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Progress in Improving Project Management at the Department of Energy: 2001 Assessment 2 Overarching Issues INTRODUCTION The Phase II report (NRC, 1999) identified a number of problems in DOE project management and provided a set of recommendations for improving project management within the department. It noted that the problems were long-standing and pervasive and that there were no quick fixes that could make the department’s project management as good as that of other agencies and private industry. The recommendations included a structure to support project managers and provide consistent methods and systems to drive a change in the culture at DOE in the direction of improved project performance. The report concluded that improvement in project management requires the full and continuing support of the secretary of energy and the deputy secretary to ensure that reforms are enacted throughout DOE. The committee reported in January 2001 that DOE had undertaken a number of initiatives to improve project management and address some of the core issues; it also identified issues that had not been addressed (NRC, 2001). Since January 2001, the committee has continued to evaluate DOE project management policies and procedures and assess project performance. The committee believes that DOE project management will improve only if senior management, indeed managers at all levels, demonstrate their support and commitment by taking an active role in project reviews, accepting responsibility for management procedures and project performance, and clearly defining management expectations. This involvement should not be limited to projects that are in trouble but should begin in early project planning and be maintained throughout the life of the project.
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Progress in Improving Project Management at the Department of Energy: 2001 Assessment The committee has continued to review project management procedures and performance to assess the potential for long-term, lasting improvement. After issuing its interim report in January 2001, the committee reviewed the performance of many specific projects in the Albuquerque Operations Office (AO), the documentation of new projects recently funded by Congress, and department-wide procedures for front-end planning, risk management, acquisition and contracting, project reviews, reporting project performance, documentation of policies and procedures, and personnel training and development. These issues are addressed in detail in the succeeding chapters. In the remainder of this chapter, the committee summarizes the overarching issues and provides recommendations for dealing with them. INVOLVEMENT OF SENIOR MANAGEMENT The secretary of energy, the deputy secretary, the CFO, and other senior members of the new DOE management team have taken the time to discuss their views on project management in DOE with representatives of the committee. The committee appreciates their time and interest in keeping the committee informed about the new management philosophy and developments at DOE. Based on these statements, the committee is cautiously optimistic that major improvements may be forthcoming in DOE project management. The committee’s optimism is based on its understanding that the following will be components of the new program and project management approach in DOE: Increased project management discipline, Implementation of professional development for project managers, Greater emphasis on project justification and mission need, Definition of options and decision points for project termination or change, Greater emphasis on accountability and responsibility for project performance, Expanded roles and responsibilities for OECM in approving projects, Formal quarterly program reviews by the deputy secretary, Clearly defined expectations for project performance, Recognition of DOE’s role as an owner, Formal, clearly defined project performance and management metrics, Change in DOE culture driven from the top, Attention by the secretary, deputy secretary, and CFO, and Consolidation of management and administration, contracting, and project management under the CFO. Similar DOE management goals were endorsed by the committee in the Phase II report and the January 2001 letter report. The committee looks forward
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Progress in Improving Project Management at the Department of Energy: 2001 Assessment with great anticipation to the proposed changes in DOE project management and will follow up in future assessment reports. However, it reiterates its conviction that there is no quick fix for DOE project management problems; that all of the above steps should be executed; that many DOE projects are inherently difficult owing to their high uncertainty and complexity; and that any effort to improve DOE project management must effectively address the issues of procurement, acquisition, contracting, and management of contracts and contractors. STRATEGIC PLANNING The Phase II report was concerned not only with DOE doing projects right but also with doing the right projects. However, the committee was unable to find documented justification for most projects, including new projects, and so could only note the absence of identifiable strategic plans for DOE as a whole and for the PSOs individually. The Paths to Closure document by EM is in some ways a very long-range plan and perhaps comes closest to meeting this need (DOE, 1998). However, what is needed in addition are rolling 5-year plans, with budget projections, for all program secretarial offices (PSOs), which can be used to identify upcoming projects, why they are needed to fulfill mission goals and requirements, and how they fit in the DOE strategic objectives. In this way, strategic plans can form the basis for, and bridge into, conceptual plans for specific projects. It is impossible in most cases to determine if DOE projects comply with the Government Performance and Results Act of 1993 (GPRA) because of the department’s unclear objectives and insufficient performance measures (GAO, 2001a). Without articulated mission needs and objectives, there is no basis for identifying and evaluating benefits. The committee believes that each PSO should develop its own strategic plan and that project justification for critical decision 0, approval of mission need (CD-0), should assess the congruity of project descriptions with these strategic plans. Strategic 5-year plans should be updated annually to assure that projects are aligned with the evolving missions of the department. Finding. There are no PSO strategic plans defining long-range goals and objectives or mission needs, and documentation of project justification is almost entirely lacking or inadequate, so that it is impossible to assess whether the right projects are being done. Cost-benefit analysis and performance measurements required by GPRA cannot be performed effectively without effective strategic plans. Recommendation. The PSOs should develop budget-based rolling 5-year strategic plans that identify the mission goals and objectives of the program, the projects necessary to achieve them, and the benefits to be expected from these projects.
