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DOE Project Management Accountability and Process Improvement

Bruce M. Carnes, Chief Financial Officer U.S. Department of Energy

In many ways DOE projects are unique in that they combine R&D with conventional construction in such leading-edge science projects as high-energy laser facilities and neutron sources. Additionally, many of our environmental cleanup projects also have R&D elements, and we are attempting to clean up one-of-a-kind mixtures of radioactive wastes. Yet other projects are similar to those of other governmental and private owners, things like computing facilities, infrastructure repair projects, and office buildings. What this means to us is that there is no one-size-fits-all for our approach to projects. Rather, our project improvement efforts provide an outline that can be tailored to each project depending upon its size and complexity.

We are interested in the what, not the how. Too often we try to tell people how to do the job. We need to tell the people less how to do it and be very certain that we are defining well what it is that we want done. One of the important reasons for involving the private sector is that the private sector brings ingenuity, creativity, and imagination to these tasks.

One initiative now under way is improving our selection process or our validation process for proposed new projects. We are building a better process to align proposed projects with the department’s mission areas, and we will do this in two ways. In the short term we will conduct an independent assessment of each proposed new project to advise the decision maker how well the project satisfies and aligns with the department’s mission areas, whether that be stewardship of the nuclear stockpile, an initiative related to the national energy plan, a nonproliferation effort, a science project, or a cleanup effort. We intend to



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Proceedings of Government/Industry Forum: The Owner’s Role in Project Management and Preproject Planning 3 DOE Project Management Accountability and Process Improvement Bruce M. Carnes, Chief Financial Officer U.S. Department of Energy In many ways DOE projects are unique in that they combine R&D with conventional construction in such leading-edge science projects as high-energy laser facilities and neutron sources. Additionally, many of our environmental cleanup projects also have R&D elements, and we are attempting to clean up one-of-a-kind mixtures of radioactive wastes. Yet other projects are similar to those of other governmental and private owners, things like computing facilities, infrastructure repair projects, and office buildings. What this means to us is that there is no one-size-fits-all for our approach to projects. Rather, our project improvement efforts provide an outline that can be tailored to each project depending upon its size and complexity. We are interested in the what, not the how. Too often we try to tell people how to do the job. We need to tell the people less how to do it and be very certain that we are defining well what it is that we want done. One of the important reasons for involving the private sector is that the private sector brings ingenuity, creativity, and imagination to these tasks. One initiative now under way is improving our selection process or our validation process for proposed new projects. We are building a better process to align proposed projects with the department’s mission areas, and we will do this in two ways. In the short term we will conduct an independent assessment of each proposed new project to advise the decision maker how well the project satisfies and aligns with the department’s mission areas, whether that be stewardship of the nuclear stockpile, an initiative related to the national energy plan, a nonproliferation effort, a science project, or a cleanup effort. We intend to

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Proceedings of Government/Industry Forum: The Owner’s Role in Project Management and Preproject Planning provide the decision maker with an unbiased evaluation of that alignment, so that we can focus our efforts where they need to be focused. Within this coming year, we will have the capability to have a multiyear program of projects. That way we can look at relative priorities, relate those priorities to need dates, and arrange the budget so that we have an affordable year-by-year program. The Department of Defense calls this planning, programming, and budgeting, and they use it to build a future year’s defense program. We are going to do that at Energy. One of the first things I noticed coming to the Department of Energy is that we did not have what DOD refers to as a program analysis and evaluation (PA&E) function, and we are creating that function. It will take a multiyear look at what projects mean to us in the future, that is to say, we need to know when we start a project what it means for us 5 years out. It is great to have great ideas. But before we launch we need to make sure we know where that great idea is going, where it is going to end up, and what it is going to cost. That way we can have a balanced portfolio and we can actually manage to get there. I have already committed the resources to implement both the short-range effort and the multiyear program. This PA&E entity has four primary functions: (1) to develop and maintain our strategic plan, (2) to guide the department through the planning, programming, and budgeting process, (3) to manage the Government Performance and Results Act efforts, and (4) to conduct ad hoc program management studies for the secretary and deputy secretary. Another initiative is greater emphasis on acquisition planning. The Federal Acquisition Regulations (FAR) require acquisition planning. The acquisition plan takes the defined project and evaluates and proposes the game plan to show how the department will acquire the capability we are seeking. Acquisition planning includes such things as business approach, technical requirements, risk identification, assessment and management, life-cycle costs for alternatives, and the contracting approach. An IPT, an integrated project team, should create this plan at the site, with headquarters involvement as appropriate, but only as appropriate, and tailor it to the size and complexity of each project. Our new initiative here will provide an independent look by my office at each plan, to provide an unbiased quality check of the plan. The deputy secretary has approved this policy and will be issuing this week a memorandum which will confer upon the undersecretaries an acquisition planning and approval authority that they have not heretofore had. They will have authority to approve projects within certain dollar range limits, and others beyond that will involve the deputy secretary as well. One of the things that we have done in the department under this administration is to confer line management responsibilities on our undersecretaries. We are involving them in this approval process. This is going to be a lot of work, but it does establish a line of responsibility and accountability that the secretary and

