Improving Project Management - Energy

ImprovingProjectManagement

ReportoftheContractandProjectManagementWorking

Group

November2014

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TABLEOFCONTENTS1. Foreword...........................................................................................................................................................................2

2. ExecutiveSummary......................................................................................................................................................3

2.1SummaryofRecommendations............................................................................................................................4 3. Introduction.....................................................................................................................................................................6

4. Background......................................................................................................................................................................7

4.1ProjectManagementOrders/Requirements....................................................................................................7 4.2SummaryofDOEProjectCharacteristics..........................................................................................................9 4.3ProjectManagementIssuesAtDOE.....................................................................................................................9 4.4RecentEffortsToImproveProjectManagement.........................................................................................12

5. FactorsContributingtoaProject’sSuccessorFailure.................................................................................15

5.1Ownership,Accountability,Responsibility,andAlignment....................................................................15 5.1.1Description..........................................................................................................................................................15

5.1.2ObservationsfromPreviousorOngoingProjects...............................................................................16

5.1.3CaseStudy:ScienceSpallationNeutronSource...................................................................................17

5.1.4Recommendations............................................................................................................................................18

5.2Front‐EndPlanning..................................................................................................................................................19 5.2.1Description..........................................................................................................................................................19

5.2.2ObservationsfromPreviousorOngoingMajorSystemProjects..................................................20

5.2.3CaseStudy:MixedOxideFuelFabricationFacilityProject.............................................................21


5.3Funding..........................................................................................................................................................................23 5.3.1Description..........................................................................................................................................................23

5.3.2ObservationsfromPreviousandOngoingProjects............................................................................26

5.3.3CaseStudy:CorrectiveActions–CanondeValleatLosAlamos,NewMexico.........................27


5.4IndependentOversight...........................................................................................................................................28 5.4.1Description..........................................................................................................................................................28

5.4.2:ObservationsFromPreviousandOngoingProjects.........................................................................29

5.4.3CaseStudy:BevatronDemolitionProject...............................................................................................30

5.4.4CaseStudy:WasteTreatmentandImmobilizationPlantProject.................................................31


6. AchievingaCulturethatEnablesConsistentlyAcceptableProjectOutcomes...................................34

7. References.......................................................................................................................................................................36

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1. FOREWORDThisreportwaswrittenbytheContractandProjectManagementWorkingGroup,whichwasformedattherequestofSecretaryofEnergyErnestMonizinAugust2013toanalyzeprojectmanagementissuesattheU.S.DepartmentofEnergy(DOE).TheworkinggroupischairedbyaSeniorAdvisortoSecretaryMonizandincludesagroupofseniorprojectmanagementleadersfromthefollowingoffices:

OfficeoftheSecretary LoanProgramsOffice NationalNuclearSecurityAdministration OfficeofAcquisitionandProjectManagement OfficeofEnvironmentalManagement OfficeofManagementandPerformance OfficeofScience

ThepurposeoftheContractandProjectManagementWorkingGroupistoimproveprojectmanagementexecution.Tothatend,thisreportreflectsfrankanalysisofanumberofissuessurroundingprojectmanagement,andofferspotentialrecommendationsforaddressingsuchissues.ThereportisnotadecisionmemobyDOE.Theobservationsandrecommendationsinitareintendedforfurtherconsiderationbyseniordepartmentalofficials.

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2. EXECUTIVESUMMARYAttherequestofSecretaryofEnergyErnestMoniz,theContractandProjectManagementWorkingGroupwasformedinAugust2013toanalyzeprojectmanagementissuesattheU.S.DepartmentofEnergy(DOE).Thegrouphasmetbiweeklytoevaluatefactorsthatcontributetoprojects’successorfailureanddeveloprecommendationsforimprovement.TheContractandProjectManagementWorkingGroupidentifiedfourkeyfactorsthatcontributetoprojectmanagementsuccessorfailureatDOE:

Ownership,accountability,responsibilityandalignment Front‐endplanning Funding Independentoversight

Ownership,accountability,responsibilityandalignment.Unclearownershipcreatesaculturewhereeveryoneisinchargebutnooneisresponsible.Thisgeneratesaproblemforsuccessfulprojectexecution.Instead,anownershouldbeestablishedwithaclearsetofresponsibilities,helpingtoensurechecksandbalancesbyoverseeingaprojectandtheteam.TheconceptofownershipvariesacrossDOE.FortheOfficeofScience,onepersonownstheprojectfromstarttofinish.FortheOfficeofEnvironmentalManagementandtheNationalNuclearSecurityAdministration,ownershipchangesovertheproject’slifecycle.Thisreportdiscussesestablishingadepartmentalprojectmanagementorganizationsolelyresponsiblefordeliveringcapitalconstructionandenvironmentalremediationprojects.Front‐endplanning.Insufficientfront‐endplanningconsistentlycontributestocostincreasesandscheduledelaysacrossDOE.Focusareascriticaltothefront‐endplanningprocessincludeensuringthatscopeandtechnicalspecificationsarewelldefinedanddocumented,andthatdesignissufficientlymaturebeforebaselining.DOEprojectsincludesmallprojectsandmajorsystemprojects,anditisimportanttodistinguishbetweenthemduringtheplanningprocess.Funding.Inadequatefundinghasledtoprojectsfailingtomeetinitialbaselines.ThisoccursacrossallprogramofficesatDOE.Adequatecontingency,fundingstability,andaccurateprojectcostandscheduleestimatesarekeyconsiderationsinthefundingprocess.Likefront‐endplanning,majorsystemprojectsshouldbedistinguishedfromsmallerprojects.Independentoversight.Lackofindependentoversightcreatesproblemsinsuccessfullyexecutingprojects.Again,thisoccursacrossallprogramofficesatDOE.Independentoversightthroughpeerreviews,independentreviews,andself‐assessmentsshouldaddvalueandbenefittheproject,theprogram,andDOEasawhole.Inadditiontothefourabove‐mentionedfactorsdrivingprojectfailureorsuccess,andembeddedwithineach,istheneedtochangeDOE’sprojectmanagementculture.DOE

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strivestoachieveaculturethatenablessuccessfulprojectoutcomes,andshouldthereforetransformitsculturetooneofcollaborativeproblemsolvingandtransparency.

2.1SUMMARYOFRECOMMENDATIONSThereport’skeyrecommendationsinclude:

Considerestablishingadepartmentalprojectmanagementorganization—withappropriateskillsandstaffing—thatissolelyresponsiblefordeliveringcapitalconstructionandenvironmentalremediationprojectsforallprogramoffices.ThisapproachwouldbesimilartotheDepartmentofDefense,U.S.ArmyCorpsofEngineersandNavalFacilitiesEngineeringCommandmodels.(Note:Onememberofthegroupexpressedsignificantconcernswiththisrecommendation,whicharedescribedinthereport’stext).

TakestepstoensureDOEfollowstherequirementsofDOEOrder413.3Bandmaketheprovisionsprovidedinall413.3guidesmandatory.

Establishclearroles,responsibilitiesandaccountabilitiesamongtheowner,the

project’slinemanagementorganizationalelements,andsupport/stafforganizations.TheseshouldbecodifiedwithintheProjectExecutionPlan.

Haveprogramofficesanalyzealternatives,independentofthecontractororganizationresponsibleforconstructingthecapitalfacility.

Developdesignmanagementplansandpreliminaryperformancebaselinesformajorsystemprojects,andreportprogress(inaccordancewithDOEOrder413.3B,inadvanceofCriticalDecision(CD)‐2).

SimilartopostCD‐1projects,conductprojectpeerreviewsannuallybetweenCD‐0andCD‐1foractiveprojects(projectsthataresupportedinannualbudgetsandthathavenotbeenofficiallyplacedina“hold”status),unlessmorefrequentreviewswouldbeappropriateperthesponsoringprogramortheAcquisitionExecutive.

RequireestimatesforProjectEngineeringandDesign(PED)funds.

LimitPEDdurationtotwoyearsforprojectswithatotalprojectcostunder$100million.

RequiremonitoringoftheexpenditureofPEDfundsforthemanagementdesignplansofallcapitalprojectsmanagedunderDOEOrder413.3B.

Developanintegratedprioritylistofcapitalprojects.Communicatethosepriorities

acrossthecomplexinfiscalguidanceissuedeachFebruaryaspartofthePlanning,Programming,BudgetingandExecutionprocess,andreflecttheminannualbudgetdecisions.

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Definepolicyforfullfundingauthorityforprojects,basedonneed,risk,andmission.

Providefullfundingforallprojectsunder$50million.

Requireallcapitalassetprojects,regardlessoffundingsource,provideaProjectDataSheetwithcostbaselineandfundingprofileinformation/commitments.

ReconstitutetheEnergySystemsAcquisitionAdvisoryBoardprocess(orsimilar)asprovidedforinDOEOrder413.3B.EachAcquisitionExecutiveroleshouldbedelegatedtoUnderSecretary‐level.

EstablishaPortfolioReviewBoardtoprovideanindependentassessmentofthestrengths,weaknesses,andriskprofilesofallmajorcapitalprojects.

ImplementanIndependentOversightreviewteamtoprovideanindependentauditfunctionreportingtotheSecretarialAcquisitionExecutive.

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3. INTRODUCTIONOverthelasttwodecades,theU.S.DepartmentofEnergy(DOE)hasexperiencedsignificantmanagementchallengesassociatedwithpastandongoingDOEprojects.Ithasconsistentlyfacedproblemsmanagingprojectsandprograms,leadingtocostincreasesandscheduledelays.DOEhasbeencriticizedbystakeholders,includingCongressandtheU.S.GovernmentAccountabilityOffice(GAO),whichhasplacedDOEonitsHigh‐RiskListsince1990.TheHigh‐RiskListincludesagenciesandprogramareasthatarehighriskbecauseoftheirvulnerabilitiestofraud,waste,abuse,andmismanagement,orareinneedoftransformation.Thislistisupdatedeverytwoyears,oratthestartofanewCongress.WhileDOEhasmadesomeprogressinimprovingprojectmanagementandGAOremovedDOE’ssmallerprojectsfromtheHigh‐RiskList,muchremainstobedone.Toaddresstheseissuesandtoenhancetheprobabilityofprojectexecutionsuccess,SecretaryofEnergyErnestMonizestablishedaspecialworkinggroupinAugust2013toanalyzefactorsthatcontributetothesuccessorfailureofDOEprojectsandrecommendchangestoimproveprojectperformance.TheContractandProjectManagementWorkingGroupisaninternalDOEbody,headedbyaSeniorAdvisortotheSecretary,thatincludesprojectmanagementexpertsfromthefollowingoffices:LoanProgramsOffice,theNationalNuclearSecurityAdministration(NNSA),OfficeofAcquisitionandProjectManagement,OfficeofEnvironmentalManagement,OfficeofManagementandPerformance,andOfficeofScience.Theseindividualsexpressedtheirownviews,andnotnecessarilythoseoftheirrespectiveoffices.ThisanalysisofDOEprojectsprovidesadeeperunderstandingofDOE’sprojectmanagementstrengthsandweaknesses.ThisreportdescribessuccessesandfailuresofDOEprojectswhilehighlightingprimaryfactorsforsuccessfulprojectcompletion.Theessentialfactorsthatareaddressedincludeownership,front‐endplanning,funding,andindependentoversight.Throughoutthereport,theworkinggroupprovidesobservationsofpreviousandongoingprojects,describescasestudiesforillustration,andprovidesrecommendationsforimprovement.

