oversight

Department of Energy: Cost Estimates for the Hanford Tank Waste Remediation Project

Published by the Government Accountability Office on 1999-05-19.

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

        United States
GAO     General Accounting Office
        Washington, D.C. 20548

        Resources, Community,      and
        Economic Development       Division


        B-282669


        May 19,1999


        The Honorable Richard (Dot) Hastings
        House of Representatives

        Subject: Detxulment of Energv: Cost Estimates for the Hanford Tank Waste
        Remediation Proiect

        Dear Mr. Hastings:

        This report responds to your February 1999 request that we explain the differences
        between our 1998 report on the Department of Energy’s (DOE) Hanford Tank Waste
        Remediation project’ and a 1998 report on the same project prepared by the Pacific
        Run Enterprise Center (Pacific Rim), a nonprofit organization.2 The two reports
        reached substantially different conclusions about the growth in costs for the tank
        waste project. We reported that the project’s costs grew from about $4.3 billion to
        $8.9 billion, an increase of 110 percent. Pacific Rim reported that the project’s costs
        grew from about $6 billion to $6.9 billion, an increase of only 15 percent.

        In summary, the two estimates of cost growth differed primarily because the two
        studies had different objectives and thus measured different aspects of the project.
        Our objective was to document how the project as a whole had changed from its
        original plan. Pacific Rim’s objective was to identify significant changes between
        the current contract DOE signed in August 1998 and earlier contracts DOE signed in
        1996 with two contractor teams. Because of these different objectives, each study
        used a substantially different approach to evaluate the project’s cost estimates and
        support costs.




        ’NuclearWaste: Denartmentof Energv’sHanford Tank Waste Project-Schedule, Cost. and
        ManagementIssues(GAO/RCED-99-13,Oct. 8, 1998).

      , * The 1998U.S. DOE-BNFLContractto Treat and Immobilize Hanford’s RadioactiveTank Waste:
        A Critical Analvsis,Pacific Rim EnterpriseCenter(Sept. 1998). Pacific Rim preparedits report at the
        requestof the WashingtonStateDepartmentof Ecology, a regulator of cleanupactivities at the
        Hanford Site.


                                               GAO/RCED-99-188R, Hanford Tank Waste Project Costs
B-282669


Background

One of the most diEcult challenges at the Hanford Site in Washington State involves
the cleanup of 177 underground storage tanks holding highly radioactive liquid
waste, sludge, and other materials. In 1996, DOE decided it would immobilize from
6 to 13 percent of the radioactive liquid waste stored in the underground tanks
through competitively awarded, fixed-price contracts3 DOE’s initial contracting
plan was to purchase services to treat waste from one or more contractors after the
contractors had designed, financed, constructed, and begun operating the waste
treatment facilities. Late in fiscal year 1996, DOE awarded contracts to two
competing contractor teams to develop design proposals. In August 1998, after an
initial design phase, DOE decided to continue with only one team and entered into a
fixed-price contract with BNF’L, IIIC.~ The purpose of the contract was to finish
 designing and to build and operate permanent facilities to treat about 10 percent of
 Hanford’s tank waste. DOE and BNFL agreed on a target price per unit for the
 contract and planned to negotiate a fixed price per unit for the contract in mid-2000.

Different    Objectives    Affected     Reporting    of Project’s      Costs

The two studies had different objectives, which led to significant differences in
measuring the project’s costs. Our objective was to document how the project as a
whole had changed from the original plan. Pacific Rim’s objective was to identify
simcant     changes between the current contract DOE signed in August 1998 and
earlier contracts DOE signed in 1996 with two contractor teams. As shown below,
the different objectives resulted in two substantially dif!ferent approaches to
evaluate the project’s initial cost estimates and support costs. (See table 1.)

Table 1: Cost Elements Evaluated Differently in the Two Reports

Cost element                          GAO report                         Pacific Rim report
Initial cost estimates                Used the official cost             Calculated an estimate of
                                      estimates DOE reported to          the project’s costs using the
                                      the Congress between 1996          1996 contracts with two
                                      and 1998.                          contractors and all contract
                                                                         options.
Project’s support costs               Included the support costs         Did not include the support
                                      in both the initial and the        costs in either cost
                                      revised cost estimates to          estimate.
                                      show the project’s total
                                      costs.

 In evaluating the initial cost estimate, we identified DOE’s initial approach and
 related costs as reported to the Congress and compared them with the project’s
 scope and costs as reflected in the contract signed with BNF’L in August 1998. In
 contrast, Pacific Rim calculated its own initial estimate of the project’s waste

 3 DOE plannedto convert the wasteto a glasslike form through a processcalled vitrification.

 ’ DOE’s reasonsfor changingits approachto the project are detailed in our 1998 report.


                                       GAOIRCED-99-188R,     Hanford   Tank Waste Project   Costs   2
                                                                                             P
B-282669


processing costs, assuming that two contractors would process the same volume of
waste that BNF’L has agreed to process, and compared this estimate with the costs
as reflected in the August 1998 contract with BNFL Pacific Rim’s senior consultant
considered this computation appropriate because it reflected the cost to process a
volume of waste similar to the volume BNF’L plans to process under the August 1998
contract. However, the initial cost estimate of $6.02 billion developed by Pacific
Rim was not an official DOE cost estimate. DOE’s manager for the project told us
that he does not agree with the $6.02 billion cost estimate because it was based on
assumptions DOE never made about the volume of waste that two competing
contractors would actually process.

The project’s support costs are those costs that DOE will need to pay in addition to
the amounts it pays to BNF’L for successfully processing the waste. These include
the costs of infrastructure, such as roads, utilities, and site preparation work, and of
other support activities, such as characterizing, retrieving, and staging the waste for
delivery to BNF’L. The cost estimates for these activities nearly doubled, from about
$1 billion to $1.97 billion, between DOE’s initial and revised cost estimates. We
included the project’s support costs in our report because doing so was consistent
with our objective to document how the project as a whole had changed from its
original plan. In contrast, Pacific Rim focused only on DOE’s contract for waste
processing services and excluded the project’s support costs.

To ensure that our October 1998 report was factually accurate and to obtain DOE’s
comments, we provided a draft of the report to DOE. DOE generally agreed with the
report’s conclusions and recommendations, including our description of the
project’s cost growth. We included DOE’s comments as an appendix to our report.



To determine why the two reports on the Hanford Tank Waste Remediation project
had different cost growth estimates, we reviewed both reports and interviewed
Pacific Rim’s senior consultant and DOE’s tank waste project manager. Our review
was performed from April through May 1999 in accordance with generally accepted
government auditing standards.

Please call me at (202) 512-8021if you or your staff have any further questions.

Sincerely yours,




Energy, Resources, and
 Science Issues




                                GAO/RCED-99-188R,   Hanford Tank Waste Project   Costs   3
.:
Ordering    Information

The first copy of each GAO report and testimony is free.
Additional  copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent    of Documents, when
necessary. VISA and Mastercard     credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting    Office
P.O. Box 37050
Washington, DC 20013                                                   E




or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony.   To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information         on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s’ World Wide Web Home Page at:

http9www.gao.gov
United States
General Accounting  Office
Washington, D.C. 20548-0001

Official   Business
Pen&y      for Private   Use $300

Address    Correction    Requested