oversight

Managing Critical Isotopes: DOE's Isotope Program Needs Better Planning for Setting Prices and Managing Production Risks

Published by the Government Accountability Office on 2012-05-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Requesters




May 2012
             MANAGING
             CRITICAL ISOTOPES
             DOE’s Isotope
             Program Needs Better
             Planning for Setting
             Prices and Managing
             Production Risks




GAO-12-591
                                           May 2012

                                           MANAGING CRITICAL ISOTOPES
                                           DOE’s Isotope Program Needs Better Planning for
                                           Setting Prices and Managing Production Risks
Highlights of GAO-12-591, a report to
congressional requesters




Why GAO Did This Study                     What GAO Found
DOE is the only domestic supplier for      The Department of Energy’s (DOE) Isotope Development and Production for
many of the over 300 different isotopes    Research and Applications program (Isotope Program) provides over 300
it sells that are critical to medical,     different isotopes for commercial and research applications. The Isotope
commercial, research, and national         Program is responsible for 243 stable isotopes that are no longer produced in the
security applications. Previous            United States but are sold from the program’s existing inventory and for 55
shortages of some isotopes, such as        radioactive isotopes, called radioisotopes, that the program is able to produce at
helium-3, an isotope used to detect        DOE facilities. An additional 10 isotopes sold by the Isotope Program are
radiation at seaports and border           provided by the National Nuclear Security Administration (NNSA), a separate
crossings, highlight the importance of
                                           agency within DOE, as by-products of its nuclear weapons program.
managing supplies of and demand for
critical isotopes. Prior reports by GAO    The Isotope Program may be forgoing revenue that could further its mission
and others highlighted risks and           because of the manner in which it sets prices for commercial isotopes. The
challenges faced by the Isotope            Isotope Program determines demand, coordinates production, and sets prices for
Program, such as assessing demand          commercial isotopes. To set prices for radioisotopes, the program considers the
for certain isotopes. GAO was asked to     full cost of production, including direct costs (e.g., labor costs) and indirect costs
determine (1) which isotopes are           (e.g., infrastructure costs). For research applications, isotope prices are set to
produced, sold, or distributed either by   recover direct costs to reduce prices and encourage research. For commercial
the Isotope Program or NNSA and how        applications, prices are set at full cost recovery—of both direct and indirect
the two agencies make isotopes
                                           costs—or at an isotope’s market price when a market price higher than full cost
available for commercial and research
                                           recovery already exists. The program, however, has not fully assessed the
applications; (2) what steps the Isotope
Program takes to provide isotopes for      pricing of most of these isotopes, as required by its 1990 pricing policy. This
commercial and research applications;      policy provides latitude for setting prices and states that prices should be
and (3) the extent to which DOE is         assessed annually. Factors that may be considered when establishing prices
assessing and mitigating risks facing      include the value of an isotope to the customer, demand, and the number of
the Isotope Program. GAO reviewed          suppliers. The program, however, has not assessed the value of isotopes to
DOE and NNSA documents, visited            customers or defined what factors it will consider when it sets prices for
Oak Ridge National Laboratory, and         commercial isotopes, including defining under what circumstances it will set
interviewed cognizant agency officials.    prices at or above full cost recovery. As a result, the program does not know if its
                                           full-cost-recovery prices are set at appropriate levels so as not to distort the
What GAO Recommends                        market, and it may be forgoing revenue that could further support its mission.
GAO recommends, among other                The Isotope Program has begun taking some actions to identify and manage
actions, that DOE’s Isotope Program        risks to achieving its mission of producing isotopes, but because it has not
define what factors it considers when      established clear, consistent program objectives, the program’s risk assessment
setting isotope prices, create clear
                                           efforts are not comprehensive. Actions the Isotope Program is taking include,
objectives as a basis for risk
                                           among other things, identifying high-priority isotopes and using its revolving fund
assessment, and consolidate the lists
of high-priority isotopes. DOE stated
                                           to mitigate risks from unforeseen events. For example, the Isotope Program has
that it will address GAO’s                 identified five lists of high-priority isotopes—those at risk of supply problems
recommendations through the Isotope        because they are already in short supply or are important to users. Isotope
Program’s current efforts to update its    Program officials reported using these lists to set program priorities. The Isotope
pricing policy and develop a strategic     Program is taking these actions, however, without first establishing clear,
plan.                                      consistent objectives. The federal standards for internal control state that a
                                           precondition to risk assessment is the establishment of clear objectives. Without
                                           clearly defined objectives, the program cannot be assured that it is assessing
                                           risks from all sources or that its efforts are focusing on the most significant risks
                                           to achieving its mission. Furthermore, without consolidating the multiple high-
View GAO-12-591. For more information,
contact Gene Aloise at (202) 512-3841 or   priority lists, Isotope Program managers may not be directing limited resources to
aloisee@gao.gov.                           the most important isotopes.

                                                                                     United States Government Accountability Office
Contents


Letter                                                                                   1
               Scope and Methodology                                                     4
               Background                                                                5
               DOE’s Isotope Program and NNSA Together Produce or Make
                  Available over 300 Isotopes for Research and Commercial
                  Applications                                                           9
               In Providing Commercial Isotopes, DOE’s Isotope Program May Be
                  Forgoing Revenue That Could Further Support Its Mission              11
               DOE’s Isotope Program Has Taken Some Actions to Identify and
                  Manage Risks, but Its Efforts Are Not Comprehensive                  17
               Conclusions                                                             23
               Recommendations for Executive Action                                    24
               Agency Comments and Our Evaluation                                      24

Appendix I     Isotopes Available from DOE’s Isotope Program                            27



Appendix II    Comments from the Department of Energy                                   36



Appendix III   GAO Contact and Staff Acknowledgments                                    39



Tables
               Table 1: Revenues and Obligations of DOE’s Isotope Program,
                        Fiscal Years 2009 through 2011                                   7
               Table 2: The Eight Top-Selling Isotopes of DOE’s Isotope Program
                        in Fiscal Year 2011                                              8
               Table 3: Isotopes Available for Sale by DOE’s Isotope Program             9
               Table 4: Stable Isotopes Sold by DOE’s Isotope Program with a
                        Supply of Less Than 10 Years                                   10




               Page i                                      GAO-12-591 DOE’s Isotope Program
Abbreviations
DOE         Department of Energy
NNSA        National Nuclear Security Administration

This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.




Page ii                                                GAO-12-591 DOE’s Isotope Program
United States Government Accountability Office
Washington, DC 20548




                                   May 23, 2012

                                   The Honorable Brad Miller
                                   Ranking Member
                                   Subcommittee on Energy and Environment
                                   Committee on Science, Space, and Technology
                                   House of Representatives

                                   The Honorable Paul D. Tonko
                                   Ranking Member
                                   Subcommittee on Investigations and Oversight
                                   Committee on Science, Space, and Technology
                                   House of Representatives

                                   The Department of Energy’s (DOE) Isotope Development and Production
                                   for Research and Applications program (Isotope Program) is the only
                                   domestic supplier for many of the more than 300 different isotopes that it
                                   sells, many of which are critical to medical, commercial, research, and
                                   national security applications. 1 For example, the program produces and
                                   sells strontium-82, an isotope used to generate rubidium-82, which is
                                   used in the diagnosis of heart disease. Overall, approximately 20 million
                                   medical procedures are performed each year in the United States using
                                   isotopes. Other applications for isotopes include oil and gas exploration,
                                   physics research, and radiation detection monitors that screen cargo and
                                   vehicles at ports and border crossings. Additionally, a January 2012
                                   federal workshop on isotopes was held by the Isotope Program and the
                                   National Nuclear Security Administration (NNSA), a separately organized
                                   agency within DOE, 2 to discuss isotope supply and demand. At this
                                   workshop, more than 20 federal government entities, including the
                                   Department of Defense’s Defense Threat Reduction Agency, Department
                                   of Homeland Security’s Domestic Nuclear Detection Office, National
                                   Aeronautics and Space Administration, National Institutes of Health, and


                                   1
                                    Isotopes are varieties of a given chemical element with the same number of protons but
                                   different numbers of neutrons. For example, the helium-3 isotope has one less neutron
                                   than the helium-4 isotope, which is the helium isotope commonly used in party balloons.
                                   2
                                    Congress created NNSA as a semiautonomous agency within DOE under Title 32 of the
                                   National Defense Authorization Act for Fiscal Year 2000 (Pub. L. No. 106-65, § 3211
                                   (1999)). NNSA is responsible for the management and security of the nation’s nuclear
                                   weapons, nonproliferation, and naval reactors programs.




                                   Page 1                                                GAO-12-591 DOE’s Isotope Program
Federal Bureau of Investigation identified more than 100 different
isotopes that are key to achieving their missions, according to program
officials.

