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Last week, the Department of Energy Inspector General released a special report regarding the NNSA’s management of the $245 million Nuclear Materials Safeguards and Security Upgrades Project Phase II at the Los Alamos National Laboratory.
The project has struggled with cost tracking, estimates, and construction defects.
In a statement, lab spokesman Fred DeSousa said, “We’ve acknowledged that there were deficiencies and we’re committed to correcting them, not only in the specific ways mentioned in the Inspector General’s report but in a broader sense on project management lab-wide. In fiscal year 2013, we achieved official project completion (CD-4) on five projects, each on or ahead of schedule and under the agreed costs. That’s what the government expects and that is our goal on each project.”
On Nov. 15, LANL project managers declared construction completion on the NMSSUP system surrounding its primary plutonium facility, and the first portion of the system’s Entry Control Facility is now in use.
The upgrade is now in the activation and testing phase and security officers are receiving training on the new equipment and software while activation and testing, continued during the holiday break.
Lab officials say that the project estimate-at-completion remains at $239.7 million versus the budgeted $244.2 million. The official project closeout, known as Critical Decision-4, is projected in February.
The project began in 2009 and while LANL retained the option to perform some of the work, it divided the bulk of the project into five firm-fixed price subcontracts that were awarded to one design company and three construction contractors.
Due to favorable contract bids in April 2011, NNSA reduced the estimated total project cost from $245 million to $213 million. The project, which consisted of more than 2,200 scheduled activities, was expected to be completed in January 2013.
In September 2012, LANL issued stop work orders to contractors due to ongoing quality concerns with construction, and on Oct. 23, 2012, suspended work on the project due to its inability to complete it within budget.
In January 2013, LANL submitted a revised estimate to NNSA that increased the total project cost to $254 million and extended project completion to December 2013. Subsequent to its submission of the revised estimate, and as part of a settlement agreement, LANS agreed to reimburse NNSA $10 million in unallowable project costs. NNSA approved the incremental funding required to complete the project in January 2013, and work resumed.
The DOE IG office then issued a special report and results of the audit stated the following.
Specifically, neither NNSA nor LANL had ensured that:
• Work scope was fully and accurately planned. In particular, LANL contracted for construction work based on designs that either did not reflect actual site conditions or were incomplete. For example, LANL awarded a contract in 2010 to construct a North Security Fence without ensuring that the design reflected up-to-date site conditions. A 2007 site survey determined that there was sufficient supporting soil to construct the fence. However, the land subsequently eroded due to environmental conditions after the completion of the survey and LANL had not updated the subcontracted design. To address this issue, LANL authorized the construction of a retaining wall. After construction began, project officials discovered that they had failed to identify that the retaining wall foundations were in the path of an existing radioactive liquid waste line. As a result, an additional retaining wall was required. The additional, unplanned retaining wall increased project costs by $11.7 million.
• Construction contractors were required to promptly correct inferior work. During our review we observed and learned from LANL officials of many examples of substandard work performed by construction contractors. These deficiencies included the failure to install rebar dowels that tie one section of poured concrete to the next and several quality problems related to fencing. Fencing problems included problems related to post spacing, post alignment, post-hole centering, height of concrete crowns, and grading for drainage.
• Management systems provided a transparent, clear and consistent view of the project’s schedule and cost performance. LANL’s schedule was not accurate or fully integrated and as a result, the schedule masked the impact of project delays by assuming unrealistic future performance. For example, the project’s December 2011 schedule reported that it would complete the remaining scope of work in 47 percent less time than the original timeline. Given that the project had already experienced a negative schedule performance trend, this level of performance appeared to be highly unlikely and should not have been relied upon. In fact, it was not sustained.
The report went on to say that management information systems failed to provide accurate and complete information about the funds available to complete the remaining work scope. For example, although Los Alamos Field Office officials were aware of the large potential liabilities and cost overruns that were likely to require contingency funds, action was not taken to report the combined impact to the NNSA Administrator in a timely manner.
According to the report, NNSA stated that the amount of contingency reported to the Administrator was based on automatically generated approved baseline changes that could take several months to be reflected in the reporting system. We found that approved baseline changes did not include potential liabilities and cost overruns, and as such, were not reflected in reported amounts of available contingency funds.
The report went on to say that project management weaknesses occurred or continued to exist despite being identified at several levels because:
• Key management officials were not qualified or authorized to take prompt action;
• The Los Alamos Field Office and LANL failed to take effective corrective actions to address numerous assessment findings;
• LANL failed to hold its contractors accountable; and
• NNSA and LANL did not have accurate management reporting systems.