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--> 1 Department of Energy Projects Introduction The U.S. Department of Energy (DOE) and its predecessor agencies have been at the center of many great achievements in science and engineering. They have built many world-class research facilities, funded excellent academic research, and developed and maintained nuclear weapons that deterred war for decades. DOE's current diverse missions (energy systems, nuclear weapons stewardship, environmental restoration, and basic scientific and technological research) are supported by hundreds of projects, ranging from cleanups of hazardous waste at individual sites of the weapons complex, such as the Hanford Tank Waste Remediation System, to the construction of scientific facilities, such as the National Spallation Neutron Source. Many of these projects are unique, complex, and rely on technologies that have not been proven at field scale. In recent years, DOE's budget has been dominated by the monumental task of environmental restoration and waste management, largely in connection with past nuclear programs. DOE anticipates that a minimum funding level of $5.75 billion per year through 2006, and a total of $147 billion by 2070 will be necessary to complete the 353 cleanup projects in its current program (DOE, 1998a). It is well documented by internal and external audits and independent statistical analyses that DOE construction and environmental projects generally take longer and cost substantially more than comparable projects by other federal agencies or in the private sector (see Chapter 2 and Appendix A for details). DOE's waste management projects, for example, cost on average almost
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--> 50 percent more than comparable industrial projects (IPA, 1993, 1995). Moreover, DOE's projects commonly overrun their budgets and schedules, leading to pressures for cutbacks that have resulted in facilities that failed to function as intended, facilities that had to be abandoned before they were completed, or facilities that were so long delayed that, upon completion, they no longer served any purpose. These problems have characterized not only the construction of sophisticated and complex facilities for scientific research and projects that involve the handling of radioactive and toxic waste, but also conventional construction projects. In fact, DOE's entire record calls into question the credibility of its procedures for developing designs and cost estimates and for managing its projects. To identify the roots of these problems, this committee reviewed the performance of DOE projects and assessed the organizations and procedures by which they are carried out. The committee believes the findings and recommendations in this report could significantly improve DOE's project performance. This study is the second phase of a two-phase study by the National Research Council (NRC). Phase I, which focused on the need for independent project reviews, concluded that DOE's problems are more institutional than technical (NRC, 1998). The report recommended that DOE use independent external reviews for certain projects, but concluded that these reviews would not solve the systemic problems of cost and schedule overruns, which involve DOE's policies and procedures for identifying, planning, procuring, and managing projects. This report is a review of those issues. Statement of Task The objectives of this study were set forth in the Committee of Conference Report on Energy and Water Development (U.S. Congress, 1997): Review and assess the processes used by DOE and its contractors to identify project requirements, develop scopes of work, execute and manage designs, prepare cost estimates, select contract types, and execute and manage environmental restoration, waste management, and construction activities. Assess the level of oversight and experience of personnel in field offices and at DOE headquarters. Analyze the effectiveness of current DOE practices and recommend improvements. Recommend guidelines for management and contracting that would help DOE establish an overall departmental process with more control of projects to reduce project cost and schedule overruns. This report focuses on DOE's management structure in the context of projects and does not assess DOE's overall organizational and management structure.
