oversight

Modernizing the Nuclear Security Enterprise: Observations on the National Nuclear Security Administration's Oversight of Safety, Security, and Project Management

Published by the Government Accountability Office on 2012-09-12.

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

                                United States Government Accountability Office

GAO                             Testimony
                                Before the Subcommittee on Oversight
                                and Investigations, Committee on Energy
                                and Commerce, House of Representatives

                                MODERNIZING THE
For Release on Delivery
Expected at 10:00 a.m. EDT
Wednesday, September 12, 2012

                                NUCLEAR SECURITY
                                ENTERPRISE
                                Observations on the
                                National Nuclear Security
                                Administration’s Oversight
                                of Safety, Security, and
                                Project Management
                                Statement of Mark Gaffigan, Managing Director
                                Natural Resources and Environment




GAO-12-912T
                                             September 12, 2012

                                             MODERNIZING THE NUCLEAR SECURITY
                                             ENTERPRISE
                                             Observations on the National Nuclear Security
Highlights of GAO-12-912T, a testimony
                                             Administration’s Oversight of Safety, Security, and
before the Subcommittee on Oversight and     Project Management
Investigations, Committee on Energy and
Commerce, House of Representatives.



Why GAO Did This Study                       What GAO Found
NNSA is responsible for managing             The National Nuclear Security Administration (NNSA), a separately organized
nuclear weapon- and nonproliferation-        agency within the Department of Energy (DOE), has successfully ensured that
related national security activities in      the nuclear weapons stockpile remains safe and reliable by using state-of-the-art
laboratories and other facilities,           facilities as well as the skills of top scientists. Nevertheless, DOE’s and NNSA’s
collectively known as the nuclear            ineffective oversight of its contractors has contributed to many safety and
security enterprise. Major portions of       security problems. As work carried out at NNSA’s sites involves dangerous
NNSA’s mission are largely carried out       nuclear materials such as plutonium and highly enriched uranium, stringent
by contractors at each site within the       safety procedures and security requirements must be observed. In response to
enterprise. GAO has designated
                                             numerous serious safety incidents over several decades, DOE has taken steps
contract management at NNSA as an
                                             to improve safety oversight. Recently, laboratory and other officials have raised
area at high risk for fraud, waste, and
abuse. Progress has been made, but
                                             concerns, however, that federal oversight has become excessive and overly
GAO continues to identify problems           burdensome. To address these concerns, DOE completed a safety and security
such as inadequate oversight of safety       reform effort to streamline or eliminate many DOE directives. However, GAO
and security as well as cost and             reported in April 2012 that the benefits of this reform effort are unclear because
schedule overruns on major projects.         DOE did not determine if the original directives were, in fact, burdensome. In
With NNSA proposing to spend tens of         addition, the reform effort did not fully address safety concerns GAO and others
billions of dollars to modernize the         identified in the areas of quality assurance, safety culture, and federal oversight.
nuclear security enterprise, it is           For example, the reform effort gives the NNSA site offices, rather than DOE’s
important to ensure scarce resources         Office of Independent Oversight staff, responsibility for correcting problems
are spent in an effective and efficient      identified in independent assessments. Site office determinations of what issues
manner.                                      require more formal contractor responses may be influenced by their
This testimony addresses (1) DOE’s           responsibility for keeping costs under control and work on schedule. NNSA has
and NNSA’s safety and security               also experienced security deficiencies, including numerous incidents involving
oversight and (2) NNSA’s project and         the compromise or potential compromise of classified information that pose the
contract management. It is based on          most serious threat to U.S. national security. NNSA has made progress
prior GAO reports issued from August         addressing these deficiencies—including the establishment of an effective
2000 to July 2012.                           headquarters security organization—but a recent and unprecedented security
                                             incident at an important NNSA site highlights the challenges the agency faces in
DOE and NNSA continue to act on the          fully implementing and sustaining safety and security improvements.
numerous recommendations GAO has
made to improve NNSA’s management            NNSA continues to experience significant cost and schedule overruns on its
of the nuclear security enterprise. GAO      major projects. For example, NNSA’s estimated cost to construct a modern
will continue to monitor DOE’s and           Uranium Processing Facility at NNSA’s Y-12 National Security Complex
NNSA’s implementation of these               experienced a nearly seven-fold cost increase from between $600 million and
recommendations.                             $1.1 billion in 2004 to between $4.2 billion and $6.5 billion in 2011. In addition,
                                             NNSA’s estimated cost to construct a new plutonium research facility at Los
                                             Alamos National Laboratory experienced a nearly six-fold increase from between
                                             $745 million and $975 million in 2005 to between $3.7 billion and $5.8 billion in
                                             2010. The project has also been delayed between 8 to 12 years from NNSA’s
                                             original plans. DOE has recently taken a number of actions to improve
                                             management of major projects, including those overseen by NNSA. For example,
                                             DOE has updated program and project management policies and guidance in an
                                             effort to improve the reliability of project cost estimates, better assess project
                                             risks, and better ensure project reviews are timely, useful and identify problems
                                             early. However, in GAO’s view, DOE and NNSA need to (1) commit sufficient
View GAO-12-912T. For more information,      people and resources to resolve contract management problems, and (2)
contact Mark Gaffigan at (202) 512-3841 or   demonstrate, on a sustained basis, the ability to complete major projects on time
gaffiganm@gao.gov
                                             and on budget.
                                                                                      United States Government Accountability Office
Chairman Stearns, Ranking Member DeGette, and Members of the
Subcommittee:

