Archive-Name: gov/us/fed/congress/gao/reports/1999/rc99129.txt

Nuclear Waste: DOE's Accelerated Cleanup Strategy Has Benefits but Faces
Uncertainties (Letter Report, 04/30/99, GAO/RCED-99-129).

Pursuant to a congressional request, GAO reviewed the Department of
Energy's (DOE) Paths to Closure report, which details DOE's strategy to
accelerate its hazardous waste cleanup efforts, focusing on the: (1)
methodologies and assumptions used to develop the Paths to Closure
report and any associated limitations; (2) uncertainties in the Paths to
Closure report that may affect its usefulness; and (3) funding
implications related to the cost of cleanup.

GAO noted that: (1) to develop the Paths to Closure report, DOE's Office
of Environmental Management issued guidance in October 1997, requiring
its field offices to develop, by project, estimates of the cleanup work
to be accomplished, the schedule to be achieved, and total--or
life-cycle costs--to complete the cleanup work; (2) the guidance also
provided each field office with an estimated annual funding allocation
for cleanup activities through 2006; (3) the Paths to Closure report is
an improvement over previous efforts because, for the first time, DOE
set goals for completing the cleanup at each site, used project-specific
data in estimating cleanup costs, and surfaced issues needing
resolution, such as where certain wastes will be disposed; (4) however,
DOE headquarters did not specify a standard methodology to be used for
estimating cleanup costs, leaving field offices to select their own
approaches for developing their estimates; (5) as a result, the data
from some of the sites may not be comparable or reliable; (6) DOE has
some initiatives under way to improve data quality for the next Paths to
Closure update; (7) a number of uncertainties regarding the information
in the 1998 Paths to Closure report, particularly in the sites' cost and
schedule estimates, affect the report's usefulness; (8) for example,
many field offices based their cost estimates on assumed cleanup levels
that have not yet been agreed to by the regulators involved; (9) if the
levels eventually agreed to are stricter than assumed, both costs and
schedules could increase; (10) DOE also faces a number of challenges to
achieving its Paths to Closure goals at the $5.75 billion annual funding
level target identified in the report; (11) the sites' estimates of
their funding needs for fiscal years 1999 through 2006 exceed the
funding level target by more than $4 billion, or by an average of about
$500 million per year; (12) DOE's Paths to Closure guidance established
cost reduction goals for each field office to help address this funding
gap, but most of the sites GAO contacted had not identified specific
strategies for achieving the cost reductions; (13) in addition, as GAO's
past work has shown, DOE's projects tend to take longer and cost more
than anticipated; and (14) moreover, if some of the cleanup activities
that were assumed to be outside the scope of Paths to Closure are
ultimately included in the Environmental Management program, costs would
grow.

--------------------------- Indexing Terms -----------------------------

REPORTNUM:  RCED-99-129
     TITLE:  Nuclear Waste: DOE's Accelerated Cleanup Strategy Has
             Benefits but Faces Uncertainties
      DATE:  04/30/99
   SUBJECT:  Nuclear waste disposal
             Interagency relations
             Strategic planning
             Nuclear waste management
             Life cycle costs
             Statistical methods
             Cost control
             Environmental monitoring
             Future budget projections
IDENTIFIER:  DOE Environmental Management Program
             DOE Paths to Closure Report

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Cover
================================================================ COVER

Report to the Chairman, Committee on the Budget, House of
Representatives

April 1999

NUCLEAR WASTE - DOE'S ACCELERATED
CLEANUP STRATEGY HAS BENEFITS BUT
FACES UNCERTAINTIES

GAO/RCED-99-129

DOE's Accelerated Cleanup Strategy

(141257)

Abbreviations
=============================================================== ABBREV

  DOE - Department of Energy

Letter
=============================================================== LETTER

B-282300

April 30, 1999

The Honorable John R.  Kasich
Chairman, Committee on the Budget
House of Representatives

Dear Mr.  Chairman:

The U.S.  Department of Energy (DOE) is responsible for the world's
largest environmental cleanup program.  Decades of nuclear weapons
production has left a legacy of radioactive, chemical, and other
hazardous wastes to be cleaned up at sites across the United States.
In 1989, DOE established the Environmental Management program to
address the cleanup of these wastes.  Eleven of DOE's field offices
throughout the country manage this cleanup for the program.  In the
past, this cleanup has been expensive and slow, and has been
criticized as lacking in commitment and accountability.  In response
to these criticisms, in 1996 DOE embarked on a new strategy to
accelerate the cleanup and reduce the costs at its 53 remaining
contaminated sites.  DOE laid out its strategy in a document called
Accelerating Cleanup:  Paths to Closure, issued in June 1998.  The
Paths to Closure report provides an overview of the cost, schedule,
and scope of work to be accomplished on 353 individual projects at
these sites.  DOE set a goal of cleaning up 41 of the remaining 53
contaminated sites by 2006.  DOE estimates that the planned cleanup
activities during this time will require $57 billion.  However,
cleanup will not be finished at all sites by 2006, and some
cleaned-up sites will require long-term monitoring.  Therefore, DOE
also estimates that the total cost for all cleanup activities,
including the long-term monitoring of the sites, will amount to $147
billion through 2070.\1 DOE plans to update the Paths to Closure
report annually.\2 The next Paths to Closure report, scheduled to be
issued in June 1999, will be updated based on project information
submitted in April 1999, along with information from DOE's fiscal
year 2000 budget request.

Because the Paths to Closure report is based on data that also serve
to form DOE's annual budget request, you asked that we provide
information on the (1) methodologies and assumptions used to develop
the Paths to Closure report and any associated limitations, (2)
uncertainties in the Paths to Closure report that may affect its
usefulness, and (3) funding implications related to the cost of
cleanup.  On February 19, 1999, we briefed your staff on the results
of our work and agreed to provide you with this report summarizing
our findings.

--------------------
\1 The estimate is in constant 1998 dollars.

\2 Paths to Closure was first issued as a discussion draft in June
1997.  Comments received on this draft were incorporated into a draft
issued for public comment in February 1998.  The final document,
issued in June 1998, incorporates stakeholder comments from
regulators, local citizen groups, and tribal nations.

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

DOE's Paths to Closure report is an improvement over earlier planning
efforts.  While it is an improvement, we identified limitations in
the methodology and assumptions that may affect the reliability of
the data; uncertainties, in such areas as the level of site cleanup
and the sites' ability to meet cleanup schedules, that could cause
cost and schedule estimates to be revised; and challenges that DOE
may face in achieving its goals at the annual funding level targets.

To develop the Paths to Closure report, DOE's Office of Environmental
Management issued guidance in October 1997, requiring its field
offices to develop, by project, estimates of the cleanup work to be
accomplished, the schedule to be achieved, and total--or life
cyclecosts to complete the cleanup work.\3

The guidance also provided each field office with an estimated annual
funding allocation for cleanup activities through 2006.  The Paths to
Closure report is an improvement over previous efforts because, for
the first time, DOE set goals for completing the cleanup at each
site, used project-specific data in estimating cleanup costs, and
surfaced issues needing resolution, such as where certain wastes will
be disposed.  However, DOE headquarters did not specify a standard
methodology to be used for estimating cleanup costs, leaving field
offices to select their own approaches for developing their
estimates.  As a result, the data from some of the sites may not be
comparable or reliable.  According to a recent report by DOE's Office
of the Inspector General, a number of the projects' cost estimates
they examined were not supported or complete.  DOE has some
initiatives under way to improve data quality for the next Paths to
Closure update.

A number of uncertainties regarding the information in the 1998 Paths
to Closure report, particularly in the sites' cost and schedule
estimates, affect the report's usefulness.  For example, many field
offices based their cost estimates on assumed cleanup levels that
have not yet been agreed to by the regulators involved--the U.S.
Environmental Protection Agency and the states.  If the levels
eventually agreed to are stricter than assumed, both costs and
schedules could increase.  Cost and schedule estimates could also be
revised as the cleanup technologies to be used are identified.  Some
sites may also need to revise their estimates because of difficulties
in completing their cleanup work by their closure dates.  Finally,
Paths to Closure contains only a limited discussion of activities
that will be required after a site closes, such as long-term
surveillance and maintenance.  These costs are expected to be
substantial at some sites, and are not included in some sites' cost
estimates, even though sites were directed to do so.