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--> Nevertheless, the committee interpreted the request to review DOE's "overall management structure and process for identifying, managing, designing, and construction facilities" to allow a discussion of DOE-wide management, policies, and procedures when necessary. Organizational Complexity DOE is a large, complex organization that has grown by accretion for more than 50 years, adding new missions and absorbing subsidiary organizations. Its structure and procedures reflect that history. DOE was created in response to the energy crisis of the 1970s to reduce the nation's dependence on foreign oil supplies, exploit new sources of energy, and improve energy efficiency. The Energy Act of 1977 (P.L. 95-31) merged the policy and regulatory functions of the Federal Energy Administration, energy supply and demand technology functions, nuclear research, nuclear weapons programs of the Energy Research and Development Administration (ERDA), and various energy-related programs of the Department of the Interior. DOE inherited from its predecessor agencies the nation's nuclear weapons program, five power marketing agencies, and a host of other activities, such as the functions of the Energy Information Agency and the Federal Energy Regulatory Commission. DOE's nuclear and scientific research missions originated in efforts by the military to develop the atomic bomb during the Second World War. After the war, the Atomic Energy Commission (AEC), the successor of the Manhattan Engineering District of the Corps of Engineers, was established as an independent agency for civilian control of nuclear weapons and nuclear energy, and given enormous legal, financial, and self-regulatory powers. Oversight of the AEC was limited by the need for security and secrecy. The AEC established a system of government-owned, contractor-operated (GOCO) laboratories, which was to become the world's greatest scientific and industrial complex. The contractors worked under comprehensive management and operations (M&O) agreements, with few restrictions and little supervision. Programs and facilities were compartmentalized for security reasons, and some were duplicated to ensure the survival of essential functions after a nuclear attack. Procurement strategies for engineering, technical services, and facilities emphasized speed over cost and accountability. Little attention was paid to environmental effects, leaving vast amounts of radioactive and toxic wastes. Over the decades, DOE's focus has shifted to meet changing national needs. In the late 1970s, the emphasis was on energy development and regulation. In the 1980s, nuclear weapons again took priority. Since the end of the Cold War, DOE has pursued a variety of diverse missions, including the environmental cleanup and restoration of the nation's nuclear weapons production facilities, stewardship of nuclear weapons, research and development in energy and basic science, and management of the power marketing administrations.
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--> The organizational structure to carry out these missions is a complex array of public and private enterprises that includes headquarters, operations offices, field offices, laboratories, M&O contractors, and subcontractors. DOE manages a vast infrastructure of facilities and associated programs and projects. Some institutional legacies of the nuclear weapons program included decentralization, a system of field offices, and reliance on private contractors. Contracting accounted for $16.2 billion, or about 91 percent of DOE's obligations in fiscal year 1997 (GAO, 1999), the majority with M&O contractors. DOE has always had a limited core staff of professional managers and engineers, and as the department took on new programs and missions, the field offices developed their own contracting processes in isolation from headquarters and from one another. Relationship between Headquarters and Field Offices DOE's organization includes 12 headquarters program offices, 10 major operations offices, and two large field offices with more than 50 major contractor-operated facilities. Most project activities are managed by the operations or field offices, which oversee the M&O contractors. Projects are funded, however, by the headquarters program, most of them headed by assistant secretaries, which provide funds and policy guidance to contractors but do not oversee them directly. In this arrangement, roles and responsibilities are unclear, and management authority is blurred (IDA, 1997; LOB, 1997; GAO, 1999). Program Offices The mission of the Office of Environmental Management (EM), created in 1989, is to reduce threats to health, safety, and the environment from contamination and waste at DOE sites, generated mostly by DOE's predecessors. EM is the largest DOE office, accounting for approximately $6 billion of the $16.8 billion appropriation for fiscal year (FY) 1998 (or 36 percent) (DOE, 1998b). EM's mission includes (1) waste management (treatment, disposal, and storage of a wide variety of radioactive, nonradioactive, and mixed waste); (2) the stabilization of nuclear material and spent fuel and the deactivation and decommissioning of surplus facilities; (3) the remediation and environmental restoration of sites that have been contaminated by DOE activities; and (4) technology development to improve the effectiveness of site cleanup. EM is also involved with national programs for transportation and pollution prevention, as well as for landlord functions, including security and infrastructure support. Once entirely self-regulated, EM and its predecessors experienced intense pressure to negotiate binding milestones to bring contaminated sites into compliance with environmental regulations and agreements. EM is largely subject to the requirements of a multitude of agreements that have been negotiated with federal, state, and local agencies.
