Nuclear Weapons: Key Nuclear Weapons Component Issues Are Unresolved
(Letter Report, 11/09/98, GAO/RCED-99-1).

Pursuant to a congressional request, GAO provided information on the
Department of Energy's (DOE) efforts to manufacture war reserve nuclear
weapon triggers, or pits, at its Los Alamos National Laboratory,
focusing on: (1) DOE's plans and schedules for reestablishing the
manufacturing of pits at Los Alamos; (2) the costs associated with these
efforts; and (3) unresolved issues regarding the manufacturing of pits
between the Department of Defense (DOD) and DOE.

GAO noted that: (1) DOE's plans for reestablishing the production of
pits at Los Alamos National Laboratory have changed and are still
evolving; (2) DOE expects to have only a limited capacity online by
fiscal year (FY) 2007; (3) specifically, DOE plans to reestablish its
capability to produce war reserve pits for one weapons system by FY 2001
and plans to have an interim capacity of 20 pits per year online by FY
2007; (4) this planned capacity differs from the goal that DOE
established in FY 1996 to produce up to 50 pits per year by fiscal 2005;
(5) DOE has not decided what the final production capacity at Los Alamos
will be; (6) DOE has done little to develop a contingency plan for the
large-scale manufacturing of pits (150-500 pits per year); (7)
large-scale manufacturing would be necessary if a systemwide problem
were identified with pits in the stockpile; (8) the current estimated
costs for establishing and operating DOE's pit-manufacturing mission
total over $1.1 billion from FY 1996 through fiscal 2007; (9) this
estimate does not include over $490 million in costs for other
activities that are not directly attributable to the mission but are
needed to support a wide variety of defense-related activities; (10) GAO
also noted that some key cost and managerial controls related to DOE's
pit-manufacturing mission are either in the formative stages of
development or do not cover the mission in its entirety; (11) DOD and
DOE have discussed, but not resolved, important issues regarding: (a)
changes in the manufacturing processes that will be used to produce pits
at Los Alamos; and (b) the pit-manufacturing capacity planned by DOE;
(12) officials from various DOD organizations have expressed concerns
about the equivalence of Los Alamo's pits to the pits previously
manufactured at Rocky Flats because some manufacturing processes will be
new at Los Alamos and are different from those previously used by Rocky
Flats; (13) also, officials from various DOD organizations are not
satisfied that DOE's current or future capacity plans will be sufficient
to meet the stockpile's needs; (14) various DOD organizations have
performed preliminary analyses of the capacity needed to support the
stockpile; (15) on the basis of these analyses, some of these officials
believe that the stockpile's needs exceed the 20-pits-per-year capacity
that DOE may establish in the future; (16) however, DOD officials said
that they will be unable to give detailed pit-manufacturing requirements
until the lifetime of pits is more clearly specified by DOE; and (17)
DOE is currently studying this issue.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-99-1
     TITLE:  Nuclear Weapons: Key Nuclear Weapons Component Issues Are 
             Unresolved
      DATE:  11/09/98
   SUBJECT:  Nuclear weapons
             Nuclear weapons testing
             Interagency relations
             Cost effectiveness analysis
             Defense capabilities
             Cost control
             Defense contingency planning
             Weapons systems
             Atomic energy defense activities
             Nuclear weapons plants

             
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Cover
================================================================ COVER


Report to the Committee on Armed Services, U.S.  Senate

November 1998

NUCLEAR WEAPONS - KEY NUCLEAR
WEAPONS COMPONENT ISSUES ARE
UNRESOLVED

GAO/RCED-99-1

Nuclear Weapons Component Issues

(141111)


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  DOE - Department of Energy
  GAO - General Accounting Office

Letter
=============================================================== LETTER


B-280854

November 9, 1998

The Honorable Strom Thurmond
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Department of Energy (DOE) is responsible for managing the
nation's stockpile of nuclear weapons.  However, DOE lacks the
capability to produce a key nuclear weapons component for use in the
stockpile.  The component is a trigger, or "pit," which is made from
plutonium and is needed to start a chain reaction in a nuclear
weapon.  Different weapons systems use different types of pits.  DOE
lost its capability to make pits when production was stopped at DOE's
Rocky Flats Plant in Colorado in 1989.  DOE must reestablish this
capability to replace pits removed from the stockpile for testing and
other reasons, but the task will be challenging.  Pits that can be
used in the stockpile, known as War Reserve pits, must meet stringent
specifications and be certified by DOE's nuclear weapons
laboratories.  DOE is reestablishing the capability to manufacture
pits at its Los Alamos National Laboratory in New Mexico. 

As requested, we are providing you with information on (1) DOE's
plans and schedules for reestablishing the manufacturing of pits at
Los Alamos, (2) the costs associated with these efforts, and (3)
unresolved issues regarding the manufacturing of pits between the
Department of Defense (DOD) and DOE.  As agreed with your office, we
will provide you with classified information on these issues in a
separate product. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

DOE's plans for reestablishing the production of pits at Los Alamos
National Laboratory have changed and are still evolving.  The
Department expects to have only a limited capacity on-line by fiscal
year 2007.  Specifically, DOE plans to reestablish its capability to
produce War Reserve pits for one weapons system by fiscal year 2001
and plans to have an interim capacity of 20 pits per year on-line by
fiscal 2007.  This planned capacity differs from the goal that DOE
established in fiscal year 1996 to produce up to 50 pits per year by
fiscal 2005.  DOE has not decided what the final production capacity
at Los Alamos will be.  Finally, DOE has done little to develop a
contingency plan for the large-scale manufacturing of pits (150-500
pits per year).  Large-scale manufacturing would be necessary if a
systemwide problem were identified with pits in the stockpile. 

