3
Infrastructure Management Challenges and Opportunities

It is the capacity for maintenance which is the best test for the vigor and stamina of a society. Any society can be galvanized for awhile to building something, but the will and the skill to keep things in good repair day-in and day-out are fairly rare.

—Eric Hoffer, Working and Thinking on the Waterfront

INTRODUCTION

Successful facilities and infrastructure (F&I) management programs have a balanced blend of resources composed of funding components for maintenance, recapitalization, and demolition. While it is essential that the level of funding be fair and equitable, even an underfunded F&I program can show substantial success when it has a balanced portfolio that integrates all appropriate components. Successful programs are based on recognition of F&I’s contribution to operational program success. In the competition for funds among operational programs and F&I, funding priorities cannot concentrate on program funding to the detriment or exclusion of F&I. When all’s said and done, successful F&I management requires a systematic approach that is consistent over time and place for assessing F&I needs and establishing priorities.

This chapter discusses the management challenges that DOE faces as it tries to achieve the objectives of Real Property Asset Management (Order O 430.1B) (RPAM), and describes examples of how these challenges have been met in other government organizations and industry. The specific challenges of oversight and quality control faced by DOE managers are also discussed.



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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure 3 Infrastructure Management Challenges and Opportunities It is the capacity for maintenance which is the best test for the vigor and stamina of a society. Any society can be galvanized for awhile to building something, but the will and the skill to keep things in good repair day-in and day-out are fairly rare. —Eric Hoffer, Working and Thinking on the Waterfront INTRODUCTION Successful facilities and infrastructure (F&I) management programs have a balanced blend of resources composed of funding components for maintenance, recapitalization, and demolition. While it is essential that the level of funding be fair and equitable, even an underfunded F&I program can show substantial success when it has a balanced portfolio that integrates all appropriate components. Successful programs are based on recognition of F&I’s contribution to operational program success. In the competition for funds among operational programs and F&I, funding priorities cannot concentrate on program funding to the detriment or exclusion of F&I. When all’s said and done, successful F&I management requires a systematic approach that is consistent over time and place for assessing F&I needs and establishing priorities. This chapter discusses the management challenges that DOE faces as it tries to achieve the objectives of Real Property Asset Management (Order O 430.1B) (RPAM), and describes examples of how these challenges have been met in other government organizations and industry. The specific challenges of oversight and quality control faced by DOE managers are also discussed.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure MANAGEMENT CHALLENGES A number of recent reviews by the U.S. Government Accountability Office (GAO) and DOE have identified DOE facilities and infrastructure management challenges (DOE, 2003a; GAO, 2003a, 2003b, 2003c, 2001), and DOE has responded to these critiques by developing improved policies and procedures. A GAO report acknowledged the improvement initiatives, but concluded that the implementation of the initiatives remains a management challenge (GAO, 2003a). Although some progress has been made in DOE program offices and sites, the improved practices and procedures have not been fully adopted for implementation throughout the department. The committee noted this inconsistency in its preliminary report (NRC, 2004a) and continues to observe an inconsistent response to DOE Order O 430.1B, Real Property Asset Management (RPAM). The objective of RPAM is to establish a corporate, holistic, and performance-based approach to real property life-cycle asset management that links real property asset planning, programming, budgeting, and evaluation to program mission projections and performance outcomes. To accomplish the objective, this Order identifies requirements and establishes reporting mechanisms and responsibilities for real property asset management. (DOE, 2003b, p. 1) The committee enthusiastically endorses this objective and believes that the policies in RPAM are encouraging, as they demonstrate that DOE is beginning to focus on effective management of real property. RPAM is a commendable first step that identifies expectations of DOE site managers and contractors for F&I management, and DOE should continue on the course set by RPAM. However, the committee believes that improvements and additional actions are needed to enhance RPAM’s effective implementation and ultimate success in achieving its objectives. The committee believes that RPAM needs the following to improve facilities management and infrastructure renewal at DOE: A clear statement of motivation that ties objectives to a corporate, holistic, and performance-based approach to achieving DOE’s missions; A clear quantitative statement of organizational F&I objectives tied to incentives for compliance and consequences for noncompliance; Metrics that quantify condition assessment and connect facilities condition to mission, goals, and objectives in order to justify budget decisions; A single software database tool to track the condition of facilities as well as the costs of repair and replacement; and A rigorous quality assurance program customized for F&I. A clear quantitative statement of DOE’s organizational F&I objectives, with incentives for compliance and consequences for noncompliance, is absent from