Thank you for the opportunity to discuss our work on safety, security, and
project management issues related to the nation’s nuclear security
enterprise. As you know, the National Nuclear Security Administration
(NNSA), a separately organized agency within the Department of Energy
(DOE), is responsible for managing nuclear weapon- and
nonproliferation-related missions in research and development
laboratories, production plants, and other facilities—known collectively as
the nuclear security enterprise. 1 NNSA manages these national security
missions, but work activities are largely carried out by management and
operating (M&O) contractors at each site within the nuclear security
enterprise. Working under M&O contracts, NNSA contractors apply their
scientific, technical, and management expertise at NNSA’s government-
owned, contractor operated sites. 2

Questions have been raised about DOE’s and NNSA’s management of
the nuclear security enterprise. For example, we first designated DOE’s
management of its contracts as an area at high risk of fraud, waste,
abuse, and mismanagement in 1990 because of the department’s record
of inadequate management and oversight of its contractors. During the
late 1990’s, DOE experienced security problems at the nation’s nuclear
weapons laboratories and significant cost overruns on major projects.
According to a June 1999 report by the President’s Foreign Intelligence
Advisory Board, DOE’s management of the nuclear weapons
laboratories, while representing “science at its best,” also embodied
“security at its worst” because of “organizational disarray, managerial
neglect, and…a culture of arrogance.” The advisory board urged


1
 Specifically, NNSA manages three national nuclear weapon design laboratories—
Lawrence Livermore National Laboratory in California, Los Alamos National Laboratory in
New Mexico, and Sandia National Laboratories in New Mexico and California. It also
manages four nuclear weapons production plants—the Pantex Plant in Texas, the Y-12
National Security Complex in Tennessee, the Kansas City Plant in Missouri, and the
Tritium Extraction Facility at DOE’s Savannah River Site in South Carolina. NNSA also
manages the Nevada National Security Site, formerly known as the Nevada Test Site.
2
 M&O contracts are agreements under which the government contracts for the operation,
maintenance, or support, on its behalf, of a government-owned or -controlled research,
development, special production, or testing establishment wholly or principally devoted to
one or more of the major programs of the contracting federal agency. Federal Acquisition
Regulation, 48 C.F.R. § 17.601.




Page 1                                                                        GAO-12-912T
Congress to create a new organization that, whether established as an
independent agency or a semiautonomous agency within DOE, would
have a clear mission, streamlined bureaucracy, and drastically simplified
lines of authority and accountability. Responding to the board’s
recommendations, Congress created NNSA under Title 32 of the National
Defense Authorization Act for Fiscal Year 2000—the NNSA Act. 3 The
NNSA Act established NNSA as a “separately organized agency” within
DOE. The act established the position of DOE Under Secretary for
Nuclear Security, who was also designated as the Administrator of NNSA.
The Secretary of Energy and the Deputy Secretary of Energy were
allowed to establish policy for NNSA and to give direction to NNSA
through the Administrator; however, other DOE employees were
prohibited from directing the activities of individual NNSA employees.
DOE directives remain the primary means to establish, communicate, and
institutionalize policies, requirements, responsibilities, and procedures for
multiple departmental elements, including NNSA, but the act gives the
NNSA Administrator the authority to establish NNSA-specific policies,
unless disapproved by the Secretary of Energy. NNSA does this through
the issuance of Policy Letters. 4

NNSA’s creation, however, has not yet had the desired effect of fully
resolving these long-standing management problems. For example,
security incidents, as well as safety issues, contributed to the temporary
shut-down of facilities at both Los Alamos and Livermore in 2004 and
2005. 5 More recently, at the Y-12 National Security Complex, three
trespassers gained access to the protected security area directly adjacent
to one of the nation’s most critically important nuclear weapons-related
facilities without being interrupted by the security measures in place.
According to the Department of Energy’s Inspector General, this security
breach was unprecedented and represented multiple system failures
including failures to maintain critical security equipment, respond properly




3
Pub. L. No. 106-65, 113 Stat. 512, 953 (1999).
4
 NNSA, Policy Letters: NNSA Policies, Supplemental Directives, and Business Operating
Procedures, NA SD 251.1 (Washington, D.C.: July 5, 2011).
5
 For additional information on the 2004 temporary shutdown of facilities at Los Alamos,
see GAO, Stand-Down of Los Alamos National Laboratory: Total Costs Uncertain; Almost
All Mission-Critical Programs Were Affected but Have Recovered, GAO-06-83
(Washington, D.C.: Nov. 18, 2005).




