. "1 Introduction ." Assessing the Need for Independent Project Reviews in the Department of Energy. Washington, DC: The National Academies Press, 1998.
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ASSESSING THE NEED FOR INDEPENDENT PROJECT REVIEWS IN THE DEPARTMENT OF ENERGY
1
Introduction
BACKGROUND
The diverse elements of the mission of the U.S. Department of Energy (DOE) (i.e., energy systems, weapons stewardship, environmental restoration, and basic scientific and technological research) are supported by various major systems, projects, and programs. They range from environmental restoration at the individual sites of the weapons complex to the National Ignition Facility and the National Spallation Neutron Source. 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 unproved 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. Although these experiences are not unique to DOE (they are also experienced in the private sector), DOE's recurrent problems in this area 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.
PURPOSE
DOE's budget is approved upon the recommendation of the subcommittees on Energy and Water Resources in both houses of Congress. In an effort to ensure that the projects submitted for the fiscal year 1998 (FY98) budget were based on demonstrated need and sound principles of cost estimating and project management, the Committee of Conference Report on Energy and Water Resources (House Report 105-271, excerpts in Appendix A) provided funds for external reviews of DOE's construction and privatization projects (U.S. Congress, 1997).
Prior to obligating these funds, however, DOE was directed to contract with an impartial, independent organization with expertise in the evaluation of government management and administrative functions for 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 requested the assistance of the National Research Council.
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INTRODUCTION 7
1
Introduction
BACKGROUND
The diverse elements of the mission of the U.S. Department of Energy (DOE) (i.e., energy systems,
weapons stewardship, environmental restoration, and basic scientific and technological research) are supported
by various major systems, projects, and programs. They range from environmental restoration at the individual
sites of the weapons complex to the National Ignition Facility and the National Spallation Neutron Source. 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 unproved 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. Although these experiences are not unique to DOE (they are also experienced in the private sector),
DOE's recurrent problems in this area 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.
PURPOSE
DOE's budget is approved upon the recommendation of the subcommittees on Energy and Water Resources
in both houses of Congress. In an effort to ensure that the projects submitted for the fiscal year 1998 (FY98)
budget were based on demonstrated need and sound principles of cost estimating and project management, the
Committee of Conference Report on Energy and Water Resources (House Report 105-271, excerpts in
Appendix A) provided funds for external reviews of DOE's construction and privatization projects (U.S.
Congress, 1997).
Prior to obligating these funds, however, DOE was directed to contract with an impartial, independent
organization with expertise in the evaluation of government management and administrative functions for a
use the print version of this publication as the authoritative version for attribution.
detailed analysis of the proposed independent assessments. To comply with this congressional directive, the
DOE Office of the Associate Deputy Secretary for Field Management requested the assistance of the National
Research Council.
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INTRODUCTION 8
Statement of Task
As approved by the Governing Board Executive Committee of the National Research Council, this study
will:
• develop a decision framework for determining the need to conduct independent reviews of DOE's
proposed and ongoing fixed-asset projects
• propose guidelines for the content of these reviews
• assess the capabilities of various organizations to conduct such reviews
Projects to be considered for independent evaluation include: construction projects initiated in FY98,
construction projects in the conceptual design phase, ongoing projects, and proposed privatization projects.1
SCOPE
Discussions were held with the staff of the Energy and Water Subcommittee of the House Appropriations
Committee in an effort to define more fully the task directed by the Conference Report. These discussions
revealed that the members of the subcommittee and the staff did not have much confidence in DOE's cost
estimates and schedules, or even in the technical scope of construction projects submitted in the budget process.
Several reasons were cited for this lack of confidence, but the most common were: (1) that past performance by
DOE on high technology projects had often been unsatisfactory in terms of cost and schedule; and (2) the cost of
civil infrastructure projects often seemed to be higher when constructed for DOE than for the private sector or
other comparable government agencies.
Although the language of the Conference Report could be interpreted to suggest that this report should
focus on a project-by-project analysis of the FY98 budget request, a systems or project characteristic approach
was used instead in hopes that the criteria and guidelines for assessment could be applied to both current and
future projects. The short time frame available for this study and the cost of individual assessments both favored
the more generic approach. The criteria developed in this study are used to recommend specific projects from the
FY98 budget request for assessment.
use the print version of this publication as the authoritative version for attribution.
Privatization is defined as the DOE contracting strategy that awards a competitive, fixed-price performance
contract. For example, DOE may purchase waste cleanup services from a private contractor but retain ownership
of the facility and be held accountable to the regulating bodies and law. See the DOE report, Harnessing the
Market: The Opportunities and Challenges of Privatization, for further discussion (DOE, 1997).
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INTRODUCTION 9
In addition to mandating this study, the Conference Report requests that DOE's “overall management
structure and process for identifying, managing, designing and constructing facilities also be reviewed by an
impartial independent organization with expertise in the evaluation of government management and
administrative functions.” That review will be a follow-up to the present study and will focus on DOE's
management structure and processes for identifying, managing, designing, and constructing facilities. However,
because management and procedures are critical to assessing the need for independent reviews of DOE projects,
these topics are introduced and discussed in this report, as necessary.
To avoid any confusion over this issue, the purpose of this report is limited to the initial charge in the
language of the Conference Report, namely, an immediate assessment of the need for independent review of
certain DOE projects that are either included in the FY98 budget request or are likely to be initiated in the FY99
request. The Conference Report also directs that a study be done of the procedures DOE uses to identify, plan,
and manage major projects. However, because of the limited time available, no attempt has been made in this
report to address the broader issues of systems acquisition and project delivery within DOE, even though this is
where many of the root causes of the problems that occasioned this study probably lie. For example, during the
several field visits undertaken in support of this study, an almost universal comment by field personnel was that
baseline commitments too early in the design process, overly long project time frames (particularly in
comparison with the private sector), and dependence on variable annual appropriations are among the prime
causes of cost overruns and schedule slippage. Although these issues are not addressed in this report, they
suggest that a single round of independent reviews or even a series of independent reviews may not improve the
overall process. Despite a very real need to examine DOE's underlying acquisition strategy, policy and
procedures, and philosophy of project management, this report, by necessity, only presents a framework for
selecting projects from the FY98 budget request for independent review, outlines the content of the independent
reviews, and identifies the necessary capabilities of reviewers. The broader issues of DOE project management
will be the subject of a subsequent study by an organization yet to be determined.
ORGANIZATION OF THE REPORT
The remainder of this report is organized into three chapters and two appendices. Chapter 2 describes the
characteristics of the projects under review and DOE project delivery systems. Chapter 3 presents background
information on independent reviews as performed by DOE and other organizations. Chapter 4 presents the
findings and recommendations of this study and identifies candidate projects for independent review.
Appendix A contains an excerpt from H.R. 105-271, which mandates the study. Appendix B is a listing of
individual site visits, meetings, and interviews held to gather information during the course of this study.
use the print version of this publication as the authoritative version for attribution.
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INTRODUCTION
10