The current estimated costs for establishing and operating DOE's
pit-manufacturing mission total over $1.1 billion from fiscal year
1996 through fiscal 2007.\1 This estimate does not include over $490
million in costs for other activities that are not directly
attributable to the mission but are needed to support a wide variety
of defense-related activities, including the production of pits.  We
also note that some key cost and managerial controls related to DOE's
pit-manufacturing mission are either in the formative stages of
development or do not cover the mission in its entirety. 

DOD and DOE have discussed, but not resolved, important issues
regarding (1) changes in the manufacturing processes that will be
used to produce pits at Los Alamos and (2) the pit-manufacturing
capacity planned by DOE.  Officials from various DOD organizations
have expressed concerns about the equivalence of Los Alamos's pits to
the pits previously manufactured at Rocky Flats because some
manufacturing processes will be new at Los Alamos and are different
from those previously used by Rocky Flats.  Also, officials from
various DOD organizations are not satisfied that DOE's current or
future capacity plans will be sufficient to meet the stockpile's
needs.  Various DOD organizations have performed preliminary analyses
of the capacity needed to support the stockpile.  On the basis of
these analyses, some of these officials believe that the stockpile's
needs exceed the 20-pits-per-year interim capacity that DOE plans at
Los Alamos or even the 50-pits-per-year capacity that DOE may
establish in the future.  However, DOD officials said that they will
be unable to give detailed pit-manufacturing requirements until the
lifetime of pits is more clearly specified by DOE.  DOE is currently
studying this issue. 


--------------------
\1 DOE refers to its efforts as the pit-manufacturing mission.  The
estimated cost figures provided in this report have not been adjusted
to constant-year dollars.  Rather, they reflect DOE's budgeting and
planning process estimates, which were provided in current-year
dollars. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Since December 5, 1989, DOE has not produced War Reserve pits for the
nuclear stockpile.  On that date, the production of pits at Rocky
Flats, which was DOE's only large-scale pit-manufacturing facility,
was suspended because of environmental and regulatory concerns.  At
that time, it was envisioned that production operations would
eventually resume at the plant, but this never occurred.  In 1992,
DOE closed its pit-manufacturing operations at Rocky Flats without
establishing a replacement location.  In 1995, DOE began work on its
Stockpile Stewardship and Management Programmatic Environmental
Impact Statement, which analyzed alternatives for future DOE nuclear
weapons work, including the production of pits.  In December 1996,
Los Alamos was designated as the site for reestablishing the
manufacturing of pits.\2 DOE is now reestablishing its capability to
produce War Reserve pits there so that pits removed from the existing
stockpile for testing or other reasons can be replaced with new ones. 

Reestablishing the manufacturing of pits will be very challenging
because DOE's current efforts face new constraints that did not exist
previously.  For example, engineering and physics tests were used in
the past for pits produced at Rocky Flats to ensure that those pits
met the required specifications.  Nuclear tests were used to ensure
that those pits and other components would perform as required. 
While engineering and physics tests will still be utilized for Los
Alamos's pits, the safety and reliability of today's nuclear
stockpile, including newly manufactured pits, must be maintained
without the benefit of underground nuclear testing.  The United
States declared a moratorium on such testing in 1992.  President
Clinton extended this moratorium in 1996 by signing the Comprehensive
Test Ban Treaty, through which the United States forwent underground
testing indefinitely.  In addition, to meet regulatory and
environmental standards that did not exist when pits were produced at
Rocky Flats, new pit-production processes are being developed at Los
Alamos. 

DOD is responsible for implementing the U.S.  nuclear deterrent
strategy, which includes establishing the military requirements
associated with planning for the stockpile.  The Nuclear Weapons
Council is responsible for preparing the annual Nuclear Weapons
Stockpile Memorandum, which specifies how many warheads of each type
will be in the stockpile.\3 Those weapons types expected to be
retained in the stockpile for the foreseeable future are referred to
as the enduring stockpile. 

DOE is responsible for managing the nation's stockpile of nuclear
weapons.  Accordingly, DOE certifies the safety and reliability of
the stockpile and determines the requirements for the number of
weapons components, including pits, needed to support the stockpile. 


--------------------
\2 According to a Los Alamos official, in the past, Los Alamos
produced a limited number of non-War Reserve pits for research
purposes, such as underground nuclear tests, but it has not built War
Reserve pits since the early years of nuclear weapons development. 

\3 The Nuclear Weapons Council coordinates activities jointly managed
by DOD and DOE to support the nuclear stockpile.  The Council is
responsible for all matters relating to nuclear weapons research,
development, and production. 


   DOE'S PLANS HAVE CHANGED AND
   ARE STILL EVOLVING
------------------------------------------------------------ Letter :3

DOE has made important changes in the plans for its pit-manufacturing
mission.  Additionally, some specific goals associated with these
plans are still evolving.  In December 1996, DOE's goals for the
mission were to (1) reestablish the Department's capability to
produce War Reserve pits for one weapons system by fiscal year 2001
and to demonstrate the capability to produce all pit types for the
enduring stockpile, (2) establish a manufacturing capacity of 10 pits
per year by fiscal year 2001 and expand to a capacity of up to 50
pits per year by fiscal 2005,\4 and (3) develop a contingency plan
for the large-scale manufacturing of pits at some other DOE site or
sites. 

