oversight

Nuclear Waste: DOE's Accelerated Cleanup Strategy Has Benefits but Faces Uncertainties

Published by the Government Accountability Office on 1999-04-30.

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

                  United States General Accounting Office

GAO               Report to the Chairman, Committee on
                  the Budget, House of Representatives



April 1999
                  NUCLEAR WASTE
                  DOE’s Accelerated
                  Cleanup Strategy Has
                  Benefits but Faces
                  Uncertainties




GAO/RCED-99-129
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-282300

      April 30, 1999

      The Honorable John R. Kasich
      Chairman, Committee on the Budget
      House of Representatives

      Dear Mr. Chairman:

      The U.S. Department of Energy (DOE) is responsible for the world’s largest
      environmental cleanup program. Decades of nuclear weapons production
      has left a legacy of radioactive, chemical, and other hazardous wastes to
      be cleaned up at sites across the United States. In 1989, DOE established
      the Environmental Management program to address the cleanup of these
      wastes. Eleven of DOE’s field offices throughout the country manage this
      cleanup for the program. In the past, this cleanup has been expensive and
      slow, and has been criticized as lacking in commitment and accountability.
      In response to these criticisms, in 1996 DOE embarked on a new strategy to
      accelerate the cleanup and reduce the costs at its 53 remaining
      contaminated sites. DOE laid out its strategy in a document called
      Accelerating Cleanup: Paths to Closure, issued in June 1998. The Paths to
      Closure report provides an overview of the cost, schedule, and scope of
      work to be accomplished on 353 individual projects at these sites. DOE set
      a goal of cleaning up 41 of the remaining 53 contaminated sites by 2006.
      DOE estimates that the planned cleanup activities during this time will
      require $57 billion. However, cleanup will not be finished at all sites by
      2006, and some cleaned-up sites will require long-term monitoring.
      Therefore, DOE also estimates that the total cost for all cleanup activities,
      including the long-term monitoring of the sites, will amount to $147 billion
      through 2070.1 DOE plans to update the Paths to Closure report annually.2
      The next Paths to Closure report, scheduled to be issued in June 1999, will
      be updated based on project information submitted in April 1999, along
      with information from DOE’s fiscal year 2000 budget request.

      Because the Paths to Closure report is based on data that also serve to
      form DOE’s annual budget request, you asked that we provide information
      on the (1) methodologies and assumptions used to develop the Paths to
      Closure report and any associated limitations, (2) uncertainties in the
      Paths to Closure report that may affect its usefulness, and (3) funding

      1
       The estimate is in constant 1998 dollars.
      2
        Paths to Closure was first issued as a discussion draft in June 1997. Comments received on this draft
      were incorporated into a draft issued for public comment in February 1998. The final document, issued
      in June 1998, incorporates stakeholder comments from regulators, local citizen groups, and tribal
      nations.



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                   implications related to the cost of cleanup. On February 19, 1999, we
                   briefed your staff on the results of our work and agreed to provide you
                   with this report summarizing our findings.


                   DOE’s Paths to Closure report is an improvement over earlier planning
Results in Brief   efforts. While it is an improvement, we identified limitations in the
                   methodology and assumptions that may affect the reliability of the data;
                   uncertainties, in such areas as the level of site cleanup and the sites’ ability
                   to meet cleanup schedules, that could cause cost and schedule estimates
                   to be revised; and challenges that DOE may face in achieving its goals at the
                   annual funding level targets.