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--> The Office of Defense Programs (DP) was formerly responsible for manufacturing, managing, and maintaining the nuclear weapons complex. Today DP's mission is the stewardship of the weapons stockpile. DP is the second largest DOE office, with a budget in FY 1998 of approximately $4 billion (25 percent of DOE appropriations) and a federal workforce of about 2,000, which oversees about 25,600 contract employees in GOCO facilities (DOE, 1998b). The Office of Science (SC) (formerly the Office of Energy Research) is the third largest DOE office, with a budget in FY 1998 of approximately $2.5 billion, about 15 percent of DOE's appropriations (DOE, 1998b). SC's mission is to support basic research to advance the fundamental science knowledge base, as well as train future scientists. Many of SC's activities require specialized, often unique, research facilities, such as particle accelerators and detectors and nuclear reactors. Energy production and related research are the primary focus of SC programs, although its activities have expanded to include a range of other areas, such as materials, mathematics, and earth science. SC is also the oversight, planning, policy, and support office for the energy and multipurpose research laboratories. The Office of Nuclear Energy, Science, and Technology (NE) is the fourth largest DOE office, with a FY 1998 budget of approximately $1 billion, about 6 percent of DOE's appropriations (DOE, 1998b). NE provides government expertise in nuclear engineering and technology, helping to maintain economic and technological competitiveness and access to diverse energy sources. The Office of Energy Efficiency and Renewable Energy (EE) develops cost-effective technologies that protect the environment and support the nation's economic competitiveness. The FY 1998 budget for EE was approximately $863 million, nearly 5 percent of DOE's appropriation (DOE, 1998b). EE programs include research, development, and market deployment through private sector partnerships. The Office of Nonproliferation and National Security (NN) is responsible for DOE's activities related to the nonproliferation of nuclear weapons, nuclear safeguards and security, classification and declassification, and emergency management. The FY 1998 budget for NN was approximately $657 million, about 4 percent of DOE's appropriation (DOE, 1998b). The Office of Fossil Energy's (FE) budget for FY 1998 was approximately $367 million, about 2 percent of DOE's appropriation (DOE, 1998b). FE conducts and sponsors research on fossil fuels and manages the petroleum reserves owned by the federal government. The Office of Civilian Radioactive Waste Management (RW) had a FY 1998 budget of approximately $346 million, about 2 percent of DOE's appropriation (DOE, 1998b). The mission of RW is to dispose of the nation's commercial and defense spent nuclear fuel and high-level nuclear waste. RW is responsible for the construction and operation of the high-level radioactive waste repository and
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--> is evaluating the Yucca Mountain site in Nevada. If this site is selected, the earliest it will be able to accept waste or commercial spent fuel will be 2010. The mission of the Office of Fissile Materials Disposition (MD) is to provide for the safe long-term storage of all weapons-usable fissile materials and the safe disposition of surplus materials. Disposition will involve the construction of facilities to treat, pack, and store these materials. The FY 1998 budget for MD was approximately $100 million, about 1 percent of DOE's appropriation, but is expected to increase considerably in the near term as these facilities are approved for construction (DOE, 1998b). The five power-marketing administrations (PMAs) (Alaska Power Administration, Bonneville Power Administration, Southeastern Power Administration, Southwestern Power Administration, and Western Area Power Administration) are distinct organizations within DOE. The mission of the PMAs is to market power generated at federal multipurpose water projects at the lowest possible rates consistent with sound business practices. Each PMA has a specific geographic boundary, responsibilities, and system of projects. Four of the five PMAs receive annual appropriations, but Bonneville Power Administration has been on a self-financed basis since 1974. The FY 1998 budget for the PMAs was approximately $241 million, about 1.5 percent of DOE's appropriation (DOE, 1998b). The two remaining program offices (the Office of Environment, Safety, and Health and the Energy Information Administration) have no significant project responsibilities and were beyond the scope of this study. Laboratories A significant organizational component of DOE is its laboratories. The DOE laboratory system is generally considered to include 10 major multiprogram (national) laboratories and many smaller, more focused laboratories. All of the national laboratories and most of the other DOE laboratories are federally funded research and development centers that are owned and funded by the government but staffed and operated by universities or private contractors. The current laboratory system can be traced back to the origins of atomic weapons development during WWII. The arrangement of government-funded facilities operated by nongovernment staff with the appropriate expertise (the GOCO system) became the model for the nuclear weapons laboratories, as well as for civilian atomic energy, science and engineering, and materials research and development laboratories, and for other DOE laboratories. Activities at the DOE laboratories (the largest government laboratory system) support four major mission areas: national security, science and technology, energy resources, and environmental quality. DOE's obligations for the laboratories were approximately $7.6 billion in FY 1998. The laboratories employ about 56,000 (federal and contractor) people (Boesman, 1998).