Page 2                                                                     GAO-12-912T
to alarms, and understand security protocols. 6 Furthermore, the Inspector
General found that contractor governance and federal oversight failed to
identify and correct early indications of these multiple system
breakdowns. Concerns have also been raised recently by national
laboratory and other officials that DOE’s and NNSA’s oversight of the
laboratories’ activities has become excessive and that the safety and
security requirements the laboratories’ are subject to are overly
prescriptive and burdensome, which has resulted in a negative effect on
the quality of science performed at these laboratories. Regarding major
projects, contract management at NNSA and DOE’s Office of
Environmental Management remain on our high-risk list. 7 In this context,
there have been calls in Congress and other organizations to enhance
NNSA’s ability to operate independently of DOE. For example, the
Defense Science Board proposed in 2006 that a completely independent
nuclear weapons agency be created. 8 In January 2007, we reported 9 that
former senior DOE and NNSA officials with whom we spoke generally did
not favor removing NNSA from DOE; we concluded that such drastic
change was unnecessary to produce an effective organization and we
continue to hold this view. 10

My testimony today discusses DOE’s and NNSA’s management of the
nuclear security enterprise. It focuses on our reports issued from August
2000 to July 2012 on (1) oversight of safety and security performance in
the nuclear security enterprise and (2) project and contract management.
Detailed information about scope and methodology can be found in our
issued reports. We conducted the performance audit work that supports



6
 DOE Office of Inspector General, Inquiry into the Security Breach at the National Nuclear
Security Administration’s Y-12 National Security Complex, DOE/IG-0868, August 2012.
7
GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).
8
 The Defense Science Board provides the Department of Defense with independent
advice and recommendations on matters relating to the department’s scientific and
technical enterprise. See Defense Science Board Task Force, Nuclear Capabilities
(Washington, D.C.: December 2006).
9
 GAO, National Nuclear Security Administration: Additional Actions Needed to Improve
Management of the Nation’s Nuclear Programs, GAO-07-36, (Washington, D.C.: Jan.19,
2007).
10
  GAO, Modernizing the Nuclear Security Enterprise: Observations on the Organization
and Management of the National Nuclear Security Administration, GAO-12-867T,
(Washington, D.C.: June 27, 2012).




Page 3                                                                       GAO-12-912T
             this statement in accordance with generally accepted government
             auditing standards. Those standards require that we plan and perform
             audits 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.


             DOE is responsible for a diverse set of missions, including nuclear
Background   security, energy research, and environmental clean-up. These missions
             are managed by various organizations within DOE and largely carried out
             by M&O contractors at DOE sites. According to federal budget data,
             NNSA is one of the largest organizations in DOE, overseeing nuclear
             weapons, nuclear nonproliferation, and naval reactors missions at its
             sites. With a $10.5 billion budget in fiscal year 2011—nearly 40 percent of
             DOE’s total budget—NNSA is responsible for providing the United States
             with safe, secure, and reliable nuclear weapons in the absence of
             underground nuclear testing and maintaining core competencies in
             nuclear weapons science, technology, and engineering. Ensuring a safe
             and reliable nuclear weapons stockpile is an extraordinarily complicated
             task and requires state-of-the-art experimental and computing facilities as
             well as the skills of top scientists in the field. To its credit, NNSA
             consistently accomplishes this task, as evidenced by the successful
             assessment of the safety, reliability, and performance of each weapon
             type in the nuclear stockpile since its creation. In 2011, the administration
             announced plans to request $88 billion from Congress over the next
             decade to operate and modernize the nuclear security enterprise.

             As discussed above, work activities to support NNSA’s national security
             missions are largely carried out by M&O contractors. This arrangement
             has historical roots. Since the Manhattan Project produced the first atomic
             bomb during World War II, NNSA, DOE, and predecessor agencies have
             depended on the expertise of private firms, universities, and others to
             carry out research and development work and efficiently operate the
             facilities necessary for the nation’s nuclear defense. Currently, DOE
             spends 90 percent of its annual budget on M&O contracts, making it the
             largest non-Department of Defense contracting agency in the
             government.

             DOE generally regulates the safety of its own nuclear facilities and
             operations at its sites. In contrast, the Nuclear Regulatory Commission
             (NRC) generally regulates commercial nuclear facilities, and the
             Occupational Safety and Health Administration (OSHA) generally


             Page 4                                                            GAO-12-912T
regulates worker safety at commercial industrial facilities. 11 However,
because of the dangerous nature of work conducted at many sites within
the national security enterprise—handling nuclear material such as
plutonium, manufacturing high explosives, and various industrial
operations that use hazardous chemicals—oversight of the nuclear
security enterprise is multifaceted. First, DOE policy states that its
contractors are expected to develop and implement an assurance
system, or system of management controls that help ensure the
department’s program mission and activities are executed in an effective,
efficient, and safe manner. 12 Through these assurance systems,
contractors are required to perform self-assessments as well as identify
and correct negative performance trends. Second, NNSA site offices,
which are collocated with NNSA sites, oversee the performance of M&O
contractors. Site office oversight includes communicating performance
expectations to the contractor, reviewing the contractor’s assurance
system, and conducting contractor performance evaluations. Third,
DOE’s Office of Health, Safety, and Security—especially its Office of
Independent Oversight—conducts periodic appraisals to determine if
NNSA officials and contractors are complying with safety and security
requirements. 13 Fourth, NNSA receives safety assessments and
recommendations from other organizations, most prominently the
Defense Nuclear Facilities Safety Board (Safety Board)—an independent
executive branch agency created by Congress to assess safety
conditions and operations at DOE’s defense nuclear facilities. 14 To
address public health and safety issues, the Safety Board is authorized to
make recommendations to the Secretary of Energy, who may then accept
or reject, in whole or in part, the recommendations. If the Secretary of