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4. BACKGROUND4.1PROJECTMANAGEMENTORDERS/REQUIREMENTSDOE’sprojectmanagementpolicy,DOEOrder413.3B,ProgramandProjectManagementfortheAcquisitionofCapitalAssets,andtheprovisionsincludedinthe413.3guides,provideguidanceforprojectmanagementexecutionatDOE.However,theyareoftennotwellunderstood,followed,orenforced.DOEOrder413.3BwasreleasedonNovember29,2010,byDeputySecretaryofEnergyDanielPonemanasaresponsetobothcongressionaldirectionandcriticismfromtheGovernmentAccountabilityOfficeandOfficeofManagementandBudget.TheupdateincludesimprovementstocontractandprojectmanagementpoliciesrecommendedbyareviewcommitteeofDOEandNNSAfederalemployeesandcontractors.IttakesintoaccountFY2008RootCauseAnalysisandCorrectiveActionPlaninitiatives,2010DeputySecretaryProjectManagementPolicies,andFY2011ContractandProjectManagementImprovementExecutiveSteeringCommitteepolicies.DOEOrder413.3BstatesthatDOE’sultimateprojectmanagementgoalisto“delivereveryprojectattheoriginalperformancebaseline,onschedule,withinbudget,andfullycapableofmeetingmissionperformance,safeguardsandsecurity,qualityassurance,sustainability,andenvironmental,safety,andhealthrequirements.”Theorderdevelopsaframeworkwithrequirementsfordifferentprojectphasestoachievethisgoal,andidentifiesrolesforprojectteamsandleaders.Withintheorder,theDOEAcquisitionManagementSystem(Figure1)“establishesprinciplesandprocessesthattranslateuserneedsandtechnologicalopportunitiesintoreliableandsustainablefacilities,systems,andassetsthatprovidearequiredmissioncapability.”Withinthesystem,projectphasesincludeinitiation,definition,execution,andcloseout.TheseprojectphasesarefurtherbrokendownwithCriticalDecision(CD)points.AtDOE,projectsgenerallytransitionthroughfiveCDs.InCD‐0,theproject’smissionneedisapprovedanditisdecidedthatthereisaneedthatcannotbemetwithothermaterialmeans.InCD‐1,thealternativeselectionandcostrangeisdecided,andinCD‐2theproject’sperformancebaselineisapproved.InCD‐3,theproject’sconstructionandstartisaccepted,andCD‐4approvesthestartofoperationsandprojectcompletion.EachCriticalDecisionpointrepresentsamilestoneintheproject’sexecutionandincludesseveralrequirementsforfulfillment.

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Figure1.TypicalDOEAcquisitionManagementSystem

Theorderalsodistinguishesbetweenmajorandnon‐majorsystemprojects,settingdifferentrulesforeach.Majorsystemprojectsareprojectswithatotalprojectcostgreaterthan$750million,andnon‐majorsystemprojectsarethosebelow$750million.SupplementalguidancetoDOE’sacquisitionandprojectmanagementordershasbeenissuedinaseriesofguides,whicharepartoftheDOEDirectivesProgram.TheseguidesrepresentbestpracticesforimplementingDOErules;however,theyarenotrequirements,andapplicationoftheguides’processesisnotuniformacrossthecomplex.DOEguidesrelevanttoprojectmanagementandhighlightedthroughoutthisreportinclude:

DOE413.3‐4A:TechnologyReadinessAssessmentGuide:AssistsindividualsandteamsinvolvedinconductingTechnologyReadinessAssessmentsanddevelopingTechnologyMaturationPlansfortheDOEcapitalassetprojectssubjecttoDOEOrder413.3B.

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DOE413.3‐7A:RiskManagementGuide:Providesnon‐mandatoryriskmanagementapproachesforimplementingtherequirementsofDOEOrder413.3B,ProgramandProjectManagementfortheAcquisitionofCapitalAssets.

DOE413.3‐12:TheU.S.DepartmentofEnergyProjectDefinitionRatingIndexGuideforTraditionalNuclearandNon‐NuclearConstructionProjects:Helpsteamsinvolvedinconductingassessmentsofprojectdefinition(e.g.,howwellhasfront‐endplanningbeenconductedtodefinetheprojectscope)usinganumericalprojectmanagementtoolcalledtheProjectDefinitionRatingIndex.

DOE413.3‐21:CostEstimatingGuide:ProvidesuniformguidanceandbestpracticesdescribingthemethodsandproceduresthatcouldbeusedinallprogramsandprojectsatDOEforpreparingcostestimates.

Inaddition,thereareotherDOEstandardsthatimpactprojectmanagement,suchas:

DOEStandard1189‐2008,IntegrationofSafetyintotheDesignProcess:ProvidesguidanceonaprocessofintegrationofSafety‐in‐Designintendedtoimplementtheapplicableintegratedsafetymanagementcorefunctions.Thesecorefunctions–definingthework,analyzingthehazards,andestablishingthecontrols–arenecessarytoprovideprotectiontothepublic,workers,andtheenvironmentfromharmfuleffectsofradiationandothertoxicandhazardousaspectsattendanttothework.

4.2SUMMARYOFDOEPROJECTCHARACTERISTICSDOEhassomeofthelargest,mostcomplex,andtechnicallychallengingprojectsinthepublicorprivatesector,whichincludeuniqueinitiativesandcutting‐edgetechnology.DOEnationallaboratoriesandsitesperformcriticalmissionsthatincludemaintainingthenuclearweaponsstockpile,cleaningupthelegacyoftheManhattanproject,andconductingsomeoftheworld’smostsophisticatedscientificresearchactivities.Thediverseprojectportfolioincludesbasicscience;energysystemsresearchanddevelopment;nuclearweaponsdevelopmentandstewardship;environmentalrestoration;contaminatedandcomplexfacilitydeactivationanddecommissioning;andradioactiveandhazardouswastemanagement.OneofDOE’smainproblemshasbeensuccessfullycompletingnuclearfacilitiesconstructionprojectsandnuclearwastecleanupprojects,sincethenuclearindustrialbaseintheU.S.hasbeenerodingfordecades.Fewothergovernmentorprivatesectororganizationsarechallengedbyprojectsofthismagnitude,diversity,orcomplexity.Tocompletetheseprojectsonschedule,withinbudget,andinscope,DOEmustemployhighlydevelopedanddisciplinedprojectmanagementcapabilities,processes,andprocedures.4.3PROJECTMANAGEMENTISSUESATDOEInadequateprojectmanagementandcontractoroversighthaveplacedDOEonGAO’sHigh‐RiskListforovertwodecades,causingDOEtoreceiveconsistentscrutinyfromCongress,

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theGovernmentAccountabilityOffice(GAO),andtheOfficeofManagementandBudget.DOEseniormanagementcontinuallystrivestoimproveprojectmanagement,andwhilesignificantprogresshasbeenmade,manyofDOE’shigh‐visibility,high‐cost,andtechnicallycomplexprojectscontinuetoencountermaterialcostincreasesandscheduledelays.Toidentifythesystematicchallengesofplanningandmanagingprojects,DOEconductedaRootCauseAnalysisworkshopinOctober2007.Theworkshophelpedidentifythe10mostsignificantissuesDOEfacesinmanagingcontractsandprojects.TheseissueswerepublishedinanApril2008DOEreport,U.S.DepartmentofEnergyContractandProjectManagementRootCauseAnalysis.TheworkshopconcludedDOE’sgreatestchallengewasinsufficientfront‐endplanningbeforeestablishingprojectperformancebaselines.Remainingkeyissuesincludedalackofskilledpersonnel,funding,acquisitionstrategies,prematurecontracts,DOE’sorganizationalstructure,inconsistentadherencetoprojectmanagementpolicies,oversight,andDOE’sinabilitytoexecuteprojectownership.In2008,CongressdirectedDOEtodevelopanactionplantoremoveitfromtheHigh‐RiskListandspecificallyaddressnuclearfacilitysafety,design,andconstructionissuesrelatedtotechnologyreadinessandseismicriskmitigation.InJuly2008,aDOEreport,U.S.DepartmentofEnergyContractandProjectManagementRootCauseAnalysisCorrectiveActionPlanhighlightedDOE’seffortstoaddresssignificantprojectmanagementissuesandtheirrootcauses.BasedonDOE’sprogress,GAOnarrowedthescopeofthehigh‐riskdesignationin2009,removingtheOfficeofScienceandfocusingonNNSAandEnvironmentalManagement.MajorimprovementswereinstitutedinDOEOrder413.3BanddocumentedintheU.S.DepartmentofEnergyContractandProjectManagementRootCauseAnalysisandCorrectiveActionPlanClosureReport.Notabledevelopmentsincluded:

Establishingadepartment‐wideprojectsuccessstandard1andanindependentcentralrepositoryto(1)determinewhetherthestandardhadbeenmet,and(2)monitorandmaintainnumerousprojectmanagementmetrics.

Improvingfront‐endplanningusingindustrystandardpractices(1)requiring

sufficientdesignmaturitypriortoestablishingperformancebaselines,and(2)dividinglargeprograms/projectsintosmaller,standaloneprojectstoimproveprojectdefinition,reducetimehorizonsandrisk,andstabilizefunding.

Developingadepartmentalprojectteamstaffingmodelandguidetohelpdetermine

andassessprojectstaffsizeandrequiredskillsetacrosstheprojectlife. EstablishingprojectfundingstabilitybyrequiringAcquisitionExecutiveapprovalof

anychangestothefundingprofilesestablishedatCD‐2.Thishelpstoensure1 The Project Success standard is defined as a project completed within the original approved scope baseline, and within 10 percent of the original approved cost baseline at project completion, unless otherwise impacted by a directed change.

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adherencetobaselinefundingprofilesforincrementally‐fundedprojectsinannualbudgetrequests.

Implementingnewrequirementsfor(1)independentcostestimatesand

independentcostreviewsforprojectscosting$100millionormoreatCDs1,2,and3,and(2)independentcostreviewsatCD‐0forwhatareexpectedtobemajorsystemprojectscosting$750millionorgreater.

DeployingamorerobustProjectAssessmentandReportingSystem,allowingfor

directuploadofcontractorprojectperformancedatathateliminateserrorsanddelaysinherentintheoriginalsystem,therebyenhancingdatareliabilityandinformeddecision‐making.

ImplementingProjectPeerReviewsacrossthecomplextobettermonitorproject

developmentandexecutionandfostersharingofdesign,procurementandconstructionlessonslearned.ThisisasuccessfulbestpracticeemployedbytheOfficeofScience.