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--> DOE Culture In the course of this study, numerous DOE employees, including those in senior management positions, cited "DOE culture," without defining it, as an explanation for the failure of many projects. In the committee's opinion, blaming the "culture" for failure to execute is itself an expression of that culture. Because this term is commonly used by DOE personnel the committee attempted to define it and determine how it affects DOE project performance. A culture is a set of implicit or tacit beliefs that pervades an organization and affects how it behaves and responds to its environment. It is the unstated way an organization sees itself and the way it really works, which is often very different from the formal organizational chart. Culture encompasses the values an organization holds. For example, the organizational culture of the DOE laboratories can be briefly described as science-driven, motivated to discover new knowledge, particularly about nuclear physics. Knowledge discovery is open-ended, continuous, and not easily planned and scheduled. A science driven culture was evident from the very beginnings (Manhattan Engineering District) of DOE. "In the earliest stages of development, organizations tend to be dominated by an adhocratic culture-characterized by an absence of formal structure, creativity and entrepreneurship, fluid and nonbureaucratic methods, and an emphasis on individuality, freedom, and flexibility among employees" (Druckman et al., 1997, p. 89). The weapons laboratories, at least in the past, were technology-driven, motivated and organized to pursue overriding national defense goals involving nuclear technology, such as advanced weapons design, development, production, and testing. The major activities of the weapons laboratories were organized around these goals in an atmosphere of secrecy, urgency, and self-sufficiency, and other issues, such as costs, openness, public scrutiny, and environmental protection, were given less attention. Because contractors were also motivated by technology and national defense, the atmosphere was cooperative rather than competitive or adversarial and favored contracting methods that assigned no financial risk to the contractor. Little distinction was made between government personnel and contractor personnel, because all of them were working toward the same goals and shared the same views. DOE, which was assembled from a heterogeneous collection of agencies, inherited a diversity of cultures, and although DOE's missions changed in response to external conditions, the culture did not necessarily change with it. For example, with the end of the Cold War and an acceleration of changes in mission, the culture of the national laboratories has remained predominantly scientific and technology-driven, although the focus of their activities in many cases has changed from nuclear weapons to pure science or to civilian applications. "Organizational expansion ultimately produces the need to emphasize structure, standard procedures, and control-that is, a hierarchy-focused culture. Such a shift makes members feel that the organization has lost the friendly, personal
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--> feeling that once characterized the workplace, and the focus on reduction of deviation, standardization, and restraint may give rise to escalating resentment or rebellion" (Druckman et al., 1997, p. 89). This description fits DOE today. DOE has found it difficult to develop a culture consistent with successful execution of its new roles. The culture throughout much of DOE headquarters and the field elements is one of preserving the status quo and can be characterized as bureaucratic and driven by process and politics. Reorganizations of DOE Every secretary of energy has made organizational changes at DOE. Some have favored centralization; others have given field offices and programs greater autonomy. DOE's organizational structure as of January 1999 is shown in Figure 1-1. An assistant secretary or director heads each program office. Reporting to each assistant secretary are a principal deputy assistant secretary and several deputy assistant secretaries, each of whom is responsible for a subprogram. Historically, assistant secretaries have been granted significant independence, and programs (and subprograms) are free to follow their own agendas, regardless of their impact on other DOE components. These vertical "stovepipes" of authority are characteristic of the department. DOE field offices and operations offices and their contractors carry out the work on DOE projects. These offices are also responsible for evaluating the results. Field offices and contractors are primarily beholden to one another and have little or no incentive to promote the interests of one program or another. However, it is not uncommon for program offices to extend their influence to a field office and its contractors. This organization makes professional project management difficult because the field offices and headquarters program offices often have different priorities, and contractors may have a difficult time deciding whose directions to follow. Poorly characterized roles and responsibilities also make it impossible to assign accountability for success or failure (see Chapter 2). In the 1990s, two major attempts have been made to reform the relationship between headquarters and the field offices in managing projects. Neither reform has been allowed to take full effect, however, and the resulting organization is even more constricted around its historic stovepipes. Creation and Demotion of the Office of Field Management In 1994 the (then) secretary of energy reorganized the reporting relationships between the field offices and the headquarters programs by creating the position of associate deputy secretary for field operations, who was intended to be a senior career professional with management authority over most of the field offices, and especially the management of their projects. However, before this new organization and position could become fully functional, a new secretary of energy was
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--> Figure 1-1 Organization of the U.S. Department of Energy, as of January 1999. Source: DOE Office of Field Management.