In regard to the first goal, DOE and Los Alamos produced a pit
prototype in early 1998 and believe they are on target to produce a
War Reserve pit for one weapons system by fiscal year 2001.\5 In
regard to the second goal, DOE has made important changes.  Most
notably, DOE's capacity plans have changed from a goal of 50 pits per
year in fiscal year 2005 to 20 pits per year in fiscal 2007.\6 What
the final production capacity at Los Alamos will be is uncertain. 
Finally, DOE's efforts to develop a contingency plan for large-scale
production have been limited and when such a plan will be in place is
not clear. 


--------------------
\4 DOE believes that if a capacity of 50 pits per year is established
by using one work shift, a capacity of 80 pits per year could be
achieved by using multiple work shifts. 

\5 DOE has made some changes related to this goal that are
classified.  These changes will be discussed further in our upcoming
classified report. 

\6 An interim capacity of 20 pits per year will be sufficient to
replace the War Reserve pits removed from the stockpile annually for
destructive testing. 


      ESTABLISHING THE CAPABILITY
      TO PRODUCE WAR RESERVE PITS
---------------------------------------------------------- Letter :3.1

To meet the first goal of reestablishing its capability to produce a
War Reserve pit for a particular weapons system by fiscal year 2001,
DOE has an ambitious schedule.  This schedule is ambitious because
several technical, human resource, and regulatory challenges must be
overcome.  Approximately 100 distinct steps or processes are utilized
in fabricating a pit suitable for use in the stockpile.  Some of the
steps in manufacturing pits at Los Alamos will be new and were not
used at Rocky Flats.  Each of these manufacturing processes must be
tested and approved to ensure that War Reserve quality requirements
are achieved.  The end result of achieving this first goal is the
ability to produce pits that meet precise War Reserve specifications
necessary for certification as acceptable for use in the stockpile. 

Skilled technicians must also be trained in the techniques associated
with the pit-manufacturing processes.  Currently, according to DOE
and Los Alamos officials, several key areas remain understaffed. 
According to a Los Alamos official, the laboratory is actively
seeking individuals to fill these positions; however, the number of
qualified personnel who can perform this type of work and have the
appropriate security clearances is limited.  Finally, according to
DOE and Los Alamos officials, the production of pits at Los Alamos
will be taking place in a regulatory environment that is more
stringent than that which existed previously at Rocky Flats.  As a
result, new processes are being developed, and different materials
are being utilized so that the amount and types of waste can be
reduced. 

Los Alamos achieved a major milestone related to its first goal when
it produced a pit prototype on schedule in early 1998.  DOE and Los
Alamos officials believe they are on schedule to produce a War
Reserve pit for one weapons system by fiscal year 2001.  DOE plans to
demonstrate the capability to produce pits for other weapons systems
but does not plan to produce War Reserve pits for these systems until
sometime after fiscal year 2007.  Furthermore, DOE's Record of
Decision stated that Los Alamos would reestablish the capability to
manufacture pits for all of the weapons found in the enduring
stockpile.  Currently, however, according to DOE officials, DOE does
not plan to reestablish the capability to produce pits for one of the
weapons in the enduring stockpile until such time as the need for
this type of pit becomes apparent. 


      ESTABLISHING
      PIT-MANUFACTURING CAPACITY
---------------------------------------------------------- Letter :3.2

Once Los Alamos demonstrates the capability to produce War Reserve
pits, it plans on establishing a limited manufacturing capacity. 
Originally, in late 1996, DOE wanted to have a manufacturing capacity
of 10 pits per year by fiscal year 2001 and planned to expand this
capacity to 50 pits per year by fiscal 2005.  In order to achieve a
10-pits-per-year manufacturing capacity by fiscal year 2001, DOE was
going to supplement existing equipment and staff in the PF-4 building
at Los Alamos.  To achieve a capacity of 50 pits per year by fiscal
year 2005, DOE planned a 3-year suspension of production in PF-4
starting in fiscal year 2002.  During this time, PF-4 would be
reconfigured to accommodate the larger capacity.  Also, some
activities would be permanently moved to other buildings at Los
Alamos to make room for the 50-pits-per-year production capacity. 
For example, a number of activities from the PF-4 facility would be
transferred to the Chemistry and Metallurgy Research building.  Once
PF-4 was upgraded, it would be brought back on-line with a production
capacity of 50 pits per year. 

In December 1997, DOE's new plan changed the Department's goal for
implementing the limited manufacturing capacity.  DOE still plans to
have a 10-pits-per-year capacity by fiscal year 2001.  However, DOE
now plans to increase the capacity to 20 pits per year by fiscal year
2007.  If DOE decides to increase production to 50 pits per year, it
would be achieved sometime after fiscal year 2007.  As with the
original plan, in order to achieve a 50-pits-per-year capacity, space
for manufacturing pits in PF-4, which is now shared with other
activities, would have to be completely dedicated to the
manufacturing of pits. 

DOE officials gave us a number of reasons for these changes.  First,
because the original plan required a 3-year shutdown of production in
PF-4, DOE was concerned that there would not be enough pits during
the shutdown to support the stockpile requirement, considering that
pits would have been destructively examined under the stockpile
surveillance program.\7 Under the new plan, annual production will
continue except for 3- or 4-month work stoppages during some years to
allow for facility improvements and maintenance.  Second, DOE was
concerned that pits produced after the originally planned 3-year
shutdown might need to be recertified.  Third, DOE wanted to decouple
the construction activities at the Chemistry and Metallurgy Research
building from planned construction at PF-4 because linking
construction projects at these two facilities might adversely affect
the pit-manufacturing mission's schedule. 