Previous shortages of some isotopes, such as helium-3, highlight the
importance of managing supplies of and demand for critical isotopes. For
example, in May 2011 we reported on a shortage of helium-3—an isotope
used in radiation detection monitors deployed at ports and border
crossings to detect nuclear material and prevent terrorists from smuggling
such material into the United States. 3 DOE is the only domestic supplier
of helium-3, producing about 8,000 liters per year. As demand for helium-
3 increased beginning in 2001, sales quickly outpaced production levels,
resulting in a critical shortage in 2008. As a result, the federal government
was forced to quickly begin developing alternatives to helium-3 in order to
continue deploying radiation detection monitors. 4

In fiscal year 2009, DOE transferred the Isotope Program from its Office
of Nuclear Energy to its Office of Science and revised the program’s
mission to three purposes: (1) produce or distribute isotopes in short
supply, their associated by-products and surplus materials, and deliver
isotope-related services; (2) maintain the infrastructure required to
produce and supply isotopes and related services; and (3) investigate and
develop new or improved isotope production and processing techniques
that can make new isotopes available for research and other applications.
To meet this three-pronged mission, the Isotope Program operates from
an annual budget consisting of yearly appropriations 5 and revenues from
isotope sales. In fiscal year 2011, appropriations totaled almost $20
million, and revenues from sales of isotopes alone totaled almost $27
million, according to data provided by agency officials.




3
 GAO, Managing Critical Isotopes: Weaknesses in DOE’s Management of Helium-3
Delayed the Federal Response to a Critical Supply Shortage, GAO-11-472 (Washington,
D.C.: May 12, 2011).
4
 GAO, Neutron Detectors: Alternatives to Using Helium-3, GAO-11-753 (Washington,
D.C.: Sept. 29, 2011).
5
  In this report, we use the phrase “yearly appropriations” to refer to funding that is
received by DOE through the annual appropriations process, but has no restrictions on the
time by which it must be obligated.




Page 2                                                GAO-12-591 DOE’s Isotope Program
In addition to DOE’s Isotope Program, NNSA generates or provides some
additional isotopes as by-products of the weapons program and research
activities. Through its Office of Nuclear Materials Integration, NNSA
makes these isotopes available to other federal entities, including DOE’s
Isotope Program, which then coordinates their sale and distribution to
researchers and commercial entities.

Since 2008, the Isotope Program has been addressing programmatic
risks and challenges as identified by external stakeholders as part of a
series of program reviews. The risks and challenges the reviews identified
included concerns over supply limitations for some isotopes, the need for
long-term infrastructure investments to maintain the capacity for isotope
production, and difficulties with accurately forecasting isotope demand.
Specifically, in August 2008, DOE organized a workshop bringing
together a wide range of stakeholders to discuss the nation’s current and
future isotope needs and to consider options for improving the availability
of needed isotopes. This workshop identified 30 key isotopes that were in
short supply at that time, including 12 whose supplies had been
exhausted or were likely to run out within the following 3 years. Also in
2008, DOE requested that the Nuclear Science Advisory Committee form
an isotope subcommittee to advise the program on specific isotope risks. 6
The subcommittee produced two reports in response: one identifying and
setting priorities for compelling research opportunities using isotopes and
another report presenting opportunities and priorities for ensuring a robust
national isotope program. These reports highlighted short-term and long-
term risks and challenges facing the Isotope Program, such as the
program’s reliance on DOE laboratories to produce certain isotopes.
Specifically, the report expressed concern that the Isotope Program relies
on the linear particle accelerators 7 at Brookhaven National Laboratory
and Los Alamos National Laboratory for isotope production, even though
isotope production is not the primary mission of these laboratories.




6
 The Nuclear Science Advisory Committee is an advisory committee that provides official
advice to the Department of Energy and the National Science Foundation on basic nuclear
science research. The lead responsibility for the direction of the advisory committee,
selecting members, creating meeting agendas, and developing charges is shared by the
two agencies.
7
 A particle accelerator uses electromagnetic forces to accelerate charged particles, such
as electrons or protons. The resulting beam of fast-moving particles may be used for a
variety of applications, including the creation of different isotopes.




Page 3                                                 GAO-12-591 DOE’s Isotope Program
              In light of the importance of the isotopes sold by the Isotope Program and
              the various challenges it faces, you asked us to review the program.
              Specifically, our objectives were to determine (1) which isotopes are
              produced, sold, or distributed either by the Isotope Program or NNSA and
              how the two entities make isotopes available for commercial and research
              applications; (2) what steps the Isotope Program takes to provide
              isotopes for commercial and research applications; and (3) the extent to
              which DOE is assessing and mitigating risks facing the Isotope Program.


              To identify which isotopes are produced, sold, or distributed either by the
Scope and     Isotope Program or NNSA and how the two agencies make isotopes
Methodology   available for commercial and research applications, we reviewed the DOE
              Isotope Program’s information on available isotopes, isotope sales data,
              and information on NNSA’s isotopes. We also visited Oak Ridge National
              Laboratory in Tennessee, where the Isotope Program’s business office
              and the program’s inventory of stable isotopes are located, to view
              production facilities and interview officials about isotope production and
              sales. We interviewed officials at the national laboratories that produce
              isotopes for the Isotope Program: Brookhaven National Laboratory in
              New York, Idaho National Laboratory in Idaho, Los Alamos National
              Laboratory in New Mexico, Oak Ridge National Laboratory in Tennessee,
              and Pacific Northwest National Laboratory in Washington State. We also
              interviewed headquarters officials with the Isotope Program and NNSA
              about isotope production and how the two entities work together. To
              determine what steps the Isotope Program takes to provide isotopes for
              commercial and research applications, we reviewed the Isotope
              Program’s production schedules, pricing policy, and documents related to
              how the program gathers information on customers’ needs. We also
              interviewed representatives from commercial companies and researchers
              who purchase isotopes from the Isotope Program. We interviewed
              officials from the National Isotope Development Center; the Isotope
              Program; and Brookhaven, Los Alamos, and Oak Ridge National
              Laboratories because officials at these locations are involved in producing
              and selling isotopes to customers. To determine the extent to which DOE
              is assessing risks facing the Isotope Program, we reviewed reports from
              the Nuclear Science Advisory Committee’s isotope subcommittee and the
              report from the isotope workshop DOE held in 2008. We also reviewed
              the strategic plans, risk assessment plans, and related documents from
              Brookhaven, Los Alamos, and Oak Ridge National Laboratories because
              the Isotope Program is the steward of isotope production at these sites.
              We reviewed and compared lists of high-priority isotopes that were
              prepared by the Isotope Program, the Nuclear Science Advisory


              Page 4                                       GAO-12-591 DOE’s Isotope Program
             Committee’s isotope subcommittee, the National Institutes of Health, and
             stakeholders at the 2008 isotope workshop. We also interviewed officials
             from the Isotope Program and Brookhaven, Los Alamos, and Oak Ridge
             National Laboratories to learn about risk assessment planning at each
             site and for the Isotope Program. In addition, we compared actions the
             Isotope Program is taking to assess risks with federal standards for
             internal control. 8

             We conducted this performance audit from June 2011 to May 2012, in
             accordance with generally accepted government auditing standards.
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             Isotope production and distribution have been part of DOE’s mission
Background   since at least 1954, when the Atomic Energy Act of 1954 specified the
             role of the U.S. government in isotope distribution. 9 DOE’s Isotope
             Program fills this role by providing isotopes to support the national and
             international need for a reliable supply for use in medicine, industry, and
             research. The Isotope Program provides both radioactive isotopes, called
             radioisotopes, and stable isotopes, which are not radioactive. 10 In
             addition, the Isotope Program provides a range of isotope-related
             services to customers worldwide. For example, the program may lease
             some stable isotopes and also provides irradiation and isotope-
             processing services for research and commercial applications.

             DOE transferred the Isotope Program from the department’s Office of
             Nuclear Energy to its Office of Science in 2009, at which time DOE
             restructured the program. The program currently consists of four DOE



             8
              GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
             (“Green Book”) (Washington, D.C.: November 1999).
             9
             Atomic Energy Act of 1954, Pub. L. No. 83-703, 68 Stat. 919.
             10
               Radioisotopes are radioactive—that is, they are unstable forms of elements that decay
             or disintegrate, emitting radiation. Some radioisotopes are found naturally, and others can
             be produced in nuclear reactors or particle accelerators. Stable isotopes do not decay or
             emit radiation and are therefore not radioactive.




             Page 5                                                  GAO-12-591 DOE’s Isotope Program
headquarters employees who oversee operations and set policy, plus the
National Isotope Development Center, which is a virtual organization
consisting of DOE contract employees located at Los Alamos National
Laboratory and Oak Ridge National Laboratory. National Isotope
Development Center employees carry out day-to-day operations of the
Isotope Program, which include interacting with the isotope user
community though a variety of outreach activities, monitoring short-term
and long-term isotope demand, coordinating isotope production across
DOE’s isotope production facilities, and distributing isotopes. The
National Isotope Development Center includes DOE contract employees
at the Isotope Business Office, located at Oak Ridge National Laboratory,
who manage business operations involved in the production, sale, and
distribution of isotopes. In addition, officials from the National Isotope
Development Center and DOE headquarters coordinate with many
federal programs, including the National Institutes of Health, to identify
current and future isotope needs.