DOE also faces a number of challenges to achieving its Paths to
Closure goals at the $5.75 billion annual funding level target
identified in the report.  The sites' estimates of their funding
needs for fiscal years 1999 through 2006 exceed the funding level
target by more than $4 billion, or by an average of about $500
million per year.  DOE's Paths to Closure guidance established cost
reduction goals for each field office to help address this funding
gap, but most of the sites we contacted had not identified specific
strategies for achieving the cost reductions.  In addition, as our
past work has shown, DOE's projects tend to take longer and cost more
than anticipated.  Moreover, if some of the cleanup activities that
were assumed to be outside the scope of Paths to Closure are
ultimately included in the Environmental Management program, costs
would grow.  For example, Paths to Closure notes that an additional
$8.1 billion could be needed to address any new waste generated after
fiscal year 2000, a cost that was not included in the report's $147
billion total cost for all cleanup.

--------------------
\3 Sites' life cycle cost estimates were to include the sum of the
cost estimates of all the activities required to clean up the site,
including the costs for storage, treatment, and disposal of wastes;
facility and other infrastructure construction and decommissioning;
and long-term surveillance and monitoring activities through 2070.

   BACKGROUND
------------------------------------------------------------ Letter :2

DOE has a complex of 113 sites around the country that were
contaminated by nuclear weapons production and by research and
testing activities.  In 1989, DOE established the Environmental
Management program to address the cleanup of the radioactive,
chemical, and other hazardous wastes at these sites.  Eleven field
offices throughout the country manage this effort.  At the end of
fiscal year 1997, DOE had 53 of its 113 sites left to clean up.
DOE's cleanup program has received considerable criticism about its
high cost and slow progress.

In response to these criticisms, in 1996 DOE began to systematically
define the technical scope, schedule, and costs of cleaning up the
radioactive, chemical, and other hazardous wastes at its contaminated
sites.  DOE laid out its new strategy in a document called
Accelerating Cleanup:  Paths to Closure in June 1998.  Through the
Paths to Closure report, DOE hoped to challenge its 53 remaining
contaminated sites to develop more efficient ways to conduct their
cleanup work in order to accelerate site closure, thereby reducing
the overall costs of the program.  In the Paths to Closure report,
DOE set a goal of cleaning up 41 of its 53 remaining contaminated
sites by 2006.\4

DOE included two estimates in the Paths to Closure report.  One
covers the period through fiscal year 2006 and forecasts that $57
billion will be required for cleanup activities during that time.
The cost to clean up the 41 sites DOE hopes to complete by the end of
fiscal year 2006 represents a small fraction of this estimate--about
$5 billion.  For the remaining 12 sites that will complete their
cleanup later (from 2007 through 2050), approximately $46.3 billion
was allocated for their cleanup activities through 2006.\5

These 12 sites include DOE's largest and most difficult cleanup
sites.  The second estimate includes all DOE planned cleanup actions
and site surveillance and monitoring costs though 2070 and amounts to
$147 billion.

--------------------
\4 The Paths to Closure report shows the Rocky Flats and Fernald
sites closing after 2006.  DOE indicated that it is committed to
accelerating the closure of these two sites to 2006 and 2005,
respectively.

\5 The remaining $5.7 billion of the $57 billion is identified as
being needed to fund headquarters and DOE-wide programs through
fiscal year 2006.

   PATHS TO CLOSURE HAS STRENGTHS,
   BUT DATA RELIABILITY QUESTIONS
   REMAIN
------------------------------------------------------------ Letter :3

Paths to Closure was developed using information provided by DOE's
field offices that was based on guidance and DOE-wide assumptions
provided from headquarters.  The Paths to Closure report is an
improvement over previous planning efforts because it sets goals for
completing cleanup work at each site.  However, the guidance from
headquarters to the field offices on collecting cost and schedule
information did not specify how to develop that information.  As a
result, field offices used varying methodologies to develop the
information, raising concerns about the reliability of the data.  A
February 1999 report by DOE's Office of the Inspector General found
that a number of the projects' cost estimates were not supported or
complete.  DOE has some initiatives under way to address the data
reliability issues for the next Paths to Closure report.