--------------------
\7 Stockpile surveillance includes the routine and periodic
examination, evaluation, and testing of stockpile weapons and weapons
components to ensure that they conform to performance specifications
and to identify and evaluate the effect of unexpected or age-related
requirements. 


      ESTABLISHING A CONTINGENCY
      PLAN
---------------------------------------------------------- Letter :3.3

DOE's 1996 plan called for developing a contingency plan to establish
a large-scale (150-500 pits per year) pit-manufacturing capacity
within 5 years, if a major problem were found in the stockpile.  DOE
has done little to pursue this goal.  It has performed only a
preliminary evaluation of possible sites.  DOE has not developed a
detailed contingency plan, selected a site, or established a time
frame by which a plan should be completed.  According to DOE
officials, they will not pursue contingency planning for large-scale
manufacturing until fiscal year 2000 or later. 

The purpose for the contingency plan was to lay out a framework by
which DOE could establish a production capacity of 150 to 500 pits
per year within a 5-year time frame.  Such a capacity would be
necessary if a systemwide problem were identified with pits in the
stockpile.  This issue may become more important in the future, as
existing nuclear weapons and their pits are retained in the stockpile
beyond their originally planned lifetime.  Research is being
conducted on the specific effects of aging on plutonium in pits. 

A DOE study found that Los Alamos is not an option for large-scale
pit manufacturing because of space limitations that exist at PF-4. 
As a result, large-scale operations would most likely be established
at some other DOE nuclear site(s) where space is adequate and where
some of the necessary nuclear infrastructure exists.  DOE has not
specified a date by which the plan will be completed, and, according
to DOE officials, the contingency plan has not been a high priority
within DOE for fiscal years 1998-99.  According to DOE officials,
they may fund approximately $100,000 for a study of manufacturing and
assembly processes for large-scale manufacturing in fiscal year 1999. 
In addition, according to DOE officials, DOE has not pursued
contingency planning for large-scale manufacturing more aggressively
because the Department would like more work to be done at PF-4 prior
to initiating this effort.  In this regard, the officials stated that
the development of a contingency plan requires more complete
knowledge of the processes, tooling, and technical skills still being
put in place at Los Alamos.  This knowledge will serve as a template
for large-scale manufacturing.  DOE believes that this knowledge
should be well defined by fiscal year 2000. 


   ESTIMATED COSTS WILL TOTAL OVER
   $1.1 BILLION
------------------------------------------------------------ Letter :4

According to information from DOE, the total cost for establishing
and operating the pit-manufacturing mission under its new plan will
be over $1.1 billion from fiscal year 1996 through fiscal 2007.  This
estimate includes funds for numerous mission elements needed to
achieve DOE's goals.  This estimate does not include over $490
million in costs for other activities that are not directly
attributable to pit production but are needed to support a wide
variety of activities, including the pit-manufacturing mission.  Some
key controls related to the mission are either in the formative
stages of development or do not cover the mission in its entirety. 


      CURRENT ESTIMATED COSTS
---------------------------------------------------------- Letter :4.1

DOE provided us with data reflecting the total estimated costs of its
new plans and schedules.  These data were developed for the first
time during our audit.  DOE emphasized that these costs should be
treated as draft estimates instead of approved numbers.  On the basis
of this information, the costs for establishing and operating the
pit-manufacturing mission were estimated to total over $1.1 billion
from fiscal year 1996 through fiscal 2007.  Table 1 shows the total
estimated costs related to the various elements of the mission.  At
the time of our review, DOE estimated that by the end of fiscal year
1998, it would have spent $69 million on the mission. 



                                Table 1
                
                   Total Estimated Pit-Manufacturing
                 Mission Costs, Fiscal Years 1996-2007,
                         as of August 10, 1998

                         (Dollars in millions)

Mission element and description                         Estimated cost
----------------------------------------  ----------------------------
War Reserve pit-manufacturing capability                        $272.1
 costs: These are the activities
 necessary to reestablish the capability
 to fabricate most of the pits in the
 enduring stockpile, develop the
 processes needed for future production,
 and produce nonnuclear pit components.
Pit-manufacturing operations costs:                              466.6
 These are the operating costs
 associated with manufacturing War
 Reserve pits for one weapons system.
 The number of pits to be produced will
 support the stockpile through fiscal
 year 2025.
Manufacturing construction costs: These                          161.3
 are the necessary construction upgrade
 costs directly attributable to pit
 production at Los Alamos.
Increased capacity costs: These are the                          162.8
 minimum initial costs for increasing
 capacity from 20 to 50 pits per year by
 moving some work from PF-4 to other
 facilities. DOE has scheduled funding
 outlays for this element beginning in
 fiscal year 2000. DOE noted that
 increases in these estimated costs are
 likely because of delays and potential
 inefficiencies associated with
 implementing this strategy. The total
 costs for a future increase in
 production capacity are not known by
 DOE.
Los Alamos certification costs: These                             49.2
 costs are specific to the weapons
 system for which Los Alamos will
 produce War Reserve pits. They include
 only those costs for required
 engineering and physics certification
 activities directly related to this
 weapons system.\a
Lawrence Livermore peer review costs:                              2.0
 These costs are specific to the
 Livermore peer reviews of Los Alamos's
 certification efforts.\a
Large-scale manufacturing (contingency)                            1.6
 planning costs: These were the costs
 incurred in fiscal years 1996-97 for
 the initial study of site alternatives
 for large-scale manufacturing and the
 costs anticipated in fiscal year 1999
 for a study of manufacturing and
 assembly processes.
======================================================================
Total costs                                                   $1,115.6
----------------------------------------------------------------------
Note:  DOE does have a cost estimate for fiscal year 2008 but not for
out-years beyond that time. 

