Case Study 8: From Plutonium Disposition Program, GAO-14-231, February 13, 2014

The Department of Energy’s (DOE) National Nuclear Security Administration (NNSA), a separately organized agency within DOE, manages the Plutonium Disposition program to dispose of surplus weapons-grade plutonium by burning it as Mixed Oxide (MOX) fuel—a mixture of plutonium and uranium oxides—in specially modified commercial nuclear reactors. In 2012, DOE forecasted cost increases of close to $3 billion over the previous estimates for the program’s two construction projects, the MOX facility and the Waste Solidification Building (WSB) for disposing of waste from the MOX facility.

NNSA identified various drivers for the close to $3 billion increase in the estimated cost of the Plutonium Disposition program’s two construction projects—the MOX Fuel Fabrication Facility and the WSB. These drivers included DOE’s approval of the MOX facility’s cost and schedule estimates before design was complete and schedule delays in construction of the WSB. According to NNSA, the cost of critical system components for the MOX facility averaged 60 percent higher than estimated as a result of approval of estimates before design was complete.

GAO’s assessment of NNSA’s process for developing its draft life cycle cost estimate found, in part, that the estimate was only partially comprehensive. GAO found that work breakdown structures were developed for the MOX and WSB projects and other components of the program, but that NNSA had not formalized a program-level work breakdown structure. A typical work breakdown structure provides a clear picture of what needs to be accomplished, how the work will be done, and a basis for identifying resources and tasks for developing a cost estimate. Without a program-level work breakdown structure, NNSA could not ensure that its life cycle cost estimate captured all relevant costs, which could lead to cost overruns.

GAO recommended that to identify lessons learned from and provide assurance of preventing recurrence of cost increases for the MOX facility and WSB, and to develop reliable cost estimates for the Plutonium Disposition program, the Secretary of Energy should direct the DOE and NNSA Offices of Acquisition and Project Management and the NNSA office responsible for managing the Plutonium Disposition program, as appropriate, to revise and update the program’s life cycle cost estimate following the 12 key steps described in the GAO Cost Estimating and Assessment Guide for developing high-quality cost estimates, such as conducting an independent cost estimate to provide an objective and unbiased assessment of whether the estimate can be achieved. In 2017, NNSA directed its Office of Cost Estimating and Program Evaluation to develop a new life cycle estimate for the plutonium disposition program based on NNSA’s preferred approach of dilute and dispose. That estimate was completed in March 2018. The estimate was directed to be done in accordance with GAO cost estimating and assessment best practices. Further, to ensure that the estimate followed best practices, NNSA officials said that they planned to contract with the U.S. Army Corps of Engineers for an independent review to ensure the cost estimate followed GAO’s best practices.

GAO reported these findings on February 13, 2014 in Plutonium Disposition Program: DOE Needs to Analyze the Root Causes of Cost Increases and Develop Better Cost Estimates, GAO-14-231.