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1 THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine Division on Engineering and Physical Sciences Board on Infrastructure and Constructed Environment 500 Fifth Street, NW Washington, DC 20001 Phone: 202 334 3371 February 27, 2004 Fax: 202 334 3370 The Honorable Spencer Abraham, Secretary of Energy U.S. Department of Energy 1000 Independence Avenue, SW Washington, DC 20585 Re: Preliminary Assessment of DOE Facility Management and Infrastructure Renewal Dear Mr. Secretary: The National Research Council has completed its initial assessment of the Department of Energy's (DOE's) policies and procedures for managing facilities and infrastructure renewal and their implementation at selected sites assigned to the National Nuclear Security Administration, Office of Science, and Office of Environmental Management. The review was ordered by the 107th Congressional Committee of Conference on Energy and Water Development (House Report 107â112). This preliminary assessment was conducted by the Committee on the Renewal of Department of Energy Infrastructure under the auspices of the National Research Council's Board on Infrastructure and the Constructed Environment. The committee's 13 members have expertise in a variety of disciplines, including construction and project management, corporate and strategic planning, capital programming and budgeting, land use and site planning, commercial real estate, and facility engineering and management. A list of committee members is appended to this letter. The group incorporates experience in large-scale strategic planning in the corporate environment, as well as facility planning and management within government, higher education, and other large institutions. The committee was established to address the following statement of task: 1. Assess DOE's facilities and infrastructure management practices and initiatives and provide recommendations for areas requiring additional focus; 2. Identify or develop âbest practiceâ tools and techniques for DOE real property asset management in such areas as site planning; maintenance and recapitalization planning; space and land utilization; disposal strategies; information technology applications; and financing, cost allocation, and cost recovery strategies to improve life-cycle performance and mission support;
2 3. Develop guidelines for deciding when to repair, renovate, or replace DOE buildings and other facilities based on factors such as agency mission objectives and return on investment; and 4. Define performance metrics that integrate budget with expected outcomes and ensure accountability. This letter report is submitted pursuant to an agreement between DOE and the National Research Council for an interim report 6 months after initiation of the study. This interim report is not intended to address all aspects of the committee's assigned tasks. More specifically, it transmits the committee's preliminary assessment of DOE facility management policies and procedures and ongoing facility management and infrastructure renewal activities. The committee's assessment is based on briefings by DOE headquarters staff in August 2003 and on site visits conducted in October and November 2003, which included briefings by DOE and contractor staff at Lawrence Berkeley, Lawrence Livermore, Oak Ridge, Sandia, and Los Alamos National Laboratories, as well as at the National Nuclear Security Administration Y-12 site and the Savannah River Site. The committee reviewed Real Property Asset Management (Order O 430.1B), the DOE-wide Condition Assessment Survey and Facility Information Management System database, and site-specific 10-year plans and facility management tools. The committee appreciates the cooperation and support of the Office of Engineering and Construction Management and the DOE program offices, site offices, and site contractors referred to above in providing background information and facilitating the site visits. The committee recognizes that at most locations DOE and contractor personnel contributed significant time, effort, and enthusiastic support, thus enabling the committee to address its assigned tasks. INTERIM ASSESSMENT OF DOE FACILITY MANAGEMENT POLICIES, PROCEDURES, AND DAY-TO-DAY PRACTICES In developing its interim assessment, the committee applied seven broad-based attributes that it believes characterize the level of maturity and quality of an organization's policies, procedures, and day-to-day practices for facility management. These seven attributes are listed below, followed by the committee's initial observations and assessment. 1. Cultural realization and communication of the strategic role that facilities and infrastructure play in achieving site missions and program objectives. It has been broadly recognized, both within DOE and among external stakeholders (e.g., advisory boards, contractors, and Congress), that reinvestment in DOE facilities and infrastructure is generally inadequate to sustain an acceptable level of performance: DOE's infrastructure problems and their effect on operations are well known. For example, DOE noted in its 2000 Strategic Plan that the poor condition of its facilities adversely impacts the safety, cost, and continuity of research activities and hurts laboratories' ability to attract and retain highly qualified scientists to work on important