To develop the Paths to Closure report, DOE's Office of Environmental
Management issued guidance in October 1997 requiring field offices to
develop, by project, estimates of the work to be accomplished,
schedules to be achieved, and total--or life cyclecosts to complete
the cleanup work at their sites.  The guidance also provided each
field office with an estimated annual funding allocation.  If a gap
existed between a field office's estimated funding needs and the
estimated funding allocation in the guidance, the field office was to
identify ways to do work more efficiently to close that gap.  For
example, if a field office estimated needing $1 million annually to
fund its cleanup work, but was given an estimated funding allocation
of $750,000, the field office would need to develop strategies to
achieve its scope of work at the lower funding level.

The guidance also provided DOE-wide assumptions that the field
offices were to use in developing the cost and schedule estimates for
their projects.  For example, field offices were to assume, among
other things, that (1) DOE's cleanup activities would be funded at
$5.75 billion annually, with each field office receiving a set
amount; (2) the Waste Isolation Pilot Plant would open in fiscal year
1998 to allow sites to dispose of certain radioactive wastes;\6 (3)
DOE's Environmental Management cleanup program would accept no waste
generated by other DOE programs after fiscal year 2000; and (4) DOE's
Environmental Management cleanup program would encompass only the
facilities currently in its inventory and would not be responsible
for additional facilities from other DOE program areas.  The guidance
also provided instructions for developing waste disposition maps,
that is, graphical representations of each site's conceptual approach
to managing its wastes through storage, treatment, and disposal.
Sites made their own assumptions about such matters as the standards
the sites' cleanup would eventually meet; where waste would be
shipped, if removed from the site; and what cleanup technologies
would be used.

One of the strengths of the report is that, for the first time, DOE
set goals for closing sites and completing the cleanup work.  Under
Paths to Closure, sites have organized their cleanup work into
definable scopes of work, or projects, and established site-by-site,
project-by-project projections of the technical scope, cost, and
schedule required to complete all of the cleanup work.  The strategy
has also helped to identify issues that will need to be resolved
before sites can close, such as technology needs, and how and where
waste will be disposed.  Sites that we contacted also said the Paths
to Closure report was a useful tool to communicate the sites' vision
of their cleanup plans to stakeholder groups, such as regulatory
agencies and local citizens groups.  Finally, improvements are being
planned for the 1999 Paths to Closure report.  For example, sites are
to explain any differences in performance from their previous year's
estimates.  In addition, DOE intends the annual Paths to Closure
report to provide a basis for its performance measure evaluations
under the Government Performance and Results Act.\7

DOE's guidance to field offices on the cost and schedule information
they were to supply did not provide a standard methodology for
developing the information.  DOE officials told us the field offices
did not use a consistent set of methodologies for developing their
estimates.  They said that some sites are more advanced in developing
projects' cost estimates, while other sites are at a lower level of
sophistication.  This raises a concern about the reliability of the
data for some of the sites.  At one site we contacted, for example,
officials were unable to provide documentation showing how their
projects' cost estimates had been derived.  They said they had
relied, in part, on their experience and professional judgment to
define the projects' costs and scope of work.

The reliability of the projects' cost estimates was also a point of
concern in a report issued in February 1999 by DOE's Inspector
General's office.\8 The Inspector General found that the cost
estimates for 7 out of the 28 projects examined had inadequate or no
support.  The Inspector General found instances in which DOE either
could not determine the method that was used to create the estimate
or the support that was provided differed materially from the
estimate in the Paths to Closure report.  In addition, the Inspector
General found valid costs that had been excluded from some projects'
cost estimates--such as those for long-term surveillance and
monitoring and security--and costs that should not have been
included, such as for waste generated in the future that may not be
the responsibility of the cleanup program.  These findings caused the
Inspector General to conclude that there were material weaknesses
with the process DOE used to develop and validate the cost estimates.
The weaknesses were serious enough for the Inspector General to issue
a qualified opinion on DOE's financial statement for fiscal year
1998.

