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3 Contracting and Project Management in the Office of Environmental Management CONTRACTING PRACTICES IN THE OFFICE OF ENVIRONMENTAL MANAGEMENT The contracting model EM utilizes has evolved since the Office of Environmental Managementâs (EMâs) inception in 1989. Initially, Management & Operating (M&O) contracts prevailed, embodying a unique relationship between the Government and contractor and a general work scope so as to comprehend the full suite of activities at a particular site, in some instances. These were cost-type contracts with fees paid either on a fixed fee schedule or incentive basis. Later EM employed contracts that had more specific work scope with cost reimbursement plus performance based awards and fees.1 In the mid-1990s, DOE implemented several so-called closure contracts at the Rocky Flats Plant and the Fernald site, both chosen for accelerated closure by the Assistant Secretary for Environmental Management in 1996 (DOE, 2006, page 3-23). These contracts were aimed at progressing the cleanup activities at the site toward a defined end-state supported by fees and monetary incentives. The fees and awards were made following a set of award criteria in cost plus incentive fee (CPIF) contracts (DOE, 2020, p. 7), a type of cost reimbursement contract. During the present study, EM explained that in the future large procurements will be subsumed under a new end-state contracting model (ESCM).2 The end-state itself is described as follows: Within the Performance Work Statement of the applicable contracts, the term âEnd Stateâ is defined as the specified situation, including accomplishment of completion criteria, for an environmental cleanup activity at the end of the Task Order period of performance (POP).3 EM further explained the relationship between these end-states and site completion: âEnd-state contracting is not a contract type but an approach to creating meaningful and visible progress through defined end-states, even at sites with completion dates far into the future. This is intended to create and motivate a culture of completion.â DOE envisages âa two-step process using a competitive qualifications- based Request for Proposal for selection of the offeror representing the best value and subsequent single source, Task Order(s) negotiations through effective partnering.â (DOE, 2020, p. 8) The first step results in a single-award Indefinite Delivery Indefinite Quantity (IDIQ) contract to capture a substantial scope of 1 Norbert Doyle, Deputy Assistant Secretary, Office of Acquisition & Project Management (EM-5.2), âContract Overview,â presentation to the Committee, Washington, D.C., February 24, 2020. 2 Written Statement of Anne Marie White Assistant Secretary for Environmental Management Before the Subcommittee on Strategic Forces Committee on Armed Services United States House of Representatives April 9, 2019. Available at <https://docs.house.gov/meetings/as/as29/20190409/109269/hhrg-116-as29-wstate-whitea- 20190409.pdf>. 3 âResponses to NAS Questionsâ sent to NASEM staff by Rodney Lehman, EM-5.22, June 30, 2020. PREPUBLICATION COPY â SUBJECT TO FURTHER EDITORIAL CORRECTION 3-1
work.4 The draw period of the IDIQ will be 10 years and uses a combination of Firm Fixed Price (FFP) and Cost Reimbursement task orders. DOE sees the benefits of this end-state concept to include: quicker evaluations of proposals; less risk of protest loss; freeing up of contractor key personnel; and less proposal cost to industry.5 DOE has awarded two IDIQs under the ESCM at Hanfordâthe Central Plateau Cleanup Contract and Tank Closure Contractâand one IDIQ for Nevada Environmental Program Services. Proposals for a fourth, the Integrated Management Cleanup Contract at the Savannah River Site were accepted through December 1, 2020.6 PREVIOUS STUDIES OF PROJECT MANAGEMENT The management of these projects has been the subject of study by different groups, and these studies led to specific changes at DOE. A rough chronology begins in 1998, when a series of reports by the National Research Council were initiated by Congress. DOE subsequently worked to improve project management in three areas recommended by the NRC: âstrengthening project management policies and guidance, developing consistent and objective performance information on ongoing projects, and improving the quality of federal oversight.â (GAO 07-518). The Office of Engineering and Construction Management (OECM) 7 (DOE, 1999) was formed within the Office of the Chief Financial Officer âto drive changes in DOEâs project management system and establish a strong project management capabilityâ (NRC, 2007, p. 8) after which DOE published Order 413.3, Program and Project Management for the Acquisition of Capital Assets on October 13, 2000. The NRC reports continued annually and in 2004 found âinadequate planning, inadequate risk management, and inadequate monitoring and follow-up.