FollowingtheissuanceoftheRootCauseAnalysisandCorrectiveActionPlan,theDeputySecretaryconvenedaDOEContractandProjectManagementSummitinDecember2010todiscussfurtherstrategiesforimprovementtocontractandprojectmanagement.ParticipantsincludedrepresentativesfromDOEprogramoffices,fieldoffices,andheadquartersinvolvedinmanaginglargeDOEprojects,aswellasDOEcontractorrepresentatives.Subsequently,teamsmembersacrossDOEconvenedtoaddresssixbarrierstoimprovedperformance:(1)projectandcontractalignmentandchangecontrol;(2)contractadministrationandoversight;(3)program/projectprioritizationandfundingalignment;(4)rolesandresponsibilities;(5)accountability;and(6)adequateprojectmanagementstaffing.Asaresult,GAOacknowledgedinFebruary2011thatDOEmetthreeofitsfivecriteriarequiredbeforehigh‐riskdesignationscouldberemoved.Figure2showstheGAOscorecardwiththefivecriteriaforremovingagenciesfromtheHigh‐RiskList.

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Figure2.GAOHigh‐RiskListScorecard

4.4RECENTEFFORTSTOIMPROVEPROJECTMANAGEMENTOverthelastfewyears,DOEhasdevotedadditionalattentiontoimprovingcontractandprojectmanagementdeficienciescitedbyGAO.Invariousmeetingsandsummits,theDeputySecretaryhasengagedDOEseniorexecutivesresponsibleforcontractandprojectmanagement,seniormanagers,subjectmatterexperts,andseniorexecutivesfromthecontractingcommunitytosystematicallyidentifytherootcausesandimplementcorrectiveactionsnecessarytoimprovecontractandprojectmanagementperformance.InMay2012,theOfficeofAcquisitionandProjectManagement(APM)wascreated.APMmergedtheprojectandcontractmanagementoversightofficesoftheOfficeofManagement,theOfficeofEngineeringandConstructionManagement,andtheOfficeofProcurementandAssistanceManagement.However,projectmanagementresponsibilitiesarespreadoutacrossallDOE’sprogramofficesanddonotalwaysfallwithintheOfficeofAcquisitionandProjectManagement.DOE’sAPMorganizationsworktocollaborativelyaddressimprovementinitiatives,suchas:

Emphasizingprojectownership.Providingdedicatedacquisition,projectmanagement,andindependentoversightensuresprojectsareeffectivelymanagedwithintheapprovedcontracts,projectbaselines,andmissionrequirements.

Establishingin‐housecostestimatingcapabilities.Thisstrengthensalternativeassessmentsandtotalprojectcostrealism.

Assistingindevelopingessentialprojectrequirements.Thisenablesmorefixed‐pricecontractsorsubcontracts.

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Leveragingenterpriseresources.Thisallowsforcloseroversightofcontractorperformance.

Improvingtheuseofthepastperformancesystem.Thisensuresthatcontractor’sperformanceisasignificantfactorinfuturecontractawarddecisions.

Integratingdepartment‐widepolicies,regulations,standards,andprocedurespertainingtoacquisition,programandprojectmanagement.

BoththeOfficeofEnvironmentalManagement(EM)andOfficeofScience(SC)projectmanagementofficesfalloutsidethescopeofDOEAPM.Forbothprogramoffices,projectmanagementresponsibilitiesarespreadout.ProjectmanagementsupportofficesinEMandSC:

Providebothassistancetotheprojectteamsandindependentoversightofprojectsonbehalfoftheirrespectiveprograms;

Managetheimplementationofprojectmanagementrequirements;

ServeastheSecretariatforProgramAcquisitionAdvisoryBoard;

CoordinateCDprocesses;

ConductquarterlyreviewsforprojectswheretheprogramsecretarialofficeristheAcquisitionExecutive;

Developprogram‐specificguidance,policies,andproceduresforprojectmanagement;

Managethelessonslearneddisseminationprocess;

Conductprojectpeerreviews;

LeadEarnedValueManagementSystemCertificationreviewsofcontractorswithprojectsbelow$100million;

Ensurethedevelopmentofacompetent,professionalprojectmanagementworkforce;and

SupportthefederalprojectdirectorsintheirProjectManagementCareerDevelopmentProgramcertificationprocess.

In2011,NNSAestablishedtheOfficeofAcquisitionandProjectManagement,ledbyahighlyqualifiedandexperiencedcareerprojectmanager.ConsistentwiththerecommendationsoftheNationalResearchCouncil,thisorganizationisresponsibleforprovidingprojectmanagementsupporttotheNNSAprogramoffices.ThisarrangementrelievestheNNSADeputyAdministratorsfrommaintainingtheirownprojectmanagementcapabilitiesandallowsthemtofocusontheircentralresponsibilities.Toassurehighlycrediblecostestimates,NNSAissuedapolicymemodatedAugust9,2012,requiringnuclearprojectstoachieve90percentdesigncompletionbeforeapprovingtheproject’sCD‐2performancebaseline.InGAO’sFebruary2013High‐RiskListupdate,GAOacknowledgedDOE’scontinuousimprovementincontractandprojectmanagementby

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shiftingthefocusofDOE’shigh‐riskdesignationtomajorcontractsandprojectsexecutedbyNNSAandEMwithvaluesof$750millionorgreater.TheContractandProjectManagementWorkingGrouphasidentifiedafurtheropportunityforimprovingDOE’sprojectmanagement.RecentbudgetchallengessignificantlyreducedDOE’sprojectworkload,andtheprojectsarespreadoutacrossmultipleprogramofficesasdiscussedabove.In2008,thenumberofactive(post‐CD‐2)capitalassetprojectsinexecutionnumberedover120,withatotalmonetaryvalueofabout$65billion.Since2008,evenwiththeinfluxofRecoveryActdollarsin2009,thecapitalassetworkloadhasbeenindecline.Today,thereare39active(postCD‐2)projectsbeingexecuted,withatotalmonetaryvalueofabout$27billion.Thistrendisexpectedtocontinue,duetotheanticipatedfiscalenvironmentinthenextfiveyears.Inthatcontext,theremaybeanopportunitytoconsidertransformationalorganizationalchangesthatwouldconcentratethebestandbrightestprojectmanagersonthisreducedworkload.ByleveragingthebestpracticesofDOEintooneconstructthatconsolidatesDOE’sprojectmanagementexperience,DOEcouldsignificantlyimproveprojectmanagementandprojectexecution.

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5. FACTORSCONTRIBUTINGTOAPROJECT’SSUCCESSORFAILURE5.1OWNERSHIP,ACCOUNTABILITY,RESPONSIBILITY,ANDALIGNMENT5.1.1DESCRIPTIONClearownershiphelpsdrivesuccessfulprojectmanagement.Itisimperativeduringthelifeofaproject(CD‐0throughCD‐4)thatsomeonehasownership,andthatpersonistheonepersonresponsiblefortheproject’sexecution.Thereisalackofaccountabilitywhenownershipisunclear,anditisperceivedthateveryoneisresponsible,butnooneisincharge.Projectownershipmustbefullytransparent,bothinwordandinpractice.Theownerensuresappropriatechecksandbalances.Theowner(astheleaderorthroughaneffectiveleader)warrantsthatallpartiesinvolvedhaveaclearlyestablishedsetofroles,responsibilities,andaccountability,andallpartiesasateamunderstandtheowner’svisionandobjectivesincludingconstraints,timelines,andriskboundaries.AcrossDOE,theownershould:

Ensurethecontractorhasputinplaceacompetentmanagersupportedbyaqualifiedprojectteam.

Ensurethereisadequateskilledstaffforfederaloversightofthecontractor.

Establishaprocessforperiodicindependentassessment(e.g.,“redteamreview”)thatwouldensuretheprojectexecution,managementstructures,anddelegateddecisionmakingprocessesareappropriatelyfunctioning.

Personallyvisittheprojectsiteandfrequentlyreviewtheprogressagainstkeymilestonesthatwereapprovedaspartofthebaseline.

Controlbudgetauthority.OwnershipvariesacrossDOE.Forexample:

InSC,theownerisaseniorprogramofficialwhoownsthemission,establishestheproject’sobjectives,andcontrolsthebudget.Thispersonownstheprojectfromstarttofinish(CD‐0toCD‐4).InSC,theheadquartersprogramistheowner,controlsthebudget,anduponcompletion,istheuserofthefacility.ForSC,aswellasotherprograms,successfulexecutionofprojectsdependsonthequalityofitsprojectleadershipteam,whichtypicallyincludestheowner,theowner'stechnicaladvisors,independentprojectmanagementadvisors,thefederalprojectdirector(FPD),andkeycontractorprojectmanagers.

InEM,theAssistantSecretaryistheowner,determinestherequirements,controlsthebudget,andensuresadherencetoapprovedscope,cost,andschedule.TheSiteManagerrecommendsabalancedutilizationoffunds(basedonrisks,regulatoryrequirements,andcommunitystakeholders),overseesexecutionbycontractors,

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andistheuserofthefacility. Whenownershipchanges,itoccursbetweenCD‐1toCD‐2.

InNNSA,ownershipstartswithsomeonewhoknowsthescienceandmissionoftheproject,andisthenpassedtosomeonewhocanexecuteprojectmanagement,typicallytheFPD.Whenthisoccurs,theFPDassumestheownershiproleastheowner’srepresentativeandbecomestheprimarypersonresponsibleandaccountableforprojectsuccess.Thesechangesduringaproject’slifecyclebuildonindividuals’strengths.ForNNSA,whenownershipchanges,itoccursbetweenCD‐1toCD‐2.

NNSAestablishedtheOfficeofAcquisitionandProjectManagement(APM)in2011toaddresslong‐standingandsignificantcontractandprojectmanagementchallengesidentifiedbyGAOandCongress.ConsistentwiththerecommendationsoftheNationalResearchCouncil,NNSA’sAPMorganizationisresponsibleforprovidingprojectmanagementsupporttotheprogramoffices,whichrelievestheDeputyAdministratorsfrommaintainingtheirownprojectmanagementcapabilitiesandallowsthemtofocusontheircentralmissionresponsibilities.5.1.2OBSERVATIONSFROMPREVIOUSORONGOINGPROJECTSTheWorkingGrouphadseveralobservationsregardingprojectownershipatDOE:

Diffuseownershipaffectstheaccountability,responsibility,andalignmentforDOEprojects.DOEOrder413.3BandtheContractandProjectManagementImprovementCorrectiveActionPlandonotdirectlyaddressownership.Theseguidestouchonleadershipengagement,whichhasimprovedsignificantlywiththeDeputySecretaryastheSecretarialAcquisitionExecutive(SAE)undertakingcorrectiveactions.