\a Unlike other elements, these activities are funded by the
Stockpile Stewardship Program rather than by the Stockpile Management
Program.  The costs shown are estimated through fiscal year 2002. 

Other activities are needed to support a wide variety of efforts,
including the pit-manufacturing mission but are not directly
attributable to pit production.  These include construction-related
activities at various Los Alamos nuclear facilities.  For example,
one activity is the construction upgrades at the Chemistry and
Metallurgy Research building.  DOE and Los Alamos officials stated
that the costs of these activities would have been incurred whether
or not Los Alamos was selected for the pit-manufacturing mission. 
However, unless these activities are carried out, DOE and Los Alamos
officials believe that it will be difficult for them to achieve the
mission's goals.  Table 2 shows the total estimated costs of these
other supporting activities. 



                                Table 2
                
                     Total Estimated Costs of Other
                    Activities That Support the Pit-
                  Manufacturing Mission, Fiscal Years
                    1996-2007, as of August 10, 1998

                         (Dollars in millions)

Activity and description                                Estimated cost
----------------------------------------  ----------------------------
Infrastructure construction costs: These                        $215.9
 are the costs associated with needed
 maintenance and infrastructure
 construction not directly attributable
 to pit production.
Other construction costs: These include                          274.7
 construction at various Los Alamos
 facilities needed to support, among
 other things, the pit-manufacturing
 mission. For example, two of these
 projects are the Chemistry and
 Metallurgy Research building's upgrades
 and the design-only phase of the
 Nuclear Materials Storage Facility
 Renovation.\a
======================================================================
Total costs                                                     $490.6
----------------------------------------------------------------------
Note:  DOE does have a cost estimate for fiscal year 2008 but not for
out-years beyond that time. 

\a Other projects included are phase 1 of the Nuclear Materials
Safeguards and Security Upgrades Project, the TA-55 Fire Water Loop
Replacement Project, and the Nonnuclear Reconfiguration Project. 
Total costs are estimated for these projects from fiscal year 1996
through fiscal 2005, the date by which all planned work will be
completed. 


      DOE'S AND LOS ALAMOS'S COST
      AND MANAGERIAL CONTROLS
      UNDER DEVELOPMENT
---------------------------------------------------------- Letter :4.2

The success of DOE's pit-manufacturing mission at Los Alamos requires
the use of effective cost and managerial controls for ensuring that
the mission's goals are achieved within cost and on time.  An
effective cost and managerial control system should have (1) an
integrated cost and schedule control system, (2) independent cost
estimates, and (3) periodic technical/management reviews.  DOE and
Los Alamos have taken actions to institute these cost and managerial
controls related to the pit mission.  However, some of these controls
are either in the formative stages of development or are limited to
addressing only certain elements of the mission instead of the entire
mission. 


         INTEGRATED COST AND
         SCHEDULE CONTROL SYSTEM
-------------------------------------------------------- Letter :4.2.1

An integrated cost and schedule control system would allow managers
to measure costs against stages of completion for the
pit-manufacturing mission's overall plan.  For example, at any given
time, the plan might identify a certain percentage of the mission's
resources that were to be spent within established limits.  If
variances from the plan were to exceed those limits, corrective
actions could be taken.  DOE and Los Alamos have in place, or are in
the process of developing, (1) an integrated planning and scheduling
system for the pit-manufacturing mission and (2) a separate financial
management information system for monitoring costs. 

Los Alamos's planning and scheduling system for the pit-manufacturing
mission will eventually track, in an integrated fashion, all key
planning and scheduling milestones.  This system will enable managers
to have timely and integrated information regarding the mission's
progress.  Currently, individual managers are tracking their own
progress toward important milestones but do not have integrated
mission information.  If their individual milestones slip, managers
can take corrective actions.  The integrated planning and scheduling
system will enable managers to have information regarding the
mission's progress as a whole.  According to a Los Alamos official,
the planning and scheduling system will be completed in December
1998. 

Los Alamos's financial management information system, through which
mission-related costs can be monitored, provides managers with
information that enables them to track expenditures and available
funds.  Eventually, this system will be interfaced with the
pit-manufacturing mission's integrated planning and scheduling
system.  However, according to a Los Alamos official, this may take
several years. 


         INDEPENDENT COST
         ESTIMATES
-------------------------------------------------------- Letter :4.2.2

Independent cost estimates are important, according to DOE, because
they serve as analytical tools to validate, cross-check, or analyze
estimates developed by proponents of a project.  DOE's guidance
states that accurate and timely cost estimates are integral to the
effective and efficient management of DOE's projects and programs.\8
According to DOE and Los Alamos officials, independent cost estimates
are required by DOE's guidance for individual construction projects
but are not required for other elements of the pit-manufacturing
mission.  DOE has two construction projects directly related to the
pit mission and five others that indirectly support it.  The
Capability Maintenance and Improvements Project and the Transition
Manufacturing and Safety Equipment project are directly related to
the pit-manufacturing mission.  The Nuclear Materials Storage
Facility Renovation, the Chemistry and Metallurgy Research Building
Upgrades Project, the Nuclear Materials Safeguards and Security
Upgrades Project, the Nonnuclear Reconfiguration Project, and the
Fire Water Loop Replacement Project indirectly support the mission as
well as other activities at Los Alamos. 