11
  DOE regulates the safety of most of its own sites with nuclear operations; NRC
regulates several DOE nuclear facilities, and OSHA regulates occupational safety at DOE
sites that have no nuclear function.
12
  DOE, Department of Energy Oversight Policy, DOE P 226.1B (Washington, D.C.:
Apr. 25, 2011). Contractor assurance systems are to cover the following operational
aspects: (1) environment, safety, and health; (2) safeguards and security; (3) emergency
management; and (4) cyber security.
13
  DOE reorganized offices within the Office of Health, Safety, and Security. The Office of
Independent Oversight merged with the Office of Enforcement and was renamed the
Office of Enforcement and Oversight. For the purposes of this report, we refer to it as the
Office of Independent Oversight.
14
 The Safety Board provides oversight for all NNSA sites except the Kansas City Plant,
which manufactures non-nuclear components.




Page 5                                                                         GAO-12-912T
                        Energy accepts the recommendations, the Secretary must prepare an
                        implementation plan. Other organizations that provide assessments and
                        recommendations to NNSA on the management of its sites include DOE’s
                        Office of Inspector General, the National Academy of Sciences, and
                        GAO.


                        Work carried out at NNSA’s sites may involve plutonium and highly
Ineffective DOE and     enriched uranium, which are extremely hazardous. For example,
NNSA Contractor         exposure to small quantities of plutonium is dangerous to human health,
                        so that even inhaling a few micrograms creates a long-term risk of lung,
Oversight Has           liver, and bone cancer, and inhaling larger doses can cause immediate
Contributed to Safety   lung injuries and death. Also, if not safely contained and managed,
and Security            plutonium can be unstable and spontaneously ignite under certain
                        conditions. NNSA’s sites also conduct a wide range of other activities,
Problems Across the     including construction and routine maintenance and operation of
Nuclear Security        equipment and facilities that also run the risk of accidents, such as those
                        involving heavy machinery or electrical mishaps. The consequences of
Enterprise              such accidents could be less severe than those involving nuclear
                        materials but could also lead to long-term illnesses, injuries, or even
                        deaths among workers or the public.

                        Long-standing DOE and NNSA management weaknesses have
                        contributed to persistent safety problems at NNSA’s national laboratories.
                        In October 2007, we reported that there had been nearly 60 serious
                        accidents or near misses at NNSA’s national laboratories since 2000. 15
                        These incidents included worker exposure to radiation, inhalation of toxic
                        vapors, and electrical shocks. Although no one was killed, many of the
                        accidents caused serious harm to workers or damage to facilities. For
                        example, at Los Alamos in July 2004, an undergraduate student who was
                        not wearing required eye protection was partially blinded in a laser
                        accident. Our review of nearly 100 reports issued since 2000 found that
                        the contributing factors to these safety problems generally fell into three
                        key categories: (1) relatively lax laboratory attitudes toward safety
                        procedures, (2) laboratory inadequacies in identifying and addressing
                        safety problems with appropriate corrective actions, and (3) inadequate
                        oversight by NNSA site offices. DOE’s Office of Inspector General has


                        15
                          GAO, Nuclear and Worker Safety: Actions Needed to Determine the Effectiveness of
                        Safety Improvement Efforts at NNSA’s Weapons Laboratories, GAO-08-73 (Washington,
                        D.C.: Oct. 31, 2007).




                        Page 6                                                                 GAO-12-912T
also raised concerns about safety oversight by NNSA’s site offices.
Specifically, the Inspector General reported in June 2011 that NNSA’s
Livermore Site Office was not sufficiently overseeing the contractor to
ensure that corrective actions were fully and effectively implemented for a
program designed to limit worker exposure to beryllium, a hazardous
metal essential for nuclear operations. 16

In a March 2010 memorandum, the Deputy Secretary of Energy
announced a reform effort to revise DOE’s safety and security directives
and modify the department’s oversight approach to “provide contractors
with the flexibility to tailor and implement safety and security programs
without excessive federal oversight or overly prescriptive departmental
requirements.” In the memorandum announcing this effort, the Deputy
Secretary noted that burdensome safety requirements were affecting the
productivity of work at DOE’s sites and that reducing this burden on
contractors would lead to measurable productivity improvement. As we
reported to this committee in April 2012, this reform effort reduced the
number of safety related directives from 80 to 42 by eliminating or
combining requirements the department determined were unclear,
duplicative, or too prescriptive and by encouraging the use of industry
standards. 17 However, the benefits of this reform effort are not clear
because DOE did not (1) determine how the original requirements
impaired productivity or added costs, (2) assess whether the cost to
implement the revised directives would exceed the benefits, or (3)
develop performance measures in order to assess how the reform effort
will lead to improved productivity or lower costs. Furthermore, DOE’s
safety reform effort did not fully address safety concerns we and others
identified in the areas of quality assurance, safety culture, and federal
oversight. In fact, some of the revisions DOE made to its safety-related
directives may actually result in weakened independent oversight. For
example, while DOE policy notes that independent oversight is integral to
help ensure the effectiveness of safety performance, DOE’s Office of
Independent Oversight staff must now coordinate its assessment
activities with NNSA site office management to maximize the use of
resources. This arrangement potentially raises concerns about whether



16
  DOE Office of Inspector General, Implementation of Beryllium Controls at Lawrence
Livermore National Laboratory, DOE/IG-0851 (Washington, D.C.: June 2011).
17
 GAO, Nuclear Safety: DOE Needs to Determine the Costs and Benefits of Its Safety
Reform Effort, GAO-12-347 (Washington, D.C.: Apr. 20, 2012).