EachDOEprogramoffice(e.g.,EM,NNSA,SC)hasauniquemission,withdifferingstakeholders,acquisitionapproaches,andchallenges.Diverseprogrammanagementpracticesyielddifferentstrategiesforexecutionofprojectmanagementroles,responsibilities,andfunctions,whichcausetheconceptofaproject“owner”tovaryacrossprogramoffices.Eachprogramofficemaintainsthatthesetermshavedifferingmeanings,whichresultsindifficultiesassigningroles,responsibilities,authority,andaccountability.Thisuncleardefinitionmaycontinuetocontributetoacultureof“anyoneoreveryoneisinchargebutnooneisresponsible.”

GiventhelengthanddurationofDOEprojects,theconceptofasingleownerforthe

project’sentirelifecyclemaybechallenging.Anotheroptionincludesvaryingphasesofownership,suchthattheownerchangestoanFPDorprojectmanageraftercertainCDpoints.Theownercouldalsobetheofficialassignedtorunoroperatethefacility.However,thiscouldcomplicateprojectsbeinghandedofffromprojectmanagersassignedtocompleteconstructionandacquisitiontotheowneroroperatorofthefacility.Forexample,theFPDmayhaveconflictingrequirementsorambiguousalignmentbetweenthefacilitymanager,theAE,ortheSAE.

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IdeasdifferregardingthehierarchyofownershipflowingdownfromtheSAE.For

SC,theprojectowneristheprogramresponsibleforexecutingtheacquisitionorconstructionmanagementofafacility.WithinNNSA,FPDsareassignedasimilarscopeofdutiesasSCprojectmanagers.WhilethismaybeappropriateforhorizontalexecutionthrougheachCDphase,differencesinopinionsexistconcerningtheoverallresponsibility,accountability,andauthorityasitflowsverticallyfromtheSAEtoFPDtocontractorexecution.ThiscouldbeduetotheSAEbeingassignedtheoverallresponsibilityformajorsystemacquisitionsforprojectsbeyonda$750millionthreshold,andconfusionamongownershipassignedtoAE/UnderSecretaries,sitemanagers,oversightandreviewgroups,theFPD,andthecontractorexecutingtheproject.

TheconceptofDoD’s“matrixorganization”couldbeusedasamodelforacquisition

projects,butnocommonunderstandingexistsforhowthismayfunctionwithinDOEorhowitwouldbeapplied.Theconceptforafunctionalorganizationsupportingamatrixorganizationisabsentalongwithitsrelationshiptoowners,ownership,orleadershipengagement.Inonepartofthediscussion,oneworkinggroupmemberofferedtheobservationthatthematrixmanageristhe“owner’srepresentative”accountablefordeliveringthefinishedfacility.Thisissimilartotheutilitymodelforlargemegaprojectsinexcessof$1billionincapitalcommitments.

Theprojectteamshouldincludefederalemployeesandcontractorswithnecessary

experience,skills,andcompetencetomanageeveryaspectofaproject.TherelationshipbetweenDOEandcontractorscannotbecontentious,andtheymustcommunicateasateam.Organizationofprojectteamsdiffersdependingonthecharacteristicsoftheprogram,DOEsiteoffice,andcontractedorganizations.

Capitalconstructionprojectsweremanagedacrossmultipleprogramofficesin

NNSAbeforetheestablishmentofAPM.Theindependentprojectmanagementorganization,separatefromtheownerrequirementsandfullyintegratedwiththeacquisitionorganization,issimilartoprojectmanagementagenciesinotherfederalandprivatesectoragencies.DOEadoptedasimilarconstructinMay2012,mergingtheprojectandcontractmanagementoversightofficesacrossDOEintothesingleDOEAPM.

5.1.3CASESTUDY:SCIENCESPALLATIONNEUTRONSOURCETheSpallationNeutronSource,aneutronscatteringresearchfacilityatOakRidgeNationalLaboratory,exemplifiesalargeandcomplexprojectthatevolvedthroughseveralleadershipteamsinitsearlyphases,untiltheteamthatultimatelydeliveredtheprojectcametogetherattherightplaceandtime.Successstemmedfromproactiveandactivelymanagedteamcompositionchanges,aswellasdefinedandclearlyexecutedroles.Successfulteamactionsandinteractionsdefinedtheproject’sabilitytoovercomechallengesandday‐to‐dayissues.

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DOEcanshowcaseanexcellentexampleoftheSpallationNeutronSource.Inthe1990s,DOEsetouttodevelopapowerfulneutronscatteringresearchfacilitywithanambitiousprojectmanagementstrategy.LesterPriceservedastheproject’stopfederalofficialinthefieldatOakRidge(histitlebecameFPDafterDOEissuednewpolicyguidanceonprojectmanagementrolesandresponsibilitiesin2003).Priceledasmallonsitefederalteamofjusttwoengineers,anofficemanager,andapart‐timehealthandsafetyofficer.“Fromanaccountabilitystandpoint,Iwasthefirsttierofaccountabilityonthefederalsidefortheproject,”hesaid.“Ihadtheauthoritytoissueallfederaltechnicaldirectionregardingprojectmattersinthefield.”PricenotedthatthissmallnumberoffederalstaffisconsistentwiththestrongpartnershipapproachthatSChaswithitslaboratoryM&Ocontractors.PricekeptupwithworkacrossthecountrythroughacontactpersonateachoftheDOEsiteofficesatthelaboratories.“ItwaswhatIcalla‘softglove’approach,”hesaid.“WewantedtomakesureitwasclearthatthepartnerlabwasworkingunderthedirectionofOakRidgeNationalLaboratory(ORNL).TheywerenotworkingunderthedirectionoftheDOEsiteoffice.Thatwaskindoftricky,butweallunderstoodit.TheguyatthesiteofficewasverycarefulnottodirecttheminanywaythatwouldconflictwiththedirectiontheyweregettingfromORNL,butthesiterepandIwouldtalkfrequently,andhewouldgivemehisperspectiveandwhattheissueswere.”Pricetookdirectionfromtheprogramsponsor,Dr.PatriciaM.Dehmer,whoatthetimewasAssociateDirectoroftheOfficeofBasicEnergySciences,andProgramManagerJeffHoy.“JeffandIwereinday‐to‐daycontact,”Pricesaid,“andPatwasinvolvedinallmajorprojectissues.Shewasthefundingsponsorfortheproject,andifyoulookatitfromaProjectManagementBodyofKnowledgestandpoint,shemetallthecriteriayouwouldwantfromaprojectsponsor.”Eachpersonontheteam,includingtheAE,SCAssociateDirector(theowner),ProgramManager,FPD,ContractorProjectManager,LaboratoryDirector,andtheworkinglevelstaff(federalandcontractor)expertlyexecutedtheirindividualrolesandworkedasacohesiveunit.Thiscoordinationhelpedtheteamresolveissuesthatrequiredeveryone’sinput,allowingtheteamtoreachconsensusondecisionsandunwaveringsupportforexecution.Trust,alignment,communication,accountabilityandcommongoalsprovedtobeasuccessfulformulaforprojectsuccess.5.1.4RECOMMENDATIONSRecommendationsregardingaproject’sownership,accountability,andresponsibilityinclude:

Considerestablishingadepartmentalprojectmanagementorganization—withappropriateskillsandstaffing—thatissolelyresponsiblefordeliveringcapitalconstructionandenvironmentalremediationprojectsforallprogramoffices.ThisapproachwouldbesimilartotheDepartmentofDefense(DoD),U.S.ArmyCorpsofEngineersandNavalFacilitiesEngineeringCommandmodels.[Note:Onemember

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ofthegroupexpressedsignificantconcernswiththisrecommendation.Shouldthisrecommendationbeimplemented,oneconcerncitedbyonememberofthegroupisthatDoDdoesnothaveacomparablecontractorincumbentworkforce,akeydifferencewithDOE.DoDawardsindividualprimecontracts,typicallylastingseveralyearsforconstructionandcleanupactivities.DoDdoesnothavecomparableDOElegacycontractorworkforceissues.AtDoD,thecontractorworkforceistypicallyhiredandthenreleasedwhentheprojectiscompleted.ForEM,especiallycleanupwork,thecapitalactivities(e.g.,facilitydecontaminationanddecommissioning,disposalcellconstruction)arecurrentlyperformedinanintegratedmanneraspartofongoingoperationsactivities(e.g.,facilitydeactivation,wastetreatment/packaging/disposal).Ifthecapitalworkandoperationsactivitiesweremanagedbydifferentorganizations,therewouldbeseparablecontractsanddivisionoftheworkforcewhichwouldhavelabor‐relatedimplications].

Communicateacrossthecomplex,thatonceacapitalassetprojectisestablished,SAE(orthedesignatedrepresentative)isthe“owner”andhasdelegatedtheresponsibilitiesandauthoritiesthroughanAEtoonepersonastheprimary“personincharge”(responsibleandaccountableforprojectsuccess)foreachproject,presumablytheFPDinmostcases.Inaddition,theroleofallothersistosupportthispersontothemaximumextentpossibletoensureprojectsuccess.

Establishclearroles,responsibilitiesandaccountabilitiesamongtheowner,theproject’slinemanagementorganizationalelements,andsupport/stafforganizations.TheseshouldbecodifiedwithintheProjectExecutionPlan.

DOEorders,policiesandguidanceshouldbeupdatedtodirectlyaddressownersandownershiptoclarifyroles,responsibilities,accountability,andauthorities.Theseupdatesshouldclarifytheverticallinesofassignedroles,responsibilities,accountability,andauthority.TheyshouldservetoalignindividualresponsibilitiesoftheFPD,AE,andSAE,toorganizationalresponsibilities,andestablishahierarchyofreporting,controllingandmanagingmajorsystemacquisitionsandprojects.