                   To develop the Paths to Closure report, DOE’s Office of Environmental
                   Management issued guidance in October 1997, requiring its field offices to
                   develop, by project, estimates of the cleanup work to be accomplished, the
                   schedule to be achieved, and total—or life cycle—costs to complete the
                   cleanup work.3 The guidance also provided each field office with an
                   estimated annual funding allocation for cleanup activities through 2006.
                   The Paths to Closure report is an improvement over previous efforts
                   because, for the first time, DOE set goals for completing the cleanup at each
                   site, used project-specific data in estimating cleanup costs, and surfaced
                   issues needing resolution, such as where certain wastes will be disposed.
                   However, DOE headquarters did not specify a standard methodology to be
                   used for estimating cleanup costs, leaving field offices to select their own
                   approaches for developing their estimates. As a result, the data from some
                   of the sites may not be comparable or reliable. According to a recent
                   report by DOE’s Office of the Inspector General, a number of the projects’
                   cost estimates they examined were not supported or complete. DOE has
                   some initiatives under way to improve data quality for the next Paths to
                   Closure update.

                   A number of uncertainties regarding the information in the 1998 Paths to
                   Closure report, particularly in the sites’ cost and schedule estimates, affect
                   the report’s usefulness. For example, many field offices based their cost
                   estimates on assumed cleanup levels that have not yet been agreed to by
                   the regulators involved—the U.S. Environmental Protection Agency and
                   the states. If the levels eventually agreed to are stricter than assumed, both
                   costs and schedules could increase. Cost and schedule estimates could

                   3
                    Sites’ life cycle cost estimates were to include the sum of the cost estimates of all the activities
                   required to clean up the site, including the costs for storage, treatment, and disposal of wastes; facility
                   and other infrastructure construction and decommissioning; and long-term surveillance and
                   monitoring activities through 2070.



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             also be revised as the cleanup technologies to be used are identified. Some
             sites may also need to revise their estimates because of difficulties in
             completing their cleanup work by their closure dates. Finally, Paths to
             Closure contains only a limited discussion of activities that will be
             required after a site closes, such as long-term surveillance and
             maintenance. These costs are expected to be substantial at some sites, and
             are not included in some sites’ cost estimates, even though sites were
             directed to do so.

             DOE  also faces a number of challenges to achieving its Paths to Closure
             goals at the $5.75 billion annual funding level target identified in the
             report. The sites’ estimates of their funding needs for fiscal years 1999
             through 2006 exceed the funding level target by more than $4 billion, or by
             an average of about $500 million per year. DOE’s Paths to Closure guidance
             established cost reduction goals for each field office to help address this
             funding gap, but most of the sites we contacted had not identified specific
             strategies for achieving the cost reductions. In addition, as our past work
             has shown, DOE’s projects tend to take longer and cost more than
             anticipated. Moreover, if some of the cleanup activities that were assumed
             to be outside the scope of Paths to Closure are ultimately included in the
             Environmental Management program, costs would grow. For example,
             Paths to Closure notes that an additional $8.1 billion could be needed to
             address any new waste generated after fiscal year 2000, a cost that was not
             included in the report’s $147 billion total cost for all cleanup.


             DOE has a complex of 113 sites around the country that were contaminated
Background   by nuclear weapons production and by research and testing activities. In
             1989, DOE established the Environmental Management program to address
             the cleanup of the radioactive, chemical, and other hazardous wastes at
             these sites. Eleven field offices throughout the country manage this effort.
             At the end of fiscal year 1997, DOE had 53 of its 113 sites left to clean up.
             DOE’s cleanup program has received considerable criticism about its high
             cost and slow progress.

             In response to these criticisms, in 1996 DOE began to systematically define
             the technical scope, schedule, and costs of cleaning up the radioactive,
             chemical, and other hazardous wastes at its contaminated sites. DOE laid
             out its new strategy in a document called Accelerating Cleanup: Paths to
             Closure in June 1998. Through the Paths to Closure report, DOE hoped to
             challenge its 53 remaining contaminated sites to develop more efficient
             ways to conduct their cleanup work in order to accelerate site closure,



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                        thereby reducing the overall costs of the program. In the Paths to Closure
                        report, DOE set a goal of cleaning up 41 of its 53 remaining contaminated
                        sites by 2006.4

                        DOE included two estimates in the Paths to Closure report. One covers the
                        period through fiscal year 2006 and forecasts that $57 billion will be
                        required for cleanup activities during that time. The cost to clean up the 41
                        sites DOE hopes to complete by the end of fiscal year 2006 represents a
                        small fraction of this estimate—about $5 billion. For the remaining 12 sites
                        that will complete their cleanup later (from 2007 through 2050),
                        approximately $46.3 billion was allocated for their cleanup activities
                        through 2006.5 These 12 sites include DOE’s largest and most difficult
                        cleanup sites. The second estimate includes all DOE planned cleanup
                        actions and site surveillance and monitoring costs though 2070 and
                        amounts to $147 billion.