3 mission needs. DOE's Inspector General has also reported on the poor condition of the department's infrastructure, noting that conditions are deteriorating at an âalarming pace.â Facilities in poor condition are costly to maintain and difficult to keep in regulatory compliance. In a September 2000 report, the Inspector General said that the deteriorating conditions are causing some Nuclear Weapons Stockpile Stewardship milestones and goals to slip, restoration costs to increase, and future nuclear weapons production work to be at risk. (General Accounting Office, 2003, Major Management Challenges and Program Risks, Department of Energy, GAO-03â100, p. 25) Recognition of the strategic importance of facilities and infrastructure is necessary to provide the impetus to increase their visibility in operating plans and budgets. Although DOE's strategic plan (DOE, 2003, Protecting National, Energy, and Economic Security with Advanced Science and Technology and Ensuring Environmental Cleanup, Washington, D.C.: U.S. Department of Energy) states that it should be âproviding world-class scientific research capacity,â an April 2003 report on the Office of Science laboratory modernization plans indicated that DOE allocates about 0.7 percent of replacement plant value for maintenance of the science laboratories, as compared with the generally accepted target of 2 percent to 4 percent of replacement plant value (DOE, 2003, Update of the Laboratory Modernization Plans in the April 2001 Report, Infrastructure Frontier Report: A Quick Look Survey of the Office of Science Laboratory Infrastructure). Although the department has begun to address these issues through policies and procedures such as O 430. 1B and the use of department-wide tools (the Condition Assessment Survey and the Facility Information Management System) to measure and track maintenance requirements, deferred maintenance, and the need for recapitalization, a definitive statement regarding the strategic importance of facilities and infrastructure as a key intermediate objective is absent from the DOE strategic plans or comparable policy documents. The committee believes that DOE's efforts to incorporate projected facility needs and deferred maintenance in 10-year comprehensive plans are appropriate, but finds that the implementation of facility management and infrastructure renewal efforts varies widely across programs and from site to site. While some programs and sites examined by the committee recognized facility management problems and took proactive corrective measures even before O 430.1B was drafted, others are just beginning to develop policies and procedures to implement the order, and some have not yet initiated meaningful action. The committee notes that the order was issued September 24, 2003, and while full compliance is not required until September 30, 2004, every effort should be made to expedite the earliest full compliance with O 430.1B. 2. Shared understanding between headquarters and field operations that facility and infrastructure management and renewal are linked with site missions in ways that are clear both to headquarters and to field operations. The committee found that DOE has historically pursued program objectives as a first priority, a focus that is commendable but that has often resulted in inadequate funding for the facilities maintenance and renewal needed to support these ongoing missions as well as the timely decontamination and demolition of obsolete facilities. Although most DOE staff and DOE contractors recognize the link between program
4 mission and facility condition, funding limits and competitive pressure to minimize overhead costs have led some sites to underfund fulfillment of their facility requirements. In response, the Facilities and Infrastructure Recapitalization Program was developed to address the backlog of deferred maintenance in the National Nuclear Security Administration and appears to be working effectively. The program has strong central direction and is linked to a 10-year comprehensive site plan and 5-year funding plans. The Facilities and Infrastructure Recapitalization Program is intended to reduce deferred maintenance to industry norms by 2009 (Office of Management and Budget, 2003, performance evaluation, available online at http://www.whitehouse.gov/omb/budget/fy2004/pma/facilitiesinfrastructure.pdf). The committee is concerned, however, that other DOE program offices do not have similar facility recapitalization programs and hopes that provisions in the recently deferred energy bill will be reintroduced, leading to a stable source of funding for such programs. A source of predictable, adequate funding is necessary to plan for and implement facility maintenance and recapitalization to meet DOE's program mission objectives and should be addressed. The committee is also concerned that there are no programs to adequately address the full burden of decontamination and demolition of contaminated excess facilities, such as the Bevatron at Lawrence Berkeley National Laboratory, Fast Burst Reactor at Oak Ridge National Laboratory, Van de Graaff accelerator at Los Alamos National Laboratory, and the Biological Science Building at the National Nuclear Security Administration Y-12 siteâa legacy that is not being addressed by the Office of Environmental Management and that impinges on the sites' functional quality. 