5.2FRONT‐ENDPLANNING

5.2.1DESCRIPTION

Thepurposeoffront‐endplanningistoensurefocusedattentionisgiventoprojectdefinitionfromtheearliestprojectphasesandcontinuallyimprovedastheprojectmatures.Projectdefinitionstartswiththeprojectownerensuringtheproject’soverallscopemeetsthemissionneed.Theprojectownershoulddefine,ascompletelyaspossible,theentireprojectlifecycle,andsupporteffortsbytheprojectteamtoestablishacomprehensiveWorkBreakdownStructureasearlyaspossible.Usingfront‐endplanningtoolsdescribedinthissection,theownerandprojectteamshouldworktodefineallprojectrequirements,engagestakeholdersandvendorsearlyinplanningprocesses,andestablishexpectations

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andcommunicationsacrosstheprojectenterprise.Thisallowsallparticipantstohaveasharedunderstandingaboutindividualandcollectiveactionneededtoconstantlyrespondtoimprovementsinprojectdefinition.DOEhasrecognizedthathigherlevelsoffront‐endplanningcanresultinsignificantcostandschedulesavings.However,insufficientup‐frontplanningconsistentlycontributestoDOEprojectsnotfinishingonbudgetorschedule.TheRootCauseAnalysisandCorrectiveActionPlanbothdeterminedthefollowingfocusareasascriticaltothefront‐endplanningprocess:

Ensurethatscopeandtechnicalspecificationsarewelldefinedanddocumented

Includefacilitysystemusersintheplanningprocess

Makesurethatdesignissufficientlymaturebeforebaselining

Ensureacompetentandexperiencedprojectteamisassembled

Identify,evaluate,andplanforinternalandexternalrisksTohelpprojectteamsmeettheprinciplescodifiedinDOEOrder413.3B,severalguidesweredeveloped.Inaccordancewithdepartmentalpolicies,theseguidesareconsideredbestpractices,butarenotrequired.Fourthatareparticularlyrelevanttofront‐endplanninginclude:

DOE413.3‐4A:TechnologyReadinessAssessmentGuide

DOE413.3‐7A:RiskManagementGuide

DOE413.3‐12:TheU.S.DepartmentofEnergyProjectDefinitionRatingIndexGuideforTraditionalNuclearandNon‐NuclearConstructionProjects

DOE413.3‐21:CostEstimatingGuide

Front‐endplanningrequirementsshouldalsodistinguishbetweenmajorsystemprojectsandsmallerprojects.DOEOrder413.3B’spoliciesaresufficientformostDOEwork,butlackspecificguidanceforlargeprojects.DOE’smajorsystemprojectsaretheonlyprojectsthatremainontheGAOHigh‐RiskList;thetechnical,scope,schedule,cost,regulatory,andpoliticalrisksoftheseprojectsshouldbereviewedindividuallyandinmoredepththanthoseassociatedwithsmallerprojects.Ifaprojectorprogramspansonlytwo‐to‐fouryears,itislikelythattheassociatedplanningandriskswillbesufficientlybounded;however,formajorsystemprojectsthattypicallyspanadecadeorlonger,thereshouldbeacodifiedmethodologytodemonstratethattheappropriatefront‐endplanninghasbeenaccomplished.Thiswillhelpbuildconfidenceinthebudgetandprojectdeliveryplanthatwillresultfromtheplanningprocess.Additionally,thenuclearsafetycharacteristicsandrequirementswithinDOEOrders413.3Band1189arecontradictoryforCDgates,safetydocumentationrequirements,andthe90percentdesignrequirementfornuclearwork.

5.2.2OBSERVATIONSFROMPREVIOUSORONGOINGMAJORSYSTEMPROJECTS

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Front‐endplanningobservationsfrompreviousandongoingmajorsystemDOEprojects:

TherearenorigorousreportingrequirementsformajorsystemprojectsinadvanceofCD‐2.Generally,periodicpeerreviewsarenotconductedbetweenCD‐0andCD‐2.AdhocreviewstoevaluatenewalternativeshaveoccurredontheU‐233,ChemistryandMetallurgyResearchReplacementFacility(CMRR),andPitDisassemblyandConversionFacility(PDCF)projects.Inmanyinstances,hundredsofmillionsofdollarsareexpendedinplanninganddesigneffortswithlimitedoversight.ExamplesincludetheMOXFacility,WasteTreatment&ImmobilizationPlantProject,SaltWasteProcessingFacility,andCMRR.Inaddition,PDCFneverreachedCD‐2,andexpendedover$700millionwithlittlereportingrequirementsforthisfunding.

Morerigorousfront‐endplanningandalternativesanalysiswouldlikelyhaveresultedintheselectionofdifferentcapitalconstructionprojects,aswiththeU‐233project,PDCF,andCMRR.

Majorsystemprojects,suchasnuclearprojects,lackguidancerequiringthatthe

ProjectEngineeringandDesignfunds(PED)berobustlyfinancedandmaintainedthroughouttheproject’slifecycle.PEDfundsaretheprecursorfordevelopingthedesignintimefortheCDpoints,allowingforabaselineandstartingconstructiononthescheduleenvisionedintheearlyCDphases.

WhileDOEhasgoodfront‐endplanningdocuments,theyarenotcodified.Itis

unclearhowvariousprogramofficesrequirethesebestpracticesbefollowed,otherthanonanadhocbasis.InNNSA’sBusinessOperatingProcedure,theprogramofficedevelopeditsnuclearwork’sdesignmaturitypolicyandcodifieditsestimatingprocedures,whichmakeitarequirement.Duringvariousaudits,GAOhasgivenNNSAcreditforthismeasure.

5.2.3CASESTUDY:MIXEDOXIDEFUELFABRICATIONFACILITYPROJECT

InMarch1995,theUnitedStatesdeclared38.2metrictonsofweapon‐gradeplutoniumassurplustodefenseneeds.InJanuary1997,afterreviewing37dispositionoptions,DOEselectedimmobilizationwithhighlevelwaste,andirradiationofthismaterialinmixedoxide(MOX)fuel.Subsequentlyin2002,asecondreviewofoptionswasconductedandtheMOXirradiationalternativewasselectedasthepreferredalternative.MOXfuel,albeitwithnon‐weapongradeplutonium,hadbeensuccessfullyproducedintwoplantsinFranceanditwasbelievedthatthetechnologyandprogrammaticrisksforthisprojectwerewellunderstood.ThecostfortheMOXprojectwasestimatedat$1.1billioninFY2001.TheMOXprojectwasmanagedunderDOEOrder413.3A.In2006,CongressrequestedthatDOEreanalyzeitsstrategyfordisposingofsurplusplutonium,causingDOEtosubmitareporttoCongressin2007,entitled“BusinessCaseAnalysisoftheCurrentU.S.MixedOxideFuelStrategyfor

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Disposingof34MetricTonsofSurplusWeapon‐GradePlutonium.”ThisreportreconfirmedtheMOXapproach.Priortodevelopingtheproject’sbaseline,DOEdidnotconductpeerreviews;analyzeFrance’sreferenceplants’constructioncostsoroperationshistorythatwerethebasisoftheMOXprogram;orperformarigoroustechnologydevelopmentreview,riskanalysisorprojectdefinitionrating.DOEandthecontractorsreliedonthefactthatsimilarfacilities,althoughbuiltdecadesearlierandunderdifferentregulatory,political,andindustryconditions,couldeasilybemodifiedandreplicatedintheUnitedStates.UndertheDOEordersatthetime,therewasnorequirementtoensurethatdesignwassufficientlymatureorthattheproject’scostestimatebeperformedbyanindependentparty.InApril2007,DOEapprovedabaselineforthecapitalconstructioncostsfortheMOXprojectat$4.8billion.Thisapprovallargelyreliedonthecostestimate,designstatus,andriskprogramdevelopedbythecontractor.Subsequentlyitwasdeterminedthatthedesignwassignificantlylessmaturethanhadbeenreported;therisksassociatedwithmeetingU.S.regulatoryandbuildingcodeswerenotwellunderstood;andthecurrentstateofthenuclearindustry’ssupplychaininbothlaborandmaterialprocurementswassignificantlyunderestimated.Designcostscontinuedtogrow,constructionandprocurementbidsgreatlyexceededestimates,andtechnicalstaffturnoverwasmuchhigherthananticipated.Insufficientresearchintothesupplychain’sabilitytomeettheprojectsrigorousNuclearQualityAssurance‐1(NQA‐1)criterialimitedavailablesourcesandsignificantlyincreasedoversightandprocurementcosts.Asconstructioncontinued,thecontractors’workcouldnotbecompletedwithinthebudgetedamount.Thiscreatedcashflowshortages,scheduleextensions,andultimatelyledtoarequesttorebaselinetheproject.DuringprojectpeerreviewssubsequenttoCD‐3,itwasdeterminedthattheMOXestimateutilizedproductionandproductivityratesthatweresignificantlyhigherthananyotherprojectinDOE’snuclearprojectportfolio;theseitemshadnotbeencheckedbytheindependentreviewerswhentheprojectwasbaselined.TheMOXprojecthasexpendedapproximately$4billionandisapproximately50percentcomplete.Estimatesforthecapitalworkrangefrom$8‐12billiondependingonthefundingprofiles.Indevelopingapathforwardforplutoniumdisposition,DOEisreevaluatingtheoptionsidentifiedintheearlystagesoftheplutoniumdispositionprogram.

5.2.4RECOMMENDATIONSBasedondiscussionsbetweenmembersoftheContractandProjectManagementWorkingGroup,thefollowingarerecommendedforfront‐endplanning:

Haveprogramofficesperformalternativesanalysisthatisindependentofthecontractororganizationresponsibleforconstructingthecapitalfacility.

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Clearlycodifythesystems‐levelrequirementsfortechnologydevelopmentanddesignmaturityforeachmajorsystemproject.

DevelopdesignmanagementplansandpreliminaryperformancebaselinesformajorsystemprojectsandreportprogressinaccordancewithDOEOrder413.3B,inadvanceofCD‐2.

SimilartopostCD‐1projects,conductprojectpeerreviewsannuallybetweenCD‐0andCD‐1foractiveprojects(projectsthataresupportedinannualbudgetsandthathavenotbeenofficiallyplacedina“hold”status),unlessmorefrequentreviewswouldbeappropriateperthesponsoringProgramortheAcquisitionExecutive.

AlignDOEOrder413.3BandDOEStandard1189inregardstothe90percentdesigncriteriafornuclearprojectsrelativetodesignsafetyrequirementsandestablishmentoftheminimumdesignmaturitylevelrequiredpriortoCD‐2approval.

RequireestimatesforProjectEngineeringandDesign(PED)funds.

LimitPEDdurationtotwoyearsforprojectswithatotalprojectcost(TPC)under$100million.

RequiremonitoringoftheexpenditureofPEDfundsformanagementdesignplansonallcapitalprojectsmanagedunderDOEOrder413.3B.

5.3FUNDING5.3.1DESCRIPTION5.3.1.1FundingRequirementsInadequatefundingcanleadtosubstantialcostgrowth,adverselyaffecttheproject’smissionasnewsourcesoffundsmustbeidentified,anddamageDOE’sreputation.Anaccurateandcredibleprojectestimateisvitalforensuringadequatefunding,andisparticularlyimportantformajorsystemprojects.Twoareastoconsiderwhendiscussingfundingare(1)departmentalpoliciescomparedtoAdministrativepolicies;and(2)theimportanceofcomplyingwitheventheleastrigorousDOEpolicies.OMBCircularA‐11providesguidanceontheAdministration’sbudgetprocess.TheCirculargenerallyrequiresthatcapitalassetprojectsarefullyfundedinadvance.Whenupfrontfundingisinfeasiblefortheentireproject,fundingcompleteandusefulsegmentsoftheprojectissufficient.Fullfundingincreasestheopportunityforperformance‐basedfixedpricecontracts,whichincreasesaccountabilityandachievementofbaselinegoals.Whenfullfundingisnotfollowed,theresultisoftenpoorplanning,higheracquisitioncosts,cancellationofprojects,andtheresultinglossofsunkcosts.