â (NAS, 2004, p. 70). DOE issued the revised project management order, Order 413.3A on July 28, 2006 to incorporate lessons learned (GAO 07-518, p. 8) and in November 2010 issued the successor Order 413.3B, Program and Project Management for the Acquisition of Capital Assets, (hereafter âOrder 413.3Bâ). The DOE Office of Project Management, created in 2015, manages Order 413.3B and is the secretariat for the Energy Systems Acquisition Advisory Board (ESAAB) and the Project Management Risk Committee (PMRC).8 An internally-led, externally-advised study by DOE addressed project management as well. Initiated by a tasker memo from Secretary Steven Chu (March 31, 2011), this latter effort noted: âAppropriately constituted program offices with empowered program managers; strong line management with well understood roles and responsibilities; effective peer reviews; stability in organizational structure and personnel; and a culture of open information sharing could address many of EMâs program and project performance issues.â9 4 DOE described its âPrinciples of End State Contractingâ to include the goal of having a very specific work- scope which potentially allows for a firm fixed price. DOE describes the benefits of this approach to include but not limited to: quicker evaluations of proposals; less risk of protest loss; frees up contractor key personnel; and less proposal cost to industry. SOURCE: Norbert Doyle, Deputy Assistant Secretary, Office of Acquisition & Project Management (EM-5.2), âContracting Overview,â presentation to the committee, February 24, 2020, Washington, D.C. 5 Norbert Doyle, Deputy Assistant Secretary, Office of Acquisition & Project Management (EM-5.2), âContracting Overview,â presentation to the committee, February 24, 2020, Washington, D.C. 6 American Nuclear Society, October 7. 2020, âProposals being accepted for $21 billion Savannah River contract.â https://www.ans.org/news/article-2261/proposals-being-accepted-for-21-billion-savannah-river-contract/ 7 Congress had eliminated funding for the DOE Office that was responsible for project and facilities management in 1999. 8 Office of Project Management, âAbout Us.â Available at <https://www.energy.gov/projectmanagement/about-us>. 9 Daniel B. Poneman, Deputy Secretary of Energy, September 9, 2011, âSecretarial Review of Environmental Management Programs and Projects.â PREPUBLICATION COPY â SUBJECT TO FURTHER EDITORIAL CORRECTION 3-2
The Government Accountability Office (GAO) found problems with DOEâs contract and project management and added the latter to its High-Risk Report first in 1990 where it has remained (GAO, 2019a). GAO further noted in 2019 that EMâs cleanup policy did not follow the majority of the leading practices for project management selected by GAO for evaluation (GAO, 2019b). The Congressional request for the present study was made about this time. The Departmentâs activities addressing project effectiveness and efficiency have evolved from the above activities and recommendations. EM applies Order 413.3B to those activities over $50 million in the following categories: major items of equipment (MIEâs); environmental cleanup projects; and line- item construction projects. As of February 2020, there were 14 line-item construction projects and with total project cost (TPC) of $21.6 billion, comprising roughly one-quarter of EMâs annual budget authority.10 The remaining three quarters includes activities to which EM is not applying Order 413.3B. Some of these activities include site services while others include projects for decommissioning of buildingsâa new protocol for these latter activities was published by EM in 2020âwaste disposal operations, or environmental remediation. The various studies discussed above are described in greater detail in Appendix C. PROJECT MANAGEMENT AT DOE The project management directive that applies to the work of the Office of Environmental Management (EM) is Order 413.3B Program and Project Management for the Acquisition of Capital Assets. The earliest version was issued in 2000 following a period of concerted activity by DOE to address project management. The Deputy Secretary (S2)11 had, earlier that year, issued an interim instruction to serve as policy guidance on critical decisions by acquisition executives (AEs) and the Energy Systems Acquisition Advisory Board (ESAAB) and on the conduct of corporate level performance reviews. In June of 2000, DOE had issued Policy P413.1, which addressed project management accountability, the establishment of project management organizations, project management tools, and training of personnel. Order 413.3 followed from the Policy. In meetings with the committee, DOE described Order 413.3B as being âIntended to provide the DOE Elements, including NNSA, with program and project management direction for the acquisition of capital assets with the goal of delivering projects within the original performance baseline (PB), cost and schedule, and fully capable of meeting mission performance unless impacted by a directed change.â12 It implements three directives from the Office of Management and Budget: A-11 Preparation, Submission, and Execution of the Budget and its Capital Programming guide; A-123 Managementâs responsibility for Internal control; and A-131 Value Engineering. The applicability of Order 413.3B is to certain types of activities over $50 million total project cost (TPC): construction projects, major items of equipment (MIEâs) and environmental cleanup projects. It does not apply to Information Technology projects, weapons life extension projects (LEPâs) or financial assistance projects (Cooperative Agreements and Grants).13 Order 413.3B contemplates several critical decision (CD) points as depicted in Figure 3.1. The official who can authorize each CD varies according to the total project cost, per Table 3.1. 