The Isotope Program produces most of its radioisotopes at three DOE
production sites: the linear particle accelerators at Brookhaven National
Laboratory in New York and Los Alamos National Laboratory in New
Mexico, and the nuclear reactor at Oak Ridge National Laboratory in
Tennessee. The program also produces a small number of radioisotopes
at the Pacific Northwest National Laboratory in Washington State and at
Idaho National Laboratory. The DOE facilities associated with the Isotope
Program are recognized as uniquely capable of producing radioisotopes.
Although the Isotope Program uses these DOE sites to produce
radioisotopes, the program does not manage all the sites’ operations.
Rather, the Isotope Program shares the use of these sites with other
missions, which consist of a diverse combination of DOE activities related
to nuclear science, materials research, or defense. The production sites
are therefore not always available to the Isotope Program, and at times
the program may not control the timing and duration of isotope
production.

The Isotope Program relies on appropriations and revenues from isotope
sales for funding its operations. Both yearly appropriations and sales




Page 6                                       GAO-12-591 DOE’s Isotope Program
revenues are deposited into a revolving fund 11 from which the program
draws funds to operate its facilities, produce isotopes, pay employees’
salaries, and fund research, among other activities. Funds remain
available to the program in the revolving fund, which allows the program
to carry over balances from year to year, giving the program budgeting
flexibility. Table 1 shows the Isotope Program’s revolving fund balances,
annual appropriations, annual sales revenues, and obligations to operate
the program for fiscal years 2009 through 2011. The Isotope Program’s
annual spending on research and development is generally aimed at
developing new or more efficient isotope production techniques.

Table 1: Revenues and Obligations of DOE’s Isotope Program, Fiscal Years 2009
through 2011

                                                 Fiscal year        Fiscal year       Fiscal year
                                                       2009               2010              2011
    Revenues
    Carryover from previous fiscal year         $14,341,000        $24,235,000       $16,844,000
    Sales revenues and other resourcesa         $25,373,000        $18,620,000       $28,837,000
    Appropriations                              $24,760,000        $19,116,000       $19,670,000
    American Recovery and                       $14,617,000               $0.00              $0.00
    Reinvestment Act fundsb
    Total funding                               $79,092,000        $61,971,000       $65,351,000
    Obligations
    Research and development                     $5,424,000         $6,151,000         $1,644,000
    Operations                                  $49,433,000        $38,976,000       $45,696,000
    Total obligations                           $54,857,000        $45,127,000       $47,360,000
    Carryover to next fiscal year               $24,235,000        $16,844,000       $17,991,000
Source: DOE.

Note: Numbers may not sum because of rounding.
a
 Sales revenues and other resources include revenues received for isotope sales and isotope-related
services, as well as funds received from federal and other entities.
b
 The Isotope Program received funds from the American Recovery and Reinvestment Act in fiscal
year 2009.




11
  The Isotope Program’s revolving fund was first established under Public Law 101-101,
Title III. Both yearly appropriations and revenues from the sales of isotopes are deposited
into the revolving fund, which the program then draws from to fund its operations. Any
funds remaining in the revolving fund at the end of a fiscal year are carried over to the
next fiscal year.




Page 7                                                      GAO-12-591 DOE’s Isotope Program
The Isotope Program sold isotopes or provided isotope-related services
to more than 100 customers in fiscal year 2011, both in the United States
and internationally, with 6 of those customers accounting for more than
80 percent of all sales revenue in fiscal year 2011. More than 95 percent
of the Isotope Program’s annual revenue came from the sale of eight
different isotopes in fiscal year 2011; these eight isotopes generated
almost $26 million in revenue (see table 2).

Table 2: The Eight Top-Selling Isotopes of DOE’s Isotope Program in Fiscal Year
2011

    Isotope                                                                        2011 revenue
    Strontium-82                                                                     $11,560,000
    Californium-252                                                                   $7,657,000a
    Helium-3                                                                           $3,255,000
    Germanium-68                                                                       $1,910,000
    Nickel-63                                                                            $576,000
    Strontium-90                                                                         $297,000
    Actinium-225                                                                         $263,000
    Lithium-6                                                                            $223,000
    Total                                                                            $25,741,000
Source: DOE.
a
 This amount includes $2 million that was paid in fiscal year 2009 by customers as advance
payments for future production costs.




Page 8                                                       GAO-12-591 DOE’s Isotope Program
                      DOE’s Isotope Program produces or makes available for sale and
DOE’s Isotope         distribution over 300 different isotopes for research and commercial
Program and NNSA      applications. NNSA generates or provides additional isotopes that are
                      transferred to other federal agencies or sold by the Isotope Program (see
Together Produce or   app. I). The program may produce or make available to customers more
Make Available over   than 300 different isotopes, but fewer than that number are sold in a given
300 Isotopes for      year. In fiscal year 2011, for example, the program sold less than 170
                      distinct isotopes. The isotopes sold by the Isotope Program can be
Research and          categorized as (1) radioisotopes currently produced by the Isotope
Commercial            Program at DOE production sites; 12 (2) stable isotopes from the Isotope
                      Program’s inventory, which are no longer produced in the United States;
Applications          and (3) isotopes generated or provided by NNSA as by-products of its
                      nuclear weapons program (see table 3). 13

                      Table 3: Isotopes Available for Sale by DOE’s Isotope Program

                       Category                                                              Number available
                       Radioisotopes produced by the Isotope Program                                           55
                       Stable isotopes in the Isotope Program’s inventory                                   243
                       Radioisotopes generated or provided by NNSA                                             10
                      Source: DOE.



                      The Isotope Program is responsible for the production and sale of 55
                      radioisotopes produced at five DOE laboratories—Brookhaven, Los
                      Alamos, Oak Ridge, Pacific Northwest, and Idaho National Laboratories.
                      In any given year, the Isotope Program does not produce all 55
                      radioisotopes; rather, it produces and sells those for which customer
                      demand exists and is unmet by supply from commercial sources. At
                      times, the Isotope Program may choose to begin or stop producing a
                      given isotope depending on whether commercial entities are meeting
                      demand, whether an isotope’s market price is so high that it inhibits
                      research, or whether DOE has the facilities necessary to produce the
                      isotope, among other considerations. For example, in 2009 the Isotope
                      Program reestablished production of californium-252, which is used in a


                      12
                        Some isotopes that are produced by DOE’s Isotope Program are extracted from other
                      materials held in inventory. For example, americium-241 is extracted from other materials.
                      13
                        In addition to these categories, many radioisotopes that are not produced or sold by
                      DOE’s Isotope Program are available from commercial entities, which produce and sell
                      isotopes on the open market.




                      Page 9                                                 GAO-12-591 DOE’s Isotope Program
variety of applications, including oil exploration and medical applications,
because of customer demand. Californium-252 was previously produced
by the Isotope Program in partnership with NNSA and sold through the
Isotope Program. When NNSA no longer needed californium-252 for its
mission, it stopped supporting its production in 2007, according to an
Isotope Program official. The Isotope Program worked with a coalition of
commercial customers to continue producing californium-252 to meet the
needs of the coalition and researchers. Isotope Program officials
indicated, however, that a change like this in the program’s production
portfolio does not happen often.

In addition to the radioisotopes it produces, the Isotope Program also
maintains an inventory of 243 stable isotopes that it sells to customers.
These stable isotopes were produced by DOE until the late 1990s at DOE
facilities that are no longer in use, and since these isotopes are stable,
they can remain in storage almost indefinitely. Because stable isotopes
are no longer produced, supplies of some of them have been exhausted,
and supplies of others are dwindling. Specifically, according to current
Isotope Program data, nine stable isotopes that were in the program’s
inventory are no longer available, and six have less than 10 years’ supply
at current rates of use (see table 4).

Table 4: Stable Isotopes Sold by DOE’s Isotope Program with a Supply of Less
Than 10 Years

 Isotope                                                        Supply (in years)
 Gadolinium-157                                                                0.5
 Nickel-62                                                                     4.5
 Neodymium-150                                                                 4.8
 Gallium-69                                                                    5.9
 Tungsten-183                                                                  7.6
 Tungsten-182                                                                  9.9
Source: DOE.



According to program officials, the Isotope Program occasionally
purchases quantities of some stable isotopes from foreign sources, such
as Russia, in an effort to maintain the program’s supply. Isotope Program
officials explained that the program buys stable isotopes from foreign
sources and then resells them to domestic customers because the
Isotope Program can take steps to ensure isotope quality and offer other
services that foreign suppliers are unwilling to provide, such as leasing
some stable isotopes for research or other applications. Given dwindling



Page 10                                          GAO-12-591 DOE’s Isotope Program
                       supplies in DOE’s inventory and increasing reliance on foreign sources,
                       whose supplies for some isotopes are also dwindling, the Nuclear
                       Science Advisory Committee recommended in 2009 that the Isotope
                       Program reestablish capability to produce stable isotopes in the United
                       States. The Isotope Program is funding several projects in response to
                       this recommendation, including the development of stable isotope
                       production at Oak Ridge National Laboratory, in part, using funds it
                       received in fiscal year 2009 from the American Recovery and
                       Reinvestment Act. Isotope Program officials stated that the project is
                       expected to be completed in 2014.