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Congressalsorecognizesthatfullfundingisthepreferredfinancingmethodologyforcapitalconstructionprojects.IntheFY2013MilitaryConstructionandVeteransAffairsAppropriationsAct,Congressstated,“IngeneraltheCommitteesupportsfullfundingformilitaryconstructionprojects.However,itcontinuestobethepracticeoftheCommitteetoprovideincrementalfundingforcertainlargeconstructionprojects,despiteadministrationpolicytothecontrary,toenabletheservicestomoreefficientlyallocatemilitaryconstructiondollarsamongprojectsthatcanbeexecutedintheyearofappropriation.”InthisAct,theCommitteeidentifiedfiveprojects,allofwhichweremorethan$200millionforaslightreduction($25‐100million),preservingmorethan70percentoftherequiredfullfundinginthePresident’srequestinthefirstyearsappropriation.Incontrast,DOEhastwoconflictingpolicydocumentsregardingprojectfunding.InhisMarch2010policymemorandum,theDeputySecretarystated,“Lineitemcapitalassetprojectswithatotalprojectcostlessthan$50millionshouldbefullyfundedinasinglebudgetrequest,ifappropriate.”DOEOrder413.3Bstates,“Allcapitalassetlineitemprojects(excludingMajorItemsofEquipment(MIE))withatotalprojectcostlessthan$20millionwillrequestallconstructionfundswithinthesameappropriationyearasthestartofconstruction.Projectswithatotalprojectcostlessthan$50millionshouldrequestfundswithinthesameappropriationyear,iffeasible.”BothDOEpoliciesaresignificantlylessrigorousthantheOMBCircularandCongress.Whileofferingenormousfundingflexibility,theDOEpoliciesleadtoproblemsthatfullfundingwouldlikelyeliminate.Specifically,fullfundingwouldallowprioritizationofrequirements,improvedplanning,marketriskmitigation,timelyprojectexecution,andtheabilitytoutilizefixedpriceperformancecontracts.TheDepartmentofDefense(DoD)approachhasgenerallybeentofullyfinanceallcapitalassetconstruction,includingmajoritemsofequipment,ifthetotalconstructioncostislessthan$100million.Rigorouslyadheringtothisprinciple,ortheDeputySecretary’sguidanceoffullyfinancingprojectsunder$50millionwithouttheexculpatorylanguageor“iffeasible,”would:

Improveprojectperformance;

Lowerinitialcapitalcostsbyallowingourcontractorstoefficientlyconstructthesesmallprojects;and

Bringprojectsonlinefastertosupportthemissiondriversthatcreatedtheneedforthecapitalprojectinthefirstplace.

Internalpressureorpressurefromoutsidestakeholdersoftendrivesadesireto“getthingsstarted,”whichgeneratesanimpedimenttofullyfinancingsmallprojectsupfront.Aslimitedeconomicresourcesarespreadoveranumberofprojects,projectperformanceisoftenextended.ItisnotedinOMB‐CircularA‐11thatinanybudgetyear,fundingcapitalprojectsgeneratestradeoffswithothercapitalassetsorpurposesoutsidecapitalassets.In2011,DOEidentifiedthatdevelopinganintegratedprioritylistfashionedaftertheDoD’sPlanning

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Programming,Budgeting,andExecutionprocessensuredresourcescouldbefocusedonthehighestdepartmentalprioritiesinaneconomicalfashion.ThisinitiativewascoordinatedamongtheprogramofficesandapprovedbytheDeputySecretary,butneverimplementedlargelyduetothelackofachampiontodrivetheeffort.ArelatedrecommendationfromtheContractandProjectManagementImprovementSummitstatedthat“theDepartmentlacksaconsistent,integratedprocessforestablishingprojectprioritieswithinprogramsandforusingthoseprioritiestodrivebudgetdecisions.”AsingleprojectmanagemententitytohelpenforcethistypeofbroaddepartmentalinitiativewouldhelpDOEimproveitsprojectmanagementexecution.5.3.1.2MajorSystemProjectsMajorsystemprojectscostmorethan$750millionandhaveuniquerequirements.Althoughthemajorsystemprojectlimitisdesignatedat$750million,DOE’sportfoliointhisareaisgenerallyinthemulti‐billiondollarrange.Examplesincludethe$12.3billionWasteTreatmentandImmobilizationPlant(WTP)project,themorethan$8.0billionMOXproject,the$6.5billionUraniumProcessingFacility,andthe$2.0billionSaltWasteProcessingFacilityproject.Inconsideringprojectsofthissize,DOEmustconsidertheinsufficientamountofcapitaltobothfullyfinancethisworkandalsoperformourothernecessarymissions.SChastraditionallyexhibitedthemostdisciplineinpreservingfundingforlargeprojectsbecauseitprioritizesthemappropriatelywithinthetotalprogramrequirements,andhaslessmajorprojectstoexecute.NNSAandEMhavebeenlesssuccessfulinthisregard.Recently,NNSAhassignificantlyalteredprojectfundingfortheHighPressureFireLoopprojectandHighExplosivePressingFacilityatPANTEX,theCMRRNuclearFacilityatLosAlamos,andtheUPFatY‐12.5.3.1.3ContingencyAcriticalelementforprojectsuccessincludescontrolofcontingenciesforcost,schedule,andscope.Contingencymanagementisanintegralpartoftheprojectriskmanagementprocess,providingFPDswiththetoolstorespondtoprojectrisksanduncertaintiesthatareinherentinallDOEprojects.Contingencyisincludedintheoverallprojectbaselineandisavailableforriskuncertainty,regardlessofwhethertheriskisinternalorexternaltotheproject.Theestablishmentofcontingencyisbasedonthelevelofprojectstatus,complexity,andrisk.Thecontingencyamountreflectsananalysisofprojectrisksusingatypicalrangeof70‐90percentconfidencelevelatthetimeofbaselineapproval.Analysisofcontingencyisperformedcontinuouslythroughoutthelifeoftheproject.5.3.1.4FundingStabilityafterCD‐2Whileimportantduringtheprojectdevelopmentphase,astableandpredictablefundingprofileisvitalafteraprojectachievesCD‐2.DOEOrder413.3Bexplicitlyrequiresleadershipinputpriortoalteringthefundingprofileofabaselinedproject.Anychangesto

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aproject’sfundingprofilemustbeapprovedbytheproject’sAEafterbeingcoordinatedwiththeChiefFinancialOfficeandDOE‐APM,thusensuringseniorleadershipisinformedandaccountableforsuchadecision.5.3.2OBSERVATIONSFROMPREVIOUSANDONGOINGPROJECTSUnderestimatingcontingencyissuesandplanningproblemshavebeenandcontinuetobeissuesforpreviousandongoingDOEprojects.

Theproject’sinitialestimateandfundingprofileshouldbemaintained.Majorsystemprojectsarefinancedovermanyyearsandadditionalestimatesarelargelybasedonthefundingprofile.Anincentiveforunderestimatingaproject’scostsoftenresultsfromfearthatDOEorCongresswillrejecttheprojectiftheyknowthefullcost,causingmajorsystemprojectstofrequentlybeunderestimated.

DOEcontinuouslyunderestimatesbothmanagementreserve(contractors’

contingency)andcontingency(owners’contingency).IndevelopingtheCostEstimatingGuideandadheringtoGAObestpractices,DOEhassignificantlyimprovedcontingencyallocationsforsmallprojects;however,DOEcontinuestounderestimatetotalcontingencyneedsforlargecomplexnuclearwork.EM’sIntegratedWasteTreatmentUnit(IWTU)inIdaho,theSWPFinSouthCarolina,theWTPinWashington,andNNSA’sMOXfacilityinSouthCarolinahaveallexperiencedmultiplerebaseliningsafterCD‐2,largelyduetounderestimatingperformancerisk.DevelopmentanduseofcontingencyisdescribedintheDOERiskManagementGuide,whichprovidesguidancethatisnotcodified.

Misalignedprojectandfundingprioritieshaveoccasionallycreatedcostand

scheduleincreasestoprojects.TwoexampleswhereNNSAprioritizationandfundingsignificantlychangedafterbaselineswereestablishedincludetheHighExplosivesPressingFacilityandtheHighPressureFireLoop.TomeetPANTEX’smission,theHighExplosivesPressingFacilitywasconsideredanurgentrequirement.TheDeputySecretaryapprovedtheproject’sbaselineinDecember2008at$116million;however,NNSAdefundedtheprojectinitsbudgetsubmission,andcancelledtheprojectinApril2009.NNSAsubsequentlyrebaselinedtheproject,andrequestedfundinginthe2010budgetwithanewcostof$145millionandcompletiondatetwoyearslaterthanoriginallyplanned.TheHighPressureFireLoopprojectachievedCD‐2inDecember2006withaTPCof$35million;however,theprojectwasunderfundedby$23.1millioninFY2008andFY2009.NNSAputtheprojectonholduntilfundsweremadeavailablein2010,causingadelaythatledtoanewbaselineof$45million.

TheinstancesofchangingfundingprofilesafterCD‐2havedecreasedacrossthe

complexsincechangestoaproject’sfundingprofilemustbeapprovedbytheproject’sAE.Priortothispolicy,severalprojectswereadverselyaffectedbychangingfundingafterCD‐2,andinsomecasesCD‐3,includingWTPinWashington;

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IWTUinIdaho;theHighExplosivesPressingFacilityproject;theHighPressureFireLoopproject;andnumerousEMcleanups.

Additionalresources,includingfinancialandpersonnel,wererequiredtovalidate

theprojectsandgothroughthebaselinechangeprocess.ForDOEAPM,theresourcesrequiredtoprocessatypicalbaselinechangeare$500,000foranon‐majorsystemprojectand$2.5millionforamajorsystemproject2.ThesecostscouldbeavoidedifaccuratebaselineswereestablishedatCD‐2withadequatefundingavailablethroughCD‐4.