                        Paths to Closure was developed using information provided by DOE’s field
Paths to Closure Has    offices that was based on guidance and DOE-wide assumptions provided
Strengths, but Data     from headquarters. The Paths to Closure report is an improvement over
Reliability Questions   previous planning efforts because it sets goals for completing cleanup
                        work at each site. However, the guidance from headquarters to the field
Remain                  offices on collecting cost and schedule information did not specify how to
                        develop that information. As a result, field offices used varying
                        methodologies to develop the information, raising concerns about the
                        reliability of the data. A February 1999 report by DOE’s Office of the
                        Inspector General found that a number of the projects’ cost estimates
                        were not supported or complete. DOE has some initiatives under way to
                        address the data reliability issues for the next Paths to Closure report.

                        To develop the Paths to Closure report, DOE’s Office of Environmental
                        Management issued guidance in October 1997 requiring field offices to
                        develop, by project, estimates of the work to be accomplished, schedules
                        to be achieved, and total—or life cycle—costs to complete the cleanup
                        work at their sites. The guidance also provided each field office with an
                        estimated annual funding allocation. If a gap existed between a field
                        office’s estimated funding needs and the estimated funding allocation in
                        the guidance, the field office was to identify ways to do work more

                        4
                          The Paths to Closure report shows the Rocky Flats and Fernald sites closing after 2006. DOE
                        indicated that it is committed to accelerating the closure of these two sites to 2006 and 2005,
                        respectively.
                        5
                         The remaining $5.7 billion of the $57 billion is identified as being needed to fund headquarters and
                        DOE-wide programs through fiscal year 2006.



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efficiently to close that gap. For example, if a field office estimated
needing $1 million annually to fund its cleanup work, but was given an
estimated funding allocation of $750,000, the field office would need to
develop strategies to achieve its scope of work at the lower funding level.

The guidance also provided DOE-wide assumptions that the field offices
were to use in developing the cost and schedule estimates for their
projects. For example, field offices were to assume, among other things,
that (1) DOE’s cleanup activities would be funded at $5.75 billion annually,
with each field office receiving a set amount; (2) the Waste Isolation Pilot
Plant would open in fiscal year 1998 to allow sites to dispose of certain
radioactive wastes;6 (3) DOE’s Environmental Management cleanup
program would accept no waste generated by other DOE programs after
fiscal year 2000; and (4) DOE’s Environmental Management cleanup
program would encompass only the facilities currently in its inventory and
would not be responsible for additional facilities from other DOE program
areas. The guidance also provided instructions for developing waste
disposition maps, that is, graphical representations of each site’s
conceptual approach to managing its wastes through storage, treatment,
and disposal. Sites made their own assumptions about such matters as the
standards the sites’ cleanup would eventually meet; where waste would be
shipped, if removed from the site; and what cleanup technologies would
be used.

One of the strengths of the report is that, for the first time, DOE set goals
for closing sites and completing the cleanup work. Under Paths to Closure,
sites have organized their cleanup work into definable scopes of work, or
projects, and established site-by-site, project-by-project projections of the
technical scope, cost, and schedule required to complete all of the cleanup
work. The strategy has also helped to identify issues that will need to be
resolved before sites can close, such as technology needs, and how and
where waste will be disposed. Sites that we contacted also said the Paths
to Closure report was a useful tool to communicate the sites’ vision of
their cleanup plans to stakeholder groups, such as regulatory agencies and
local citizens groups. Finally, improvements are being planned for the 1999
Paths to Closure report. For example, sites are to explain any differences
in performance from their previous year’s estimates. In addition, DOE
intends the annual Paths to Closure report to provide a basis for its




6
The Waste Isolation Pilot Plant is a deep geologic repository for the disposal of certain radioactive
wastes. It is located in an underground salt formation near Carlsbad, New Mexico.