                       The Isotope Program sells an additional 10 isotopes that are provided by
                       NNSA. The program does not control the supply of these isotopes but
                       coordinates with NNSA to sell and distribute them. Isotope Program
                       officials coordinate with NNSA’s Office of Nuclear Materials Integration,
                       which was created in 2008 to work across DOE to, among other things,
                       make NNSA’s isotopes and other materials available to government
                       entities. For example, NNSA has a stockpile of lithium-6, some of which it
                       provides to the Isotope Program to sell; lithium-6 is used in research and
                       security equipment to detect neutrons given off by other nuclear
                       materials. The Isotope Program also coordinates with NNSA to produce
                       isotopes that the Isotope Program does not have the capability to
                       produce, such as americium-241, which is used in smoke detectors and
                       medical diagnostic devices.


                       To provide isotopes for commercial and research applications, the
In Providing           Isotope Program takes steps to determine the demand for isotopes,
Commercial Isotopes,   coordinate production across production sites, and set prices for isotopes,
                       but the program is not using thorough assessments to establish prices for
DOE’s Isotope          commercial isotopes. The Isotope Program has flexibility to set prices at
Program May Be         market levels for isotopes sold for commercial applications but instead,
Forgoing Revenue       for most isotopes where the program is the only domestic supplier, sets
                       prices at the level necessary to recover its cost to produce them. In
That Could Further     setting prices for commercial isotopes, however, the Isotope Program is
Support Its Mission    not assessing the value of the isotope to the customer or prices of
                       alternatives, as permitted under its pricing policy. As a result, the Isotope
                       Program may be forgoing revenue that could be used to further its
                       mission and address unmet needs.




                       Page 11                                        GAO-12-591 DOE’s Isotope Program
To Ensure the Availability   To ensure the availability of isotopes for research and commercial
of Isotopes, DOE’s Isotope   applications, the Isotope Program annually determines demand,
Program Determines           coordinates production across its production sites, and sets prices for
                             selling isotopes. To determine annual demand, Isotope Program officials
Demand, Coordinates          said they start with a general sense of demand based on historical sales
Production, and Sets         data and frequent interaction with customers, through which they learn
Prices                       about changes in isotope needs. According to program officials, the Isotope
                             Program asks customers to provide information on expected demand for
                             the next year and as far as 5 years into the future, although some
                             customers said such estimates are difficult to make. The Isotope Program
                             also takes customers’ orders for isotopes throughout the year via e-mail,
                             telephone, or the program’s website. These orders, for radioisotopes and
                             stable isotopes, are received by the Isotope Program’s business office. To
                             determine annual demand for strontium-82, for example, Isotope Program
                             officials ask customers how much strontium-82 they need for the coming
                             year, and each customer commits to a certain amount for that year. These
                             customers then provide updates throughout the year to clarify actual
                             strontium-82 quantities and delivery dates.

                             Orders for stable isotopes are received and processed throughout the
                             year by the Isotope Program, but producing radioisotopes to meet
                             demand requires considerable planning, according to program officials.
                             When the Isotope Program receives an order for a stable isotope, such as
                             calcium-48, it can be filled from the existing inventory of stable isotopes.
                             In contrast, orders for radioisotopes are taken throughout the year and
                             used to plan production during the Isotope Program’s annual production
                             planning meeting. The outcome of the meeting is a production schedule
                             for the production sites, which identifies radioisotopes needed for the
                             coming year. The production schedule outlines the projected dates when
                             each isotope will be produced and which site will produce it, but the exact
                             schedule depends on a variety of factors. Specifically, because the
                             Isotope Program generally does not control the operation of reactors or
                             accelerators, it uses the facilities at the same time as other DOE
                             programs, thus limiting the Isotope Program’s capability to produce
                             isotopes, according to program officials. For instance, according to
                             program officials, the accelerator at Los Alamos National Laboratory
                             typically operates from July through December, and the accelerator at
                             Brookhaven National Laboratory typically operates from January through
                             June. In addition, because many radioisotopes decay rapidly after
                             production, they need to be delivered in a timely manner, and officials




                             Page 12                                       GAO-12-591 DOE’s Isotope Program
must consider customers’ desired delivery times when determining the
production schedule. For instance, strontium-82 has a half-life 14 of about
26 days and, according to one customer, must arrive predictably to be
used for its intended purpose. Other isotopes have even shorter life
spans and need to be delivered on a precise day before they decay too
much to be useful. An Isotope Program official told us that that the
production schedule is adjusted throughout the year as customers’
demands change, as new isotopes are ordered, as facilities experience
unanticipated shutdowns, or for other reasons. During our discussions
with several Isotope Program customers, we found that they were
generally satisfied with the timeliness of isotope delivery.

To set prices for radioisotopes, program officials annually request detailed
production cost data, including both direct and indirect costs, from the
individual DOE and NNSA production sites that provided the isotope.
According to program officials, direct costs include labor costs and costs
for chemical processing, among others; indirect costs include facility
maintenance costs and other infrastructure costs. These officials said that
the Isotope Program uses cost data from the production sites to
determine the sales price for each isotope and prices isotopes differently
depending on whether the intended use is for research or commercial
applications. For research applications, isotope prices are set to recover
only direct costs. In addition, according to program officials, research
isotopes are priced by unit, instead of batch, so researchers can buy
small quantities of isotopes and not have to pay for production of an
entire batch. 15 Thus, prices for research isotopes are subsidized by the
Isotope Program, with indirect costs covered by the program’s yearly
appropriation. Program officials told us that the intent of this subsidy is to
promote independent research on uses of isotopes by making them more
affordable to the research community. Overall, the result is that some
research isotopes are priced significantly lower—from about 9 percent to
75 percent less, in some cases—than the same isotope used for
commercial applications.




14
  The half-life of a radioactive isotope is the time required for half the unstable atoms to
disintegrate, or decay, and release their radiation.
15
 A batch of isotopes is the amount produced by an entire production cycle. Researchers
may require a smaller quantity of an isotope than what is produced in a batch.




Page 13                                                   GAO-12-591 DOE’s Isotope Program
                             For isotopes used in commercial applications, prices are generally set to
                             recover, at a minimum, the full cost of isotope production, including both
                             direct costs and indirect costs. For orders of large quantities of
                             commercial isotopes, the per-unit cost of production is lower, so the
                             Isotope Program can provide volume discounts. In addition, according to
                             program officials, the Isotope Program adds a nominal fee to isotopes
                             sold commercially, which amounts to approximately 10 percent in
                             additional costs for commercial isotopes—6 percent for administrative
                             costs to process orders for isotopes and 4 percent as a contingency
                             charge to cover unanticipated events. A recent unanticipated event, for
                             example, occurred in fiscal year 2011. According to a program official,
                             orders for strontium-82, which had accounted for more than a third of the
                             program’s sales revenue in 2010, decreased significantly and
                             unexpectedly as the result of a recall of the cardiac imaging device that
                             was the main application for strontium-82. According to program officials,
                             the Isotope Program sales revenue declined by over $5 million from July
                             2011 through January 2012 as a result, and program officials said they
                             had to draw from the revolving fund to maintain operations.

                             For stable isotopes that are sold from its existing inventory, Isotope
                             Program officials told us that prices are based on historical production
                             costs adjusted annually for inflation, rather than on current replacement
                             costs; the prices are the same regardless of whether they are used for
                             research or commercial applications. Officials told us that they do not
                             base the prices of stable isotopes on current replacement costs because
                             DOE does not have the capability to produce these stable isotopes.
                             Isotope Program officials told us that market studies were in the early
                             stages of being carried out in preparation for reestablishing the capability
                             to produce stable isotopes in 2014; these studies are intended to help the
                             program determine which stable isotopes to produce and in what
                             quantities.


In Setting Prices for Most   The Isotope Program generally charges full cost recovery for commercial
Commercial Isotopes,         isotopes, but the program has not fully assessed the pricing of most of the
DOE’s Isotope Program        commercial isotopes it sells, as required by its current policy, such as
                             assessing the value of the isotopes to the customer or prices of similar
May Be Forgoing Revenue      isotopes. As a result, the program may be discouraging others from
That Could Further           producing isotopes and, at the same time, forgoing sales revenue that
Support Its Mission          could further support its mission to deliver needed isotopes, maintain
                             isotope production infrastructure, and support research, in addition to
                             addressing unmet needs. The Atomic Energy Act of 1954 states that the
                             federal government should be reasonably compensated for isotopes it


                             Page 14                                       GAO-12-591 DOE’s Isotope Program
sells and that isotope prices should not discourage commercial isotope
producers from entering the market. Aside from these constraints, the
Isotope Program has broad authority in setting isotope prices. To this
end, the Isotope Program established a pricing policy in 1990 that
provides latitude for establishing prices at full cost recovery or at market
prices that are higher or lower than full cost recovery, but also states that
when a market price already exists that is higher than full cost recovery,
the market price should be used. The policy also states that prices should
be assessed annually and that additional factors may be considered
when establishing prices, including the number of suppliers, demand,
competitors’ prices, and the value of the isotope to the customer. This
policy appears to be consistent with guidance from the Office of
Management and Budget on the sale of government goods and services,
which suggests that sales should be self-sustaining and based on market
prices. 16 In cases where no market currently exists, such as many of the
commercial isotopes produced and sold by the Isotope Program, the
Office of Management and Budget’s guidance states that prices can be
set by taking into account the prevailing prices for goods that are the
same as or substantially similar to those provided by the government and
then adjusting the supply made available, prices of the goods, or both so
that there will be neither a shortage nor a surplus.