5.3.3CASESTUDY:CORRECTIVEACTIONS–CANONDEVALLEATLOSALAMOS,NEWMEXICOTheCañondeValleproject(CdV)’smissionwastoinvestigatethenatureandextentofremediationrequiredfor239SolidWasteManagementUnits(SWMU)andAreasofConcerns(AOC)attheLosAlamosSiteOffice(LASO).ThescopealsoincludedimplementationofremedialactionsfortheSWMUsandAOCsasappropriatetomaintainregulatorycompliancewiththeStateofNewMexicoEnvironmentalDepartmentconsentorder.CD‐2wasapprovedinApril2010,withaTPCof$52.9millionandacompletiondateofSeptember2015.BothcostandschedulecontingencywereincludedinTPCestimatesandwereaccurateandbasedonassumptionsknownatthattime.DuringFY2012,theprojectexperiencedsetbacksduetoregulatoryandbudgetconstraints.LASO’scongressionalappropriationwas52percent($188million)oftheEMrequestof$357million.Asaresult,LASOassessedtheallocationofthisreducedfundingacrossallitsprojects,andCdVreceived$1.5millioninFY2012fundingagainsttheplanned$13.9million.AstheStateofNewMexicoidentifiedtransuranic(TRU)wasteremovalfromLASOasitsfirstpriorityundertheconsentorder,LASOusedamajorityofcongressionalfundingreceivedforTRUwasteremoval.Asaresultofbudgetcutbacks,theCdVprojectreplannedthescheduletofocusonminimumtasksrequiredtomaintainregulatorycompliance.TheFY2013budgetallocationforCdVwasalsolowerthanrequestedandtheprojectwasforcedtoreplantasksagaintoaccommodatetheconstrainedbudgetenvironment.AstheContinuingResolutioncontinuedtobeinplaceandTRUwasteremovalremainedtoppriorityforNMEDandLASO,theexpectationwasthatfundingallocationforCdVwouldstayatlowerlevelsthanoriginallyplanned.Theprojectwasonly38percentcompleteasofDecember2013,andtheFPDdeterminedthattheprojectwouldnotachieveenoughscheduleprogresstorealisticallysustainthecompletiondateof2015.EventhoughtheprojecthadinitiateddiscussionswithNMEDtoextendthecompletiondateforCdVandreprioritizethescheduledactivitiestocomplywiththeconsentorder,theStateregulatorsdidnotapproveaprojectextensionbeyond2015.Consequently,duetouncertainbudget,inabilitytodefineafundingprofile,andtheregulatoryclimate,CdV2 These costs do not include: 1) the costs expended by the federal project team in the field or the program office at DOE/NNSA headquarters to review the contractor’s baseline change proposal, or 2) what the contractor bills the government for the preparation of the baseline change.

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submittedaprojectcancellationmemoinAugust2013,andcancellationwasapprovedbytheAEinDecember2013afterspending$17million.IftheprojectweretoberestartedinthefuturetomeetDOE’srequiredremedialoptions,thentheTPCwilllikelyexceedthepreviousbaselineof$52.9million.Thekeylessonlearnedisthatcapitalassetprojectsshouldbeapprovedonlyifthefundingcanbemadeavailable.DOEshouldnot,aspolicy,changeaproject’sfundingprofileafterapprovingaprojectbaseline.

5.3.4RECOMMENDATIONSTobuildonthelessonslearnedinDOEprojectfunding,recommendationsincludethefollowing:

Developadepartmentalintegratedprioritylistofcapitalprojects.CommunicatethoseprioritiesacrossthecomplexinfiscalguidanceissuedeachFebruaryaspartofthePlanning,Programming,BudgetingandExecutionprocess,andreflecttheminannualbudgetdecisions.ThiswillallowseniorleadersthroughoutDOE,regardlessofprogramaffiliation,tocommunicatethoseprioritieswithonevoice.

Definepolicyforfullfundingauthorityforprojects,basedonneed,risk,andmission.Providefullfundingforallprojectsunder$50million.

Requireallcapitalassetprojects,regardlessoffundingsource,toprovideaProjectDataSheetwithcostbaselineandfundingprofileinformation/commitments.Currently,onlylineitemcapitalassetprojectsrequireaprojectdatasheet,whileoperatingandmajoritemofequipmentprojectsdonot.

5.4INDEPENDENTOVERSIGHT5.4.1DESCRIPTIONIn1999,theNationalResearchCouncilreport,ImprovingProjectManagementintheDepartmentofEnergy,citedthat“independentprojectreviewsareanessentialtoolforassessingthequalityofprojectmanagementandtransferringlessonslearnedfromprojecttoproject.”Thereportfurtherstatedthat“DOEshouldformalizeandinstitutionalizeproceduresforcontinuingindependent,non‐advocatereviews…toensurethefindingsandrecommendationsofthereviewersareimplemented.”ThereportrecommendedthatindependentreviewresultsshouldbepresentedtotheEnergySystemsAcquisitionAdvisoryBoardandbeusedindecisionsregardingwhetherprogramsorprojectsshouldproceedforward.DOEOrder413.3BrequiresprogramofficestoperformanannualpeerreviewforprojectspastCD‐2andwithaTPCof$100millionorgreater.TheimportanceofpeerreviewswasreemphasizedattheDecember2010ContractandProjectManagementSummit.Peerreviewsensurechecksandbalances,suchthatanonproponentbodydetermineswhether

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thescopeofprograms,projects,oractivities,underlyingassumptions,costandscheduleestimates,contingencyprovisions,andmanagementapproachesarevalidandcredible.TheyensurethatDOEseniormanagementreceivesarealisticassessmentoftheproject,sincethereisatendencyforprojectstohaveanoptimisticbias.Moreover,whenprojectsencounterchallenges,projectteamsmaynotlookoutsideforsolutionsorhelp.Peersfromothersites/projectscansuggestalternativetechnicalandmanagementoptionsthatmaybenefittheproject.Independentoversightalsopromotessharingoflessonslearnedandbestpracticesbetweenthereviewcommitteeandtheproject,andviceversa—fromtheprojecttothereviewcommittee.Theyalsoconfirmthatprojectsfollowtherequiredpoliciesandrequirementsthroughoutplanningandexecution.5.4.2:OBSERVATIONSFROMPREVIOUSANDONGOINGPROJECTSIndependent‐oversightobservationsfrompreviousandongoingDOEprojectsincludethefollowing:

SC’speerreviewsprovideoneprocessthatyieldssuccessinbringingcapitalprojectsforwardtocompletionwithminimalcostescalationorscheduledelays.Majorfunctionsoftheprojectoversightofficeincludedevelopingandcommunicatingpoliciesrelevanttoconstructionprojectsandoperationoffacilities,andensuringtheyareconsistentlyandappropriatelyimplemented.Thisofficealsoservestoadviseseniormanagementontheconstructionandoperationoffacilities,andcoordinateswithotherDOEorganizationsandoffices,includingDOEAPM.Inaddition,theofficeprovidesassistanceandoversighttolinemanagementorganizations.SC’sformalizedreviewprocessincludesareviewcommitteeandareviewcommitteechair.

SC’speerreviewprocessmaynotbeadaptabletotheconstructionoracquisitionoffacilitiesthatinvolvenuclearoperationsorwasteremediation.IntheContractandProjectManagementWorkingGroup’sdiscussions,SCexpresseditsneedforaflexibleapproachthatdoesnotinvolvetherigorsofexternalregulatorybodies,stakeholdersettlementagreements,andcomplexitiesofadaptingtechnologiesinherentinotherprogramoffices’largerscaleprojects.

DOElacksanintegratedindependentoversightreviewtoinformexecutivedecision

makers.ThechannelsofcommunicatingthestatusofmajorsystemprojectshavebeenseveredbecauseaformalprocessdoesnotornolongerexistsatDOE.Therefore,theearlywarningsystemstriggeredbythresholdsandahierarchyofreportingresultstoDOE’smostseniorleadersresponsibleforthedeliveryofmajorsystemprojectsisineffective.

Anindependentoversightbodyisneededthatadvisesaseniordepartmentofficial

onaproject’sprogressorprocesswhenmajordecisionsareneeded.ThiswillhelpvalidateprogramprogressreportedonbytheAE,thusrestoringinternalandexternalcredibility.ThisprocesswouldreturnDOEtotherecommendationscited

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bytheNationalResearchCouncilin1999andbegintoestablishacultureofcontinuousperformanceimprovementthroughcontinuouslearning.

Thedistributionofprogrammanagementoversighthousedwithinvarious

organizationshasdilutedandsegregatedthelimitednumberofprojectmanagementpersonnel.Inrecentyears,DOE’sportfolioofconstructionprojects(postCD‐2)hasshrunkfrom121projectsvaluedaround$65billioninJanuary2008to39projectsvaluedaround$27billioninDecember2013.Thestaffsupportingtheseprojectshasalsodeclined,whiletherewasashortageofqualifiedpersonnelduringthattimeperiod.Consolidationtooneintegratedoversightfunctioncouldyieldefficiencyandimproveoversighteffectiveness.TheresponsibleAEs(UnderSecretaries)arebestsuitedintheirroleasthemostqualifiedandknowledgeableaboutprojectmanagementtobecomemembersinareconstitutedEnergySystemsAcquisitionAdvisoryBoard.

5.4.3CASESTUDY:BEVATRONDEMOLITIONPROJECTThemissionoftheBevatronDemolitionProject,locatedatLawrenceBerkeleyNationalLaboratory(LBNL),wastodeactivate,demolish,anddisposeoftheBevatronaccelerator,ancillaryBuildings51and51A,andnumeroussupportingstructures.OnOctober25,2005,theDirectorforOfficeofLaboratoryPolicyandInfrastructureinSCrequestedthattheOfficeofProjectAssessmentconductareviewoftheBevatronDemolitionprojecttoensuretheproject’sreadinessforCD‐1.Anon‐sitereviewwasperformedfromNovember29toDecember1,2005.ThereviewwaschairedbytheDirector,OfficeofProjectAssessment,SC,andutilizedasmallbutdiversereviewcommittee.Basedontheinformationpresented,thecommitteejudged:

TheprojectisnotreadyforCD‐1.TheprojectmanagementteamdoesnothaveexperienceinmanaginglargeprojectssubjecttoDOEprojectmanagementrequirements.Thereappearstobeopportunitiesforcostreductionandscheduleoptimization.However,theCommitteecouldnotcrediblyevaluatethesefeaturessincethereisalackofintegrationandconsistencyamongprojectscope,schedules,andcostsdocuments;andlackofrobustnessofsomealternativesanalyzed.

Priortoleavingthesite,thecommitteechairinformedtheprojectteamandtheLBNLseniormanagementofthereviewresults.Afterthereview,theproject’sAcquisitionExecutivewasprovidedwithatwo‐pagesummaryofthereviewandwasbriefedonthereviewresults.Withinafewmonths,LBNLmanagementimplementedtherecommendations.Anewprojectteamwithmoreexperiencewasplacedincharge,thetechnicalapproachtodemolitionwasmodified,andthedemolitionworkwascontractedoutinsteadofbeing

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performedbyLBNLin‐houselaborforces(whodidnothaveexperiencewithdemolitionoflargehazardousfacilities).TheTPCrangeduringtheCD‐1reviewwas$78millionto$83millionandbyCD‐2theTPCwasreducedto$50million.TheprojectwascompletedonscheduleinJuly2008.Theproject’scarefulplanning,management,andattentiontolessonslearnedandrisks,allowedittodeliverthefullprojectscopeand$2.4millionunderbudget.