DOE plans to eventually make an independent cost estimate for most of
these construction projects.  According to a DOE official,
independent cost estimates have been completed for the Nuclear
Materials Storage Facility Renovation, the Nonnuclear Reconfiguration
Project, and the Fire Water Loop Project.  Independent cost estimates
have been performed for portions of the Chemistry and Metallurgy
Research Building Upgrades Project.  Additionally, a preliminary
independent cost estimate was performed for the Capability
Maintenance and Improvements Project prior to major changes in the
project.  DOE officials plan to complete independent cost estimates
for the Nuclear Materials Safeguards and Security Upgrades Project,
the revised Capability Maintenance and Improvements Project, and
portions of the Transition Manufacturing and Safety Equipment
project, depending upon their complexity.\9

Because the bulk of mission-related costs are not construction costs,
these other funds will not have the benefit of independent cost
estimates.  The mission's elements associated with these funds
include activities concerning War Reserve pit-manufacturing
capability, pit-manufacturing operations, and certification. 
Moreover, according to DOE and Los Alamos officials, no independent
cost estimate has been prepared for the mission as a whole, and none
is planned.  According to these officials, this effort is not planned
because of the complexity of the mission and because it is difficult
to identify an external party with the requisite knowledge to
accomplish this task.  It is important to note, however, that these
types of studies have been done by DOE.  In fact, DOE has developed
its own independent cost-estimating capability, which is separate and
distinct from DOE's program offices, to perform such estimates. 


--------------------
\8 "Cost Estimating Guide" (DOE G 430.1-1, Mar.  28, 1997). 

\9 DOE and Los Alamos officials told us that internal cost reviews
have been performed for most of the projects that have not had
independent cost estimates. 


         TECHNICAL/MANAGEMENT
         REVIEWS
-------------------------------------------------------- Letter :4.2.3

Technical/management reviews can be useful in identifying early
problems that could result in cost overruns or delay the
pit-manufacturing mission.  DOE and Los Alamos have taken a number of
actions to review particular cost and management issues.  These
include (1) a "Change Control Board" for the entire mission, (2) a
technical advisory group on the management and technical issues
related to the production of pits, (3) peer reviews by Lawrence
Livermore National Laboratory on pit-certification issues, and (4)
annual mission reviews. 

The Change Control Board consists of 14 DOE, Los Alamos, and Lawrence
Livermore staff who worked on the development of the mission's
integrated plan.  The Board was formed in March 1998 to act as a
reviewing body for costs and management issues related to the
mission.  This group will meet quarterly or more regularly, as
needed, to resolve cost or schedule problems.  The group's initial
efforts have focused on addressing unresolved issues in the
integrated plan.  For example, the group has merged data from
Lawrence Livermore National Laboratory and Los Alamos into the
integrated plan and is updating a key document associated with the
mission's master schedule. 

Since July 1997, Los Alamos has been using a technical advisory group
composed of nuclear experts external to Los Alamos and DOE.  This
group, paid by Los Alamos, provides independent advice and
consultation on management and technical issues related to pit
manufacturing and other related construction projects.  The specific
issues for assessment are selected either by the group or upon the
request of Los Alamos's management.  According to the group's
chairman, Los Alamos has historically had problems with project
management, and the group's work has focused on efforts to strengthen
this aspect of the pit-manufacturing mission.  For example, the group
has identified the need for and provided advice on the development of
key planning documents.  This group meets at Los Alamos on a monthly
basis. 

Los Alamos plans specific peer reviews by Lawrence Livermore to
independently assess the processes and tests related to the
certification of pits.  Los Alamos's use of these peer reviews is an
effort to provide an independent reviewing authority because Los
Alamos is responsible for both manufacturing the pits and approving
their certification.  An initial planning session for this effort is
scheduled for the fall of 1998. 

DOE and Los Alamos officials conducted a review of the
pit-manufacturing mission in September 1997.  The purpose of this
review was to brief DOE management on the progress and status of
various elements associated with the mission.  As a result of the
1997 review, DOE and Los Alamos began developing an integrated plan
that brings together the various elements of the mission.  According
to Los Alamos officials, such reviews will be held annually. 


   DOD AND DOE HAVE NOT RESOLVED
   ALL PIT-MANUFACTURING ISSUES
------------------------------------------------------------ Letter :5

DOD is responsible for implementing the U.S.  nuclear deterrent
strategy.  According to officials from various DOD organizations,
DOE's pit-manufacturing mission is critical in supporting DOD's
needs.  As a result, representatives from both Departments have
conferred on and continue to discuss plans for the mission.\10 Two
important issues remain unresolved.  First, officials from various
DOD organizations have concerns about changes in the manufacturing
processes that will be used to produce pits at Los Alamos.  Second,
on the basis of preliminary analyses by various DOD organizations,
some representatives of these organizations are not satisfied that
DOE's planned capacity will meet the anticipated stockpile needs. 