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Progress in Improving Project Management at the Department of Energy: 2001 Assessment OWNER’S ROLE DOE continues to rely heavily on contractors not only for the management of projects, which is to be expected, but also for project justification and definition of scope. DOE does not directly manage projects unless the contractor is simply working on a time and materials basis, as do some management and operations (M&O) contractors. However, in some cases DOE has virtually abdicated its role of owner in the oversight and management of contracts and contractors. Although many projects are managed successfully, especially those identified as outstanding examples in the OECM October 2000 project management workshop awards, there are still large projects where DOE is not executing the role of owner with respect to oversight and management of contracts and contractors and is not in effective control of these projects. As stated in the Phase II report, DOE needs to become proficient in the role of owner; and DOE project managers should become knowledgeable owner’s representatives. The committee has seen little evidence that DOE is aware of the distinction between the project management roles of owners and contractors, let alone of acting on it. The committee notes that there has been independent confirmation of these findings in the form of the June 2001 report Department of Energy: Follow-up Review of the National Ignition Facility (GAO, 2001b). In the nearly 2 years since the public revelation of massive cost and schedule overruns, according to the GAO, this project still lacks a defined mission need and goals acceptable to the three national laboratories—Lawrence Livermore (LLNL), Sandia (SNL), and Los Alamos (LANL). Moreover, it does not have a fully staffed oversight office in DOE, does not have a technical risk assessment capability, relies on optimistic assumptions about operational issues, does not have essential predecessor activities under project control, and does not have an independent external review process. These are all elementary, basic requirements for good project management. According to the GAO study, this project, which has been under intense public scrutiny since 1999 and is considered as being “an essential element of the Stockpile Stewardship Program,” is now estimated to cost over $4.2 billion and still has serious deficiencies in project management. Finding. DOE continues to rely excessively on contractors for project justification and definition of scope. There are some large projects in which DOE is not effectively executing its role of owner with respect to the oversight and management of contracts and contractors. Recommendation. DOE should develop its position as an effective owner of projects and should assure that federal project managers are trained and qualified owner’s representatives, capable of dealing effectively with contractors.
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Progress in Improving Project Management at the Department of Energy: 2001 Assessment PROCESS IMPROVEMENT The Phase II report found that the process in DOE for proposing, planning, and managing projects had serious shortcomings. The remaining chapters in this report show that many of these shortcomings remain, although some steps have been taken to address them. The first step toward a process definition was taken in DOE O413.3 (DOE, 2000), but much remains to be done. A consistent, efficient, expedited, and documented process for project planning, justification, and execution is essential. The committee believes that the lack of a standard, consistent project planning process is unacceptable. It believes that significantly greater progress should have been made in the more than 2 years since the issuance of the Phase II report. The committee recommends that DOE initiate a program of project process improvement, following an established statistical process control or continuous quality improvement procedure such as the well-known six-sigma process, which follows five steps: define, measure, analyze, improve, and control (DMAIC) (Rath & Strong, 2001). DOE has not successfully executed the first step, define, and has accomplished even less in the areas of measure and analyze. The six-sigma process is discussed further in Chapter 5, which gives specific recommendations. Pressures on DOE to demonstrate immediate or instantaneous improvements may be problematic because experience has shown that going directly to Step 4, improve (i.e., implementing preestablished solutions without passing through define, measure, and analyze), often leads to poor results. The committee believes that the DOE secretarial acquisition executive should be the sponsor of a program for process improvement, with OECM as the department’s process improvement champion. Finding. The DOE process for project initiation, planning, justification, and execution continues to need substantial improvement. A top-to-bottom process that recognizes best practices in both government and industry, as well as the unique and specific requirements of DOE programs and projects, is essential. Recommendation. The DOE secretarial acquisition executive should sponsor a process improvement program, and OECM should be named the program champion in DOE. ORGANIZATIONAL STRUCTURE AND RESPONSIBILITY The committee finds that the project management support offices (PMSOs) in the Environmental Management (EM), Defense Programs (DP), and Office of Science (SC) program secretarial offices (PSOs) are having a positive influence on project management in their programs. Much remains to be done, but there is movement in the right direction. The committee recognizes the need for tailoring