DOE has begun to take steps to improve the quality of its data.  The
updated guidance, issued in December 1998 for the 1999 Paths to
Closure report, requires field offices to provide more detailed
information on projects' costs.  For example, the field offices are
to explain differences between last year's cost and schedule
estimates and this year's.  In addition, the updated guidance
requires more information on the potential cost impacts of additional
surplus facilities that may be transferred to the cleanup program; on
the costs for a range of possible levels of site cleanup, for sites
for which cleanup levels are uncertain; and on the long-term
surveillance and maintenance costs for cleaned-up sites.  As well as
requiring more detailed information, the new guidance requires the
field offices to submit information to support not only the Paths to
Closure report but also a new DOE management data system called the
Integrated Planning, Accountability, and Budgeting System, which DOE
expects to have in operation by fall 1999.  According to DOE, the
primary goal of the new system is to integrate formerly independent
pieces of planning, accountability, and budgeting functions into one
system, thereby achieving better data consistency.  The Inspector
General's report also noted that DOE is pursuing strategies to
improve its validation process for cost and schedule estimates to
improve data quality.

--------------------
\6 The Waste Isolation Pilot Plant is a deep geologic repository for
the disposal of certain radioactive wastes.  It is located in an
underground salt formation near Carlsbad, New Mexico.

\7 The Government Performance and Results Act of 1993 requires
federal agencies to prepare annual performance plans identifying
goals for their program activities and measuring their success in
meeting those goals.

\8 The Inspector General has been examining DOE's financial
statements for fiscal years 1997 and 1998.  This effort resulted in
report DOE\IG-FS-99-01 (Feb.  1999).

   CLEANUP UNCERTAINTIES LIMIT
   PATHS TO CLOSURE INFORMATION
------------------------------------------------------------ Letter :4

The Paths to Closure's cost and schedule estimates for the sites are
likely to be revised as more becomes known at some sites about the
levels of cleanup that must be reached and the technologies to be
used.  Many sites do not have a final agreement with their
regulators--such as the U.S.  Environmental Protection Agency and the
states--on what cleanup standards must be achieved.  For example, a
major environmental impact study is still under way at the West
Valley Demonstration Project in New York that will provide a range of
options to determine exactly what cleanup levels need to be achieved
there.  Standards could range from no further cleanup to the complete
removal of contamination and the return of the site to its original
condition.  In addition to the uncertainties about the cleanup
standards, technological advances are needed to address some cleanup
problems and to meet the Paths to Closure goals.  For example, no
technology exists for some aspects of removing and treating the
radioactive waste now in large tanks at several major DOE facilities.

The cost and schedule information in the Paths to Closure could also
be affected by difficulties sites are experiencing in meeting their
closure dates.  For example, the 1998 Paths to Closure lists the West
Valley Demonstration Project as closing in 2005.  However, West
Valley officials told us their closure date will be delayed to
between 2008 and 2015.  West Valley officials said the site's budget
reduction for fiscal year 1999 had an impact on their ability to
complete the cleanup projects on schedule.  Officials also
acknowledged that the site's environmental impact statement has not
been completed, which could affect the site's cost and schedule
estimates because it will determine which cleanup strategy options
will be used.  In addition to delays at West Valley, two sites for
which DOE has committed to accelerate cleanup activities face
challenges in meeting their new closure dates.  The Rocky Flats
Environmental Technology Site in Colorado is trying to accelerate its
closure from the baseline estimate of 2010 to 2006 by expediting
several cleanup projects.  However, we identified challenges that
these projects face and that raised concerns about whether the site's
closure can be accelerated as planned.\9 For example, Rocky Flats has
had difficulty readying some of its radioactive waste materials for
removal from the site, decontamination and decommissioning are
costing more and taking longer than anticipated, agreement has not
been reached with the site's regulators on the use of protective
barriers over portions of the site, and several types of radioactive
materials and wastes have no sites willing or able to take them.
Similarly, the Fernald Environmental Management Project in Ohio faces
difficulty in trying to accelerate its closure from the baseline
estimate of 2008 to 2005.  Agreement has yet to be reached on the
technology that will be used for one of the projects that Fernald
officials expect to occur by 2001.  If the technology selected
differs from that currently assumed, the site's cost and schedule
estimates could be affected.