In practice, according to program officials, the Isotope Program generally
sets the prices for commercial isotopes at full cost recovery—the lowest
price possible for the program to recover its costs for providing an
isotope. According to Isotope Program officials, prices for commercial
isotopes are set above full cost recovery only when a higher price for the
isotope already exists in the commercial market and pricing the isotope at
full cost recovery would be low enough to distort the existing market. 17 If
isotope prices are artificially low, the Isotope Program’s price may, in turn,
discourage private entities from entering the isotope market, discourage
commercial entities or researchers from exploring alternatives to using
some isotopes, or encourage overconsumption. Isotope Program officials
offered two reasons why the program charges no more than full cost


16
  Office of Management and Budget, Circular A-25.
17
  According to program officials, at present the Isotope Program has set the price above
full cost recovery for helium-3 and two other isotopes. These three isotopes are priced
above full cost recovery because, according to officials, market prices exist that are
greater than the full cost of production, and setting the prices lower would distort their
market prices.




Page 15                                                 GAO-12-591 DOE’s Isotope Program
recovery for most of the commercial isotopes it sells. First, officials told us
they believe many customers are sensitive to prices and already consider
prices for isotopes to be too high. Isotope Program officials said that
some potential customers are already unwilling or unable to pay current
prices for many isotopes and that some existing customers have
suggested that any price increases would make isotopes unaffordable
and force them to seek other isotope sources. Second, Isotope Program
officials stated that the program’s role is not to maximize revenue from
isotope sales but to make isotopes widely available. Isotope Program
officials told us that, consistent with the program’s mission and the Atomic
Energy Act, the Isotope Program strives to supply isotopes at reasonable
prices to encourage their use.

For most of the isotopes it produces and sells, however, program officials
told us that in instances where the Isotope Program is the only domestic
supplier, the program has not formally determined the value of isotopes to
commercial customers or prices of alternatives. Program officials told us
that they gain a sense of customers’ value for isotopes through various
interactions with these customers, although they did not provide a formal
analysis as described in the pricing policy. According to documents
provided by the Isotope Program, the program has also collected limited
market information for a small number of isotopes, but these studies are
outdated or do not consider pricing. For example, a market study
provided by the Isotope Program that was conducted in 2002 projects the
future demand and potential revenues for 25 different radioisotopes used
in medicine over the next 5 to 10 years, but that study is now outdated.
Additionally, according to one program official, the market study to be
conducted for the Isotope Program’s isotopes beginning in 2012 is to
provide information on which isotopes are in greatest demand so officials
will know which stable isotopes to produce, although the study will not
address isotope prices.

Without formally assessing the value of isotopes to commercial
customers or the prices of alternatives for isotopes where the Isotope
Program is the only domestic supplier, the Isotope Program does not
know if its full cost recovery prices for isotopes are in fact discouraging
others from producing isotopes, discouraging commercial entities and
researchers from developing alternatives, and/or encouraging
overconsumption. If assessments of customers’ value for isotopes and
the prices of potential alternatives show that prices can be increased
above full cost recovery for some commercial isotopes, the additional
revenue could be used to further the Isotope Program’s mission and
address unmet needs. For example, revenues could be used to fund


Page 16                                         GAO-12-591 DOE’s Isotope Program
                           research for the development of new or more efficient production
                           capabilities for additional isotopes. Also, the Nuclear Science Advisory
                           Committee recommended in its report on opportunities and priorities for
                           ensuring a robust national isotope program that the Isotope Program
                           invest in a facility dedicated to producing radioisotopes. Such a facility,
                           according to the advisory committee, is the most cost-effective option to
                           position the Isotope Program to ensure continuous access to many of the
                           needed radioactive isotopes. Program officials told us they were
                           developing a new pricing policy, but because the policy is in draft form
                           and subject to change, we were unable to determine, among other things,
                           whether the new policy would provide direction on how commercial
                           isotope prices are to reflect the value of the isotope to the customer, the
                           prices of alternatives, or both.


                           The Isotope Program has begun taking some actions to identify and
DOE’s Isotope              mitigate risks to achieving its mission of producing isotopes, such as the
Program Has Taken          risk of relying on sales of a small number of commercial isotopes for a
                           large percentage of its revenues, but without first establishing clear,
Some Actions to            consistent program objectives, the program’s risk assessment efforts are
Identify and Manage        not comprehensive.
Risks, but Its Efforts
Are Not
Comprehensive

DOE’s Isotope Program Is   The Isotope Program is taking some actions to assess risks to achieving
Taking Varied Actions to   its mission, including identifying high-priority isotopes and using its
Identify and Mitigate      revolving fund to mitigate risks from unforeseen events. Risk assessment
                           first involves, according to federal standards for internal control, 18
Program Risks
                           identifying and analyzing risks associated with achieving a program’s
                           objectives and then determining how to manage such risks. Our analysis
                           shows that the Isotope Program currently assesses risks through several
                           methods. First, Isotope Program officials, National Isotope Development
                           Center staff, and production site managers identify risks to providing
                           isotopes by monitoring long-term changes in demand within the isotope
                           community that could affect isotope supply. Unlike determining demand


                           18
                            GAO/AIMD-00-21.3.1.




                           Page 17                                       GAO-12-591 DOE’s Isotope Program
for annual production planning, these monitoring activities focus on
changes that could influence isotope supply and demand in the longer
term, such as new products that could eventually increase demand for a
specific isotope, according to Isotope Program documents. According to
program officials, long-term monitoring activities help them stay abreast of
changes in the isotope community that may warrant adjustments to the
program’s product portfolio. In addition, program officials told us that
these activities play a role in long-range program planning, as well as
informing decisions regarding research and development. Some
monitoring activities are performed on a continuous basis, such as
discussing new developments in isotope uses and production capacity
with foreign isotope suppliers, while others occur once or a few times a
year, such as attending industry conferences to collect information about
new commercial products that use isotopes. To manage risks created by
changes in demand, according to Isotope Program officials, the program
gathers additional information on the issue and may convene workgroups
that bring together isotope community stakeholders to discuss trends for
one or several isotopes. For example, the program organized a working
group in 2008 with representatives from the National Institutes of Health
to explore supply and demand for medical research isotopes. It also
convened a workshop of federal stakeholders in January 2012 to discuss
isotope priorities, supply, and demand among federal entities.

The Isotope Program also assesses risks to the program by identifying
high-priority isotopes—those at risk of supply problems, either because
the isotopes are already in short supply or are important to users. Five
lists of high-priority isotopes have been created by isotope stakeholders,
and Isotope Program officials said that they use the lists to set program
priorities. The following describes each of the lists and the entity that
created them:

•   The 2008 workshop of isotope community stakeholders created an
    unranked list of more than 47 isotopes considered to be in short
    supply or unavailable from DOE for research and applications.

•   In 2009, the National Institutes of Health isotope working group
    developed a list of important medical research isotopes that are not
    commercially available; the list was updated and ranked in order of
    priority in January 2012.

•   In 2009, the Nuclear Science Advisory Committee’s isotope
    subcommittee produced a list of isotopes important for medical and




Page 18                                       GAO-12-591 DOE’s Isotope Program
    scientific research purposes and prioritized them according to the
    importance of the research opportunities.

•   In 2011, the National Isotope Development Center listed stable
    isotopes in priority order according to the importance of the isotopes
    in research and commercial applications.

•   In 2011, the National Isotope Development Center listed specific
    isotopes called nuclear materials and heavy elements and prioritized
    them on the basis of importance of the isotopes in research and
    commercial applications.

Program officials told us they use the high-priority lists to establish
program priorities, such as determining what research and development
initiatives to undertake. For example, according to program officials, for
some of the listed isotopes, the program has reached out to universities
to research new production methods. In addition, the Nuclear Science
Advisory Committee’s isotope subcommittee’s list serves as a criterion for
awarding research and development grants; research projects for
isotopes on the list receive higher priority for funding than projects for
isotopes not on this list. Four of the lists rank the isotopes in order of
priority, and one does not; the prioritized lists rank isotopes according to
different criteria. For example, the National Institutes of Health prioritized
isotopes on the basis of their importance to medical research, while the
National Isotope Development Center prioritized isotopes on the basis of
their importance to research and commercial applications. In total, 104
different isotopes appear on the five lists—about 18 percent of the total
number of isotopes currently available from the program. Although a few
isotopes are found on more than one list, most isotopes are found on only
a single list.

