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Introduction

BACKGROUND

Recurrent problems with U.S. Department of Energy (DOE) project performance in the 1990s raised questions on the part of congressional appropriations committees about the credibility of the practices and processes used by the department to procure and manage projects. In an effort to increase confidence in DOE’s capital acquisition budget, the 105th Committee of Conference on Energy and Water Resources directed DOE to investigate establishing a project review process. DOE requested the assistance of the National Research Council (NRC), which resulted in the publication of the report Assessing the Need for Independent Project Reviews in the Department of Energy, also known as the Phase I report (NRC, 1998). That report found that poor project performance in the DOE was due, in part, to deficiencies in the department’s procedures for initiating and managing projects.

Congress also directed DOE to undertake a review and assessment of its overall management structure and process for identifying, managing, designing, and constructing facilities (U.S. Congress, 1997). DOE again asked the NRC for assistance, this time to conduct an independent review and develop recommendations to improve DOE’s management of projects. The NRC published its findings and recommendations as Improving Project Management in the Department of Energy, also known as the Phase II report (NRC, 1999). The Phase II report indicated that the problems in DOE project management were pervasive and ingrained in the culture of the department. It provided a set of findings and recommendations as a guide to improving project management and noted that the



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Progress in Improving Project Management at the Department of Energy: 2001 Assessment 1 Introduction BACKGROUND Recurrent problems with U.S. Department of Energy (DOE) project performance in the 1990s raised questions on the part of congressional appropriations committees about the credibility of the practices and processes used by the department to procure and manage projects. In an effort to increase confidence in DOE’s capital acquisition budget, the 105th Committee of Conference on Energy and Water Resources directed DOE to investigate establishing a project review process. DOE requested the assistance of the National Research Council (NRC), which resulted in the publication of the report Assessing the Need for Independent Project Reviews in the Department of Energy, also known as the Phase I report (NRC, 1998). That report found that poor project performance in the DOE was due, in part, to deficiencies in the department’s procedures for initiating and managing projects. Congress also directed DOE to undertake a review and assessment of its overall management structure and process for identifying, managing, designing, and constructing facilities (U.S. Congress, 1997). DOE again asked the NRC for assistance, this time to conduct an independent review and develop recommendations to improve DOE’s management of projects. The NRC published its findings and recommendations as Improving Project Management in the Department of Energy, also known as the Phase II report (NRC, 1999). The Phase II report indicated that the problems in DOE project management were pervasive and ingrained in the culture of the department. It provided a set of findings and recommendations as a guide to improving project management and noted that the

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Progress in Improving Project Management at the Department of Energy: 2001 Assessment problems could not be resolved by any single change and that improvement would require a program of reform for the entire project management process. DOE’s diverse missions are supported by hundreds of projects resulting in annual expenditures of billions of dollars. Consequently, Congress has an ongoing concern about project management in the DOE and the need to assure American taxpayers that the nation’s resources are effectively and efficiently managed. SCOPE OF WORK In response to a directive from the 106th Committee of Conference on Energy and Water Resources, DOE requested the NRC to appoint a committee to review and assess the progress made by the department in improving its project management practices, as recommended in the Phase II report, and conducting adequate external, independent project reviews. The principal goal of this effort is to review and comment on DOE’s recent efforts to implement the recommendations in the Phase II report and improve its project management, including a review of the following: Specific changes implemented by the department to achieve improvement (e.g., organization, practices, training); An assessment of the progress made in achieving improvement; and The likelihood that improvement will be permanent. This oversight and assessment is planned as a 3-year effort. It will include annual reports on DOE’s accomplishments, the identification of problems needing additional attention, and recommendations for departmental actions. The NRC appointed a committee under the auspices of the Board on Infrastructure and the Constructed Environment (BICE) to undertake the review and assessment of DOE project management. The committee is composed of 11 professionals with diverse experience in academic, government, and industrial settings and knowledge of project management and process improvement. Five members of the committee also participated in the Phase II review and assessment, and one member participated in both Phase I and Phase II. See Appendix A for biographies of the committee members. The committee met five times from September 2000 to July 2001 to review and assess data on projects and project management procedures presented by the DOE project managers and representatives of the Office of Engineering and Construction Management (OECM), the project management support offices (PMSOs) in the Office of Environmental Management (EM), the National Nuclear Security Agency (NNSA), the Office of Science (SC), and the Albuquerque Operations Office (AO). Committee representatives also attended project management workshops and awards programs sponsored by OECM, EM, NNSA, and SC and met with DOE senior managers responsible for managing programs,