Page 7                                                                     GAO-12-912T
Office of Independent Oversight staff will be sufficiently independent from
site office management. In addition, the reform effort gives the NNSA site
office, rather than Office of Independent Oversight staff, increased
responsibility for managing actions to correct problems identified in
independent assessments. Site office determinations of what issues
require more formal contractor responses may be influenced by the fact
that the site offices also have responsibility for keeping costs under
control and work on schedule.

Similar to, but independent of DOE’s safety and security reform effort, in
February 2011, NNSA initiated its “governance transformation” project,
which involved revising the agency’s business model to, among other
things, place more reliance on contractor’s self-oversight through its
contractor assurance systems to ensure such things as effective safety
and security performance. NNSA’s Kansas City Plant has completed
implementation of this new business model, and other NNSA sites—such
as the Nevada National Security Site and the Y-12 National Security
Complex—are currently making changes to implement it as well. In
response to the new business model, the Safety Board and the DOE
Office of Inspector General have raised concerns about contractor
assurance systems. For example, in an April 2011 congressional
testimony, the chairman of the Safety Board stated that contractor
assurance systems at defense nuclear facilities have not achieved a
degree of effectiveness that would warrant a reduction in federal safety
oversight and that they are not expected to achieve this effectiveness in
the foreseeable future. In May 2012, the DOE Office of Inspector General
reported on weaknesses with Sandia National Laboratories’ Integrated
Safety Management contractor assurance system. 18 Specifically, the
report stated, among other things, that (1) contractor self-assessments
often failed to identify weaknesses that were subsequently identified by
independent assessments and (2) the NNSA site office had not always
included goals in the contractor’s performance evaluation plans for
correcting known weaknesses.

NNSA’s work with nuclear materials such as plutonium and highly
enriched uranium, nuclear weapons and their components, and large
amounts of classified data requires extremely high security. However, we



18
  DOE Office of Inspector General, Integrated Safety Management at Sandia National
Laboratories, DOE/IG-0866 (Washington, D.C.: May 2012).




Page 8                                                                    GAO-12-912T
have documented cases of poor security performance within the nuclear
security enterprise. For example, in January 2008, we reported that Los
Alamos experienced 57 reported security incidents involving the
compromise or potential compromise of classified information from
October 1, 2002, through June 30, 2007, according to DOE records. 19
Thirty-seven (or 65 percent) of these reported incidents posed the most
serious threat to U.S. national security interests. Of the remaining 20
incidents, 9 involved the confirmed or suspected unauthorized disclosure
of secret information, which posed a significant threat to U.S. national
security interests. The remaining 11 reported security incidents involved
the confirmed or suspected unauthorized disclosure of confidential
information, which posed a threat to DOE security interests. Since that
time, NNSA has made progress resolving some security issues. In our
January 2007 report, we made 21 recommendations to the Secretary of
Energy and the Administrator of NNSA that were intended to correct
deficiencies in five areas, including security. 20 Our security-related
recommendations included having NNSA implement a professional
development program for security staff to ensure the completion of
needed training, develop a framework to evaluate results from security
reviews and guide security improvements, and establish formal
mechanisms for sharing and implementing lessons learned across the
nuclear security enterprise. DOE and NNSA have taken important steps
to address most of these recommendations. Specifically, NNSA’s
establishment of an effective headquarters security organization has
made significant progress implementing these recommendations by
performing security reviews, developing security performance measures,
and instituting a security lessons-learned center.

Nevertheless, as the recent and unprecedented security incident at Y-12
highlights, NNSA struggles to fully implement and sustain safety and
security improvements while facing security challenges. In June 2008, we
reported that significant security problems at Los Alamos had received
insufficient attention. 21 The laboratory had over two dozen initiatives



19
 GAO, Los Alamos National Laboratory: Information on Security of Classified Data,
Nuclear Material Controls, Nuclear and Worker Safety, and Project Management
Weaknesses, GAO-08-173R (Washington, D.C.: Jan. 10, 2008).
20
 GAO-07-36
21
 GAO, Los Alamos National Laboratory: Long-Term Strategies Needed to Improve
Security and Management Oversight, GAO-08-694 (Washington, D.C.: June 13, 2008).