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure RPAM and from the department’s strategic and long- and short-term plans. DOE has stated that it desires a real property asset inventory that is properly sized and in a condition to effectively support its mission. Yet to accomplish this goal, RPAM and related planning documents need to provide a quantitative statement of overall size and condition objectives for DOE F&I. The associated metrics in RPAM—the asset utilization index (AUI) and the asset condition index (ACI)—have little meaning unless and until specific goals are established and taken to heart by the department. Statements such as “The program will attain an AUI of 0.90 by 2005” or “Budget execution will be focused to attain an ACI of 0.95 by 2006” are examples of the specific goals needed to clarify DOE objectives. (Note that the quantities in this example are illustrative only; actual values need to be determined by DOE to reflect the program’s and the department’s goals. Care must be taken to set metrics that will result in the outcomes desired by the department. See Chapter 4 for a discussion of the impact of performance measures on management decisions.) The deputy secretary’s directive that programs budget at least 2 percent of the replacement plant value (RPV) for maintenance is a step forward; however, as discussed later, a more robust measure for determining maintenance budgets is needed. Establishing clear objectives leads to the development of an action plan or at the minimum a milestone chart of progress, which then supports a factual review of progress and correction of process along the way. DOE will not attain its facilities goals through a business-as-usual approach. If meaningful facilities management improvement is to occur, changed business practices need to be adopted throughout the department, tracked as progress is made, and corrected where necessary. The metrics currently defined by RPAM quantify condition assessment but do not connect facilities condition to DOE mission, goals, and objectives. RPAM appropriately requires the definition of performance goals and measures for F&I, and ostensibly requires that these goals and measures be consistent with programmatic outcomes. The committee believes that a clear connection between programmatic objectives and performance measures is key to long-term improvement of facilities management. Tying facilities management to programmatic needs is necessary in order to foster the organizational determination to manage facilities properly. Furthermore, while RPAM identifies what it considers good performance, it does not specify when or how it intends to achieve this level of performance, nor does it explain why a specific level of performance is important in relation to programmatic needs. The shortcomings of the budget and planning process established by RPAM are illustrated by comparison with the Department of Defense (DoD) program for facilities sustainment, restoration, and modernization. This program establishes department-wide sustainment budget targets based on the real property inventory and recapitalization budget targets based on a recapitalization rate (in years). As such. this model is significantly more proactive than the budget tools used by DOE—for example, deferred maintenance as a percent of RPV, which is retroac-

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure tive. The committee notes that the National Aeronautics and Space Administration has adopted a program with metrics similar to those of DoD and suggests that DOE evaluate the DoD facilities sustainment model for adaptability to its needs. The DoD facilities sustainment and recapitalization construct are discussed in more detail below. Overall, the committee believes that RPAM is a sound policy document. The management challenges discussed above involve the detailed guidance and direction needed for effective implementation of the policy. The committee recommends that these issues be addressed through a manual that clearly defines implementation procedures and sets performance targets. Facilities Information Management System RPAM does not prescribe the use of a single software database tool to track both the condition of facilities and the costs of replacement and repair. However, RPAM Attachment 5 appropriately identifies two major components of an effective facilities management strategy: A detailed, centrally controlled, computerized database of facilities inventory information, and Accurate knowledge of the condition of facilities and of the costs to replace and repair facilities systems and components. The Facilities Information Management System (FIMS) is DOE’s facilities inventory database (DOE, 2003c). FIMS is managed and maintained through broad user involvement in the Facilities Data Development Committee and is further supported by a FIMS Advisory Committee and FIMS Technical Monitors. The committee is impressed by the consistent, robust, and thorough process validation and feedback loops provided in FIMS to ensure an up-to-date and complete facilities inventory. The committee wholly supports the provision that requires all DOE sites to input data. This is a system that has consistency, apparent reliability, and thus credibility both inside and outside DOE. Condition Assessment System The committee could not find the same measure of effectiveness regarding a standard condition assessment survey (CAS) (DOE, 2003d). Despite identifying such a system as the second element of an effective facilities strategy, the department, through RPAM, has not established the same mandated compliance for this effort. Although OECM has developed a Condition Assessment Survey and Condition Assessment Information System (CAIS) that appear to fulfill departmental requirements, their use is not required. Rather than mandating consistent use and providing the associated support staff (as is done with FIMS), the department has