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performance measure evaluations under the Government Performance
and Results Act.7

DOE’s  guidance to field offices on the cost and schedule information they
were to supply did not provide a standard methodology for developing the
information. DOE officials told us the field offices did not use a consistent
set of methodologies for developing their estimates. They said that some
sites are more advanced in developing projects’ cost estimates, while other
sites are at a lower level of sophistication. This raises a concern about the
reliability of the data for some of the sites. At one site we contacted, for
example, officials were unable to provide documentation showing how
their projects’ cost estimates had been derived. They said they had relied,
in part, on their experience and professional judgment to define the
projects’ costs and scope of work.

The reliability of the projects’ cost estimates was also a point of concern in
a report issued in February 1999 by DOE’s Inspector General’s office.8 The
Inspector General found that the cost estimates for 7 out of the 28 projects
examined had inadequate or no support. The Inspector General found
instances in which DOE either could not determine the method that was
used to create the estimate or the support that was provided differed
materially from the estimate in the Paths to Closure report. In addition, the
Inspector General found valid costs that had been excluded from some
projects’ cost estimates—such as those for long-term surveillance and
monitoring and security—and costs that should not have been included,
such as for waste generated in the future that may not be the responsibility
of the cleanup program. These findings caused the Inspector General to
conclude that there were material weaknesses with the process DOE used
to develop and validate the cost estimates. The weaknesses were serious
enough for the Inspector General to issue a qualified opinion on DOE’s
financial statement for fiscal year 1998.

DOE  has begun to take steps to improve the quality of its data. The updated
guidance, issued in December 1998 for the 1999 Paths to Closure report,
requires field offices to provide more detailed information on projects’
costs. For example, the field offices are to explain differences between
last year’s cost and schedule estimates and this year’s. In addition, the
updated guidance requires more information on the potential cost impacts

7
 The Government Performance and Results Act of 1993 requires federal agencies to prepare annual
performance plans identifying goals for their program activities and measuring their success in
meeting those goals.
8
 The Inspector General has been examining DOE’s financial statements for fiscal years 1997 and 1998.
This effort resulted in report DOE\IG-FS-99-01 (Feb. 1999).



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                         of additional surplus facilities that may be transferred to the cleanup
                         program; on the costs for a range of possible levels of site cleanup, for
                         sites for which cleanup levels are uncertain; and on the long-term
                         surveillance and maintenance costs for cleaned-up sites. As well as
                         requiring more detailed information, the new guidance requires the field
                         offices to submit information to support not only the Paths to Closure
                         report but also a new DOE management data system called the Integrated
                         Planning, Accountability, and Budgeting System, which DOE expects to
                         have in operation by fall 1999. According to DOE, the primary goal of the
                         new system is to integrate formerly independent pieces of planning,
                         accountability, and budgeting functions into one system, thereby achieving
                         better data consistency. The Inspector General’s report also noted that DOE
                         is pursuing strategies to improve its validation process for cost and
                         schedule estimates to improve data quality.


                         The Paths to Closure’s cost and schedule estimates for the sites are likely
Cleanup Uncertainties    to be revised as more becomes known at some sites about the levels of
Limit Paths to Closure   cleanup that must be reached and the technologies to be used. Many sites
Information              do not have a final agreement with their regulators—such as the U.S.
                         Environmental Protection Agency and the states—on what cleanup
                         standards must be achieved. For example, a major environmental impact
                         study is still under way at the West Valley Demonstration Project in New
                         York that will provide a range of options to determine exactly what
                         cleanup levels need to be achieved there. Standards could range from no
                         further cleanup to the complete removal of contamination and the return
                         of the site to its original condition. In addition to the uncertainties about
                         the cleanup standards, technological advances are needed to address
                         some cleanup problems and to meet the Paths to Closure goals. For
                         example, no technology exists for some aspects of removing and treating
                         the radioactive waste now in large tanks at several major DOE facilities.

