Executive Summary

The U.S. Department of Energy (DOE) manages some of the most sophisticated, complex, and technologically advanced energy and science related programs and facilities in the world. The various elements of DOE 's diverse mission (i.e., energy systems, weapons stewardship, environmental restoration, and basic scientific and technological research) are supported by various major systems, projects, and programs. Included in this portfolio are defense laboratories and production facilities, energy research and development facilities and laboratories, and facilities and programs for the environmental cleanup of past agency activities. By their very nature, many of these projects are unique (or nearly so), complex, expensive, and reliant on technologies that are either still evolving or are unproven at field scale. Because of these complex and interrelated factors, some DOE projects have cost more than they might have in the private sector, some have encountered cost and schedule overruns, and some have ultimately been canceled after significant costs were incurred.

These recurrent problems with project management have raised questions on the part of the House and Senate Appropriations Committees about the credibility of the assumptions and processes DOE uses to develop conceptual designs and cost estimates and generally manage projects. The primary reason cited for this lack of confidence is that past performance by DOE on high technology projects (with regard to cost and schedules) has often been unsatisfactory, and the cost of civil infrastructure projects often seemed to be higher for DOE than for similar projects constructed for the private sector or other comparable government agencies. The current total costs for planned DOE projects is estimated at more than $125 billion. Therefore, these projects must meet critical standards for need and scope, budgeting, management, and execution.

In an effort to increase its confidence in DOE's budget, the Committee of Conference on Energy and Water Resources directed DOE to investigate establishing an independent project review process. DOE was directed to contract with an impartial, independent organization with expertise in evaluating government management and administrative functions to do a detailed analysis of the proposed independent assessments. To comply with this congressional directive, the DOE Office of the Associate Deputy Secretary for Field Management of the U.S. Department of Energy requested the assistance of the National Research Council (NRC) in preparing a report that:



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OCR for page 1
About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please EXECUTIVE SUMMARY 1 Executive Summary The U.S. Department of Energy (DOE) manages some of the most sophisticated, complex, and technologically advanced energy and science related programs and facilities in the world. The various elements of DOE's diverse mission (i.e., energy systems, weapons stewardship, environmental restoration, and basic scientific and technological research) are supported by various major systems, projects, and programs. Included in this portfolio are defense laboratories and production facilities, energy research and development facilities and laboratories, and facilities and programs for the environmental cleanup of past agency activities. By their very nature, many of these projects are unique (or nearly so), complex, expensive, and reliant on technologies that are either still evolving or are unproven at field scale. Because of these complex and interrelated factors, some DOE projects have cost more than they might have in the private sector, some have encountered cost and schedule overruns, and some have ultimately been canceled after significant costs were incurred. These recurrent problems with project management have raised questions on the part of the House and Senate Appropriations Committees about the credibility of the assumptions and processes DOE uses to develop conceptual designs and cost estimates and generally manage projects. The primary reason cited for this lack of confidence is that past performance by DOE on high technology projects (with regard to cost and schedules) has often been unsatisfactory, and the cost of civil infrastructure projects often seemed to be higher for DOE than for similar projects constructed for the private sector or other comparable government agencies. The current total costs for planned DOE projects is estimated at more than $125 billion. Therefore, these projects must meet critical standards for need and scope, budgeting, management, and execution. In an effort to increase its confidence in DOE's budget, the Committee of Conference on Energy and Water Resources directed DOE to investigate establishing an independent project review process. DOE was directed to contract with an impartial, independent organization with expertise in evaluating government management and administrative functions to do a detailed analysis of the proposed independent assessments. To comply with this congressional directive, the DOE Office of the Associate Deputy Secretary for Field Management of the U.S. Department of Energy requested the assistance of the National Research Council (NRC) in preparing a report that: use the print version of this publication as the authoritative version for attribution.

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About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please EXECUTIVE SUMMARY 2 • assesses the need for conducting independent reviews of DOE projects • develops guidelines for the content of independent reviews • assesses the capabilities of independent organizations (including, but not limited to, the U.S. Army Corps of Engineers) to conduct independent reviews Although the language of the conference report may have suggested a project-by-project analysis, this NRC study was based on a systems, or project characteristic, approach, which could also be used as a continuing process. This report focuses on the development of criteria and guidelines for assessments that can be applied to projects in the FY98 budget request, as well as to future budget requests. Although specific projects are recommended for assessment, the short time frame for this study, as well as the cost of making individual assessments, favored this more generic approach. This report does not attempt to address the broader issues of systems acquisition and project delivery within DOE. FINDINGS DOE has constructed and managed large scale, often one-of-a-kind facilities to fulfill its mission and objectives. Given the many unknowns and complications inherent in DOE's mission, funding, management, and organizational structure, it should come as no surprise that the agency has encountered scoping problems, project delays, and cost overruns. Nevertheless, even though cost estimates and schedules naturally tend to drift under these conditions, radical deviations from approved baselines should not become the norm. Complexities and uncertainties should not be used as excuses for inadequate project planning, management, and oversight. Although DOE has developed comprehensive practice guides for the design and construction phases of projects, the department has not developed comparable guidance for the early conceptual and preconceptual phases of projects when the potential is high for substantial savings in both cost and time. Independent reviews performed early in the process (i.e., at the conceptual stage) can be very helpful for identifying and evaluating alternative approaches so that the project scope, and hence the baseline, is well defined and less subject to change as the project matures. The potential benefits of the sound project guidance that has been developed by the department are diminished because use of the guides is not mandated by DOE Headquarters, and consequently, they are not always followed by the field offices. The overall purpose of an independent assessment process should be to determine, by a nonproponent body or individual, whether the scope of projects, the underlying assumptions regarding technology and management, the cost and use the print version of this publication as the authoritative version for attribution.