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure allowed sites to use CAS/CAIS “or equal.” It is difficult to understand why use of this second essential input to a facilities strategy was left arbitrary, while the use of FIMS was mandated. As stated in RPAM, “real property data elements in … the CAIS … must be consistent with the corresponding FIMS real property data elements.” A standardized and mandated CAS/CAIS would assist in ensuring such consistency. The committee also notes that an auditing mechanism is needed for CAS/CAIS.1 Sites are required to have a quality assurance plan for their FIMS data, but no such requirement exists for CAS/CAIS. In response to the committee’s inquiry, the Office of Science (SC) stated that, “since most of the SC sites rely on nationally recognized CAS/CAIS contractors to perform the surveys, it has been assumed that a quality product is being delivered.” The committee considers the level of effort for quality assurance of condition assessments to be insufficient. The success of the DoD program is in large part due to the consistent department-wide use of the DoD sustainment model. The committee recommends that CAS/CAIS use be required throughout DOE. In addition, the committee believes that DOE’s condition assessment procedures should focus on facilities that are critical to the agency’s mission; on life, health, and safety issues; and on systems that are critical to a facility’s performance. These procedures should optimize available resources, provide timely and accurate data for formulating maintenance and repair budgets, and provide critical information for the ongoing management of facilities. Ten-Year Site Plans The committee supports the RPAM requirement that sites develop and revise annually a ten-year site plan (TYSP). The committee believes that such a practice is critical for all DOE sites and that steps should be taken to ensure their quality and consistent development throughout the department. The use of TYSPs is an excellent mechanism to enforce the discipline of carefully considering the condition of current physical assets, their support of the site’s mission, and the budgetary requirements for F&I to meet the planned mission objectives. The committee believes it is important that the TYSP document the planning process and contain supporting evidence of the basis on which F&I decisions have been made. The TYSP should clearly discuss the plan’s impacts on F&I performance metrics as well as on the site’s mission performance. The committee also notes the title confusion between the NNSA ten-year comprehensive site plans and the RPAM ten-year site plans. The committee suggests that a single title be adopted for site planning documents of all PSOs. 1   The committee notes that in July 2004 NNSA contracted for parametric estimates to verify deferred maintenance data in CAIS.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure SUSTAINMENT AND RECAPITALIZATION BUDGET CONTROLS The committee reviewed several F&I planning and budget processes and identified those of Dupont and the Department of Defense (DoD) as examples of best practices. The Dupont facilities engineering process begins with the determination of customer needs and requirements, then maps the needs into a business plan, which is then interpreted and developed into a facilities plan (Dupont, 1996). The facilities plan incorporates elements of asset effectiveness, facilities engineering, and asset optimization to develop a joint business and facilities plan. The needs and requirements, business plan, and facilities plan are coupled together to analyze asset productivity and to support planning decisions. The asset optimization process at Dupont is designed to be embedded in core business processes versus a stand-alone operation. The key thrust of the optimization process is directed toward businesses operating with a minimum net asset strategy that incorporates a “decapitalization” goal. The process recognizes the need to link the achievement of the organization’s vision through its business plan to the facilities required to implement the plan. There are obvious differences between a business plan for private industry facilities, which are driven by financial return on investments, and a plan for DOE facilities, which are mission driven; however, as indicated in the NRC publication Investments in Federal Facilities: Asset Management Strategies for the 21st Century, the frameworks for making effective decisions are similar and include the following: Common terminology, A basis of shared information, Decision processes that are clearly defined and incorporate multiple decision points, Performance measures, Feedback process, Methods for establishing accountability, and Incentives for groups and individuals. Together these components support decision making related to facilities requirements and investments, create an effective decision-making environment, and provide the basis for measuring and improving facilities investment outcomes. (NRC, 2004b, p. 45) The committee applauds the direction provided by the department’s FY2006–FY2010 Planning Guidance (DOE, 2004a) that maintenance expenditures should be a minimum of 2 percent of RPV annually. However, the committee is concerned that this target, although based on NRC recommendations that maintenance expenditures should be 2 to 4 percent of RPV (NRC, 1990), is not sufficient for the long-term management of DOE assets. When applied to DOE assets, this judgment-based rule of thumb results in a range of about $1.5 billion between the 2 percent and 4 percent targets. The committee believes that DOE needs to develop historical data to refine the planning target for its facilities. It is critical

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure that DOE also develop useful metrics to assess what it needs to spend on an ongoing basis at each site and track its progress against those metrics. The committee believes that the current target is a productive first step, but encourages DOE to look beyond a simple rule of thumb to ensure that maintenance budgets for its facilities are adequate to meet current and future challenges. Recapitalization Management An assessment of four approaches to managing capital reinvestment was developed by the Pacific Partners Consulting Group (PPCG) (Beidenweg et al., 1998). The review assessed the cost, accuracy, impact on policy, and several other less critical factors affecting the robustness of four approaches for planning and budgeting for facilities capital reinvestment that included (1) physical plant audits, (2) plant depreciation, (3) fixed percentage of current replacement value, and (4) predictive maintenance based on facility subsystems. PPCG did not identify a clearly best method, but rather focused on the strengths and weaknesses of each alternative. The analysis showed the benefits of the predictive maintenance model, which either achieved the best score or tied for the best score in 10 of the 15 subelements of the four criteria. This model does not depend on a physical audit of condition, but rather compares the inventory to industry standards for replacement costs and life-cycle predictions. The predictive maintenance model achieved the best score for impact on policy, accuracy, and robustness. The predominant weakness of the model results from its dependency on facilities inventory and the associated subsystem inventory in those facilities. PPCG concluded that a combination of approaches may be the most effective strategy to meet an institution’s specific needs. Including facility depreciation in the annual financial report has the advantage of highlighting to policy makers and governing bodies the fact that institutions use up physical assets. Seeking agreement to fund a facilities reserve or provide an annual operating budget based upon either calculated depreciation or a fixed percentage of RPV may be a successful approach to generate an annual stream of revenue. A predictive sub-system model could be used, inexpensively, to provide estimates of actual facility renewal and deferred maintenance needs. The predictive sub-system model can also be used to identify facilities and sub-systems that need further focused facility audits. (Beidenweg et al., 1998) DoD Facilities Sustainment, Restoration, and Modernization Construct In an attempt to further validate the perceived advantages of the predictive subsystem model, the committee examined the DoD Facilities Sustainment, Restoration, and Modernization (S/RM) construct (DoD, 2002).