                         The cost and schedule information in the Paths to Closure could also be
                         affected by difficulties sites are experiencing in meeting their closure
                         dates. For example, the 1998 Paths to Closure lists the West Valley
                         Demonstration Project as closing in 2005. However, West Valley officials
                         told us their closure date will be delayed to between 2008 and 2015. West
                         Valley officials said the site’s budget reduction for fiscal year 1999 had an
                         impact on their ability to complete the cleanup projects on schedule.
                         Officials also acknowledged that the site’s environmental impact
                         statement has not been completed, which could affect the site’s cost and
                         schedule estimates because it will determine which cleanup strategy



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options will be used. In addition to delays at West Valley, two sites for
which DOE has committed to accelerate cleanup activities face challenges
in meeting their new closure dates. The Rocky Flats Environmental
Technology Site in Colorado is trying to accelerate its closure from the
baseline estimate of 2010 to 2006 by expediting several cleanup projects.
However, we identified challenges that these projects face and that raised
concerns about whether the site’s closure can be accelerated as planned.9
For example, Rocky Flats has had difficulty readying some of its
radioactive waste materials for removal from the site, decontamination
and decommissioning are costing more and taking longer than anticipated,
agreement has not been reached with the site’s regulators on the use of
protective barriers over portions of the site, and several types of
radioactive materials and wastes have no sites willing or able to take them.
Similarly, the Fernald Environmental Management Project in Ohio faces
difficulty in trying to accelerate its closure from the baseline estimate of
2008 to 2005. Agreement has yet to be reached on the technology that will
be used for one of the projects that Fernald officials expect to occur by
2001. If the technology selected differs from that currently assumed, the
site’s cost and schedule estimates could be affected.

Paths to Closure’s cost and schedule information could change as more is
known about the activities that will continue at sites after they are
considered closed, such as long-term surveillance and monitoring
activities. In some cases, these activities will continue many years after
sites have been cleaned up. The 1998 Paths to Closure report provided
only a limited discussion of these activities, and some sites’ cost estimates
did not include them. The costs for these activities are expected to be
substantial at some sites. For example, we have reported that the total
cost of monitoring and maintaining the Rocky Flats site after it closes
through 2040 could amount to nearly $1.5 billion, including adjustments
for inflation. In the Paths to Closure report, DOE acknowledges the need
for more comprehensive plans addressing its role at sites after the initial
cleanup has been achieved. A DOE official told us that the agency has
created a working group on long-term stewardship to address these issues.
In addition, DOE’s guidance for the 1999 Paths to Closure report requires
field offices to provide more detailed information on the potential cost
impacts of long-term surveillance and maintenance after sites are
considered closed.




9
 Our report on the closure of Rocky Flats will be issued soon.



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                        DOE’s Paths to Closure report assumes that cleanup work can be
DOE Faces Significant   accomplished with annual funding of $5.75 billion (in current dollars).
Challenges in           However, DOE faces significant challenges in achieving its Paths to Closure
Achieving Paths to      goals at this funding level. First, a funding gap exists between the
                        $5.75 billion funding target and the sites’ identified needs. DOE also has a
Closure Goals at Its    history of project delays and cost growth, and changes in assumptions
Annual Funding Level    could have an impact on the Paths to Closure report’s cost estimates.
Target                  According to our analysis of DOE’s data for fiscal years 1999 through 2006,
                        the sites’ estimates of their costs exceeded the $5.75 billion annual funding
                        target for each fiscal year.10 As shown in figure 1, the biggest gaps between
                        sites’ baseline estimates and the annual funding targets are in fiscal years
                        2000, 2004, and 2005, with gaps of over $700 million (in current dollars)
                        occurring for each of those years.11 The total gap in funding for fiscal years
                        1999 through 2006 is $4.3 billion (in current dollars), or an average of over
                        $500 million per year. To close this funding gap, DOE assumed that sites
                        would develop strategies through fiscal year 2006 to accomplish the
                        required cleanup work at a lower cost. However, most of the sites we
                        contacted did not have specific plans for meeting those enhanced
                        performance goals.




