THE NATIONAL ACADEMIES

Advisers to the Nation on Science, Engineering, and Medicine

National Academy of Sciences

National Academy of Engineering

Institute of Medicine

National Research Council

Board on Infrastructure and Constructed Environment Division on Engineering and Physical Sciences

May 23, 2002

The Honorable Spencer Abraham

Secretary

U.S. Department of Energy

1000 Independence Avenue, S.W. Washington, DC 20585

Re: Progress in Improving Project Management at the Department of Energy, 2002 Interim Assessment

Dear Mr. Secretary:

On January 17, 2001, the National Research Council’s (NRC’s) Committee for Oversight and Assessment of Department of Energy Project Management sent to you its initial assessment of the Department of Energy’s (DOE’s) progress in implementing the recommendations made in the 1999 NRC report Improving Project Management in the Department of Energy (National Academy Press, Washington, D.C.), and commented as well on related actions. The January 17, 2001, interim letter report, “Improved Project Management in the Department of Energy,” was followed in November 2001 by a more extensive evaluation, Progress in Improving Project Management at the Department of Energy: 2001 Assessment (National Academy Press, Washington, D.C.). These reviews and assessments were requested by the 106th Congress’s Committee of Conference on Energy and Water Power Development (House Report 106–336).

The present letter report is submitted pursuant to an agreement between DOE and the NRC for updates at 6-month intervals. It transmits the committee’s summary assessment of DOE’s progress to date in implementing prior recommendations. The scope of this interim assessment was based on DOE actions and committee reviews that have occurred in the last 6 months. The committee’s assessment is based on meetings with Undersecretary Robert G.Card, Undersecretary John A.Gordon, Assistant Secretary Jessie H.Roberson, and Director of the Office of Management, Budget, and Evaluation/Chief Financial Officer Bruce M.Carnes and on briefings by DOE staff from the Office of Engineering and Construction Management and the Project Management Support Offices of Environmental Management, the National Nuclear Security Agency, and the Office of Science. The committee also visited DOE field sites managed by the Oakland Area Office to receive briefings from DOE personnel and contractors on the planning and execution of projects and the implementation of DOE policies and procedures. The assessment included review of documents provided by DOE, as referenced in the following text. This letter provides observations on DOE’s status regarding project management initiatives as of April 2002, which, in the committee’s judgment, are deserving of your attention. A more extensive set of findings and any related recommendations will be transmitted in the committee’s full report on its 2002 assessment, to be completed later this year.

   

HA 274, 2101 Constitution Avenue NW, Washington DC 20418 (202) 3343376 Fax (202) 334 3370 DEPS@nas.edu www.national-academies.org



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THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine National Academy of Sciences National Academy of Engineering Institute of Medicine National Research Council Board on Infrastructure and Constructed Environment Division on Engineering and Physical Sciences May 23, 2002 The Honorable Spencer Abraham Secretary U.S. Department of Energy 1000 Independence Avenue, S.W. Washington, DC 20585 Re: Progress in Improving Project Management at the Department of Energy, 2002 Interim Assessment Dear Mr. Secretary: On January 17, 2001, the National Research Council’s (NRC’s) Committee for Oversight and Assessment of Department of Energy Project Management sent to you its initial assessment of the Department of Energy’s (DOE’s) progress in implementing the recommendations made in the 1999 NRC report Improving Project Management in the Department of Energy (National Academy Press, Washington, D.C.), and commented as well on related actions. The January 17, 2001, interim letter report, “Improved Project Management in the Department of Energy,” was followed in November 2001 by a more extensive evaluation, Progress in Improving Project Management at the Department of Energy: 2001 Assessment (National Academy Press, Washington, D.C.). These reviews and assessments were requested by the 106th Congress’s Committee of Conference on Energy and Water Power Development (House Report 106–336). The present letter report is submitted pursuant to an agreement between DOE and the NRC for updates at 6-month intervals. It transmits the committee’s summary assessment of DOE’s progress to date in implementing prior recommendations. The scope of this interim assessment was based on DOE actions and committee reviews that have occurred in the last 6 months. The committee’s assessment is based on meetings with Undersecretary Robert G.Card, Undersecretary John A.Gordon, Assistant Secretary Jessie H.Roberson, and Director of the Office of Management, Budget, and Evaluation/Chief Financial Officer Bruce M.Carnes and on briefings by DOE staff from the Office of Engineering and Construction Management and the Project Management Support Offices of Environmental Management, the National Nuclear Security Agency, and the Office of Science. The committee also visited DOE field sites managed by the Oakland Area Office to receive briefings from DOE personnel and contractors on the planning and execution of projects and the implementation of DOE policies and procedures. The assessment included review of documents provided by DOE, as referenced in the following text. This letter provides observations on DOE’s status regarding project management initiatives as of April 2002, which, in the committee’s judgment, are deserving of your attention. A more extensive set of findings and any related recommendations will be transmitted in the committee’s full report on its 2002 assessment, to be completed later this year.     HA 274, 2101 Constitution Avenue NW, Washington DC 20418 (202) 3343376 Fax (202) 334 3370 DEPS@nas.edu www.national-academies.org