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure The S/RM construct is an outgrowth of several years of DoD research into best practices outside DoD. Much of this research has been summarized by the National Research Council in Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation’s Public Assets (NRC, 1998). Also, the S/RM construct represents, in part, DoD’s response to problems identified in a 1999 GAO report on real property management practices in DoD (GAO, 1999). Finally, the S/RM construct has been designed to support and strengthen DoD’s compliance with the Government Performance and Results Act and the Chief Financial Officers Act. The challenges that DoD faced before applying the S/RM process appear analogous to those faced by DOE: Prior to S/RM, no single tool was employed throughout the agency to calculate facilities recapitalization rates and associated program funding levels. Each DoD component was using its own metrics and accounting. This appears similar to the inconsistencies presented by DOE’s programs. There were difficulties in identifying what portion of various funding sources was being devoted to recapitalization. Similar inconsistencies and difficulties through some program budgets have led DOE to establish the cross-cut budget in an attempt to collect, identify, and understand expenditures. There was confusion among DoD branches regarding site recapitalization responsibilities vis-à-vis specific budgets. Again this mirrors the DOE’s difficulties of site landlord responsibilities conflicting with other site program responsibilities. The S/RM construct is based on the general assumption that facilities performance degrades as facilities age. Thus, S/RM posits “that full sustainment is the most cost-effective approach to managing facilities because it gains the most performance over the longest time for the least investment.” However, S/RM acknowledges that “even with full sustainment, facilities eventually either physically wear out or become obsolete. Once facilities reach the end of their expected service lives, they must be replaced or extensively renovated or modernized (i.e., they must be recapitalized) if they are to continue providing adequate performance.” DoD established a Facilities Sustainment Model (FSM) in order to determine its sustainment requirements. Based on actual field inventories, FSM assesses sustainment requirements for a facility from its associated components or subsystems. The costs to sustain these components are calculated based on their respective quantities, unit costs to maintain, area cost factors, and inflation. By using this component approach, similar to the subsystem approach described above, even complex and unique facilities can often be referenced to standard sources, thus providing validity to the resulting summary sustainment requirements. For example, the Navy indicated that 93 percent of its current sustainment

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure costs have been estimated using standard, off-the-shelf commercially published resources. The resulting summary sustainment value provides management with the budget amount necessary to sustain the existing inventory. To the extent that changes in the inventory can be predicted, the sustainment model can be applied against the modified inventory and timeline (adjusted for inflation) to predict the required sustainment dollars needed for the future inventory. The committee’s discussions with DoD indicated that while 100 percent sustainment was still not attained in existing budgets, the information from the model gives decision makers the tools to determine the minimum acceptable sustainment level to be programmed (currently set at 95 percent of requirement) as well as to identify at what point in the out-years the 100 percent sustainment goal will be achieved. Similarly, DoD developed the Facilities Recapitalization Metric (FRM). As with the sustainment model, DoD used its substantial inventory of commercial sources to establish a goal for an acceptable recapitalization rate of the DoD inventory, as an average of the wide variety of component elements. Thus the current DoD-accepted recapitalization rate goal of 67 years is a composite made up of 100-year rates for airfield aprons, ground drainage systems, electrical distribution systems, etc., averaged with 50-year rates for roads, railroad tracks, and heat distribution systems, with 25-year rates for pipelines and refrigeration plants, and with recapitalization rates for other F&I with shorter useful life expectancies. It is important to point out that the resulting recapitalization rate is designed as a macrolevel tool for corporate-level physical plant analysis. The rate to be applied to a smaller set of facilities or to even a single facility must be recalculated to the specific details of that facility. With the service-life benchmark established as indicated above, DoD is then able to determine the budget program recapitalization rate by dividing the total value of assets (plant replacement value) by the investment amounts budgeted for facilities recapitalization. To the extent that recapitalization rates meet the goal, the budget is in balance with facilities requirements. Adjustments to the goal can then be assessed against appropriate sustainment impacts. The committee believes that the DoD example illustrates eight important considerations for sustainment and recapitalization budget controls: Both sustainment and recapitalization funding are needed to adequately support facilities and infrastructure. The basic commercial standards demonstrate the essential aspects of adequately funding both sustainment and recapitalization accounts. If one is underfunded there will be impacts in the other account. An accurate facilities inventory is extraordinarily important to the operation of these models. Since DoD relies on the models to establish departmental programming values, there is an incentive to maintain accurate inventories throughout the system.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure The FSM and FRM values are clear, consistent guidelines that can be shared from the most senior leader down to the most junior operator. They are understandable metrics that concisely capture an abundance of facilities processes. DoD representatives indicated to the committee that the secretary of defense had personally adjusted a service-level budget when he discovered that the service was underfunding its sustainment requirements. The committee believes that the secretary of energy should be able to apply similar attention and controls to DOE programs. Since the DoD metrics are sensitive to inventory, there is an internal mechanism encouraging the components to reduce inventory. A larger inventory results in both higher sustainment values and higher recapitalization rates. Efficient budgeting strives to decrease these overhead values, thus providing the most efficient inventory. The S/RM construct provides visibility and accountability of actions and the resulting budgets to all parties in F&I activities. Too often program managers are allowed to understate their program requirements by ignoring issues that are too complex to evaluate. Providing proper levels of facilities support is a function that frequently falls into this category. The FRM encourages a life-cycle thought process in facilities management. The calculation to establish the FRM service-life benchmark requires an analysis of the components of the associated facilities along with their time-phased funding requirements. The DoD process identifies the budget required to operate the facilities inventory accepted by the agency. By all measures this may seem obvious, but the S/RM construct can be a real eye-opener to those who never realized the actual costs required to adequately run the facilities needed to support the program and thus the full costs of the programs. The DoD process also demonstrates a substantial reliance on established commercial standards. Thus the resulting products generally have been found to be more acceptable and reliable than products based solely on internally produced analyses. The DoD transition to the S/RM construct is relatively recent with between one and two years’ worth of effort expended in execution (and several additional years in review and implementation). Yet the committee is impressed by the advantages already achieved in this process. At a minimum, once fully implemented (i.e., once the underlying standards have been established and applied against an acceptable inventory), the S/RM construct exposes the cost of ownership for the associated facilities. Understanding the cost of ownership is a big step in ultimately identifying discrepancies and providing adequate F&I resources. The committee believes that DOE should review the DoD S/RM construct and implement it to the extent deemed appropriate. The committee also recommends that DOE establish a corporate sustainment standard to be applied across