Page 9                                                                     GAO-12-912T
under way that were principally aimed at reducing, consolidating, and
better protecting classified resources. However, the laboratory had not
implemented complete security solutions to address either classified parts
storage in unapproved storage containers or weaknesses in its process
for ensuring that actions taken to correct security deficiencies were
completed. Furthermore, Los Alamos had implemented initiatives that
addressed a number of previously identified security concerns but had not
developed the long-term strategic framework necessary to ensure that its
fixes would be sustained over time. In March 2009, we reported on
numerous and wide-ranging security deficiencies at Livermore,
particularly in the ability of Livermore’s protective forces to ensure the
protection of special nuclear material and the laboratory’s protection and
control of classified matter. 22 Livermore’s physical security systems, such
as alarms and sensors, and its security program planning and assurance
activities were also identified as areas needing improvement.
Weaknesses in Livermore’s contractor self-assessment program and the
Livermore Site Office’s oversight of the contractor contributed to these
security deficiencies at the laboratory. According to one DOE official, both
programs were “broken” and missed even the “low-hanging fruit.” The
laboratory took corrective action to address these deficiencies, but we
noted that better oversight was needed to ensure that security
improvements were fully implemented and sustained. Following the
security incident at Y-12, which resulted in a 2 week suspension of
nuclear operations at the site, DOE and NNSA have taken a number of
actions to address both site-specific and enterprise-wide security issues.
For example, DOE and NNSA: (1) required the entire site workforce to
undergo additional security training; (2) increased the number of
protective force patrols that review alarm assessments; and (3) tasked a
senior agency official to conduct an assessment of NNSA’s enterprise-
wide security oversight model.




22
  GAO, Nuclear Security: Better Oversight Needed to Ensure That Security Improvements
at Lawrence Livermore National Laboratory Are Fully Implemented and Sustained,
GAO-09-321 (Washington, D.C.: Mar. 16, 2009).




Page 10                                                                  GAO-12-912T
                      A basic tenet of effective management is the ability to complete projects
NNSA Needs to Make    on time and within budget. For more than a decade and in numerous
Further               reports, we have found that NNSA has continued to experience significant
                      cost and schedule overruns on its major projects, principally because of
Improvements to Its   ineffective oversight and poor contractor management. Specifically:
Management of Major
                           In August 2000, we reported that poor management and oversight of
Projects and          •
                           the National Ignition Facility construction project at Lawrence
Contracts                  Livermore National Laboratory had increased the facility’s cost by $1
                           billion and delayed its scheduled completion date by 6 years. 23
                           Among the many causes for the cost overruns or schedule delays,
                           DOE and Livermore officials responsible for managing or overseeing
                           the stadium-sized laser facility’s construction did not plan for the
                           technically complex assembly and installation of the facility’s 192 laser
                           beams. They also did not use independent review committees
                           effectively to help identify and correct issues before they turned into
                           costly problems. Similarly, in April 2010, we reported that weak
                           management by DOE and NNSA had allowed the cost, schedule, and
                           scope of ignition-related activities at the National Ignition Facility to
                           increase substantially. 24 Since 2005, ignition-related costs have
                           increased by around 25 percent—from $1.6 billion in 2005 to over $2
                           billion in 2010—and the planned completion date for these activities
                           has slipped from the end of fiscal year 2011 to the end of fiscal year
                           2012 or beyond.

                      •    We have issued several reports on the technical issues, cost
                           increases, and schedule delays associated with NNSA’s efforts to
                           extend, through refurbishment, the operational lives of nuclear
                           weapons in the stockpile. For example, in December 2000, we
                           reported that refurbishment of the W87 strategic warhead had
                           experienced significant design and production problems that
                           increased its refurbishment costs by over $300 million and caused



                      23
                       GAO, National Ignition Facility: Management and Oversight Failures Caused Major Cost
                      Overruns and Schedule Delays, GAO/RCED-00-271 (Washington, D.C.: Aug. 8, 2000).
                      24
                        Ignition-related activities consist of the efforts separate from the facility’s construction
                      that have been undertaken to prepare for the first attempt at ignition—the extremely
                      intense pressures and temperatures that simulate on a small scale the thermonuclear
                      conditions created in nuclear explosions. See GAO, Nuclear Weapons: Actions Needed to
                      Address Scientific and Technical Challenges and Management Weaknesses at the
                      National Ignition Facility, GAO-10-488 (Washington, D.C.: Apr. 8, 2010).




                      Page 11                                                                          GAO-12-912T
    schedule delays of about 2 years. 25 Similarly, in March 2009, we
    reported that NNSA and the Department of Defense had not
    effectively managed cost, schedule, and technical risks for the B61
    nuclear bomb and the W76 nuclear warhead refurbishments. 26 For the
    B61 life extension program, NNSA was only able to stay on schedule
    by significantly reducing the number of weapons undergoing
    refurbishment and abandoning some refurbishment objectives. In the
    case of the W76 nuclear warhead, NNSA experienced a 1-year delay
    and an unexpected cost increase of nearly $70 million as a result of
    its ineffective management of one of the highest risks of the
    program—manufacturing a key material known as Fogbank, which
    NNSA needed to refurbish the warhead but did not have the
    knowledge, expertise, or facilities to manufacture.

•   In October 2009, we reported on shortcomings in NNSA’s oversight of
    the planned relocation of its Kansas City Plant to a new, more modern
    facility. 27 Rather than construct a new facility itself, NNSA chose to
    have a private developer build it. NNSA would then lease the building
    through the General Services Administration for a period of 20 years.
    However, when choosing to lease rather than construct a new facility
    itself, NNSA allowed the Kansas City Plant to limit its cost analysis to
    a 20-year life cycle that has no relationship with known requirements
    of the nuclear weapons stockpile or the useful life of a production
    facility that is properly maintained. As a result, NNSA’s financing
    decisions were not as fully informed and transparent as they could
    have been. If the Kansas City Plant had quantified potential cost
    savings to be realized over the longer useful life of the facility, NNSA
    might have made a different decision as to whether to lease or
    construct a new facility itself.