The Isotope Program mitigates risks by using the flexibility of its revolving
fund to help manage unexpected events, such as losses in revenues. The
Isotope Program is authorized to carry over revenues and yearly
appropriations in its revolving fund from fiscal year to fiscal year. The law
authorizing the revolving fund provides the program broad discretion for
managing the fund, stating that appropriations and revenues deposited
into the fund are to be used for “activities related to the production,




Page 19                                        GAO-12-591 DOE’s Isotope Program
distribution, and sale of isotopes and related services.” 19 The program
uses its flexibility in managing the revolving fund to prepare for and
mitigate unexpected events. To this end, of the 10 percent fee the
program adds to the price of isotopes sold to commercial customers, it
deposits 4 percent into the revolving fund to cover unanticipated events.
For example, the program drew on the fund to maintain operations in
2011 and 2012 in the face of a significant, unexpected decline in revenue
from the sale of strontium-82.

The Isotope Program also assesses risks at its three primary isotope
production facilities by identifying and managing risks to the production
sites. The isotope production facilities at Oak Ridge and Los Alamos
National Laboratories in 2011 developed plans that describe processes
for identifying and managing risks at the sites that could be detrimental to
isotope production. 20 The plans lay out which production site elements—
such as infrastructure, chemical processing, and shipping processes—
should be assessed for risks and describe how site officials are to
determine the likelihood and consequence of any identified risks. In
conjunction with the plans, Oak Ridge and Los Alamos National
Laboratories created spreadsheets for tracking risks—called risk
registers—that list each identified risk, its likelihood, consequence, and
mitigation strategy, among other things. Many of the identified risks focus
on equipment failure or malfunction, such as risks that components of a
processing facility shut down unexpectedly. Other risks are related to
management and regulatory issues. Brookhaven National Laboratory has
developed a similar risk-tracking spreadsheet that focuses exclusively on
risks to production equipment. According to one program official, the risk
management plans and spreadsheets help the program set priorities for
investments that will help manage risks. For example, on the basis of Los
Alamos National Laboratory’s risk register, the program decided to modify
its facilities to reduce radiation risks. These risk management plans and
risk registers are specific to the three production sites and do not identify
risks to the entire Isotope Program.




19
  Energy and Water Development Appropriations Act, 1990 (Pub. L. No. 101-101, 103
Stat. 641).
20
   The plans also describe a similar process for identifying and managing opportunities.
The third production site at Brookhaven National Laboratory has not developed a similar
risk and opportunity assessment and management plan.




Page 20                                                GAO-12-591 DOE’s Isotope Program
DOE’s Isotope Program       The Isotope Program is taking risk assessment actions without first
Does Not Have Clear         establishing clear, consistent objectives; that is, it does not identify and
Objectives That Enable It   mitigate risks to achieving program objectives in a comprehensive way.
                            One of the federal standards for internal control—risk assessment—
to Comprehensively          states that a precondition to risk assessment is the establishment of clear,
Assess Program Risks        consistent objectives. Long-term goals and objectives describe how the
                            program will implement its mission, when actions will be taken, and what
                            resources are needed to reach these goals. Once objectives have been
                            set, the program then identifies risks that could keep it from efficiently and
                            effectively achieving those objectives at all levels. After risks have been
                            identified, they are to be analyzed for their possible effect and decisions
                            made on how to manage the identified risks. 21

                            DOE’s Isotope Program has not established clear, consistent objectives
                            to serve as a basis for risk assessment. Isotope Program officials told us
                            the program is relying on two reports from the Nuclear Science Advisory
                            Committee’s isotope subcommittee to guide its decisions and that these
                            two reports provide adequate guidance. Together, these reports
                            recommend 15 different long-term actions for the program but do not
                            provide clear objectives for the program or a description of how those
                            objectives are to be achieved. For example, one report recommends that
                            the program construct and operate an electromagnetic isotope separator
                            facility for stable and long-lived radioisotopes but does not describe how
                            this recommendation is to be achieved. The report also does not provide
                            criteria for measuring progress toward meeting this or other
                            recommendations. Isotope Program officials told us, however, that the
                            program is undertaking a new strategic planning process in 2012 to
                            develop a 5-year strategic plan.

                            Without clearly defined objectives that lay out what the program is to
                            accomplish, the Isotope Program cannot be assured that its current risk
                            assessment and mitigation efforts focus on the most significant issues
                            that could impede achievement of its mission. For example, the program
                            does not have objectives that could provide direction about which of the
                            five high-priority isotope lists warrants the most attention. Instead,
                            program officials reported that they take all the lists into account when
                            making production and research decisions. They could not tell us if one
                            list of isotopes is a higher priority than the others. Furthermore, without



                            21
                             GAO/AIMD-00-21.3.1.




                            Page 21                                        GAO-12-591 DOE’s Isotope Program
clear objectives, program officials cannot determine how important one
isotope on a list is relative to isotopes on the other lists because they are
prioritized using different criteria, or they are not prioritized. For example,

•   thallium-203 is ranked as the most important isotope on the National
    Isotope Development Center’s list of stable isotopes;

•   actinium-225, astatine-211, and lead-212 are identified as the most
    important isotopes in medicine, pharmaceuticals, and biology in the
    report of the Nuclear Science Advisory Committee’s isotope
    subcommittee; and

•   californium-252 and radium-225 are identified as the most important
    isotopes for physical science and engineering in this same report.

Without consolidating the multiple lists of high-priority isotopes, however,
it is unclear which isotopes have greater priority than others. Thus,
program managers may not be focusing limited resources on the most
important isotopes.

Furthermore, because the program does not have clear objectives, it
cannot be assured that it is assessing and mitigating risks from all
relevant external and internal sources. In particular, the program has not
assessed risks associated with relying on a small handful of isotopes for a
large percentage of annual revenue. This issue is important in the context
of the unexpected decline in strontium-82 orders that occurred in 2011,
which resulted in a large reduction in expected revenue. The program
likely could not have anticipated this loss, but comprehensive risk
assessment efforts might have identified the risk of relying on strontium-
82 and a few other isotopes for a large amount of revenue. Without
identifying all relevant risks, the program also cannot determine how to
manage such risks. When the strontium-82 orders declined, the program
was able to rely on its revolving fund to make up for unexpected revenue
loss, but it may not always be able to do so. Isotope Program officials told
us there is no guiding document for how the revolving fund should be
spent or managed. Without guidance on how to manage the revolving
fund in a way that helps mitigate risk, the program cannot be assured that
it will be able to continue using the fund to both advance program
missions and mitigate risks. For example, if the program unexpectedly
loses revenue for several years in a row, the revolving fund may not
provide sufficient reserves to maintain program operations.




Page 22                                          GAO-12-591 DOE’s Isotope Program
              Managing the production and sale of over 300 different isotopes for
Conclusions   various research, commercial, industrial, and medical applications is a
              daunting task. With a wide variety of customers, whose needs may
              change over time, it is difficult for the Isotope Program to determine
              demand, plan production, and project revenue streams to avoid shortages
              of important isotopes or interruptions in the revenues that help to sustain
              the program. The Isotope Program is taking several actions to assess
              demand and plan production. In addition, the Isotope Program has clearly
              defined under what circumstances it will charge reduced prices for
              research isotopes. The program has not, however, defined what factors it
              will consider when it sets prices for isotopes sold commercially, including
              defining under what circumstances it will set prices for such isotopes at or
              above full cost recovery. Without transparency in decisions on pricing, it is
              unclear if Isotope Program officials are setting prices consistently.
              Moreover, in the absence of established market prices and without
              current information on the value customers place on isotopes and prices
              of similar products, the Isotope Program cannot ensure that the prices it
              sets are appropriate and thus may be forgoing revenues that could be
              used to further its mission and ensure the program’s long-term viability.

              As the Isotope Program moves forward with its process to establish a 5-
              year strategic plan, creating clear goals and objectives is the first step in
              being able to identify and manage risks to achieving the program’s
              mission. Identifying high-priority isotopes that may need additional
              oversight is a good step toward managing risks, but without consolidating
              those lists and prioritizing them, program managers may not direct limited
              resources toward the most important isotopes.

              Finally, when the Isotope Program’s revenues from strontium-82
              unexpectedly stopped, program officials were fortunate to have the
              revolving fund to mitigate the unexpected loss in revenue and maintain
              operations without disrupting supplies of other isotopes. Without clear
              guidance on when and how to use the revolving fund to mitigate future
              unexpected losses in revenue, the program cannot ensure that it will have
              sufficient funds to maintain operations, or for other activities, such as
              funding research and other projects that help the Isotope Program
              achieve its mission.




              Page 23                                        GAO-12-591 DOE’s Isotope Program
                      We are making four recommendations to the Secretary of Energy
Recommendations for   designed to improve the Isotope Program’s transparency in setting prices
Executive Action      and efficiency in managing isotopes. Specifically, we recommend that the
                      Secretary of Energy direct the Isotope Program to take the following four
                      actions:

                      •   Clearly define the factors to be considered when the program sets
                          prices for isotopes sold commercially, including defining under what
                          circumstances it will set prices at or above full cost recovery. This
                          should include assessing, when appropriate, current information on
                          the value of isotopes to customers and the prices of similar products.

