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.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 7
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 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.

OCR for page 7
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 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).

OCR for page 7
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 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.

OCR for page 7
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. INTRODUCTION 10