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2002 Interim Assessment Since May 1, 2001, when members of the committee met with you to present its findings, there have been encouraging improvements, but attention is still needed in several areas. The committee’s interim observations are as follows. DOE Order, Program and Project Management for the Acquisition of Capital Assets (O413.3). This definition of policies and procedures for project management is an important step for DOE, and the committee encourages its full implementation. Minor amendments may be justified, but the committee recommends against any substantial changes at this time. To improve results, DOE should focus on establishing stability, consistency, persistence, and discipline in managing its projects. Management Oversight. The committee supports the increased importance given to project reporting and oversight as detailed in former Deputy Secretary Francis S.Blake’s memoranda of September 19, 2001, and November 15, 2001, and the greater involvement of the undersecretaries, the assistant secretaries, and the director of the Office of Management, Budget, and Evaluation/Chief Financial Officer (OMBE/CFO) in the review and approval of project justification based on mission need and project acquisition plans, as defined in the memoranda. Formal quarterly program reviews now planned by DOE are also essential elements of the process for improving project management and will help to establish the principles of good project management. The committee supports the increased roles of the Energy Systems Acquisition Advisory Boards for project review and approval at formal option and decision points required by DOE Order O413.3. Human Resources. The committee strongly believes that upgrading of the project management capabilities of DOE project managers continues to be necessary. The committee applauds the achievement of the National Nuclear Security Administration’s (NNSA’s) Project Management Support Office (NA-54) in having 100 percent of its project managers satisfy the Project Management Institute’s requirements for education, experience, and ethical conduct, and pass the examination to be certified as Professional Project Managers (PMP). The committee urges other offices in DOE to emulate this achievement. The project management workshops have been a useful addition for transmitting lessons learned, manifesting DOE management’s interest in good project management, recognizing superior project performance, and creating project management group identity and cohesion. Despite these accomplishments, however, the number of experienced DOE project managers is still insufficient considering the number, complexity, and dollar value of DOE’s projects, and staffing is below the estimated number of project managers employed by other federal agencies and private sector businesses. The committee continues to stress that the department’s workforce should be strengthened in project, contract, and acquisition management. The implementation of project management career development and training programs in DOE still lags behind the committee’s expectations. Project and program resources should be provided to accelerate the pace and expand the scope of project management training. Preproject Planning. In its November 2001 report, the committee expressed its concern for inadequate front-end planning of DOE projects. Thus it sponsored “The Government/Industry Forum on the Owner’s Role in Project Management and Pre-project Planning” in November 2001 with DOE executives and with industry executives from companies that procure major, complex projects. Undersecretary Robert G.Card and Chief Financial Officer Bruce Carnes