Paths to Closure's cost and schedule information could change as more
is known about the activities that will continue at sites after they
are considered closed, such as long-term surveillance and monitoring
activities.  In some cases, these activities will continue many years
after sites have been cleaned up.  The 1998 Paths to Closure report
provided only a limited discussion of these activities, and some
sites' cost estimates did not include them.  The costs for these
activities are expected to be substantial at some sites.  For
example, we have reported that the total cost of monitoring and
maintaining the Rocky Flats site after it closes through 2040 could
amount to nearly $1.5 billion, including adjustments for inflation.
In the Paths to Closure report, DOE acknowledges the need for more
comprehensive plans addressing its role at sites after the initial
cleanup has been achieved.  A DOE official told us that the agency
has created a working group on long-term stewardship to address these
issues.  In addition, DOE's guidance for the 1999 Paths to Closure
report requires field offices to provide more detailed information on
the potential cost impacts of long-term surveillance and maintenance
after sites are considered closed.

--------------------
\9 Our report on the closure of Rocky Flats will be issued soon.

   DOE FACES SIGNIFICANT
   CHALLENGES IN ACHIEVING PATHS
   TO CLOSURE GOALS AT ITS ANNUAL
   FUNDING LEVEL TARGET
------------------------------------------------------------ Letter :5

DOE's Paths to Closure report assumes that cleanup work can be
accomplished with annual funding of $5.75 billion (in current
dollars).  However, DOE faces significant challenges in achieving its
Paths to Closure goals at this funding level.  First, a funding gap
exists between the $5.75 billion funding target and the sites'
identified needs.  DOE also has a history of project delays and cost
growth, and changes in assumptions could have an impact on the Paths
to Closure report's cost estimates.

According to our analysis of DOE's data for fiscal years 1999 through
2006, the sites' estimates of their costs exceeded the $5.75 billion
annual funding target for each fiscal year.\10 As shown in figure 1,
the biggest gaps between sites' baseline estimates and the annual
funding targets are in fiscal years 2000, 2004, and 2005, with gaps
of over $700 million (in current dollars) occurring for each of those
years.\11 The total gap in funding for fiscal years 1999 through 2006
is $4.3 billion (in current dollars), or an average of over $500
million per year.  To close this funding gap, DOE assumed that sites
would develop strategies through fiscal year 2006 to accomplish the
required cleanup work at a lower cost.  However, most of the sites we
contacted did not have specific plans for meeting those enhanced
performance goals.

   Figure 1:  Amount That the
   Projects' Cost Estimates Exceed
   the Annual $5.75 Billion
   Funding Target

   (See figure in printed
   edition.)

Note:  Data were obtained from the cost estimates DOE used in
developing the 1998 Paths to Closure report.  Amounts contain
privatization estimates.

DOE's history of cost increases and delays in its cleanup projects
will also challenge the agency's ability to achieve the goals and
milestones in Paths to Closure.  Our previous work has found cost
overruns and delays in several major DOE projects.\12 For example, in
July 1997, we reported that DOE's Pit 9 project, involving the
cleanup of an inactive waste disposal pit at the Idaho National
Engineering and Environmental Laboratory, was at least 26 months
behind the original schedule and could potentially cost well over
twice its original estimate of $200 million.  Similarly, in May 1998,
we reported that the Hanford Spent Fuel Storage project, involving
the retrieval and storage of deteriorating nuclear fuel rods
currently stored in water basins at DOE's Hanford Site in Washington
State, was over 4 years behind the original schedule and had almost
doubled in cost to about $1.4 million.

Finally, DOE's ability to achieve the Paths to Closure goals could be
affected if the assumptions used to develop the report change.  This
could add to field offices' funding needs.  For example, DOE
acknowledges in the report that $8.1 billion could be added to the
Paths to Closure life cycle estimate if the responsibility for waste
generated after fiscal year 2000 is kept in the cleanup program
instead of being transferred to other DOE programs responsible for
generating the waste.  Similarly, Paths to Closure identifies another
$8.7 billion that could be added to the life cycle estimate if the
cleanup program is given the responsibility for additional surplus
facilities.

--------------------
\10 In Paths to Closure, DOE also acknowledges a funding gap exists
between the $5.75 billion annual funding target and the requirements
to meet sites' compliance agreements and other commitments.  DOE
estimates the gap between the two at $3.9 billion (in constant 1998
dollars) between 1999 and 2006.