                        10
                           In Paths to Closure, DOE also acknowledges a funding gap exists between the $5.75 billion annual
                        funding target and the requirements to meet sites’ compliance agreements and other commitments.
                        DOE estimates the gap between the two at $3.9 billion (in constant 1998 dollars) between 1999 and
                        2006.
                        11
                          Sites’ cost estimates include privatization costs. DOE’s privatization strategy relies on the use of
                        competitively awarded fixed-price performance contracts through which DOE purchases waste
                        cleanup services from private contractors. Although under privatization DOE does not pay until these
                        services are delivered, funds set aside each year to pay for these contracts are part of DOE’s annual
                        budget request.



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Figure 1: Amount That the Projects’
Cost Estimates Exceed the Annual
$5.75 Billion Funding Target




                                      Note: Data were obtained from the cost estimates DOE used in developing the 1998 Paths to
                                      Closure report. Amounts contain privatization estimates.




                                      DOE’s history of cost increases and delays in its cleanup projects will also
                                      challenge the agency’s ability to achieve the goals and milestones in Paths
                                      to Closure. Our previous work has found cost overruns and delays in
                                      several major DOE projects.12 For example, in July 1997, we reported that
                                      DOE’s Pit 9 project, involving the cleanup of an inactive waste disposal pit
                                      at the Idaho National Engineering and Environmental Laboratory, was at
                                      least 26 months behind the original schedule and could potentially cost
                                      well over twice its original estimate of $200 million. Similarly, in May 1998,
                                      we reported that the Hanford Spent Fuel Storage project, involving the
                                      retrieval and storage of deteriorating nuclear fuel rods currently stored in
                                      water basins at DOE’s Hanford Site in Washington State, was over 4 years
                                      behind the original schedule and had almost doubled in cost to about
                                      $1.4 million.




                                      12
                                       Nuclear Waste: Department of Energy’s Project to Clean Up Pit 9 at Idaho Falls Is Experiencing
                                      Problems (GAO/RCED-97-180, July 28, 1997); Nuclear Waste: Management Problems at the Department
                                      of Energy’s Hanford Spent Fuel Storage Project (GAO/T-RCED-98-119, May 12, 1998).



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                     Finally, DOE’s ability to achieve the Paths to Closure goals could be
                     affected if the assumptions used to develop the report change. This could
                     add to field offices’ funding needs. For example, DOE acknowledges in the
                     report that $8.1 billion could be added to the Paths to Closure life cycle
                     estimate if the responsibility for waste generated after fiscal year 2000 is
                     kept in the cleanup program instead of being transferred to other DOE
                     programs responsible for generating the waste. Similarly, Paths to Closure
                     identifies another $8.7 billion that could be added to the life cycle estimate
                     if the cleanup program is given the responsibility for additional surplus
                     facilities.


                     We provided a copy of this report to DOE for its review and comment. DOE
Agency Comments      raised concerns that our report understated the benefits of the Paths to
and Our Evaluation   Closure strategy and focused too much on its limitations, which, it said,
                     are minor in comparison. Our report identifies a number of strengths and
                     benefits of the Paths to Closure document and acknowledges that it is an
                     improvement over prior planning efforts. However, part of our objective
                     was to provide information on the limitations and uncertainties that affect
                     the usefulness of the Path to Closure report. In our view, it is important for
                     readers of Paths to Closure to keep the limitations and uncertainties in
                     mind when using it for decision-making purposes. Nevertheless, we made
                     changes to our report and its title to better recognize the benefits of the
                     Paths to Closure strategy. The full text of DOE’s comments and our
                     response is in appendix I.