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Proceedings of Government/Industry Forum: The Owner’s Role in Project Management and Preproject Planning the deputy secretary feel very, very strongly about. A designated decision maker must render key or critical decisions at the entry phases of each project. Critical decision 0 determines that the project is in fact supportive of a departmental mission. Critical decision 1 authorizes the start of design with the project engineering and design fund, a fund that was just implemented last year. Critical decision 2 approves inclusion in the department’s budget. The Office of Engineering Construction Management now validates the budget and schedule at this critical decision for the decision maker. Critical decision 3 authorizes the start of construction or fabrication. The idea behind these critical decisions is that the project manager must demonstrate to the decision maker—that is, to include certain independent validations—that the project is ready to proceed. The National Academy, in their 1999 report, was very critical of the department for not performing this function. I believe we have fixed that problem. A second practice we borrowed from industry is that of periodic project performance reviews. We require the project manager to review the status of each project with that same decision maker either quarterly or monthly. This was not standard practice in the department until last year. The length of these reviews varies from project to project, depending upon size and complexity. It could be 15 minutes; it could even be an hour if necessary. But the point is we are doing them and learning how to manage better. My office participates in all the reviews of the larger projects, to help round out the capabilities of the review. A third improvement is a standard project reporting and status system. Unlike our brethren in DOD, in the Corps of Engineers, or the Naval Facilities Engineering Command, we at DOE did not have a standard system until now. With accurate information, our managers at all levels will have a much better capability to influence projects. We issued the first report, which resembles a traffic light in that it gives red, yellow, green indicators of significant projects, so that senior managers in the department can see whether projects are on track against a variety of criteria. If you see a yellow or you see a red, you can drill down and find out what is going on and causing a problem. It is not sufficient to wait until something blows up to find out what happened. The Project Analysis and Reporting System is facilitated by the required use of earned value management as part of the project controls used by our contractors for all projects over $20 million. We believe that the use of this standard and well-accepted tool will help all our managers, both contractors and federal project managers, to see what is happening in real time and be able to better influence outcomes. Fourth, the President and this administration are committed to better measurement of performance, awards for good performance, improvement of not-so-good performance, and accountability. What I’ve outlined above provides the metrics we need to better oversee our projects as the owner. Critical decision 0, once it is approved, tells us that we need to expend resources. The acquisition plan is the game plan, so we know where we are going and how we will approach

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Proceedings of Government/Industry Forum: The Owner’s Role in Project Management and Preproject Planning the acquisition. Validation of the budget and performance baseline parameters will build credibility with Congress and give us more attainable targets. Use of project controls and earned value management will give us the tools to manage better and solve problems earlier, as well as serve as a performance metric. And the reviews and reporting will provide the project managers with a vehicle to inform senior managers. This will enable our senior managers to see how things are going utilizing predefined metrics. Bruce Carnes was nominated by President Bush and confirmed by the Senate as chief financial officer for the Department of Energy in the spring of 2001. In addition, he serves as director of the Office of Management, Budget and Evaluation, in charge of the DOE’s budget, finance and accounting operations, human resources, acquisition, and program and project evaluation. Prior to that, Dr. Carnes was deputy director of the Defense Finance and Accounting Service (DFAS), a nearly 20,000-employee agency responsible for the Defense Department’s worldwide financial operations. In this position, he functioned as the agency’s chief operating officer, overseeing DFAS’s budget, human resources, acquisition, and planning activities and the finance and accounting operations of the Department of Defense. Dr. Carnes came to DFAS in 1993 from the Office of National Drug Control Policy, Executive Office of the President, where he served as director of the Office of Planning, Budget and Administration and briefly as acting director. Dr. Carnes entered federal service in 1976 in the U.S. Office of Education, in Washington, D.C. In 1979, he joined the National Endowment for the Humanities as assistant director, Office of Planning and Policy Analysis. He later assumed the post of director, Office of Planning and Budget, managing the development of overall agency program policy, budget, legislative proposals, congressional testimony, and agency management issues. In 1985, Dr. Carnes was nominated by President Reagan and confirmed by the Senate as deputy undersecretary for planning, budget, and evaluation in the Department of Education. Dr. Carnes has a B.A. from the University of Colorado and an M.A. and a Ph.D. from Indiana University. Prior to joining the government, he was an assistant professor of English at James Madison University, Harrisonburg, Virginia.