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure all programs and a DOE recapitalization rate for the overall plant. Budget formulation by programs should then be required to at least meet the required metrics. CONSISTENT IMPLEMENTATION RPAM requires the preparation of ten-year site plans (TYSPs) that are to be based on the condition of facilities, their relationships to mission needs, what needs to be done to support the mission on a priority basis, and the related estimates of costs and schedules. But RPAM does not address the federal facilities manager’s oversight for the TYSP or for the implementation of an approved plan. RPAM defines some performance metrics but does not define a measure to fully assess implementation of the TYSP. At most sites the M&O contractor prepares the plan in accordance with DOE direction. The committee believes, however, that that there may be too much overall authority delegated to the M&O site manager and too few specific responsibilities assigned to the DOE site manager. As a result of these factors, the consistent implementation of RPAM may be compromised. Review and Oversight Additional definition of the expectations of DOE site managers and their responsibilities for oversight of contractor compliance and accountability is needed. This definition may not be appropriate for inclusion in RPAM, but nevertheless senior management needs to clarify its expectations. RPAM implements a 2002 management policy (P 580.1) with a principal goal of ensuring proper stewardship of real property assets (DOE, 2002). As the first level of oversight, the DOE site manager is responsible for oversight of contractor compliance and accountability. Policy P 580.1 requires that federal managers be responsible for F&I stewardship through proper planning, programming, budgeting, operation, maintenance, and disposal practices. Furthermore, DOE federal managers are responsible for ensuring that real property assets under their purview are managed with integrity and in compliance with applicable laws. RPAM also provides for the review and approval of the TYSP by LPSOs and CSOs/PSOs. However, there is no provision, direction, or guidance provided for a consistent review and approval process. Good management practices should include a documented basis for the oversight process. A formal process should be developed and required for the review and approval of TYSPs, including definitions of the findings to be made and the timing of submittals. There also needs to be a process that includes requirements for all PSOs and DOE site managers to keep OECM informed of changes in program missions, budgets, and schedules as well as problems encountered in implementing the requirements in the order. NNSA has learned from implementing TYCSPs (or TYSPs) and addressing problems with process and quality control (described below) to create a guide for

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure developing ten-year site plans that has also been adopted by EM. The NNSA guide could be the basis for a consistent departmental process for TYSPs (DOE, 2004b). Quality Control A review of the DOE inspector general’s audit report Planning for National Nuclear Security Administration Infrastructure (DOE, 2003f) on the reliability of TYCSPs for three NNSA sites has led the committee to confirm its prior conclusion that there is an urgent need for improvement in oversight, establishment of a quality assurance/quality control program, and development of more detailed direction for RPAM implementation. The IG’s report found that the plans did not provide accurate assessments, did not identify and prioritize mission-critical facilities, used out-of-date information, did not have a standardized methodology for assigning the level of mission criticality, and did not include any guidance to help sites prioritize maintenance and repair needs. The report recommended that NNSA develop and implement guidance establishing standard criteria for identifying mission-critical facilities and define the types of facilities to be included. Although based on a brief review, the committee believes that the IG’s recommendations should apply throughout the department. The committee also notes that although there is room for improvement, the NNSA F&I planning and management procedures are more mature than those of other DOE PSOs. The IG auditors assessed the significant internal controls and performance measures established under the Government Performance and Results Act of 1993 (GPRA) and concluded that the act did not address the need for complete and accurate site plans. However, GPRA does specify that annual performance plans should establish performance goals expressed in measurable forms and performance indicators to assess relevant outputs, and that they should provide a basis for comparing results with goals. This further illustrates the need for DOE to build on previously established objectives and requirements, and to establish more department-wide procedures, methods, and tools. F&I Management Standards The primary objective of the 1994 DOE Criteria for the Department’s Standards Program (DOE, 1994) was stated thus: “Work is planned, performed and appropriately documented as meeting standards for protecting the environment