                     To identify concerns with the methodologies and assumptions used to
Scope and            develop the Paths to Closure report, we (1) interviewed DOE officials with
Methodology          responsibility for preparing the report and for the budget for the cleanup
                     program and (2) reviewed Paths to Closure documentation, including the
                     1998 national report and site-specific reports, the guidance for developing
                     the 1998 report, and the current guidance for developing the June 1999
                     update. To identify limitations on the usefulness of the Paths to Closure
                     report, we reviewed the document, contacted officials at 12 DOE cleanup
                     sites,13 and reviewed the stakeholders’ comments on the February 1998

                     13
                      These sites were the Hanford Site (Washington), Rocky Flats Environmental Technology Site
                     (Colorado), West Valley Demonstration Project (New York), Portsmouth Gaseous Diffusion Plant
                     (Ohio), Fernald Environmental Management Project (Ohio), Miamisburg Environmental Management
                     Project (Ohio), Brookhaven National Laboratory (New York), Lawrence Livermore National
                     Laboratory (California), Columbus Environmental Management Project - King Avenue (Ohio),
                     Columbus Environmental Management Project - West Jefferson (Ohio), Rulison (Colorado), and
                     Weldon Spring Site (Missouri). In selecting sites to contact, we obtained a mix of large sites (in terms
                     of budget and number of projects) and small sites, many of which are scheduled to be closed by 2006.



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Paths to Closure draft. To obtain budgetary information, we obtained and
analyzed funding data from DOE’s project baseline database. We conducted
our review from October 1998 through April 1999 in accordance with
generally accepted government auditing standards.


As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 14 days from the
date of this letter. At that time, we will make copies of this report available
to the Honorable Bill Richardson, Secretary of Energy, and the Honorable
Jacob Lew, Director, Office of Management and Budget. Copies will be
made available to others on request.

If you have any questions or need additional information, please contact
me on (202) 512-3841. Major contributors to this report were Chris
Abraham, Dwayne Curry, Rachel Hesselink, Nancy Kintner-Meyer, Tom
Perry, and Glen Trochelman.

Sincerely yours,




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




Page 12                        GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
Page 13   GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
Contents



Letter                                                                                              1


Appendix I                                                                                         16

Comments From the
Department of Energy
Figure                 Figure 1: Amount That the Projects’ Cost Estimates Exceed the               10
                         Annual $5.75 Billion Funding Target




                       Abbreviations

                       DOE       Department of Energy


                       Page 14                      GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
Page 15   GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
Appendix I

Comments From the Department of Energy


Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




                             Page 16   GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
                 Appendix I
                 Comments From the Department of Energy




See comment 2.




See comment 3.




See comment 4.




                 Page 17                         GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
                 Appendix I
                 Comments From the Department of Energy




See comment 5.




See comment 6.




See comment 7.




                 Page 18                         GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
               Appendix I
               Comments From the Department of Energy




               The following are GAO’s comments on the Department of Energy’s letter
GAO Comments   dated April 1, 1999.

               1. DOE’s comments provided a list of benefits of the Paths to Closure
               strategy. We acknowledged in our report that Paths to Closure has
               strengths and pointed out many of the same benefits that DOE listed in its
               comments. For example, we noted that, under Paths to Closure, DOE has
               for the first time set goals for completing the cleanup at each site and has
               surfaced challenges that need to be addressed to achieve those goals. Part
               of our objective was to provide information on the limitations and
               uncertainties in the Paths to Closure report. In doing this, we pointed out
               limitations and uncertainties of the report’s information that are important
               for a reader to keep in mind in using this document. In describing both the
               strengths and limitations of the Paths to Closure report, we identified the
               underlying issues that need to be considered when using Paths to
               Closure’s information for decision-making purposes. Nevertheless, we
               made changes to our report to better recognize the benefits of the Paths to
               Closure strategy.