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Progress in Improving Project Management at the Department of Energy: 2001 Assessment establishing policies, and implementing project management reforms. The committee’s findings and recommendations are based on briefings and documents provided by DOE. The committee’s fact-finding efforts are listed in Appendix B. ORGANIZATION OF THE REPORT This is the committee’s first annual report. It includes the committee’s assessment of progress in improving project management in the DOE as of mid-2001 and provides additional discussions of issues the committee determined to be key factors affecting project management in the department. The body of this report addresses some of the issues raised in the Phase II report that the committee believes are most critical to improving project management. Not all the findings and recommendations in the Phase II report are repeated here, although the committee continues to endorse them, so this report should be used in conjunction with the Phase II report. The Phase II report findings and recommendations are reproduced as Appendix C. The findings and recommendations in this report reiterate and expand on those given in the committee’s interim letter report, Improved Project Management in the Department of Energy (NRC, 2001), reproduced here as Appendix D. The report is organized in nine chapters. The findings and recommendations in Chapters 2 through 4 are listed after each subtopic discussion. In Chapters 5 through 9 they are listed in a separate section at the end of the chapter. Chapter 1, “Introduction,” includes background information on earlier project management oversight and assessment efforts conducted for DOE by the NRC and the scope of the current study. Chapter 2, “Overarching Issues,” includes a discussion of the department’s organizational structure, the role of senior management, the role of DOE managers as project owners, and department-wide policies and procedures for strategic planning and process improvement. The succeeding chapters discuss in detail specific aspects of project management that the committee believes are most critical and DOE’s efforts to improve project management. Chapter 3, “Front-End Planning,” addresses an aspect of project management that correlates closely with project performance. It includes background information on the process and impact of front-end planning and assesses current front-end planning efforts in the DOE. There, the committee discusses possible actions that it believes will improve oversight, evaluation, and improvement of the front-end planning process. Chapter 4, “Risk Management,” addresses an issue identified by DOE project managers and the committee as one of the most critical and difficult components of project management. It assesses DOE efforts to improve risk management and provides technical background on methods the department could employ to identify, analyze, evaluate, and respond to the risks inherent in DOE projects. A department-wide approach to assessing the level of risk in ongoing projects and to managing risk in the department’s portfolio of projects is also discussed.

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Progress in Improving Project Management at the Department of Energy: 2001 Assessment Chapter 5, “Project Reporting and Oversight,” assesses department-wide efforts in data collection and analysis. It discusses analysis techniques to evaluate project performance and the use of the data for benchmarking and process improvement. Additional information on the use of project performance data for statistical process control is provided as Appendix E. Chapter 6, “Independent Reviews,” assesses progress in planning, managing, and implementing external independent reviews (EIRs), independent cost estimates (ICEs), and internal project reviews (IPRs). It assesses the documentation of procedures, review-team qualifications, review requirements, and review evaluations for EM, SC, and NNSA . Chapter 7, “Acquisition and Contracting,” reviews progress in implementing the Phase II recommendation that the department should employ contracting methods that address risk and assign accountability. There, the committee emphasizes the importance of performance-based contracting and methods for achieving the department’s contracting objectives. Chapter 8, “Documentation of Project Management Policies and Procedures,” assesses the effectiveness of DOE project management policies and procedures documents issued since publication of the Phase II report, in June 1999. It addresses general aspects of the content and organization of the documents and specific issues regarding value engineering, change management, and ISO 9000 that the committee considers in need of additional attention. The report concludes with an assessment of DOE progress in establishing a department-wide training program for project managers, as well as criteria and standards for the selection and assignment of project managers. Chapter 9, “Project Manager Training and Development,” assesses the Project Management Career Development Program currently being developed and the department’s interim efforts to ensure that project managers have the knowledge, skills, and abilities needed to manage DOE projects. Alternative approaches to delivering training to DOE managers are also discussed. REFERENCES NRC (National Research Council). 1998. Assessing the Need for Independent Project Reviews in the Department of Energy. Washington, D.C.: National Academy Press. NRC. 1999. Improving Project Management in the Department of Energy. Washington, D.C.: National Academy Press. NRC. 2001. Improved Project Management in the Department of Energy. Letter report, January. Washington, D.C.: National Academy Press. U.S. Congress. 1997. Committee of Conference on Energy and Water Development. HR 105–271. Washington, D.C.: Government Printing Office.