GAO weighs in on NNSA

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Government: Report is critical of organization’s budget review processes

By The Staff

The Government Accountability Office (GAO) released a report that takes a look at the National Nuclear Security Administration’s reviews of budget estimates this week.

And what did it find?

The GAO says the NNSA needs to make better decisions when it comes to its budgets.

The major finding in its report is that NNSA does not thoroughly review budget estimates before it incorporates them into its proposed annual budget. Instead, NNSA relies on informal, undocumented reviews of such estimates and its own budget validation review process—the formal process for assessing budget estimates. Neither of these processes adheres to Department of Energy (DOE) Order 130.1, which defines departmental provisions for the thoroughness, timing, and documentation of budget reviews.

According to NNSA officials, the agency’s trust in its contractors minimizes the need for formal review of its budget estimates.

GAO identified three key problems in NNSA’s budget validation review process.

The report states, “First, this process does not inform NNSA, DOE, Office of Management and Budget, or congressional budget development decisions because it occurs too late in the budget cycle — after the submission of the President’s budget to Congress.

“Second, this process is not sufficiently thorough to ensure the credibility and reliability of NNSA’s budget because it is limited to assessing the processes used to develop budget estimates rather than the accuracy of the resulting estimates and is conducted for a small portion of NNSA’s budget—approximately 1.5 percent of which received such review in 2011.

“Third, other weaknesses in this process, such as no formal evaluative mechanism to determine if corrective actions were taken in response to previous findings, limit the process’s effectiveness in assessing NNSA’s budget estimates.”

A GAO report addressed to the ranking members of the subcommittee on Energy and Water Development Committee cited some examples of how the NNSA has faced numerous challenges in accurately estimating the costs of major projects since 2002.

The letter cites “we reported in March of this year that the estimated cost to construct the Chemistry and Metallurgy Replacement Nuclear Facility rose from between $745 million and $975 million in 2005 to between $3.7 billion and $5.8 billion in 2010 — a six-fold increase.”

The letter also cites that the Uranium Processing Facility in Oak Ridge, Tenn.’s cost estimates have jumped from between $600 billion and $1.1 billion in 2004 to between $4.2 billion and $6.5 billion in 2011.

The third example GAO cited was that NNSA’s efforts to extend the operational lives of nuclear weapons experienced a $300 million cost increase for the refurbishment of one warhead and a $70 million increase for another.

“Given NNSA’s record of weak management of major projects, we believe improved federal oversight of NNSA’s modernization of the nuclear security enterprise is critical to ensuring that resources are spent in as an effective and efficient manner as possible,” the report stated.

GAO made the following recommendations to the NNSA.

• Develop a formal process, or amend its budget validation review process, to ensure that all budget estimates are thoroughly reviewed by site and headquarters program offices, and that these reviews are timed to inform NNSA, DOE, OMB, and congressional budget decisions.

• Once this process is developed, incorporate a formal mechanism to evaluate the status of recommendations made during previous budget validation reviews so that NNSA can measure M&O contractors’ and programs’ progress in responding to deficiencies with their budget estimates.

• Combine the integrated priorities lists for each of the program offices funded within the Weapons Activities appropriation into a single integrated priorities list, as stipulated in NNSA instructions, to better inform DOE which program activities would be affected by changes to this appropriation.

• Reinstitute an independent analytical capability to provide senior decision makers with independent program reviews, including an analysis of different options for deciding on resource trade-offs, and facilitate NNSA making the best decisions about what activities to fund and whether they are affordable. As part of this capability, formally retain the Requirements and Resources Assessment process to review proposed new activities and unfunded requirements.

• Reinstitute the issuance of the Administrator’s Final Recommendations to document the Administrator’s rationale and methodology for deciding on resource trade-offs to support in his budget proposal to DOE and to better facilitate NNSA’s participation in DOE’s budget process.

• Complete and formally issue the Program Managers’ Guide to Understanding and Reviewing Cost Estimates for Operations and Sustainment Activities so that program managers will be better equipped to evaluate the reasonableness of cost estimates.

After being provided with a draft report by the GAO, NNSA was mixed in its response from Cynthia Lersten, the associate administrator for management and budget.

Lersten wrote, “Overall, NNSA agrees that there are selected areas with our Planning, Programming, Budgeting and Evaluation (PPBE) process that can continue to be improved. However, we believe the report misrepresents the status of NNSA’s budgeting and estimating processes and draws invalid conclusions based on the information provided during the audit.

Lersten cited an example in the GAO Highlights section that states that “NNSA does not thoroughly review budget estimates before incorporating them into its proposed annual budget. Lersten said the report goes on to conclude that “instead, the NNSA relies on informal, undocumented reviews of such estimates and NNSA’s budget validation review process.”

Lersten strongly opposed that statement, saying the NNSA has demonstrated a wide range of review activities including the formal budget validations (which are fully documented) as well as formal reviews by site and Headquarters organizations which are a part of successive levels of review that go into validating NNSA’s budget submission.

However, as certain parts of the process are not documented fully and/or are conducted at varying levels of the organization, GAO has chosen to label the reviews as not being thorough.

“We believe the conclusion as stated, overemphasizes some procedural areas for potential improvement, without accurately considering the cumulative effectiveness of NNSA’s PPBE process as a whole.”