\11 Sites' cost estimates include privatization costs.  DOE's
privatization strategy relies on the use of competitively awarded
fixed-price performance contracts through which DOE purchases waste
cleanup services from private contractors.  Although under
privatization DOE does not pay until these services are delivered,
funds set aside each year to pay for these contracts are part of
DOE's annual budget request.

\12 Nuclear Waste:  Department of Energy's Project to Clean Up Pit 9
at Idaho Falls Is Experiencing Problems (GAO/RCED-97-180, July 28,
1997); Nuclear Waste:  Management Problems at the Department of
Energy's Hanford Spent Fuel Storage Project (GAO/T-RCED-98-119, May
12, 1998).

   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

We provided a copy of this report to DOE for its review and comment.
DOE raised concerns that our report understated the benefits of the
Paths to Closure strategy and focused too much on its limitations,
which, it said, are minor in comparison.  Our report identifies a
number of strengths and benefits of the Paths to Closure document and
acknowledges that it is an improvement over prior planning efforts.
However, part of our objective was to provide information on the
limitations and uncertainties that affect the usefulness of the Path
to Closure report.  In our view, it is important for readers of Paths
to Closure to keep the limitations and uncertainties in mind when
using it for decision-making purposes.  Nevertheless, we made changes
to our report and its title to better recognize the benefits of the
Paths to Closure strategy.  The full text of DOE's comments and our
response is in appendix I.

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

To identify concerns with the methodologies and assumptions used to
develop the Paths to Closure report, we (1) interviewed DOE officials
with responsibility for preparing the report and for the budget for
the cleanup program and (2) reviewed Paths to Closure documentation,
including the 1998 national report and site-specific reports, the
guidance for developing the 1998 report, and the current guidance for
developing the June 1999 update.  To identify limitations on the
usefulness of the Paths to Closure report, we reviewed the document,
contacted officials at 12 DOE cleanup sites,\13 and reviewed the
stakeholders' comments on the February 1998 Paths to Closure draft.
To obtain budgetary information, we obtained and analyzed funding
data from DOE's project baseline database.  We conducted our review
from October 1998 through April 1999 in accordance with generally
accepted government auditing standards.

--------------------
\13 These sites were the Hanford Site (Washington), Rocky Flats
Environmental Technology Site (Colorado), West Valley Demonstration
Project (New York), Portsmouth Gaseous Diffusion Plant (Ohio),
Fernald Environmental Management Project (Ohio), Miamisburg
Environmental Management Project (Ohio), Brookhaven National
Laboratory (New York), Lawrence Livermore National Laboratory
(California), Columbus Environmental Management Project - King Avenue
(Ohio), Columbus Environmental Management Project - West Jefferson
(Ohio), Rulison (Colorado), and Weldon Spring Site (Missouri).  In
selecting sites to contact, we obtained a mix of large sites (in
terms of budget and number of projects) and small sites, many of
which are scheduled to be closed by 2006.

---------------------------------------------------------- Letter :7.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 14 days
from the date of this letter.  At that time, we will make copies of
this report available to the Honorable Bill Richardson, Secretary of
Energy, and the Honorable Jacob Lew, Director, Office of Management
and Budget.  Copies will be made available to others on request.

If you have any questions or need additional information, please
contact me on (202) 512-3841.  Major contributors to this report were
Chris Abraham, Dwayne Curry, Rachel Hesselink, Nancy Kintner-Meyer,
Tom Perry, and Glen Trochelman.

Sincerely yours,

(Ms.) Gary L.  Jones
Associate Director, Energy,
Resources, and Science Issues

(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
ENERGY
============================================================== Letter

(See figure in printed edition.)

(See figure in printed edition.)

GAO COMMENTS

The following are GAO's comments on the Department of Energy's letter
dated April 1, 1999.