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--> appointed who in turn made fundamental changes in DOE's organizational structure that had the effect of negating the previous changes. The associate deputy secretary became a director (Office of Field Management [FM]), as such only one of several staff offices reporting to the deputy secretary. Since then, field managers have reported both to the director of FM and to one or more program assistant secretaries. However, certain selected site offices, such as the Rocky Flats Environmental Technology Site, report directly to the secretary of energy, while others continue to report through the program assistant secretaries. A similar lack of consistency and clarity of authority and responsibility was found to be a contributing cause of the problems of the superconducting super collider project, because oversight and accountability actually decreased under the ad hoc organizational structure set up specifically for this project (DOE, 1996). Life-Cycle Asset Management Program Beginning in 1994, the secretary of energy initiated an effort to give program and field offices greater management flexibility by reducing the number of DOE orders and headquarters-mandated requirements. DOE's Order 4700.1, Project Management System (detailed, prescriptive procedures for managing and reporting projects) was replaced with the Life-Cycle Asset Management (LCAM) Program (DOE Order 430.1, recently revised and replaced with 430.1A) and an evolving collection of "Good Practices Guides" (e.g., "Critical Design Criteria," "Risk Analysis and Management," and "Performance Measures") (DOE, 1998c). Although compliance with the general principles and methods contained in LCAM is required, this document (nor the accompanying Good Practice Guides) does not provide metrics by which to measure performance (or the lack of it). Therefore, practically everyone can say they have followed these principles, and no one can be proven wrong. DOE's lack of a basis for measuring project performance has made it impossible to ensure consistency or excellence in the management of projects. Identification and Execution of Projects Many DOE programs require the development and use of capital facilities. FM was established to provide policy, oversight, and support for headquarters and field organizations. LCAM (DOE Order 430.1A), the operative policy on managing physical assets includes the following definition of a project: In general, [a project is] a unique effort that supports a program mission with defined start and end points, undertaken to create a product, facility, or system with interdependent activities planned to meet a common objective/mission. Projects include planning and execution of construction/renovation/modification/environmental restoration or decontamination and decommissioning efforts, and large capital equipment or technology development activities. Tasks that do
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--> not include the above elements, such as basic research, grants, and operations and maintenance of facilities, are not considered projects (DOE, 1998c). LCAM divides projects into four categories according to the degree of management authority, planning, and support required: strategic systems, major systems, line item projects, and general plant projects. Strategic systems are acquisitions for which the total project cost (TPC) exceeds $400 million or that are stand-alone efforts to advance DOE's strategic goals. In addition to TPC, DOE Notice N 430.1, section 4 (i) states that "Strategic System designation by the Secretary shall consider risk factors, international implications, stakeholder interest and/or national security. Critical Decisions (CDs) (generally approval of mission need, project baselines, start construction, and completion/start of operations) for Strategic Systems are the responsibility of the Acquisition Executive" (DOE, 1997). Some secretaries of energy have retained executive authority for acquisitions, but most secretaries have delegated the responsibility either to the deputy secretary or the under secretary. Major systems are acquisitions for which the TPC ranges from $100 million to $400 million or that support significant programmatic objectives and goals. Critical decision responsibility for major systems is delegated to the appropriate program secretarial officers, who sometimes delegate the responsibility for certain decisions to operations or field managers. Line item projects usually have a TPC of $5 million to $100 million, appear as single line items in the federal budget, and are typically intended to enhance existing operations and capabilities. General plant projects have a TPC of less than $5 million and consist mainly of projects that maintain existing facilities and infrastructure. Project Phases The planning and construction process normally has four phases (although this varies slightly from organization to organization in DOE). Preconceptual phase activities take place before a project is formally defined and include identifying ideas, making preliminary evaluations of their feasibility, and documenting the need for the project. Costs in the preconceptual phase do not accrue to the TPC. In the conceptual phase, technical and project requirements are defined and necessary resources are identified. In this phase of the project, a conceptual design report and project execution plan are prepared, both of which are critical in setting the scope, cost, and schedule baselines. Costs for the conceptual phase of the project are included in the TPC. The execution phase includes design and construction of the project and the transition to start-up and acceptance. A closeout decision may be made at any time during the life of a project. Generally by the time of the closeout phase, the project has been completed and turned over for operations. Closeout can also be the termination of an incomplete project or the retirement of a facility at the end of its life cycle (NRC, 1998).