DOE is responsible for ensuring that the stockpile is safe and
reliable.  The safety and reliability of the pits produced at Rocky
Flats were proven through nuclear test detonations.\11 Officials from
various DOD organizations are concerned that Los Alamos's pits will
be fabricated by some processes that are different from those
employed previously at Rocky Flats.  Furthermore, pits made with
these new processes will not have the benefit of being tested in a
nuclear detonation to ensure that they perform as desired.  As a
result, officials from various DOD organizations want assurance that
Los Alamos's pits are equivalent to those produced at Rocky Flats in
all engineering and physics specifications.  To accomplish this, DOE
and Los Alamos plan to have Lawrence Livermore conduct peer reviews. 
These peer reviews will focus on the certification activities related
to the first type of pit to be produced.  This will help verify that
the necessary standards have been met.  According to representatives
from both Departments, they will continue to actively consult on
these issues. 

The other unresolved issue between DOD and DOE is DOE's planned
pit-manufacturing capacity.  Several efforts are currently under way
within various DOD organizations to determine the stockpile's needs
and the associated requirements for pits.\12 DOD has not established
a date for providing DOE with this information.  Nevertheless, on the
basis of the preliminary analyses performed by various DOD
organizations, many DOD officials believe that DOE's capacity plans
will not meet their stockpile needs.  According to these officials,
their requirements will be higher than the production capacity
planned at Los Alamos.  As a result, these officials do not support
DOE's stated goal of developing a contingency plan for a large-scale
manufacturing capacity sometime in the future.  Rather, these
officials told us that they want DOE to establish a large-scale
manufacturing capacity as part of its current efforts.  However, DOD
officials said that they will be unable to give detailed
pit-manufacturing requirements until the lifetime of pits is
specified more clearly through DOE's ongoing research on how long a
pit can be expected to function after its initial manufacture. 

According to DOE officials, they believe that the planned capacity is
sufficient to support the current needs of the nuclear weapons
stockpile.  Furthermore, no requirement has been established for a
larger manufacturing capacity beyond that which is planned for Los
Alamos.  DOE officials told us that they are discussing capacity
issues with DOD and are seeking to have joint agreement on the
required capacity.  However, no date has been established for
reaching an agreement on this issue. 


--------------------
\10 One means by which DOD stays informed of the pit-manufacturing
mission is through the use of "Project Officer Groups" composed of
representatives from DOD and DOE organizations.  These groups confer
on weapons issues and conduct site visits to Los Alamos.  Project
Officer Groups are associated with the Nuclear Weapons Council. 

\11 DOE emphasized that a large share of the relevant underground
tests were conducted on pits manufactured by processes similar to
those currently employed at Los Alamos. 

\12 One of these organizations is DOD's Program Analysis and
Evaluation group, which will report its findings to the Nuclear
Weapons Council. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

DOE plans to spend over $1.1 billion through fiscal year 2007 to
establish a 20-pits-per-year capacity.  This capacity may be expanded
to 50 pits per year sometime after fiscal year 2007.  Various DOD
organizations have performed preliminary analyses of the capacity
needed to support the stockpile.  These analyses indicate that
neither the 20-pits-per-year capacity nor the 50-pits-per-year
capacity will be sufficient to meet the needs of the stockpile.  As a
result, officials from organizations within DOD oppose DOE's plan for
not developing a large-scale manufacturing capacity now but rather
planning for it as a future contingency.  Once the various DOD
organizations have completed their stockpile capacity analyses, DOD
can then let DOE know its position on the needs of the nuclear
stockpile.  DOE will then be faced with the challenge of deciding how
it should respond.  A decision to pursue a production capacity larger
than that planned by DOE at Los Alamos will be a major undertaking. 

Because of the cost and critical nature of the pit-manufacturing
mission, DOE needs to ensure that effective cost and managerial
controls are in place and operating.  DOE and Los Alamos have not
fully developed some of the cost and managerial control measures that
could help keep them within budget and on schedule.  An integrated
cost and schedule control system is not in place even though millions
of dollars have been spent on the mission.  Furthermore, only a small
portion of the costs associated with the mission has had the benefit
of independent cost estimates.  Without fully developed effective
cost and managerial controls, the mission could be prone to cost
overruns and delays. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

In order for DOE to have the necessary information for making
pit-production capacity decisions, we recommend that the Secretary of
Defense do the following: 

  -- Provide DOE with DOD's views on the pit-manufacturing capacity
     needed to maintain the stockpile.  This should be done so that
     DOE can use this information as part of its reevaluation of the
     stockpile's long-term capacity needs.  While we understand that
     DOD cannot yet provide detailed requirements, DOE can be
     provided with the findings of the preliminary analyses of
     various DOD organizations. 

In order to ensure that the pit-manufacturing mission at Los Alamos
supports the nuclear stockpile in a cost-effective and timely manner,
we recommend that the Secretary of Energy take the following
measures: 

  -- Reevaluate existing plans for the pit-manufacturing mission in
     light of the issues raised by DOD officials regarding the
     capacity planned by DOE. 

  -- Expedite the development of the integrated cost and schedule
     control system at Los Alamos.  This needs to be done as soon as
     possible to help ensure that the mission is achieved within cost
     and on time. 