3. Clear operational guidance for field sites that links facility management and infrastructure renewal actions to management's expectations for achieving program objectives. The committee commends DOE for issuing O 430.1B as a comprehensive description of its expectations for the management of DOE facilities and infrastructure by DOE site offices and site management and operations contractors. However, the committee found wide variance in the level of readiness of DOE field offices to implement the order. This is probably because the order describes what is expected but does not provide direction on how to achieve the desired results. From the committee's visits, it appears that several sites, Lawrence Livermore and Sandia in particular, have already integrated major elements contributing to a successful facilities management program. Other sites have not achieved similar progress. Although the committee believes that contractors should have some flexibility in implementing O 430.1B, it also believes that some procedures known to be effective should become standard practice department-wide. Consistency in implementation of procedures such as condition assessment and facility planning and management is also needed as a basis for evaluating performance across the DOE complex. The rollout of O 430.1B has been delegated to the program offices, and the committee has seen no evidence of a plan for DOE-wide implementation of O 430.1B. The committee believes that DOE headquarters should provide implementation guidelines that incorporate the best practices currently employed at DOE sites and by other organizations in government and industry. DOE should consider developing a
5 facility management manualâone similar to Project Management for Acquisition of Capital Assets (Manual M 413.3â1), which guides implementation of the program and project management policy (Order O 413.3)âand a training program for facility managers similar to the Project Management Career Development Program. 4. Consistent integration across programs and sites of corporate goals, site activities, and the budget process in a manner that balances maintenance and renewal of facilities and infrastructure with the programmatic mission. The committee observed inconsistency from site to site in the integration of corporate goals, site activities, and the budget process. Overhead charges seem to vary from site to site, with one site assessing a fee for the space assigned to a program and another assessing a fee as a percentage of the payroll costs. The committee believes that of the two approaches, facility charges based on assigned space are more likely to promote efficient facility management decisions; however, either approach could be adjusted to adequately fund facility and infrastructure requirements. On the basis of the apparent level of underinvestment in DOE facilities and infrastructure as observed by the committee, an appropriate balance has generally not been achieved. 5. Formal structures to develop and implement corporate best practices in facility management and to facilitate the transfer of lessons learned among programs and sites. As noted above, the committee has observed examples of highly effective facility management and infrastructure renewal at some DOE sites. Congress has authorized pilot projects to provide models for improving DOE facilities and infrastructure. The pilot program on site planning and facility maintenance management conducted by Lawrence Livermore National Laboratory is one example. The committee believes that DOE should have a rigorous program to take full advantage of opportunities to transfer expertise and the application of effective practices and tools to all sites. The size of the DOE complex provides a unique opportunity to identify and apply at all sites the best of the best solutions. Common practices applied department- wide may provide an opportunity to leverage DOE's size for more cost-effective procurement of facility maintenance and capital renewal. The committee learned of informal efforts at some DOE sites to share lessons learned and best practices, and there was also some indication of infrequent meetings of facility directors within program offices. However, there was no indication of a formal process to identify lessons learned and to facilitate the adoption of best practices department-wide, a process that the committee believes could return large dividends for a modest investment. The committee notes the success of the excellent Web-based lessons-learned programs for environmental safety and health operations at DOE sites and believes that facility management and infrastructure renewal could benefit from a similar program. DOE should take a collaborative approach across its sites and programs to recognize best practices and principles and to promote their adoption at all levels. The committee observed that DOE sites have a culture that values independence, which when