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--> The environmental restoration and waste management projects of EM have a different structure, driven by statutory mandates and other legally binding requirements and decision-making processes. Most decisions for these projects are made at the site level, but some must be deferred to DOE headquarters. EM projects are generally organized in three phases: the assessment/remedial investigation/ feasibility study (RIFS); remediation/cleanup; and closeout. In a recent report, Accelerating Cleanup: Paths to Closure, EM provides for the first time, a project by-project description of the technical scope, cost, and schedule of all 353 projects at DOE's remaining 53 cleanup sites in the United States (DOE, 1998a). That report breaks the process down into six phases to account for the significant role of public participation in decision making: (1) planning; (2) study, in which projects are characterized and alternative solutions are evaluated; (3) recommendations, in which a preferred solution is identified; (4) decision; (5) implementation; and (6) monitoring. Organization of This Report The succeeding chapters of this report assess DOE's performance and offer findings and recommendations for improving project management. Chapter 2 reviews DOE's track record in project performance, including the planning and budgeting process and the aspects of management and accountability that affect project performance. Chapter 3 discusses using project reviews as a management tool. Chapter 4 assesses the contracting and acquisition methods used by DOE. Chapter 5 discusses in more detail the committee's recommendation for the establishment of a project management office as the center for excellence in project management at DOE. References Boesman, W.C. 1998. Restructuring DOE and Its Laboratories: Issues in the 105th Congress, by William C. Boesman. Issue Brief IB97012. August 19 Update. Bethesda, Md.: Congressional Research Service. DOE (U.S. Department of Energy). 1996. Summary Audit Report on Lessons Learned from the Superconducting Super Collider Project. IG-0389. Washington, D.C.: U.S. Department of Energy, Office of the Inspector General. DOE. 1997. Energy Systems Acquisition Board Procedures and Distribution Memorandum. DOE Notice: N 430.1, Approved October 28, 1997. Washington, D.C.: U.S. Department of Energy. DOE. 1998a. Accelerating Cleanup: Paths to Closure. Washington, D.C.: U.S. Department of Energy, Office of Environmental Management. DOE. 1998b. Department of Energy Fiscal Year 1999 Budget Request to Congress. Washington, D.C.: U.S. Department of Energy. DOE. 1998c. Life Cycle Asset Management. DOE Order 430.1A. Oct. 14 Revision. Washington, D.C.: U.S. Department of Energy. Druckman, D., J.E. Singer, and H. Van Cott, eds. 1997. Enhancing Organizational Performance. National Research Council Division on Education, Labor and Human Performance. Washington, D.C.: National Academy Press.
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--> GAO (General Accounting Office). 1999. Major Management Challenges and Program Risks: Department of Energy. GAO/OCG-99-6. Washington, D.C.: Government Printing Office. IDA (Institute for Defense Analysis). 1997. The Organization and Management of the Nuclear Weapons Program. Alexandria, Va.: Institute for Defense Analysis. IPA (Independent Project Analysis, Inc). 1993. U.S. Department of Energy, Office of Environmental Restoration and Waste Management, Project Performance Study. Reston, Va.: Independent Project Analysis, Inc. IPA. 1995. U.S. Department of Energy, Office of Environmental Restoration and Waste Management, Project Performance Study, Waste Management Addendum. Reston, Va.: Independent Project Analysis, Inc. LOB (Laboratory Operations Board). 1997. Third Report of the External Members to the Secretary of Energy Advisory Board. Washington, D.C.: U.S. Department of Energy. Available on line at <http://www.hr.doe.gov/seab/thdrplob.html> NRC (National Research Council). 1998. Assessing the Need for Independent Project Reviews in the Department of Energy. National Research Council, Board on Infrastructure and the Constructed Environment. Washington, D.C.: National Academy Press. U.S. Congress. 1997. Committee of Conference Report on Energy and Water Development. HR 105-271. Washington, D.C.: Government Printing Office.
Representative terms from entire chapter: