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1 Introduction The Department of Energy's (DOE's) diverse missions are supported by hundreds of projects resulting in annual expenditures of billions of dollars. Con- sequently, 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. In response to a directive from the Commit- tee of Conference on Energy and Water Resources of the 106th Congress (U.S. Congress, 1997), DOE requested the National Research Council (NRC) to appoint a committee to review and assess the progress made by the department in improv- ing its project management practices, as recommended in previous NRC reports (NRC, 1998, 1999~. The principal goal of this effort is to review and comment on DOE's recent efforts to improve its project management, including a review of the following: Specific changes implemented by the DOE 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. (See Appendix A for the statement of task.) The NRC appointed a committee under the auspices of the Board on Infra- structure and the Constructed Environment (BICE) to undertake the review and assessment of DOE project management. The committee is composed of 10 professionals with diverse experience in academic, government, and industrial s

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6 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE settings and knowledge of project management and process improvement. Four members of the committee also participated in the Phase II review and assess- ment, and one member participated in both Phase I and Phase II. See Appendix B for biographies of the committee members. This document is the committee's second annual report. It includes the committee' s assessment of progress in improving project management at DOE as of October 2002 and provides additional discussion of what the committee deter- mined to be key factors affecting DOE project management. The body of this report addresses some of the issues raised in the Phase II report (NRC, 1999), the committee's first annual report (NRC, 2001b), interim fetter reports (NRC, 2001a, 2002a), and the proceedings of the 2001 forum on the owner's role in project management and preproject planning (NRC, 2002b). Not all the findings and recommendations in the previous reports are referred to here, although the com- mittee continues to endorse them. REVIEW ACTIVITIES The committee met six times from November 2001 to October 2002 to review and assess the data on projects and project management procedures presented by the DOE project managers and representatives of the Office of Management and Budget Evaluation (OMBE), 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), and the Office of Science (SC). The committee also met with DOE personnel and DOE contractor personnel in Berkeley, Oakland, Livermore, and Stanford, California; Oak Ridge, Tennessee; and Richland, Wash- ington. Committee representatives also attended the 2002 project management workshop and awards programs sponsored by OECM and met with DOE senior managers responsible for managing programs, establishing policies, and imple- menting project management reforms. The committee's findings and recommen- dations are based on briefings and documents provided by DOE. The committee' s fact-finding efforts are listed in Appendix C. ORGANIZATION OF THE REPORT This report is organized in 10 chapters and 6 appendixes. Chapter 1, Intro- duction, provides background on the initiation and conduct of this review and the objectives of this report. Chapter 2, Core Competencies, discusses overarching issues that demon- strate DOE's progress in improving project management and the committee's concern for the consistency and continuity of this improvement department-wide. The committee also discusses its concern for improving risk planning and contin- gency management on DOE projects.

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INTRODUCTION 7 Chapter 3, DOE Order O 413.3 and the Program and Project Management Manual, discusses the committee's observations on the evolving project manage- ment policies and procedures and recommendations for their continued improve- ment while maintaining a consistent approach. Chapter 4, Human Capital, recognizes that a corps of competent project managers is the key to a successful capital acquisition program in DOE. The committee discusses the attributes of successful project managers and the need to assess the adequacy of personnel resources in the department. The committee notes the progress that has been made in training and career development for project managers and the need for this effort to continue. Chapter 5, DOE's Role As Owner, reviews the lessons learned from the 2001 government/industry forum on the owner's role and draws on previous NRC reports on the government's role in acquisition of facilities to further define the role of federal project managers. Chapter 6, DOE Project Management Culture, discusses the role of DOE senior managers in project management process improvement and the cultural changes that have been observed by the committee. It also discusses how the department might overcome resistance to change. Chapter 7, Readiness to Proceed for First-of-a-Kind Projects, focuses on the types of project that offer the greatest challenge to DOE. The committee dis- cusses the characteristics of these projects and what project managers can do to manage them successfully. Chapter 8, Project Cycle Time Reduction, follows up on the observation in the 1999 report that DOE projects take three times longer to complete than comparable projects in industry. The committee discusses the progress that has been made and the steps that should be taken to eliminate delays. Chapter 9, Acquisition and Contracting, discusses progress and additional steps needed for planning contractor selection, performance-based contracting, and aligning contractor incentives with departmental goals. Chapter 10, Recognizing Project Management Successes, provides an over- view of the DOE 2002 project management awards and the factors that are common to successful projects. The discussion includes projects that received awards as well as others that were nominated and considered noteworthy by the committee. The Appendixes include additional information on the issues discussed in the report. Appendix A is the statement of task. Appendix B includes biogra- phies of committee members. Appendix C is a list of briefings and materials reviewed by the committee for this report. Appendix D provides a checklist of the characteristics of a successful owner's representative. Appendix E provides a checklist of questions that should be asked during DOE critical decision reviews. Appendix F describes the use of flexibility to manage uncertainties in the National Ignition Facility and how this strategy can be used for other projects.

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8 PROGRESS IN IMPROVING PROJECT MANAGEMENT AT THE DOE 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. 2001a. Improved Project Management in the Department of Energy. Letter report, January. Washington, D.C.: National Academy Press. NRC. 2001b. Progress in Improving Project Management at the Department of Energy, 2001 Assess- ment. Washington, D.C.: National Academy Press. NRC. 2002a. Proceedings of the Government/Industry Forum, The Owner's Role in Project Manage- ment and Preproject Planning. Washington, D.C.: National Academy Press. NRC. 2002b. Progress in Improving Project Management at the Department of Energy, 2002 Interim Assessment. Letter report, May 23. 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.