently being met, improvements in project
planning, independent project reviews at critical decision points, and
stronger federal oversight should result in improved project performance
in the future.

DOE has not ensured that its project management requirements are
consistently followed. For example, on a project started in June 2004 to
demonstrate an alternative waste treatment technology at DOE's Hanford
site, DOE officials decided to accelerate the project's schedule. As a
result, the project was initiated without using key project management
tools, such as an independent review of the cost and schedule baseline.
After the project experienced significant schedule and technical problems
and the estimated cost more than tripled to about $230 million, DOE began
requiring that the project be managed consistent with its project
management requirements. Furthermore, on four additional projects,
estimated to cost over $100 million each, cost and schedule information
was not being reported into DOE's project tracking system, resulting in
less senior management oversight.

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