Department of Energy: Observations on Project and Program Cost Estimating in NNSA and the Office of Environmental Management

Testimony issued by the Government Accountability Office with an abstract that begins "For more than a decade, GAO has reported on the challenges the Department of Energy's (DOE) National Nuclear Security Administration (NNSA) and the Office of Environmental Management (EM) have faced in meeting their projects' cost performance targets as developed in estimates and for ensuring that these cost estimates are based on sound assumptions. NNSA and EM are included on GAO's High-Risk List in recognition of the potential for vulnerabilities to fraud, waste, abuse, and mismanagement in contract administration and management of major projects. In January 2010, GAO reported on DOE's project cost-estimating practices and found that DOE did not have a cost-estimating policy and that cost-estimating guidance it had developed in the 1990s remained in effect but was out-of-date. GAO also found that DOE was taking steps to improve its cost-estimating practices, such as establishing the Office of Cost Analysis (OCA) in 2008 to improve cost-estimating capabilities and better ensure that project cost estimates are reliable by providing a new independent cost-estimating function. Both DOE's NNSA, a separately organized agency within the department, and EM adopted policies and practices to support cost estimating. GAO is conducting an ongoing review of DOE's and NNSA's cost-estimating practices for this Subcommittee. Its preliminary observations indicate that while DOE followed through on some of GAO's January 2010 recommendations to improve the department's cost-estimating practices--such as revising the department's project management order to better align it with some cost-estimating best practices--it has not addressed other recommendations with which it initially concurred. For example, GAO's preliminary observations indicate that OCA has been disbanded, and DOE may not have developed a cost-estimating policy.