Golden Hammer: Watchdog says power plant cost overruns poorly managed

The oft-criticized Energy Department is again in the spotlight, as a government watchdog says the agency has done a poor job of managing cost overruns at the agency’s South Carolina Savannah River Site.

A new power plant, designed to dispose of plutonium by burning it as a “mixed oxide fuel” or “MOX,” has seen its price tag jump by an astounding $3 billion. That prompted a review by the semi-autonomous National Nuclear Security Administration.

But the NNSA never looked at the root causes of why costs skyrocketed and never suggested how overruns could be avoided in the future, said the Government Accountability Office, Congress’ watchdog arm. In fact, investigators labeled NNSA’s oversight of construction projects as an area with a “high risk of fraud, waste, abuse and mismanagement.”

The Energy Department policy doesn’t require an analysis of what’s causing a price increase, “even when a project exceeds its cost estimate by billions of dollars,” the GAO said in a report to Congress earlier this month.

Without a more in-depth investigation, NNSA “cannot provide assurance that it has correctly identified the underlying causes to ensure that they will not lead to further cost increases as the projects move forward,” the GAO said.

The biggest reason for the price increase investigators found? DOE approved the cost and schedule for construction before the final designs for the power plant were even finished.

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For allowing the cost of a construction project to spiral more than $3 billion out of control — and for not learning any lessons from the boondoggle — the Energy Department and National Nuclear Security Administration win the Golden Hammer, a weekly distinction awarded by The Washington Times to examples of fiscal abuse and waste.

The good news is that NNSA is attempting to reign in some of the wasteful spending, and has so far withheld $52.8 million in payments to contractors, citing delays and cost overruns by those working on the MOX facility and a related Waste Solidification Building.

“After determining that the performance of the contractors for the MOX facility and WSB contributed to the projects’ construction cost increases, NNSA took steps to hold the contractors accountable for their performance by withholding fees,” GAO said.

But investigators said no one ever analyzed “the extent to which NNSA and its contractors shared responsibility for cost drivers,” and that as far back as 2006 — before some of the contractors were hired — DOE was already aware that changes to the facility’s safety systems would likely lead to a $1.1 billion cost increase.

Nuclear officials said they agreed with the GAO’s recommendation to more deeply investigate the reasons behind the cost overruns.

“NNSA is committed to effectively managing its major projects,” a response from the agency said. “Some of the resulting project management improvements that will positively impact our largest, most complex nuclear work going forward include: establishing more defined processes for holding contractors accountable for their performance; better engaging senior leadership in project status and delivery; and conducting periodic peer reviews using subject matter experts from across the DOE complex.”

With labs and facilities spread out across the country — and billions of dollars worth of projects underway — the Energy Department has often been a target for fiscal watchdogs. But poor management has been cited repeatedly as the cause of wasted tax dollars.

In October, the Times reported that the DOE had spent $56 million on the design of a radioactive waste treatment plant — before construction had even began. In September, the Times reported that a biofuel plant was likely to wind up $67 million over budget because officials hadn’t planned properly.

And the Energy Department has twice won the Golden Hammer for its mismanagement of contractors. In October, the Hammer went to DOE for paying out an estimated $100 million on food, drink and entertainment for contractors working on a renewable car battery project. Last July, the department “won” for wasting $37 million in excessive costs to bring experts to the D.C. area.

Perhaps it was this history of fiscal mismanagement that brought the GAO down so harshly on the NNSA’s poor oversight of the plutonium facility.

DOE requires a review of cost overruns so that “lessons learned” can “benefit future endeavors.” But while the NNSA found what caused the price increase, it didn’t investigate why. The GAO said that despite the review of what went wrong, no one’s taking notes on how to correct practices so that wasteful mistakes can be eliminated.

“The cost drivers NNSA identified provided few details about why the drivers existed,” investigators said. “Without a root cause analysis, it is uncertain whether NNSA will be able to accurately identify underlying causes of the increases to identify and implement corrective measures and identify lessons learned to apply to other projects.”