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participated actively in this meeting. The forum provided examples that illustrated the points made by the committee’s reports regarding how industry plans successful projects and applies procedures to improve its capabilities for managing projects. In subsequent meetings with contractors and DOE personnel in the field and at headquarters, the committee has seen evidence of an increased emphasis in DOE on front-end planning. For example, the committee reviewed planning documents for recent projects at Lawrence Berkeley National Laboratory, Stanford Linear Accelerator Center, and Lawrence Livermore National Laboratory that reflected effective planning activities, as well as recent policy memoranda that emphasize acquisition planning. The committee hopes to see this emphasis continued and expanded. Risk Management. The committee continues to advocate the use of objective risk assessments and the development of risk mitigation and management plans early in front-end planning and throughout the life of all projects. The committee applauds the Acquisition Risk Management initiative and the efforts of the Office of Engineering and Construction Management (OECM) to review risk management components of acquisition plans. Also, the committee reiterates its previous finding that objective, independent cost, schedule, and scope risk assessments for ongoing major projects would be of great value to DOE management. Internal Organization. The committee continues to recommend that the three program Project Management Support Offices (PMSOs) be supported and strengthened to become centers of excellence for project management in DOE. It is the committee’s strong belief that the PMSOs’ resources are inadequate for the task of effectively managing DOE’s projects. The committee is encouraged by OMBE’s expanding role and responsibilities in project justification, project planning, and project oversight. The committee supports the procedures established in the OMBE memorandum of February 14, 2002, for the Office of Program Analysis and Evaluation and OECM to assess justification of mission need, and endorses the emphasis placed on the acquisition execution plan defined in DOE Order O413.3. Program and Project Management Manual (February 2002 draft). On the basis of a preliminary assessment, the committee regards this document, which has been completely revised from its earlier draft version, as a major improvement over the preceding draft document released in October 2000. Earned Value Analysis. The committee observed that more, but not all, projects are now capturing earned value analysis data, as a consequence of DOE Order O413.3. Ongoing management attention is needed to ensure the accuracy and timeliness of this critical management tool. Project Reporting System. The committee applauds the startup of the Project Analysis and Reporting System (PARS). Much more needs to be done to make this system useful to DOE management at all levels. The reporting system should be tied to project performance and management metrics. It is apparent even from the limited PARS data now available that project performance from month to month is highly variable. The committee is monitoring PARS data and strongly encourages upper-level DOE management to do the same, in order to strengthen the department’s commitment to use of the system for managing projects so as to reduce variability and uncertainty. Performance-Based Contracting. The committee has observed DOE’s increased interest in performance-based contracting; however, much more management attention and guidance are

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needed. Project managers have to be trained in the use of performance-based contracts. Considering DOE’s reliance on contractors and the well-documented decline in the DOE contractor pool, this should be a higher priority for DOE. The committee emphasizes that performance-based contracting does not diminish DOE’s responsibility for contractor oversight and active involvement in assessing performance. Accelerating Projects. The committee is particularly encouraged by the stated intention of NNSA and Environmental Management (EM) executives to reduce the duration of projects. The committee agrees with Undersecretary Card’s estimation that substantial savings can follow from reducing project cycle times and recommends that these opportunities be aggressively pursued. Strategic Planning. The committee notes DOE’s increased activity in strategic planning, especially efforts by NNSA and the program planning and evaluation function in the OMBE. The department urgently needs better documentation of programmatic strategic plans in order to evaluate whether projects are justified with respect to current mission needs. Conclusions The committee observes that the secretary, the deputy secretary, the undersecretaries, and the chief financial officer of DOE have all taken visible positions on the need for improved project management. The committee strongly recommends that this high-level attention continue so that improvements can become ingrained in the DOE culture. In summary, the committee believes that the department has mandated major changes in planning and executing projects and project oversight that, if continued, should lead to improvements in project performance. Because DOE projects are often complex, difficult, and long, the effects of such efforts cannot be seen immediately. Currently, DOE project performance is still too variable, but if the department has the persistence to continue in the direction it has started, it has the opportunity to achieve better results in project management. Sincerely, Kenneth F.Reinschmidt, Chair Committee for Oversight and Assessment of Department of Energy Project Management