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Progress in Improving Project Management at the Department of Energy: 2001 Assessment project management programs to the different PSO mission requirements. However, some PSOs are improving faster than others, and progress could be accelerated through stronger central oversight and support, using OECM as a unifying organization, to assist the PMSOs and the PSO projects and to validate the results. The Phase II report found that project management in DOE was not being adequately addressed. To remedy this critical situation, a departmental center of excellence in project management was needed. Also, the secretary of energy and the deputy secretary/secretarial acquisition executive were in great need of a responsive organization they could rely on for accurate, unbiased project management information, advice, and early warning of problems. The Phase II report accordingly recommended the establishment of an office of project management, at the level of assistant secretary, reporting to the deputy secretary, with department-wide project management functions and responsibilities. This recommendation was reiterated in the January 2001 letter report. The committee also calls attention to the expanded functions and responsibilities of the project management office as proposed in the Phase II report. Congress stated the following in the House Appropriations Committee report for FY2002 appropriations (U.S. Congress, 2001): The Department has established an Office of Engineering and Construction Management (OECM) to strengthen its project management capabilities. The Committee strongly supports this effort, but continues to be concerned with the placement of this Office in the Department’s organizational structure. In its recent report to Congress, the National Research Council (NRC) reaffirmed its recommendation that the Office of Engineering and Construction Management should be at the level of assistant secretary and report directly to the Deputy Secretary. The NRC also noted that “the most important unresolved issues are: (1) definition of the authority and scope of the OECM; (2) the provision of adequate financial and staff resources to improve project management.” The Committee endorses the NRC recommendation that “…the authority of OECM and the PMSOs be strengthened and that the resources and personnel available to them be increased to support their responsibilities.” In that regard, the Committee strongly urges the Department to elevate OECM to a level equal to an Assistant Secretary with a direct reporting relationship to the Deputy Secretary/ Secretarial Acquisition Executive authority. The Committee believes that the director of this office should continue to be a career position rather than a political appointment. Further, it fully expects that OECM’s existing personnel should continue in their current positions in OECM’s new location. The Department should also place the facilities and infrastructure policy development and program oversight responsibilities under OECM. Consistent with NRC’s recommendation for strengthening available financial and staff resources, the Committee has provided $7,600,000 for OECM in fiscal year 2002 and expects the office to report directly to the Deputy Secretary.
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Progress in Improving Project Management at the Department of Energy: 2001 Assessment Finding. The combination of the OECM and the PMSOs in the three major PSOs addresses many of the issues raised in the Phase II report but not all. This organizational structure is probably workable, but it does not fully address the department-wide issues of consistency, discipline, and excellence in project management that the Phase II report felt were essential. Recommendation. The roles and responsibilities of the OECM should be strengthened, as set forth in the Phase II report, and the OECM should be budgeted, staffed, and empowered to become the center of excellence in project management and the coordinator for project manager training and development and for oversight and approval of all capital projects in DOE. REFERENCES DOE (U.S. Department of Energy). 1998. Accelerating Cleanup: Paths to Closure (DOE/EM 0362). Washington, D.C.: Department of Energy. DOE. 2000. Program and Project Management for the Acquisition of Capital Assets (Order O413.3). Washington, D.C.: Department of Energy. GAO (U.S. General Accounting Office). 2001a. Department of Energy Status of Achieving Key Outcomes and Addressing Major Management Challenges (GAO-01–823). Washington, D.C.: General Accounting Office. GAO. 2001b. Department of Energy: Follow-up Review of the National Ignition Facility (GAO-01– 677R ). Washington, D.C.: General Accounting Office. NRC (National Research Council). 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. Rath & Strong, 2001. Six Sigma Pocket Guide. Lexington, Mass.: Rath & Strong/Aon Management Consulting. U.S. Congress. 2001. Energy and Water Development Appropriations Bill, 2002 (HR 107–112). Washington, D.C.: U.S. House of Representatives.
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