               2. While DOE provided guidance on the cost and schedule information field
               offices should submit, no standard methodology for estimating projects’
               costs was specified. The guidance DOE cited in its letter says only, sites
               should use “an appropriate activity based cost estimating methodology.”
               As we pointed out in our report, some sites were less experienced than
               others in preparing cost estimates, including developing and using cost
               estimating techniques. We revised the report to clarify that DOE
               headquarters did not specify a standard methodology that sites should use
               for estimating cleanup costs.

               3. The Inspector General’s findings involving the seven projects caused the
               Inspector General to conclude that there were material weaknesses with
               the process DOE used to develop and validate the cost estimates. The
               weaknesses cited by the Inspector General were serious enough for that
               office to issue a qualified opinion on DOE’s fiscal year 1998 financial
               statement. DOE concurred with the report’s recommendations and
               indicated that it was actively working to improve the quality of the process
               for estimating environmental liabilities. In light of that and our own
               review, we believe that the reliability of the cost estimates in Paths to
               Closure is a limitation that needed to be raised. In addition, DOE noted in
               Paths to Closure that numerous stakeholders had raised concerns about
               the quality of the data when commenting on the February 1998 Paths to
               Closure draft. DOE said—and we pointed out in our report—that the



               Page 19                         GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
Appendix I
Comments From the Department of Energy




agency is planning to take steps to improve the quality and consistency of
the data. We added information to our report to clarify aspects of the
Inspector General’s findings and the activities that DOE is planning.

4. We agree that when cleanup standards are not known, cost estimates
can only be based on assumptions. However, as we stated in our report,
these assumptions are uncertainties that will likely result in the Paths to
Closure cost and schedule estimates being revised as more becomes
known. In addition, the majority of DOE’s sites—41 of 53—are scheduled to
be closed by 2006, not in 40 or 50 years as DOE states in its letter. Some
sites—due to finish their cleanup work in less than 7 years—are still
negotiating their cleanup levels. We cited the West Valley Demonstration
Project, due to close by 2005, as an example of one of the sites for which
the level of cleanup to be achieved is still being negotiated and could range
from no further cleanup to much stricter standards. Site estimates will
likely be revised as cleanup levels are agreed to. Therefore, we noted such
situations as an uncertainty in the Paths to Closure estimates and made no
changes to our report as a result of DOE’s comment on this point.

5. As DOE points out, the $147 billion life cycle estimate includes an
estimated $4 billion in costs associated with activities that will be required
after a site has completed its cleanup work. In addition to this amount, one
site we contacted estimated its long-term costs at more than $1.5 billion.
These costs were not included in its Paths to Closure estimate. In total,
this represents more than $5.5 billion in long-term costs for about 50
percent of DOE’s sites, a figure that is likely to be higher once estimates
from all of the sites are included. While these costs will be spread over a
20- to 30-year period, we believe that $5.5 billion is a significant cost. We
made no changes to our report as a result of DOE’s comments on this point.

6. As DOE acknowledges, it faces challenges in trying to meet the Paths to
Closure goals with a $5.75 billion annual funding target. In addition to the
challenges of closing the funding gap between the sites’ needs and the
annual funding target described by DOE in Paths to Closure, we provided
information in our report on other challenges, such as overcoming the
tendencies toward delays and cost increases that major DOE projects have
historically experienced. Because these challenges have potential budget
implications, we pointed them out as limitations that a reader needs to
keep in mind in understanding the costs of the cleanup program. We made
no changes to our report as a result of DOE’s comments on this point.




Page 20                         GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
           Appendix I
           Comments From the Department of Energy




           7. We were asked to focus on the limitations and uncertainties of the Paths
           to Closure report that affect its usefulness. Although that was our focus,
           we also reported on the strategy’s strengths. We have changed the title of
           our report to better express this message.




(141257)   Page 21                         GAO/RCED-99-129 DOE’s Accelerated Cleanup Strategy
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