•   We reported in March 2010 that NNSA’s plutonium disposition
    program was behind schedule in establishing a capability to produce
    the plutonium feedstock necessary to operate its Mixed-Oxide Fuel


25
  GAO, Nuclear Weapons: Improved Management Needed to Implement Stockpile
Stewardship Program Effectively, GAO-01-48, (Washington, D.C.: Dec. 14, 2000).
26
  GAO, Nuclear Weapons: NNSA and DOD Need to More Effectively Manage the
Stockpile Life Extension Program, GAO-09-385 (Washington, D.C.: Mar. 2, 2009).
27
  GAO, Nuclear Weapons: National Nuclear Security Administration Needs to Better
Manage Risks Associated with Modernization of Its Kansas City Plant, GAO-10-115
(Washington, D.C.: Oct. 23, 2009).




Page 12                                                                   GAO-12-912T
     Fabrication Facility currently being constructed at DOE’s Savannah
     River Site in South Carolina. 28 In addition, NNSA had not sufficiently
     assessed alternatives to producing plutonium feedstock and had only
     identified one potential customer for the mixed-oxide fuel the facility
     would produce. In its fiscal year 2012 budget justification to Congress,
     NNSA reported that it did not have a construction cost baseline for the
     facility needed to produce the plutonium feedstock for the mixed-oxide
     fuel, even though Congress had already appropriated over $270
     million through fiscal year 2009 and additional appropriation requests
     totaling almost $2 billion were planned through fiscal year 2016.
     NNSA stated in its budget justification that it was considering options
     for producing necessary plutonium feedstock without constructing a
     new facility.

•    In November 2010, we reported that NNSA’s plans to construct a
     modern Uranium Processing Facility (UPF) at its Y-12 National
     Security Complex in Oak Ridge, Tennessee, had experienced
     significant cost increases. 29 Originally estimated in 2004 to cost from
     $600 million to $1.1 billion, NNSA revised its cost estimate in 2007,
     more than doubling the estimated cost to construct the facility to
     between $1.4 billion and $3.5 billion. Costs have continued to rise
     since we issued our report. As of September 2011, NNSA estimated
     that the facility would cost from $4.2 billion to $6.5 billion to
     construct—a nearly seven-fold cost increase from the original
     estimate.

•    We reported in March 2012 on NNSA’s plans to construct the
     Chemistry and Metallurgy Research Replacement Nuclear Facility
     (CMRR) at Los Alamos, which is intended to modernize the
     laboratory’s capability to analyze and store plutonium. 30 Specifically,
     we found that in 2005, when DOE developed initial plans for CMRR, it


28
  GAO, Nuclear Nonproliferation: DOE Needs to Address Uncertainties with and
Strengthen Independent Safety Oversight of Its Plutonium Disposition Program,
GAO-10-378 (Washington, D.C.: Mar. 26, 2010). Mixed-oxide fuel contains plutonium
blended with natural uranium, reprocessed uranium, or depleted uranium.
29
 GAO, Nuclear Weapons: National Nuclear Security Administration’s Plans for Its
Uranium Processing Facility Should Better Reflect Funding Estimates and Technology
Readiness, GAO-11-103 (Washington, D.C.: Nov. 19, 2010).
30
  GAO, Modernizing the Nuclear Security Enterprise: New Plutonium Research Facility at
Los Alamos May Not Meet All Mission Needs, GAO-12-337 (Washington, D.C.:
Mar. 26, 2012).




Page 13                                                                   GAO-12-912T
     estimated that the project would cost from $745 million to $975 million
     and would be completed between 2013 and 2017. In April 2010,
     NNSA estimated that CMRR will cost between $3.7 and $5.8 billion—
     a nearly six-fold increase from the initial estimate—and that
     construction will be complete by 2020—a 3- to 7-year delay. In
     February 2012, after we had provided NNSA with a draft of our report
     for its comments, NNSA announced that it had decided to defer
     CMRR construction by at least an additional 5 years, bringing the total
     delay from NNSA’s original plans to 8 to 12 years. Furthermore, even
     though CMRR as designed may be large enough to meet nuclear
     weapon stockpile requirements, it is unclear if the facility will be large
     enough to accommodate DOE’s nonweapons activities that involve
     plutonium—such as nonproliferation, nuclear forensics, and nuclear
     counterterrorism programs—because the department has not
     comprehensively studied their long-term research and storage needs.