1.  DOE's comments provided a list of benefits of the Paths to
Closure strategy.  We acknowledged in our report that Paths to
Closure has strengths and pointed out many of the same benefits that
DOE listed in its comments.  For example, we noted that, under Paths
to Closure, DOE has for the first time set goals for completing the
cleanup at each site and has surfaced challenges that need to be
addressed to achieve those goals.  Part of our objective was to
provide information on the limitations and uncertainties in the Paths
to Closure report.  In doing this, we pointed out limitations and
uncertainties of the report's information that are important for a
reader to keep in mind in using this document.  In describing both
the strengths and limitations of the Paths to Closure report, we
identified the underlying issues that need to be considered when
using Paths to Closure's information for decision-making purposes.
Nevertheless, we made changes to our report to better recognize the
benefits of the Paths to Closure strategy.

2.  While DOE provided guidance on the cost and schedule information
field offices should submit, no standard methodology for estimating
projects' costs was specified.  The guidance DOE cited in its letter
says only, sites should use an appropriate activity based cost
estimating methodology. As we pointed out in our report, some sites
were less experienced than others in preparing cost estimates,
including developing and using cost estimating techniques.  We
revised the report to clarify that DOE headquarters did not specify a
standard methodology that sites should use for estimating cleanup
costs.

3.  The Inspector General's findings involving the seven projects
caused the Inspector General to conclude that there were material
weaknesses with the process DOE used to develop and validate the cost
estimates.  The weaknesses cited by the Inspector General were
serious enough for that office to issue a qualified opinion on DOE's
fiscal year 1998 financial statement.  DOE concurred with the
report's recommendations and indicated that it was actively working
to improve the quality of the process for estimating environmental
liabilities.  In light of that and our own review, we believe that
the reliability of the cost estimates in Paths to Closure is a
limitation that needed to be raised.  In addition, DOE noted in Paths
to Closure that numerous stakeholders had raised concerns about the
quality of the data when commenting on the February 1998 Paths to
Closure draft.  DOE said--and we pointed out in our report--that the
agency is planning to take steps to improve the quality and
consistency of the data.  We added information to our report to
clarify aspects of the Inspector General's findings and the
activities that DOE is planning.

4.  We agree that when cleanup standards are not known, cost
estimates can only be based on assumptions.  However, as we stated in
our report, these assumptions are uncertainties that will likely
result in the Paths to Closure cost and schedule estimates being
revised as more becomes known.  In addition, the majority of DOE's
sites41 of 53are scheduled to be closed by 2006, not in 40 or 50
years as DOE states in its letter.  Some sitesdue to finish their
cleanup work in less than 7 yearsare still negotiating their cleanup
levels.  We cited the West Valley Demonstration Project, due to close
by 2005, as an example of one of the sites for which the level of
cleanup to be achieved is still being negotiated and could range from
no further cleanup to much stricter standards.  Site estimates will
likely be revised as cleanup levels are agreed to.  Therefore, we
noted such situations as an uncertainty in the Paths to Closure
estimates and made no changes to our report as a result of DOE's
comment on this point.

5.  As DOE points out, the $147 billion life cycle estimate includes
an estimated $4 billion in costs associated with activities that will
be required after a site has completed its cleanup work.  In addition
to this amount, one site we contacted estimated its long-term costs
at more than $1.5 billion.  These costs were not included in its
Paths to Closure estimate.  In total, this represents more than $5.5
billion in long-term costs for about 50 percent of DOE's sites, a
figure that is likely to be higher once estimates from all of the
sites are included.  While these costs will be spread over a 20- to
30-year period, we believe that $5.5 billion is a significant cost.
We made no changes to our report as a result of DOE's comments on
this point.

6.  As DOE acknowledges, it faces challenges in trying to meet the
Paths to Closure goals with a $5.75 billion annual funding target.
In addition to the challenges of closing the funding gap between the
sites' needs and the annual funding target described by DOE in Paths
to Closure, we provided information in our report on other
challenges, such as overcoming the tendencies toward delays and cost
increases that major DOE projects have historically experienced.
Because these challenges have potential budget implications, we
pointed them out as limitations that a reader needs to keep in mind
in understanding the costs of the cleanup program.  We made no
changes to our report as a result of DOE's comments on this point.

7.  We were asked to focus on the limitations and uncertainties of
the Paths to Closure report that affect its usefulness.  Although
that was our focus, we also reported on the strategy's strengths.  We
have changed the title of our report to better express this message.

*** End of document. ***