5.4.4CASESTUDY:WASTETREATMENTANDIMMOBILIZATIONPLANTPROJECTTheWasteTreatmentandImmobilizationPlant(WTP)ProjectislocatedinRichland,WA.Itsmissionwastodesign,construct,andcommissionfacilitieswiththecapacitytotreatandimmobilize,upto56milliongallonsofradioactivewastestoredin177undergroundstoragetanksandprepareitfordisposalatapermanentnationalgeologicrepository.TheWTPdesignwasinitiatedin1998astheTankWasteRemediationSystemPrivatizationProject,byBritishNuclearFuelsLimited,Inc.In1999,DOEawardedacontracttoBechtelNational,Inc.todesign,construct,andcommissionWTP.Constructionbeganin2000,withaplantostartradioactiveoperationsby2007.TheprojectbaselinewasestablishedinMarch2003at$5.78billionandacompletiondateofJuly2011.InDecember2006,theprojectbaselinewasrevisedto$12.26billionwithacompletiondateofNovember2019.In2003,tomeetthedemandsoftheTri‐PartyAgreement,DOEandBechteladoptedafast‐track,design‐buildapproachtoconstructingWTP.Inaconventionalconstructionapproach,technologydevelopmentactivities,plantdesign,andconstructionoccursequentially,buttheyoccursimultaneouslywiththisunconventionaldesign‐buildapproach.Theuseofafasttrackapproachforfirstofakindnuclearplantconsistingofmultiplenuclearfacilitieswasabadacquisitionapproach.Itistheprimaryfactorforthesignificantcostincreasesandscheduledelaysthathaveensuedovertheyears.Therecontinuestobesignificantperformanceriskassociatedwiththisproject.Overthelastdecade,theprojecthasundergoneregularprojectpeerreviewsandseveralindependentreviewstoinformtheprojectteamandtheSAEontheprojectprogressandresolutionstatusoftechnicalissues.Thesereviewsinclude:

AnnualConstructionProjectReviews–todate

After‐ActionFactFindingReport–January2006toidentifyrootcausesofprojectedcost/scheduleincreases

ExternalTechnicalFlowsheetReview–March2006

USArmyCorpsofEngineerValidationofcontractorMay2006EstimateatCompletion

ExternalIndependentReview–October2006,charteredbyOECM

SecretaryofEnergyChuReviewofWTP,2013(Webinarseries)Inspiteofthesereviews,serioustechnicalissuesremainunresolved.Whilesomeofthesereviewsmayhavehadwarnings,ittakescouragetocorrectthedecisionmakingprocessandchangecourseafterspendingbillionsofdollars.

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IntheviewoftheContractandProjectManagementWorkingGroup,EMisagainatthesecrossroads.Theissuanceoftheframeworkdocument,HanfordTankWasteRetrieval,Treatment,andDispositionFrameworkonSeptember24,2013generatedtheconsiderationofanalternativephasedcompletionapproachusingDirectFeedtotheLowActivityWasteFacility.Thisalternativeapproachwillbeamajorshiftinhowtobringthefacilityonline.ItwillallowwasteimmobilizationtobeginasearlyasJune2020whileproceedingsimultaneouslyonresolvingtheremainingtechnicalchallengeswiththePre‐TreatmentandHighLevelWastefacilities.

5.4.5RECOMMENDATIONSIndependentoversightthroughpeerreviews,independentreviews,andself‐assessmentsshouldaddvalue,whichbenefitstheproject,theprogram,andDOEasawhole.Asanear‐termobjective,itisrecommendedthatDOEfocusonafewspecificareaslistedbelow:

ReconstitutetheEnergySystemsAcquisitionAdvisoryBoard(ESAAB)process(or

similar)asprovidedforinDOEOrder413.3B.DelegateESAABmemberswithresponsibilityandaccountabilityformajorsystemacquisitions/capitalprojects.EachAEroleshouldbedelegatedtoUnderSecretary‐level.

ConductregularperiodicESAABmeetingsforAEstoupdatetheSAEonprogressordecisionsthatareneededatthecorporatelevel.Strengthendashboardmetricsandwatchliststoalertexecutiveleadershipofmajorissues,interdepartmentalpriorities,successesandcorporatelessonslearned.

Recreatethehierarchyofreporting.EstablishasystematicprocessofreportingvariouscontrollevelsfromtheFPDtotheESAAB.

EstablishaPortfolioReviewBoardtoprovideanindependentassessmentofthestrengths,weaknesses,andriskprofilesofallmajorcapitalprojects.TheboardwouldadvisetheAEwhetherinvestmentdecisions,resourcecommitments,andprioritiesaremeetingtheirexpectedoutcomesandDOE’sgoals.Itwouldbemodeledafter“governanceboards”thatprovidechecksandbalancesbetweenthemostseniorexecutive(SAE)responsiblefortheportfolioofDOEactivitiesandtheESAABmemberswhoreportontheirareasofresponsibility.

ImplementanIndependentOversightreviewteamtoprovideanindependentaudit

functionreportingtotheSAE.TheteammustbefirewalledfrombothprogramandprojectmanagementorganizationsandtheAEs(DOEUnderSecretaries/ProgramSecretarialOfficers)andmustbepurelyindependent.TheAEmustsupportandunderstandthepurposeofthereview,bebriefedandawareofthereviewrecommendations,andensurethattherecommendationsareimplementedorresolvedinatimelymanner.

RequirethatindependentpeerreviewsandSAEIndependentOversightreviews

occurduringthelifecycleofaprojectfromCD‐1toCD‐4.Establisha“gradedrisk‐

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based”approachtotheimplementationofreviews.Therefore,fromtheonset,highertechnicalrisksassociatedwithfirst‐of‐a‐kindengineeringwouldrequiregreaterscrutiny.Incontrast,programswithlowerriskprofiles(e.g.,buildtoprintprojects)wouldrequirelessscrutiny.

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6. ACHIEVINGACULTURETHATENABLESCONSISTENTLYACCEPTABLEPROJECTOUTCOMES

Afterdecadesofstudies,evaluations,analyses,anddozensofactionplans,DOE’sprojectdeliveryperformancehasimproved,butperformanceissuesremain.Inaddition,theseimprovementsareinconsistentacrossprogramoffices.ExpertisewithintheContractandProjectManagementWorkingGrouphelpedidentifyfourfactorsforcontinuousprojectmanagementsuccessatDOE.EffortstoaddressthesefourfactorscanresultintheimprovementsDOEneedsanditsstakeholdersdemand.

Afifthfactor–culture–helpsaddressthelongevityofimprovedperformance,andisoverarchingandsupportiveofthefourfactorsalreadydescribed.Whileotherstudieshaveindicatedchangesinorganizationalandindividualcultureareneededtosupportprojectmanagementimprovements,moreshouldbedonetomakelonglastingimprovements.Currently,weaknessesintheorganizationofDOE’sprojectscreatebarrierstosuccessfulprojectdelivery.Insomecases,insufficientlinemanagement,ownershipandauthority,routinedecisionmakingatthewronglevels,andfocusonreportingprojectsas“green”ratherthanonsustainedperformanceimprovementsareallemblematicofthedeepculturalissuesunderlyingprojectperformance.Inothercases,thereappearstobealackofstrategicprioritizationforprojectfunding,aswellasalackofatransparentfundingallocationprocess.Oftenforgovernmentagencies,aninternalprioritizationlistofprogramsandprojectsdoesnotexist,orifitdoesexist,theagencydoesnotadheretoit.Thiscausesprojectstofallvictimtotheirbudgetallocations.Projectmanagersalsodevelopanoptimismbiasindeliveringtheprojectoncostandscheduledespitethechangestoaproject’sfundingprofile.Inmanyinstances,theContractandProjectManagementWorkingGroupprovidedanecdotesofan“informalculture”withinDOEwithregardstoprojectandacquisitionmanagement,whichismisalignedwiththeformalstructurethatincludespolicies,ordersandguidance.Insomerespects,becauseofthismisalignment,theinformalcultureovertakesrecognizedsystems,processes,andproceduresresultinginlessthanacceptableoutcomesfromprojectandacquisitionmanagement.EM’s2011ReportontheOfficeofEnvironmentalManagementProgramandProjectOrganizationshighlightstheimpactofculturechangeonprojectperformance,andcanbeextrapolatedacrossDOE.Thereport’sfindingsfocusonastrategicchangethatembracesacommitmenttoanewculture,andprovidesrecommendationstoachievethisgoal.Onekeyrecommendationfromthisreportstates:

TransformthecultureofEMtooneofmoreopensharing,collaborativeproblemsolving,andtransparencysothatopenandhonestresultsarecommunicatedandactedupon,resultingincontinuousimprovementsbeingmadetoEM.Thisculture

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shouldbeproactiveinitsapproachtomanagingprogramsandprojects,ratherthanreactive.

Anotherapplicablerecommendationfocusesontheneedforaccountability,responsibility,andauthoritiestobeformallydocumented,effectivelycommunicated,andexecutedattherightlevel,whichisrelatedtotherecommendationsidentifiedthroughoutthisreport.TheContractandProjectManagementWorkingGroupwishestoreemphasizetheneedforculturechangeandendorsestherecommendationsincludedintheEMreport.Thegroupbelieves,however,thattheEMrecommendationsshouldembraceadditionalelementstochangeDOEculture.Forexample,DOEshouldworktoovercomenaturaldefensiveroutinesinusethroughouttheprojectdeliverysystemandensurethatallprojectteamsunderstandtheneedtosolicitappropriateoutsideviewsinallprojectphases.

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7. REFERENCESDOE2008,RootCauseAnalysisContractandProjectManagement,U.S.DepartmentofEnergy,Washington,DC,April2008

DOE2008,RootCauseAnalysisContractandProjectManagement,CorrectiveActionPlan,U.S.DepartmentofEnergy,Washington,DC,July2008

DOE2011,ReportontheOfficeofEnvironmentalManagementProgramandProjectOrganizations,U.S.DepartmentofEnergy,Washington,DC,August2011

DOE2011,RootCauseAnalysisandCorrectiveActionPlanClosureReport,Final,U.S.DepartmentofEnergy,Washington,DC,February2011

DOE2013,HanfordTank,WasteRetrieval,Treatment,andDispositionFramework,U.S.DepartmentofEnergy,Washington,DC,September24,2013

DOEGuide413.3‐4A,TechnologyReadinessAssessmentGuide,U.S.DepartmentofEnergy,Washington,DC,September15,2011

DOEGuide413.3‐7A,RiskManagementGuide,U.S.DepartmentofEnergy,Washington,DC,January18,2011

DOEG413.3‐12,U.S.DepartmentofEnergyProjectDefinitionRatingIndexGuide,U.S.DepartmentofEnergy,Washington,DC,July22,2010

DOEG413.3‐21,CostEstimatingGuide,U.S.DepartmentofEnergy,Washington,DC,May9,2011

DOEOrder413.3B,ProgramandProjectManagementfortheAcquisitionofCapitalAssets,U.S.DepartmentofEnergy,Washington,DC,November29,2010

DOEStandard1189‐2008,IntegrationofSafetyintotheDesignProcess,U.S.DepartmentofEnergy,Washington,DC,March2008

OMBCircularA‐112013,Preparation,Submission,andExecutionoftheBudget,ExecutiveOfficeofthePresident,OfficeofManagementandBudget,WashingtonDC,July2013

NAPA2009,DepartmentofEnergyManagingattheSpeedofLightImprovingMission‐SupportPerformance,NationalAcademyofPublicAdministration,WashingtonDC,July2009

NRC1999,ImprovingProjectManagementintheDepartmentofEnergy,NationalResearchCouncil,WashingtonDC,1999

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