10 Norbert Doyle, Deputy Assistant Secretary, Office of Acquisition & Project Management (EM-5.2), âContracting Overview,â presentation to the committee, February 24, 2020, Washington, D.C. 11 The Secretary has the designation âS1,â the Deputy Secretary âS2â, and the undersecretaries âS3â, âS4â and âS5.â 12 Rodney Lehman, Director, EM Office of Project Management (EM-5.22), âOverview of DOE O 413.3B and EM Project Management Protocol for Demolition Projects,â presentation to the Committee, February 24, 2020, Washington, D.C. 13 Paul Bosco, Director, Office of Project Management (PM), âProject Management (PM) Governance, Systems and Training,â presentation to the Committee, May 6, 2020, Washington, D.C. PREPUBLICATION COPY â SUBJECT TO FURTHER EDITORIAL CORRECTION 3-3
FIGURE 3-1 DOE Project Management Process. SOURCE: Paul Bosco, Director, Office of Project Management (PM), âProject Management (PM) Governance, Systems and Training,â presentation to the committee, May 6, 2020, Washington, D.C. TABLE 3.1 Decision Authority for Various Total Project Costs (TPCs) Critical Decision Authority Total Project Cost Thresholds Deputy Secretary â¥ $750M Under Secretary â¥ $100M and < $750M Program Secretarial Officer > $50M and < $100M SOURCE: Paul Bosco, Director, Office of Project Management (PM), âProject Management (PM) Governance, Systems and Training,â presentation to the committee, May 6, 2020, Washington, D.C. There are a number of oversight committees internal to DOE including those concerned with project management:14 ï· Project Management Risk Committee (PMRC). PMRC is chaired by a non-career senior advisor to the Deputy Secretary. (The Deputy Secretary is also Chief Executive (CE) for Project Management.) The directorâs office of the Office of Project Management (PM-1) serves as Executive Secretariat. The PMRC provides advice on cost, schedule and technical issues regarding capital asset projects with a (TPC) â¥ $750M, and on other high risk/high visibility projects, as needed. ï· Energy Systems Acquisition Advisory Board (ESAAB). Chaired by the Deputy Secretary/CE, ESAAB advises project management policy and issues, and assists the CE on each project Critical Decision (i.e., those >$750 million TPC). 14 Adapted from: Paul Bosco, Director, Office of Project Management (PM), âProject Management (PM) Governance, Systems and Training,â presentation to the Committee, May 6, 2020, Washington, D.C. PREPUBLICATION COPY â SUBJECT TO FURTHER EDITORIAL CORRECTION 3-4
In addition, the department operates a number of management information systems owned by the Office of Project Management (PM), which is a line office reporting to a different undersecretary than EM. Two of the most important for project management and oversight include the following: 15 ï· Project Assessment and Reporting System (PARS). Reporting on a monthly basis, PARS is DOEâs System of Record for project management information. PARS tracks projects with TPC greater than $50M, and PARS is the system that captures the progress reporting and documentation required per Order 413.3B to include 1) At Critical Decision (CD)-0, Approve Mission Need: Start Narrative assessments/document upload; and 2) At CD-2, Approve Performance Baseline, to CD-4 (Completion): Start cost and schedule data reporting. Starting in June 2019, PARS was updated to include EMPOWER, a commercial off-the-shelf analysis and reporting tool to enable informed decision making. ï· Earned Value Management System (EVMS) Project Control System. This control system implements the requirement of the Federal Acquisition Regulation to certify the use of an EVMS, which captures schedule, cost, and technical performance data to be used for informed decision making. The corporate ownership of this control system is with PM. This section has described DOEâs process and controls for project management. Crucially, the above are applied according to threshold criteria and to certain types of projects as described in the applicability of Order 413.3B. The committee has received briefings and exchanged written queries and replies with DOE to understand these process and controls as used in EM for the defense nuclear waste cleanups. The following chapters analyze these in more detail and offer findings and recommendations. REFERENCES U.S. Government Accountability Office (GAO). 2019a. High-Risk Series: Substantial Efforts Needed to Achieve Greater Progress on High-Risk Areas. GAO 19-157SP. Washington, D.C.: GAO. GAO. 2019b. Nuclear Waste Cleanup: DOE Could Improve Program and Project Management by Better Classifying Work and Following Leading Practices. GAO-19-223. Washington, D.C.: GAO. U.S. Department of Energy, Rocky Flats Project Office. 2006. Closure Legacy: from weapons to wildlife. Washington, D.C.: U.S. Department of Energy. August. DOE. 2020. Department of Energy FY 2021 Congressional Budget Request: Volume 5, Environmental Management. DOE/CF-0166. Washington, D.C.: DOE. 15 Adapted from: Paul Bosco, Director, Office of Project Management (PM), âProject Management (PM) Governance, Systems and Training,â presentation to the Committee, May 6, 2020, Washington, D.C. PREPUBLICATION COPY â SUBJECT TO FURTHER EDITORIAL CORRECTION 3-5