                      •   In conjunction with strategic planning efforts already under way,
                          create clear goals and objectives to serve as a basis for risk
                          assessment, identify risks to achieving its goals and objectives, and
                          determine what actions to take to manage the risks.

                      •   Consolidate the lists of high-priority isotopes so the program can
                          ensure that its resources are focused on the most important isotopes.

                      •   Establish clear guidance for managing the revolving fund to ensure
                          that the fund is sufficient to use as a contingency for unexpected
                          losses in revenue.


                      We provided a draft of this report to DOE for review and comment. In its
Agency Comments       written response, reproduced in appendix II, DOE explained that our
and Our Evaluation    recommendations will generally be addressed through the Isotope
                      Program’s current efforts to update its pricing policy and develop a
                      strategic plan. DOE took exception, however, to our characterization of
                      how the Isotope Program sets prices for commercial isotopes.
                      Specifically, according to DOE’s letter, the Isotope Program does
                      consider “value of isotopes to customers” when setting prices for
                      commercial isotopes. Nevertheless, none of the documents provided by
                      the Isotope Program during our review show that the program conducted
                      a current, formal analysis of what customers are willing to pay for
                      commercial isotopes. Our report points out that program officials gain a
                      sense of the value customers place on commercial isotopes through
                      informal interactions with the customers themselves. Such interactions, in
                      our view, do not provide a rigorous approach to determining a customer’s
                      value for commercial isotopes as customers generally strive to obtain
                      needed materials, including isotopes, at the lowest possible cost. We are
                      encouraged to see that, according to DOE’s comments, the Isotope



                      Page 24                                       GAO-12-591 DOE’s Isotope Program
Program’s updated pricing policy is to identify which factors are to be
considered in setting prices, including formal analysis of the value of
commercial isotopes to customers.

In its comments, DOE expressed concern that our report suggests
maximizing revenue and pricing commercial isotopes to increase
revenue. DOE explained that the Isotope Program generally sets prices to
fulfill the mandate established by the Atomic Energy Act of 1954 to
provide isotopes at prices that do not discourage their use. Our report
does not emphasize maximizing revenue or setting prices solely to
increase revenue. It does point out that the Isotope Program has not
performed the formal market analyses required by its own pricing policy.
DOE further stated that the Isotope Program considers several factors
when determining prices for commercial isotopes, including a “bottom-up
activity-based costing for isotope production,” and it has initiated two
market studies that will provide input into the assessment of market
prices. Comprehensive market studies would determine the prices
customers are willing to pay for isotopes and prices of alternatives,
among other factors, and would thus determine if the Isotope Program’s
prices for commercial isotopes are set at the appropriate level. Such
analyses would also show whether the full-cost-recovery price, which is
used for all but three of the commercially sold isotopes, is resulting in
unintended, but avoidable, consequences. General economic
considerations suggest that setting prices of isotopes at artificially low
levels could have unintended consequences such as discouraging other
entities from producing isotopes, discouraging commercial entities and
researchers from developing alternatives, and encouraging
overconsumption. Furthermore, our report points out that the Atomic
Energy Act of 1954 states that isotope prices should not discourage
commercial isotope producers from entering the market.

With regard to our recommendations, DOE’s letter indicates that three of
our four recommendations are being addressed through the Isotope
Program’s present efforts to update its pricing policy and develop a
comprehensive strategic plan and risk assessment. With regard to our
fourth recommendation—to consolidate and prioritize isotopes from the
lists of high-priority isotopes—DOE stated that it “will need to assess the
value added of doing an overall prioritization.” DOE further states that
even though an isotope may be a high priority for the isotope community,
there is no guarantee that an entity is capable of producing it. In our view,
this situation highlights the need for our recommendation. The Isotope
Program has done outreach with the isotope community to identify the
most important isotopes and has created a peer-review process that


Page 25                                        GAO-12-591 DOE’s Isotope Program
considers isotopes on the various high-priority lists as one of its factors in
selecting projects for funding. This process alone, however, cannot
ensure that the program’s resources are accurately focused on the most-
needed isotopes. Therefore, we believe it is up to the Isotope Program to
consolidate the lists of high-priority isotopes and develop criteria to
determine on which isotopes resources are to be focused.

Finally, DOE’s letter stated that we mischaracterized NNSA’s mission,
which does not include providing isotopes to stakeholders. We clarified
this statement and have made changes throughout the report as needed.
DOE also provided technical comments that we incorporated in the report
as appropriate.


As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to the appropriate
congressional committees, Secretary of Energy, and other interested
parties. In addition, the report will be available at no charge on the GAO
website at http://www.gao.gov.

If you or your staff members have any questions about this report, please
contact me at (202) 512-3841 or aloisee@gao.gov. 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 key contributions to this
report are listed in appendix III.




Gene Aloise
Director
Natural Resources and Environment




Page 26                                         GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
              Appendix I: Isotopes Available from DOE’s
              Isotope Program



Isotope Program

              This table identifies the isotopes provided at the time of this report for sale
              by the Department of Energy’s (DOE) Isotope Development and
              Production for Research and Applications program (Isotope Program).
              According to Isotope Program officials, the availability of these isotopes
              may change and some isotopes may be provided in different chemical
              forms. For example, bromine-79 is available as sodium bromide but also
              as potassium bromide, silver bromide, and ammonium bromide. The table
              also shows how the Isotope Program classifies each isotope—as a
              radioisotope or stable isotope—and if an isotope is provided by the
              National Nuclear Security Administration (NNSA) and sold by the Isotope
              Program.

              Isotope                   Radioisotope      Stable isotope      Provided by NNSA
              Actinium-225                    X
              Americium-243                   X                                        X
              Antimony-121                                      X
              Antimony-123                                      X
              Argon-36                                          X
              Argon-40                                          X
              Arsenic-72                      X
              Arsenic-73                      X
              Barium-130                                        X
              Barium-132                                        X
              Barium-134                                        X
              Barium-135                                        X
              Barium-136                                        X
              Barium-137                                        X
              Barium-138                                        X
              Berkelium-249                   X
              Beryllium-7                     X
              Bismuth-207                     X
              Bromine-79                                        X
              Bromine-81                                        X
              Cadmium-106                                       X
              Cadmium-108                                       X
              Cadmium-109                     X
              Cadmium-110                                       X
              Cadmium-111                                       X
              Cadmium-112                                       X




              Page 27                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Cadmium-113                                       X
Cadmium-114                                       X
Cadmium-116                                       X
Calcium-40                                        X
Calcium-42                                        X
Calcium-43                                        X
Calcium-44                                        X
Calcium-46                                        X
Calcium-48                                        X
Californium-249                 X
Californium-252                 X
Carbon-12                                         X
Cerium-136                                        X
Cerium-138                                        X
Cerium-140                                        X
Cerium-142                                        X
Chlorine-35                                       X
Chlorine-37                                       X
Chromium-50                                       X
Chromium-52                                       X
Chromium-53                                       X
Chromium-54                                       X
Cobalt-60                       X
Copper-63                                         X
Copper-65                                         X
Copper-67                       X
Curium-244                      X                                        X
Curium-248                      X                                        X
Dysprosium-156                                    X
Dysprosium-158                                    X
Dysprosium-160                                    X
Dysprosium-161                                    X
Dysprosium-162                                    X
Dysprosium-163                                    X
Dysprosium-164                                    X
Dysprosium-166                  X
Erbium-162                                        X




Page 28                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Erbium-164                                        X
Erbium-166                                        X
Erbium-167                                        X
Erbium-168                                        X
Erbium-170                                        X
Europium-151                                      X
Europium-153                                      X
Gadolinium-148                  X
Gadolinium-152                                    X
Gadolinium-154                                    X
Gadolinium-155                                    X
Gadolinium-156                                    X
Gadolinium-157                                    X
Gadolinium-158                                    X
Gadolinium-160                                    X
Gallium-69                                        X
Gallium-71                                        X
Germanium-68                    X
Germanium-70                                      X
Germanium-72                                      X
Germanium-73                                      X
Germanium-74                                      X
Germanium-76                                      X
Gold-199                        X
Hafnium-174                                       X
Hafnium-176                                       X
Hafnium-177                                       X
Hafnium-178                                       X
Hafnium-179                                       X
Hafnium-180                                       X
Helium-3                                          X                      X
Holmium-166                     X
Indium-113                                        X
Indium-115                                        X
Iridium-191                                       X
Iridium-192                     X
Iridium-193                                       X