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About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please EXECUTIVE SUMMARY 3 schedule baselines, and contingency provisions are valid and credible within the budgetary and administrative constraints under which DOE must function. RECOMMENDATIONS Guidelines for Project Selection To address the need for conducting independent project reviews, this report examined the history of DOE performance in energy, science, waste management, and environmental restoration programs. The report concludes that these reviews are warranted and would be beneficial. However, independent reviews are not justified for all projects, and all projects that are reviewed should not be subject to the same type and intensity of review. In practice, application of the proposed criteria will vary with the type and size of the specific project, and, ultimately, DOE must exercise judgment in selecting projects for review. The screening criteria are designed to provide guidance to DOE, not to prescribe a course of action. This report recommends a “graded approach.” In other words, the resources expended to improve performance should be commensurate with the benefits obtained. The following criterion is recommended for initial screening of candidate projects for independent assessment: • All projects with a total estimated cost (TEC) of more than $20 million should be considered for review. The following criteria apply to projects whose TECs are less than $20 million but more than $5 million: • projects that propose delivery methods with which DOE has little or no experience (e.g., privatization of waste management) • projects for which new technology is proposed or the technology requires significant research and development to increase confidence that it will be workable at field scale • projects that are not obviously or strongly supported by the mission objectives in DOE's Strategic Plan • projects that have had significant cost or schedule overruns or that have a high potential for such overruns • projects managed by an area operations office that has a history of project overruns, failures, or terminations use the print version of this publication as the authoritative version for attribution.

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About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please EXECUTIVE SUMMARY 4 Content of Project Reviews At a minimum, an independent review of a project should consider the technical scope, proposed technologies, cost estimates, schedules, underlying assumptions and supporting data, and the management and contracting strategy for delivering the project. The independent review should consider all life cycle costs (i.e., deactivation, decontamination, and decommissioning) as described in DOE Order 430.1, Life Cycle Asset Management (DOE, 1995). The assessment should be sufficiently detailed and rigorous to permit an objective, independent reviewer to reach a supportable conclusion about the project's justification in light of the current mission of the DOE program sponsor and about whether the project represents a technically valid, cost effective, realistic means of accomplishing its stated objectives. These criteria are also intended to identify projects that have a long history but which have been overtaken by world events or changes in administration policy and, therefore, are no longer supportable by DOE's mission. This includes ongoing projects that may be performing well but are no longer needed. Reviews of these projects might show that they should be rescoped or even terminated. Each review should be augmented by two specific actions. First, assessments should contain a finding of whether, in the judgment of the reviewer, the project can be delivered within the cost, scope, and schedule baselines established by DOE or whether alternative solutions may be preferable. Second, in the event that this finding is negative or there are other significant differences between the results of the independent review process and the original project documentation, DOE must make a timely disposition of the findings. Capabilities of the Independent Reviewer The group or individual performing the independent review should have, or have available, the requisite capabilities to address the technical disciplines involved (e.g., civil, environmental, and nuclear engineering; high energy physics and energy research), as well as experience with systems and performance analysis, project management, and cost estimates. The appropriate mix and depth of expertise will depend on the nature of the project under review and anticipated problems. Experience suggests that, as long as the reviewing body is truly independent, whoever is chosen to conduct the review may be less critical than the protocols under which the review is conducted. The key capabilities of the reviewer appear to be technical capability, objective detachment from the project under review, and the absence of other conflicts of interest or agenda. The value of these reviews will only be realized by an organization committed to continuous improvement and with a management structure that can act on the results. It is not important whether the review is conducted by a use the print version of this publication as the authoritative version for attribution.

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About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please EXECUTIVE SUMMARY 5 specially constituted peer review group or a private contractor; whether it is managed by an outside entity, such as the Corps of Engineers, another federal agency, or the NRC; or whether it is performed by a DOE organizational element outside the proponent chain, such as the Office of Field Management. Regardless of who actually conducts and manages the assessment, procedures must be put in place at the highest levels of DOE to incorporate the results into the decision-making process to foster continuous quality improvement and accountability. Although the project manager has both line management accountability and the resources and knowledge to advance specific recommendations, a culture supporting truly independent review (and the benefits to be derived therefrom) may not exist at the project level. Therefore, in implementing the independent reviews recommended in this report, the efficacy of the review, the type and scope of the review, and the body that conducts the review should be determined by a designated nonproponent element within DOE in consultation with the project manager. The establishment and tasks of the review body, as well as the disposition of review recommendations, should flow through higher levels of DOE and should not be under the sole direction of the project manager. In the longer term, DOE should formalize a process for conducting independent reviews (and applying the results) to all programs within the organization. Ultimately, however, DOE must be responsible and accountable for the successful management of its programs. Success is affected more by culture, attitude, and organizational commitment to quality and service than by procedures. Therefore, adjustments by the upper management of DOE to the recommendations made in this report can, and should, be expected. use the print version of this publication as the authoritative version for attribution.

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About this PDF file: This new digital representation of the original work has been recomposed from XML files created from the original paper book, not from the original typesetting files. Page breaks are true to the original; line lengths, word breaks, heading styles, and other typesetting-specific formatting, however, cannot be retained, and some typographic errors may have been accidentally inserted. Please use the print version of this publication as the authoritative version for attribution. EXECUTIVE SUMMARY 6