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure and the safety and health of the public and workers.” It was added that achieving the objective would also: Allow for good judgment in planning work and allocating resources, Create consistency and stability in expectations and accountability, Maintain protection, while establishing a balance between cost and benefit, Permit judgment to be exercised at the appropriate decision level, and Increase effectiveness of work. Establishing a standards program in support of facilities and infrastructure would provide similar benefits if the implementation of such a program were taken seriously and enforced by management at all levels. The Work Smart Standards effort undertaken at LLNL is an example of what is involved when a program is taken seriously. This effort was considered to be a key component of DOE’s Integrated Safety Management System (LLNL, 1998). Similarly, an F&I standards program could be the key to achieving the objectives of RPAM. The necessary coupling of F&I with program missions could well be called the integrated F&I management system. The committee believes that, whatever the name, the key to meeting the RPAM objective is the development and use of department-wide standards. Contract Management Options For the most part, DOE facilities and infrastructure are government owned and contractor operated. F&I stewardship responsibilities are part of the M&O contract for each site. DOE has structured its M&O contracts to be performance-based, cost-plus-award-fee contracts. The Federal Acquisition Regulations (FAR) state: Description. A cost-plus-award-fee contract is a cost reimbursement contract that provides for a fee consisting of (1) a base amount fixed at inception of the contract and (2) an award amount that the contractor may earn in whole or in part during performance and that is sufficient to provide motivation for excellence in such areas as quality, timeliness, technical ingenuity, and cost-effective management. The amount of the award fee to be paid is determined by the Government’s judgmental evaluation of the contractor’s performance in terms of the criteria stated in the contract. This determination and the methodology for determining the award fee are unilateral decisions made solely at the discretion of the Government. Application. The cost-plus-award-fee contract is suitable for use when— The work to be performed is such that it is neither feasible nor effective to devise predetermined objective incentive targets applicable to cost, technical performance, or schedule;