  -- Conduct independent cost estimates for the entire
     pit-manufacturing mission.  This can be done either for the
     mission as a whole or for those individual mission elements that
     have not had independent estimates. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We provided DOE and DOD with a draft of this report for review and
comment.  DOE concurred with all but one recommendation in the
report.  That recommendation was that the Secretary of Energy
"establish a separate line item budget category for the
pit-manufacturing mission at Los Alamos." In its comments, DOE
emphasized that its current budgeting and accounting practices
related to pit production are consistent with appropriation
guidelines, are consistent with budgeting and accounting standards,
and are responsive to the Government Performance and Results Act. 
DOE also stated that it plans to keep congressional staff informed of
the mission's progress through quarterly updates.  These updates will
be initiated following the approval of the budget for fiscal year
1999.  In a subsequent discussion, DOE's Laboratory Team Leader in
the Office of Site Operation, said that these updates will include
information on the mission's cost and milestones.  He noted that the
cost information provided could be as detailed as congressional staff
require.  Our recommendation was aimed at getting DOE to identify the
total estimated costs associated with the pit-manufacturing mission
in a clear and comprehensive manner to the Congress.  The clear
identification of total estimated costs is important because the
pit-manufacturing mission is critical to national security interests
and represents a significant financial investment for the future. 
Since DOE prepared a cost estimate covering the total pit mission
during our audit, a baseline has been established.  We believe that
DOE's planned quarterly updates will be an appropriate means of
updating this cost information for the Congress.  As a result, we
have deleted this recommendation from our final report.  DOE also
provided several clarifications to the report, and the report has
been revised where appropriate.  DOE's comments are provided in
appendix II. 

DOD agreed with the information presented in our draft report and
provided us with technical clarifications, which we incorporated as
appropriate.  DOD did not agree with our recommendation that the
Secretary of Defense clearly articulate DOD's views on the
pit-manufacturing capacity needed to maintain the stockpile.  DOD was
concerned that the aging of pits was not clearly identified in our
report as a driving force of pit-production requirements.  DOD said
that it could not give detailed pit-manufacturing requirements until
the lifetime of pits is specified more clearly by DOE.  We have
modified our report and the recommendation to recognize that DOD
believes that it cannot provide DOE with detailed pit-manufacturing
capacity requirements until more is known about the aging of pits. 
However, we believe that there are merits in DOD's sharing of the
information from the preliminary analyses of various DOD
organizations with DOE.  This information would be useful for DOE in
its long-term planning efforts, especially those related to
contingency planning.  DOD's comments are included in appendix III. 


---------------------------------------------------------- Letter :8.1

To address our objectives, we interviewed officials and obtained
documents from DOD, DOE, Los Alamos, and the Nuclear Weapons Council. 
We did not independently verify the reliability of the estimated cost
data that DOE provided us with.  According to DOE, these data
represent its best estimates of future mission costs but are likely
to change as the mission progresses and should not be viewed as
final.  Our scope and methodology are discussed in detail in appendix
I.  We performed our review from October 1997 through August 1998 in
accordance with generally accepted government auditing standards. 

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter.  At that time, we will
send copies of the report to the Secretary of Energy; the Secretary
of Defense; and the Director, Office of Management and Budget; and
appropriate congressional committees.  We will also make copies
available to others on request. 

If you or your staff have any questions about this report, please
call me at (202) 512-8021.  Major contributors to this report include
William F.  Fenzel, Assistant Director, James C.  Charlifue, Senior
Evaluator, and Frank B.  Waterous, Senior Evaluator. 

(Ms.) Gary L.  Jones
Associate Director, Energy,
 Resources, and Science Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To obtain information about the Department of Energy's (DOE) plans
and schedules for reestablishing the manufacturing of pits, we
gathered and analyzed various documents, including DOE's (1) Record
of Decision for the Stockpile Stewardship and Management Programmatic
Environmental Impact Statement, (2) guidance for stockpile management
and the pit-manufacturing mission, and (3) the draft Integrated Plan
for pit manufacturing and certification.  We discussed with DOE and
Los Alamos National Laboratory officials the basis for the mission's
plans and schedules.  These officials also discussed why changes were
made to these plans and schedules in December 1997.  DOE and Los
Alamos officials discussed with us their progress in meeting
milestones, which we compared with the established major milestones
for the mission.  In order to have a better understanding of the
efforts taking place at Los Alamos, we also met with DOE and
contractor employees at Rocky Flats who were formerly involved with
the production of pits at that site.  These individuals discussed the
pit production issues and challenges that they faced at Rocky Flats. 

Cost information associated with the pit-manufacturing mission was
obtained primarily from DOE's Albuquerque Operations Office.  This
information was compiled by DOE with the assistance of Los Alamos
officials.  These costs were only recently prepared by DOE and Los
Alamos.  According to a DOE official, this effort took several months
partly because of changes in DOE's mission plans.  These costs were
provided for us in current-year dollars.  As such, we did not adjust
them to constant-year dollars.  Additionally, we did not
independently verify the accuracy of the cost data.  These data were
in draft form during our review and not considered approved by DOE. 
We interviewed both DOE and Los Alamos officials regarding the
methodology that was used to develop the cost data.  In addition, we
also discussed with DOE and Los Alamos officials cost and managerial
controls related to the mission and reviewed pertinent documents on
this subject. 

To understand unresolved issues between the Department of Defense
(DOD) and DOE regarding the manufacturing of pits, we spoke with
representatives from DOD, DOE, and Los Alamos.  DOD officials with
whom we spoke included representatives from the Joint Chiefs of
Staff, Nuclear and Chemical and Biological Defense Programs, Army,
Air Force, Navy, and Strategic Command.  We also met with a
representative of the Nuclear Weapons Council. 

Our work was conducted in Golden, Colorado; Germantown, Maryland;
Albuquerque, New Mexico; Los Alamos, New Mexico; Alexandria,
Virginia; and Washington, D.C., from October 1997 through August 1998
in accordance with generally accepted government auditing standards. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
ENERGY
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix I



(See figure in printed edition.)


*** End of document. ***