Page 29                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Iron-52                         X
Iron-54                                           X
Iron-55                         X
Iron-56                                           X
Iron-57                                           X
Iron-58                                           X
Krypton-78                                        X
Krypton-80                                        X
Krypton-82                                        X
Krypton-84                                        X
Krypton-86                                        X
Lanthanum-138                                     X
Lanthanum-139                                     X
Lead-204                                          X
Lead-206                                          X
Lead-207                                          X
Lead-208                                          X
Lithium-6                                         X                      X
Lithium-7                                         X                      X
Lutetium-175                                      X
Lutetium-176                                      X
Lutetium-177                    X
Magnesium-24                                      X
Magnesium-25                                      X
Magnesium-26                                      X
Magnesium-28                    X
Mercury-196                                       X
Mercury-198                                       X
Mercury-199                                       X
Mercury-200                                       X
Mercury-201                                       X
Mercury-202                                       X
Mercury-204                                       X
Molybdenum-92                                     X
Molybdenum-94                                     X
Molybdenum-95                                     X
Molybdenum-96                                     X




Page 30                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Molybdenum-97                                     X
Molybdenum-98                                     X
Molybdenum-100                                    X
Neodymium-142                                     X
Neodymium-143                                     X
Neodymium-144                                     X
Neodymium-145                                     X
Neodymium-146                                     X
Neodymium-148                                     X
Neodymium-150                                     X
Neon-22                                           X
Nickel-58                                         X
Nickel-60                                         X
Nickel-61                                         X
Nickel-62                                         X
Nickel-63                       X
Nickel-64                                         X
Nitrogen-15                                       X
Osmium-184                                        X
Osmium-186                                        X
Osmium-187                                        X
Osmium-188                                        X
Osmium-189                                        X
Osmium-190                                        X
Osmium-192                                        X
Oxygen-16                                         X
Palladium-102                                     X
Palladium-104                                     X
Palladium-105                                     X
Palladium-106                                     X
Palladium-108                                     X
Palladium-110                                     X
Platinum-190                                      X
Platinum-192                                      X
Platinum-194                                      X
Platinum-195                                      X
Platinum-196                                      X




Page 31                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Platinum-198                                      X
Plutonium-238                   X                                        X
Plutonium-239                   X
Plutonium-240                   X
Plutonium-241                   X
Plutonium-242                   X                                        X
Polonium-209                    X
Potassium-39                                      X
Potassium-40                                      X
Potassium-41                                      X
Radium-223                      X
Radium-225                      X
Rhenium-185                                       X
Rhenium-186                     X
Rhenium-187                                       X
Rubidium-83                     X
Rubidium-85                                       X
Rubidium-87                                       X
Ruthenium-96                                      X
Ruthenium-97                    X
Ruthenium-98                                      X
Ruthenium-99                                      X
Ruthenium-100                                     X
Ruthenium-101                                     X
Ruthenium-102                                     X
Ruthenium-104                                     X
Samarium-144                                      X
Samarium-147                                      X
Samarium-148                                      X
Samarium-149                                      X
Samarium-150                                      X
Samarium-152                                      X
Samarium-153                    X
Samarium-154                                      X
Selenium-72                     X
Selenium-74                                       X
Selenium-75                     X




Page 32                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Selenium-76                                       X
Selenium-77                                       X
Selenium-78                                       X
Selenium-80                                       X
Selenium-82                                       X
Silicon-28                                        X
Silicon-29                                        X
Silicon-30                                        X
Silicon-32                      X
Silver-107                                        X
Silver-109                                        X
Sodium-22                       X
Strontium-82                    X
Strontium-84                                      X
Strontium-85                    X
Strontium-86                                      X
Strontium-87                                      X
Strontium-88                                      X
Strontium-90                    X
Sulfur-32                                         X
Sulfur-33                                         X
Sulfur-34                                         X
Sulfur-36                                         X
Tantalum-180                                      X
Tantalum-181                                      X
Technetium-95                   X
Technetium-96                   X
Technetium-99                   X
Tellurium-120                                     X
Tellurium-122                                     X
Tellurium-123                                     X
               a
Tellurium-123                   X
Tellurium-124                                     X
Tellurium-125                                     X
Tellurium-126                                     X
Tellurium-128                                     X
Tellurium-130                                     X




Page 33                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




Isotope                   Radioisotope      Stable isotope      Provided by NNSA
Thallium-203                                      X
Thallium-205                                      X
Thorium-227                     X
Thorium-228                     X
Tin-112                                           X
Tin-114                                           X
Tin-115                                           X
Tin-116                                           X
Tin-117                                           X
          a
Tin-117                         X
Tin-118                                           X
Tin-119                                           X
Tin-120                                           X
Tin-122                                           X
Tin-124                                           X
Titanium-44                     X
Titanium-46                                       X
Titanium-47                                       X
Titanium-48                                       X
Titanium-49                                       X
Titanium-50                                       X
Tungsten-180                                      X
Tungsten-182                                      X
Tungsten-183                                      X
Tungsten-184                                      X
Tungsten-186                                      X
Tungsten-188                    X
Uranium-234                     X
Uranium-235                     X                                        X
Uranium-238                     X                                        X
Vanadium-48                     X
Vanadium-49                     X
Vanadium-50                                       X
Xenon-124                                         X
Xenon-126                                         X
Xenon-127                       X
Xenon-129                                         X




Page 34                                               GAO-12-591 DOE’s Isotope Program
Appendix I: Isotopes Available from DOE’s
Isotope Program




    Isotope                 Radioisotope          Stable isotope          Provided by NNSA
    Xenon-131                                             X
    Xenon-134                                             X
    Xenon-136                                             X
    Ytterbium-168                                         X
    Ytterbium-170                                         X
    Ytterbium-171                                         X
    Ytterbium-172                                         X
    Ytterbium-173                                         X
    Ytterbium-174                                         X
    Ytterbium-176                                         X
    Yttrium-88                      X
    Zinc-64                                               X
    Zinc-65                         X
    Zinc-66                                               X
    Zinc-67                                               X
    Zinc-68                                               X
    Zinc-70                                               X
    Zirconium-88                    X
    Zirconium-90                                          X
    Zirconium-91                                          X
    Zirconium-92                                          X
    Zirconium-94                                          X
    Zirconium-96                                          X
Source: DOE.
a
 Tellurium-123 and tin-117 each has two forms offered by the Isotope Program, one that is stable and
a second that emits radiation when it decays to the stable state.




Page 35                                                       GAO-12-591 DOE’s Isotope Program
Appendix II: Comments from the Department
             Appendix II: Comments from the Department
             of Energy



of Energy




             Page 36                                     GAO-12-591 DOE’s Isotope Program
Appendix II: Comments from the Department
of Energy




Page 37                                     GAO-12-591 DOE’s Isotope Program
Appendix II: Comments from the Department
of Energy




Page 38                                     GAO-12-591 DOE’s Isotope Program
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Gene Aloise, (202) 512-3841 or aloisee@gao.gov
GAO Contact
                  In addition to the individual named above, Ned H. Woodward, Assistant
Staff             Director; Wyatt R. Hundrup; Katherine Killebrew; and Michael Krafve
Acknowledgments   made key contributions to this report. Eric Bachhuber, Ellen W. Chu, R.
                  Scott Fletcher, Cindy Gilbert, Jonathan Kucskar, Mehrzad Nadji, and
                  Timothy M. Persons also made important contributions.




(361311)
                  Page 39                                      GAO-12-591 DOE’s Isotope Program
GAO’s Mission         The Government Accountability Office, the audit, evaluation, and
                      investigative arm of Congress, exists to support Congress in meeting its
                      constitutional responsibilities and to help improve the performance and
                      accountability of the federal government for the American people. GAO
                      examines the use of public funds; evaluates federal programs and
                      policies; and provides analyses, recommendations, and other assistance
                      to help Congress make informed oversight, policy, and funding decisions.
                      GAO’s commitment to good government is reflected in its core values of
                      accountability, integrity, and reliability.

                      The fastest and easiest way to obtain copies of GAO documents at no
Obtaining Copies of   cost is through GAO’s website (www.gao.gov). Each weekday afternoon,
GAO Reports and       GAO posts on its website newly released reports, testimony, and
                      correspondence. To have GAO e-mail you a list of newly posted products,
Testimony             go to www.gao.gov and select “E-mail Updates.”

Order by Phone        The price of each GAO publication reflects GAO’s actual cost of
                      production and distribution and depends on the number of pages in the
                      publication and whether the publication is printed in color or black and
                      white. Pricing and ordering information is posted on GAO’s website,
                      http://www.gao.gov/ordering.htm.
                      Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
                      TDD (202) 512-2537.
                      Orders may be paid for using American Express, Discover Card,
                      MasterCard, Visa, check, or money order. Call for additional information.
                      Connect with GAO on Facebook, Flickr, Twitter, and YouTube.
Connect with GAO      Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.
                      Visit GAO on the web at www.gao.gov.
                      Contact:
To Report Fraud,
Waste, and Abuse in   Website: www.gao.gov/fraudnet/fraudnet.htm
                      E-mail: fraudnet@gao.gov
Federal Programs      Automated answering system: (800) 424-5454 or (202) 512-7470

                      Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-
Congressional         4400, U.S. Government Accountability Office, 441 G Street NW, Room
Relations             7125, Washington, DC 20548

                      Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
Public Affairs        U.S. Government Accountability Office, 441 G Street NW, Room 7149
                      Washington, DC 20548




                        Please Print on Recycled Paper.