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure The likelihood of meeting acquisition objectives will be enhanced by using a contract that effectively motivates the contractor toward exceptional performance and provides the Government with the flexibility to evaluate both actual performance and the conditions under which it was achieved; and Any additional administrative effort and cost required to monitor and evaluate performance are justified by the expected benefits. The number of evaluation criteria and the requirements they represent will differ widely among contracts. The criteria and rating plan should motivate the contractor to improve performance in the areas rated, but not at the expense of at least minimum acceptable performance in all other areas. Cost-plus-award-fee contracts shall provide for evaluation at stated intervals during performance, so that the contractor will periodically be informed of the quality of its performance and the areas in which improvement is expected. Partial payment of fee shall generally correspond to the evaluation periods. This makes effective the incentive which the award fee can create by inducing the contractor to improve poor performance or to continue good performance. (GSA, DoD, and NASA, 2001, 16.405-2) As previously discussed, a robust facilities and infrastructure program, properly planned and executed with adequate funding, is an enabler for program objectives. Because DOE has delegated its facilities management authority to the site M&O contractors, it is important that the site contractors share DOE’s vision and embrace the overall F&I policies and procedures. Because M&O contracts are performance based, F&I contract incentives need to be clearly identified to ensure effective F&I stewardship. The committee asked OECM, NNSA, SC, and EM to provide a compilation of the performance-based contract metrics used at each site and the percentage of the total performance score that is determined by F&I stewardship performance. OECM deferred to the PSOs and the responses varied widely among PSOs and sites. NNSA indicated that the performance data are part of the annual performance evaluation plan developed by the DOE site office with input from headquarters. The data are collected, compiled, and retained at the DOE site offices, and become the basis for the federal appraisal of each contractor’s F&I management performance. SC provided a comprehensive listing of the contractor performance measures for all labs and noted: “Percent of total award fee rating associated with infrastructure performance varies from lab to lab as shown.” The percentage of incentive fee for F&I performance ranged from zero at Ames National Laboratory to a maximum of 11 percent at Oak Ridge National Laboratory.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure EM noted that “Facilities and Infrastructure Management performance is generally not identified as a specific fee-bearing activity in EM contracts. EM maintains the philosophy that infrastructure is a necessary part of performing EM’s scope of work but is not a performance metric or fee item by itself.” As with so many other issues discussed in both this report and the preliminary assessment, the disparity and lack of consistency among PSOs and sites hinders department-level review of F&I status and improvement efforts. The committee believes that the long-term success of DOE’s F&I stewardship depends on M&O contractors’ consistent attention to their F&I responsibilities. This does not preclude DOE’s responsibility to establish performance requirements and to evaluate processes and outcomes. Without appropriate attention, fractured and diffuse execution is inevitable. Incentive payments as established by the award-fee determinations are powerful tools for focusing contractors on what DOE considers important. The amount of emphasis on and consistency in F&I-dependent incentives will determine expectations among the contractors. During its brief site visits, the committee observed an apparent, and not surprising, correlation between the level of importance placed on F&I by senior M&O contractor management and the quality of F&I stewardship. The committee notes that the award fee is not the only reason M&O senior managers are involved in F&I issues but it is a major factor. The committee believes that OECM should take the lead in documenting the performance measures and award fees utilized throughout DOE M&O contracts and use this information to validate a set of best practices that should be considered for department-wide implementation. The committee was asked to consider the possible benefits or problems that might occur if DOE F&I were managed under a separate contract from the site M&O contract. The committee believes that F&I management contracts should not be separate from program management contracts. It has been increasingly evident that F&I management and existing problems should not be considered independently of the implementation of program missions. Particularly for M&O contracts, mission activities can be affected adversely in many ways by independent F&I management activities. For example, the lack of clear, centralized management in a laboratory or complex would require the involvement of DOE to resolve frequent interface considerations and issues between the mission and facilities activities. Planning and implementation of both activities should be continuous and interrelated. Lack of a clear management authority could also result in duplication of effort in assessing interface impacts and would dilute the overall responsibility to DOE that presently exists in a single M&O contractor. The shutdown or timing of facilities for routine and special maintenance is likely to have an impact on the timing and ability to conduct mission activities. Unavailable or reduced infrastructure services could also affect the conduct of mission activities.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure FINDINGS AND RECOMMENDATIONS Finding 3a. A clear quantitative statement of the organizational F&I objectives, and the specification of incentives for compliance and consequences for noncompliance, are absent from DOE action plans. If meaningful facilities management improvement is to occur, improved business practices need to be adopted throughout the department, tracked as progress is made, and corrected where necessary. The DOE plan needs to provide a clear, quantitative statement of overall F&I objectives and these objectives should be further detailed in departmental polices, orders, and implementation guidance. Without quantitative F&I objectives, the metrics required by RPAM—the asset utilization index (AUI) and the asset condition index (ACI)—have little meaning. Recommendation 3a. DOE F&I performance plans should include quantitative objectives, such as “programs will attain an AUI value by a target date,” or “Budget execution will be focused to attain an ACI value by a target date,” which are needed to clarify DOE objectives. The F&I objectives should lead to the development of action plans and progress charts to support the factual review of progress and correction of process along the way. Finding 3b. The DoD facilities sustainment, restoration, and modernization (S/RM) construct establishes sustainment budget targets based on the real property inventory and recapitalization budget targets based on a target recapitalization rate (in years). This process is significantly more proactive and robust than the budget tools used by DOE—for example, deferred maintenance as a percent of replacement plant value (RPV). Recommendation 3b. DOE should evaluate the DoD facilities sustainment, restoration, and modernization (S/RM) construct for adaptability to its needs. The committee also recommends that DOE establish departmental sustainment targets and recapitalization rates for all programs. Program budgets should then be required to meet the required metrics. Finding 3c-1. Although OECM has developed the Condition Assessment Survey (CAS) and Condition Assessment Information System (CAIS) that fulfill departmental needs, their use is not required. Other federal agencies, such as DoD and NASA, have demonstrated the benefits of a department-wide model for developing facilities sustainment budgets. Finding 3c-2. The committee applauds the direction provided by the FY2006–FY2010 Planning Guidance (DOE, 2004a) that maintenance expenditures should be a minimum of 2 percent of RPV annually. However, the committee is concerned that this target, although based on NRC recommendations (NRC, 1990), is not sufficiently rigorous for the long-term management of DOE assets. Recommendation 3c. DOE should continue to invest in improving CAS/CAIS and develop a schedule for requiring their use across the department. The committee believes that DOE needs to collect and analyze historical data to refine the