•    In July 2012, we identified concerns with NNSA’s framework for
     planning, prioritizing, funding, and evaluating its program activities. 31
     For example, we found that NNSA’s formal process for assessing
     budget estimates is not sufficiently thorough to ensure that the
     agency’s budget is credible and reliable because (1) it is limited to
     assessing the processes used to develop budget estimates rather
     than the accuracy of the resulting estimates and, (2) it is conducted
     for a small portion of NNSA’s budget—approximately 1.5 percent in
     2011. Furthermore, NNSA lacks an independent analysis unit to verify
     cost estimates and review proposals for program activities, as called
     for by prior DOE Inspector General and GAO recommendations. 32

As discussed above, NNSA remains on our high-risk list as vulnerable to
fraud, waste, abuse, and mismanagement. DOE has recently taken a
number of actions to improve management of major projects, including
those overseen by NNSA. For example, DOE has updated program and
project management policies and guidance in an effort to improve the
reliability of project cost estimates, better assess project risks, and better



31
  GAO, Modernizing the Nuclear Security Enterprise: NNSA’s Review of Budget
Estimates and Decisions on Resource Trade-offs Need Strengthening, GAO-12-806
(Washington, D.C., July 31, 2012).
32
  DOE Office of Inspector General, National Nuclear Security Administration’s Planning,
Programming, Budgeting, and Evaluation Process, DOE/IG-0614, (Washington, D.C.:
August 2003) and GAO-07-36.




Page 14                                                                     GAO-12-912T
ensure project reviews that are timely and useful and identify problems
early. These are positive steps, and we will continue to monitor and
evaluate DOE’s and NNSA’s implementation of these actions. However,
DOE needs to ensure that NNSA has the capacity—that is, the people
and other resources—to resolve its project management difficulties so
that its major projects do not continue to experience major cost overruns
and schedule delays.

In conclusion, the critical nature of the work NNSA performs and the high-
hazard operations it conducts—often involving extremely hazardous
materials, such as plutonium and highly enriched uranium, that must be
stored under high security to protect them from theft—requires careful
oversight and stringent safety and security requirements. With regard to
the concerns that DOE’s and NNSA’s oversight of the laboratories’
activities have become excessive and that safety and security
requirements are overly prescriptive and burdensome, we agree that
excessive oversight and micromanagement of contractors’ activities is not
an efficient use of scarce federal resources. Nevertheless, in our view,
the problems we continue to identify in the nuclear security enterprise are
not caused by excessive oversight, but instead result from ineffective
oversight. NNSA has made significant progress—including the
establishment of an effective headquarters security organization—
resolving many of the safety and security weaknesses we have identified,
but, as demonstrated by the recent security incident at Y-12, the agency
faces challenges in ensuring these improvements are fully implemented
and sustained.

Regarding management of major projects and contracts, NNSA has, to its
credit, successfully ensured that the nuclear weapons stockpile remains
safe and reliable in the absence of underground nuclear testing,
accomplishing this complicated task by using state-of-the-art facilities, as
well as the skills of top scientists. NNSA faces a complex task in planning,
budgeting, and ensuring the execution of interconnected activities across
the nuclear security enterprise. Among other things, maintaining
government-owned facilities that were constructed more than 50 years
ago and ensuring M&O contractors are sustaining critical human capital
skills that are highly technical in nature are difficult undertakings. Over the
past decade, we have made numerous recommendations to DOE and
NNSA to improve their management practices. DOE and NNSA have
acted on many of these recommendations and have made considerable
progress. Nevertheless, enough significant management problems
remain to prompt some to call for removing NNSA from DOE and either
moving it to another department or establishing it as a separate agency.


Page 15                                                             GAO-12-912T
                  However, we do not believe that such drastic changes are necessary.
                  Importantly, we are uncertain whether such significant organizational
                  changes to increase NNSA’s independence would produce the desired
                  effect of creating a modern, responsive, effective, and efficient nuclear
                  security enterprise. Nevertheless, DOE and NNSA must continue their
                  efforts to (1) commit sufficient people and resources to resolve project
                  and contract management problems and (2) demonstrate, on a sustained
                  basis, the ability to complete major projects on time and on budget. As
                  NNSA is proposing to spend decades and tens of billions of dollars to
                  modernize the nuclear security enterprise, Congress and the American
                  taxpayer have the right to know whether investments made in the nuclear
                  security enterprise are worth the cost.


                  Chairman Stearns, Ranking Member DeGette, and Members of the
                  Subcommittee, this completes my prepared statement. I would be
                  pleased to respond to any questions you may have at this time.


                  If you or your staff have any questions about this testimony, please
GAO Contact and   contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for
Staff             our Offices of Congressional Relations and Public Affairs may be found
                  on the last page of this statement. GAO staff who made key contributions
Acknowledgments   to this testimony are Allison Bawden, Ryan T. Coles, and Jonathan Gill,
                  Assistant Directors; and Patrick Bernard, Senior Analyst.

                  A special acknowledgement is due to Gene Aloise, who recently retired
                  after 38 years of federal service. For the past 10 years, Gene was GAO’s
                  senior executive responsible for issues related to United States and
                  international nuclear security and cleanup. The assessments of federal
                  initiatives conducted under his direction on a wide range of nuclear
                  issues, including efforts to modernize the U.S. nuclear weapons complex,
                  hold the Department of Energy accountable for significant cost and
                  schedule overruns on major projects, protecting the nation from the
                  dangers of nuclear proliferation, and cleaning up the legacy of the United
                  States’ production of nuclear weapons during the Cold War, have
                  provided the Congress with valuable information for making informed
                  policy decisions on and providing oversight of these very complex and
                  controversial issues. We wish Gene well in his new position as Deputy
                  Inspector General at the Special Inspector General for Afghanistan
                  Reconstruction (SIGAR).




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                  Page 16                                                         GAO-12-912T
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