6 coupled with competition among the sites seems to diminish enthusiasm for collaboration and sharing knowledge. The committee believes that DOE could also benefit from benchmarking its programs for facility management and infrastructure renewal across DOE sites and programs and also benchmarking against the performance of similar programs in other federal agencies and in industry. 6. Performance metrics and indicators that use consistent and accurate data to measure meaningful outcomes department-wide. The committee is impressed by the robustness of the Condition Assessment Survey and the Facility Information Management System and by the ability of some DOE sites to integrate these department-wide systems with each site's facility management systems. However, the committee is concerned about the effectiveness of the quality control system for condition assessment and data collection in ensuring the accurate and consistent application of criteria across the complex. The committee is also concerned about DOE's reliance on the Asset Utilization Index and the Asset Condition Index to determine facility management performance, because the committee believes that both indices oversimplify the parameters of effective facility stewardship. Metrics are needed that show how the investments in DOE facilities support program objectives, as well as address the deferred maintenance backlog plus requirements for modernization, plant adaptation, and compliance with regulatory requirements. More robust metrics are also needed to assess management of the elimination of excess facilities. Current metrics track only the floor area of facilities demolished without taking into account the level of contamination, the impact on the site, or the impact on the overall program mission. An apparent result has been the demolition of excess facilities that present little risk, rather than prioritizing and removal of such facilities on the basis of their impact on the program objectives and the site. Although it generally supports linking the demolition of excess facilities to new construction, the committee believes that effective elimination of excess property is focused on achieving the optimal space required for meeting overall DOE program office or departmental objectives. 7. Open communication channels, both vertical and horizontal to convey guidance and reduce feedback time. Facility management and infrastructure renewal of DOE sites are controlled by the site management and operations contractors. At most of the sites visited by the committee, the contractors' senior managers were actively involved and facility issues were integrated into management procedures. At some sites, communication included active engagement with program directors and scientists to ensure an appreciation of the strategic nature of the facilities and the infrastructure. The involvement of personnel at all levels should be encouraged across the DOE complex. DOE oversight of contractor performance is undertaken by site offices communicating directly with and accountable to DOE headquarters. The committee observed a generally high level of partnering and communication between the facilities' contractor personnel and DOE site office personnel. The committee believes that such
7 close interactions are conducive to efficient operations so long as the roles and responsibilities of the owner and contractor are clearly understood. DOE site office personnel assigned to managing facilities and infrastructure are responsible for setting objectives and providing the means for the contractor to carry them out. The contractor is responsible for ensuring that the owner's objectives for the site are achieved. SUMMARY COMMENTS The success of any organization depends on the quality of its leadership at all levels. The committee believes that success in DOE depends on a shared vision and continuous, consistent leadership from DOE headquarters, DOE site offices, and site management and operations contractors. To create an organization that demonstrates the attributes of maturity and quality in facility management, DOE will need more than written policies. It will have to transform policies into a culture that recognizes the value of facilities and infrastructure to DOE missions. This change in culture will be achieved with excellence in implementing the seven attributes discussed above. In summary, the level of recognition of the importance of facility stewardship and the synergy between the quality of facilities and the achievement of program objectives are inconsistent across DOE program offices and sites. This disparity is manifested in the level of funding and passion for facility-oriented programs and the planning and managing of facilities for current and future program requirements. The committee's initial assessment is that DOE has issued policies that if adequately and consistently supported by meaningful practices and procedures will improve the quality of facility management and will lead to better allocation of resources for the effective support of DOE's missions. Successful implementation will require timely and effective leadership, communication, and guidance from headquarters, site offices, and management and operations contractors to ensure consistent stewardship of facilities in DOE. As it continues its work toward developing its final report, the committee will address opportunities and methods to facilitate implementation of improved DOE policies and procedures consistently across DOE programs and sites. The committee appreciates this opportunity to be of service to DOE and looks forward to assisting the department in its continuing efforts to improve facility management and infrastructure renewal programs. Respectfully submitted, James M.Braus, Chair Committee on the Renewal of Department of Energy Infrastructure