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure planning target for its facilities maintenance budget. It is critical that DOE also develop useful metrics to assess what it needs to spend on maintenance on an ongoing basis at each site and track its progress against those metrics. Finding 3d. The RPAM implementation processes employed by NNSA, SC, and EM are inconsistent. While all programs have made progress, the inconsistent approaches reduce the overall rate of the improvements in management of real property assets and compromise the department’s ability to achieve the objectives of RPAM. Recommendation 3d. OECM should take the lead in establishing consistent implementation guidelines for RPAM. The development of an implementation guidance document, such as a manual, is needed to direct implementation of the order and clearly align authority and responsibility for facilities and infrastructure throughout the department. Additional definition of the expectations of DOE site managers and their responsibilities for oversight of contractor compliance and accountability is needed. Finding 3e. RPAM defines some performance metrics but does not define a measure to fully assess implementation of the TYSP. RPAM provides for the review and approval of the TYSP by lead program secretarial offices (LPSOs) and cognizant secretarial offices (CSOs)/PSOs; however, there is no provision, direction, or guidance provided for the departmental review and approval process. Recommendation 3e. A formal process should be developed and required for the review and approval of TYSPs, including definitions of the findings to be made and timing of submittals. The process should include requirements for LPSOs and DOE site managers to keep senior management informed of changes as well as problems encountered in implementing the requirements set forth in RPAM. Finding 3f. The DOE inspector general’s audit report Planning for National Nuclear Security Administration Infrastructure (DOE, 2003f), on the reliability of ten-year comprehensive site plans (TYCSPs) for three NNSA sites, has led the committee to confirm its observation that there is a need for improvement in oversight, establishment of a quality assurance/quality control program, and development of more detailed direction for RPAM implementation. The inspector general (DOE IG) recommended that NNSA develop and implement guidance establishing standard criteria for identifying mission-critical facilities and define the types of facilities to be included. The committee also notes that although there is room for improvement, the NNSA F&I planning and management procedures are more mature than those of other DOE PSOs and could form a basis for a department standard. Recommendation 3f. The DOE IG’s recommendations should be extended to apply to quality control of reported data and to the application of procedures used to measure and interpret those data throughout the department.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure Finding 3g. The committee believes that the long-term success of DOE’s F&I stewardship depends on M&O contractors’ attention to their F&I responsibilities. And this in turn depends on DOE’s leadership in requiring such attention from the M&O contractors. Incentive payments as established by the award-fee contracts and determinations are powerful tools for focusing contractors on what DOE considers important. The committee found disparity and lack of consistency in the use of incentive fees among PSOs and sites. Recommendation 3g. OECM should take the lead in documenting the use of performance measures and award fees among DOE M&O contracts and use this information to define and validate a set of best practices that should be considered for department-wide implementation. REFERENCES Beidenweg, F., L. Weisburg-Swanson, and C. Gardner. 1998. Planning for Capital Reinvestment: Alternatives for Facilities Renewal Budgeting. Available online at http://www.ppcg.com/. Pacific Partners Consulting Group. Accessed June 29, 2004. DoD (U.S. Department of Defense). 2002. Facilities Recapitalization Front-End Assessment. Washington, D.C.: Department of Defense. DOE (U.S. Department of Energy). 1994. Criteria for the Department’s Standards Program (DOE/EH/0416). Washington, D.C.: U.S. Department of Energy. DOE. 2002. Management Policy for Planning, Programming, Budgeting, Operation, Maintenance and Disposal of Real Property (Policy P 580.1). Washington, D.C.: U.S. Department of Energy. DOE. 2003a. Performance and Accountability Report; Fiscal Year 2003. Washington, D.C.: U.S. Department of Energy. DOE. 2003b. Real Property Asset Management (Order O 430.1B). Washington, D.C.: U.S. Department of Energy. DOE. 2003c. Facilities Information Management System. Available online at http://fims.hr.doe.gov/. Accessed June 29, 2004. DOE. 2003d. Condition Assessment Survey. Available online at http://cas.hr.doe.gov/. Accessed June 29, 2004. DOE. 2003e. Memorandum from Kyle E. McSlarrow, Deputy Secretary; Subject: Order O 430.1B, Real Property Asset Management. December. DOE. 2003f. Planning for National Nuclear Security Administration Infrastructure (IG OAS-B-0302). Washington, D.C.: U.S. Department of Energy. DOE. 2004a. FY2006—FY2010 Planning Guidance. Washington, D.C.: U.S. Department of Energy. DOE. 2004b. National Nuclear Security Administration FY 2005-20014 Ten-Year Comprehensive Site Plan Guideline. Washington, D.C.: U.S. Department of Energy. Dupont. 1996. Asset Optimization Process. Wilmington, Del.: E.I. du Pont de Nemours and Company. GAO (Government Accountability Office). 1999. Military Real Property Maintenance: Improvements Are Needed to Ensure That Critical Mission Facilities Are Adequately Maintained (GAO/T-NSIAD-00-51). Washington, D.C.: U.S. General Accounting Office. GAO. 2001. Department of Energy Status of Achieving Key Outcomes and Addressing Major Management Challenges (GAO-01-823). Washington, D.C.: U.S. General Accounting Office. GAO. 2003a. Major Management Challenges and Program Risks at the Department of Energy (GAO-03-100). Washington, D.C.: U.S. General Accounting Office. GAO. 2003b. Federal Real Property; Executive and Legislative Actions Needed to Address Long-standing and Complex Problems; Testimony June 5 (GAO 03-839T). Washington, D.C.: U.S. General Accounting Office.

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Intelligent Sustainment and Renewal of Department of Energy Facilities and Infrastructure GAO. 2003c. High-Risk Series; Federal Real Property (GAO 03-122). Washington, D.C.: U.S. General Accounting Office. GSA (General Services Administration), DoD (Department of Defense), and NASA (National Aeronautics and Space Administration). 2001. Federal Acquisition Regulation. Available online at http://www.arnet.gov/far/current/pdf/FAR.book.pdf. Accessed September 15, 2004. LLNL (Lawrence Livermore National Laboratory). 2003. Pilot Program Report; Site Planning and Facility Maintenance Management at Lawrence Livermore National Laboratory. Livermore, Cal.: Lawrence Livermore National Laboratory. LLNL. 1998. Integrated Safety Management System Description (UCRL-AR-132791). Lawrence, Cal.: Lawrence Livermore National Laboratory. NRC (National Research Council). 2004a. Preliminary Assessment of DOE Facility Management and Infrastructure Renewal. Letter report. February. Washington, D.C.: National Academies Press. NRC. 2004b. Investments in Federal Facilities: Asset Management Strategies for the 21st Century. Washington, D.C.: National Academies Press. NRC. 1998. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation’s Public Assets. Washington, D.C.: National Academy Press. NRC. 1990. Committing to the Cost of Ownership. Washington, D.C.: National Academy Press.