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News from the National Academies
Date: July 1, 1999
Contacts: Bob Ludwig, Media Relations Associate
Jennifer Cavendish, Media Relations Assistant
(202) 334-2138; e-mail <news@nas.edu>

EMBARGOED: NOT FOR PUBLIC RELEASE BEFORE 5 P.M. EDT THURSDAY, JULY 1

Inadequate Project Management at DOE
Results in Frequent Cost Overruns, Delays

WASHINGTON -- The U.S. Department of Energy (DOE) is plagued by poor project management practices that result in frequent cost overruns and delays in completing work, says a new report from a committee of the National Research Council. Design and construction of environmental remediation facilities such as the Hanford K basins in Richland, Wash., can take longer and can cost more than comparable projects by other federal agencies or by the private sector.

"There is no doubt that many of DOE's projects are difficult, complex, and expensive," said committee chair Kenneth Reinschmidt, retired senior vice president of Stone and Webster Inc., Littleton, Mass. "However, the public has the right to expect that more difficult projects get better project management, not worse. Most of DOE's projects could be brought in on time and on budget if the agency applied generally accepted project management practices.

"DOE's problems in this area are pervasive and rooted in a culture that lacks focus on project completion," Reinschmidt continued. "Remedying the agency's deficiencies will not be a quick fix; it will take time and require broad reform and leadership."

The agency plans to spend more than $20 billion in the next five years on environmental cleanup, energy research, and other new projects -- but it has not implemented adequate policies and procedures to manage projects effectively, the report says. No single office within DOE is solely responsible for project management. The lines of authority are blurred among headquarters and field office personnel and independent contractors, who perform about 90 percent of DOE's work.

DOE should establish an office of project management that is led by an individual who is equal to or higher than the level of assistant secretary, the committee said. This office would oversee all projects and take responsibility for developing procedures and standards and providing support services to DOE's program offices. "DOE's project performance can be improved most effectively by establishing a center for excellence in project management within the agency," Reinschmidt said.

The committee pointed out examples of well-managed projects, including the Advanced Photon Source facility at the Argonne National Laboratory and the B-Factory at the Stanford Linear
Accelerator Center. Government or private-sector firms that have built new facilities with better-than-average project performance have some form of project management organization that is responsible for controlling project definition, maintaining budgets and schedules, and integrating management activities.

But because of a lack of coordination in project management activities, DOE has failed to develop management skills among agency personnel across all projects, the report says. DOE should establish a state-of-the-art training program for project managers. For this effort, it should recruit the assistance of an engineering or construction organization with a clear record of success in training and certifying project managers. There are few opportunities to receive such training and no career paths specifically for project managers.

Pre-construction planning is among the most important factors for successful outcomes; projects that get off to a bad start rarely end on time or within budget. The committee noted that many DOE projects suffer from inadequate upfront planning and preliminary design. In addition, the agency often does not use proven techniques to assess risks of major projects, such as setting proper contingencies for unexpected problems, and it develops cost estimates too early in the design phase.

New construction projects with estimated costs of more than $20 million also should be subject to an internal review before building begins, the report says. Such reviews are essential for assessing the validity of project cost estimates and schedules, and can be useful in transferring lessons learned from one project to another.

Because reviews are both expensive and time-consuming, the decision to undertake an internal assessment for projects costing less than $20 million should be made jointly by the committee's proposed management office and the DOE program office that initiated the project, the report says. The decision should be based on DOE's experience with similar projects, the estimated cost of the project, and any uncertainties about the tasks, such as working with new, unproven technology.

Contract Practices

DOE often does not structure its construction contracts to accurately reflect a project's requirements, the report says. Fixed-priced contracts, for example, are sometimes awarded for projects that involve a high level of uncertainty such as how to incorporate new technology. This mismatch often results in projects being delayed and forces appropriations of additional funds to cover increased costs.

Contract reform efforts should focus on assessing project uncertainties such as poor or unsafe site conditions, determining a contract method that binds contractors to meeting cost goals and technical requirements, and increasing the use of performance-based incentive fees for contractors who complete work successfully or ahead of schedule. A risk analysis of the potential pitfalls to completing a project should be conducted before DOE enters into a fixed-price agreement, the report recommends.

The study was funded by the U.S. Department of Energy. The National Research Council is the principal operating arm of the National Academy of Sciences and the National Academy of Engineering. It is a private, nonprofit institution that provides independent advice on science and technology issues under congressional charter. A committee roster follows.

Read the full text of Improving Project Management in the Department of Energyfor free on the Web, as well as more than 1,800 other publications from the National Academies. Printed copies are available for purchase from the National Academy Press Web site or at the mailing address in the letterhead; tel. (202) 334-3313 or 1-800-624-6242. Reporters may obtain a pre-publication copy from the Office of News and Public Information at the letterhead address (contacts listed above).


NATIONAL RESEARCH COUNCIL
Commission on Engineering and Technical Systems
Board on Infrastructure and the Constructed Environment

Committee to Assess the Policies and Practices of the Department of Energy to Design, Manage and Procure Environmental Restoration, Waste Management, and Other Construction Projects

Kenneth F. Reinschmidt *(chair)
Senior Vice President
Stone and Webster Inc. (retired)
Littleton, Mass.

Philip R. Clark Sr. *
President, Chief Operating Officer, and Chief Executive Officer
GPU Nuclear Corp. (retired)
Boonton, N.J.

Frank P. Crimi
Vice President
Lockheed Martin Advanced Environmental Systems Co. (retired)
Saratoga, Calif.

Lloyd A. Duscha*
Deputy Director, Engineering and Construction Directorate
U.S. Army Corps of Engineers (retired)
Reston, Va.

G. Brian Estes
Director of Construction Projects
Westinghouse Hanford Co. (retired)
Williamsburg, Va.

Paul H. Gilbert*
Senior Vice President, Principal Professional Associate, and Principal Project Manager
Parsons Brinckerhoff Quade and Douglas Inc.
Seattle

Alvin Mushkatel
Professor
School of Urban Planning and Landscape Architecture
Arizona State University
Tempe

Ray O. Sandberg
Manager of Special Projects
Superconducting Magnetic Energy Storage Project
Bechtel Inc. (retired)
Moraga, Calif.

Alan Schriesheim*
Director Emeritus
Argonne National Laboratory
Chicago

Mark Silverman
Manager, DOE Rocky Flats Field Office (retired), and
President, Silverman Consulting Group
Highland Ranch, Colo.

Richard I. Smith
Staff Engineer
Systems and Risk Management Department
Battelle Pacific Northwest Laboratories (retired)
Kennewick, Wash.

Rebecca Snow
Partner
Covington and Burling
Washington, D.C.

Clyde B. Tatum
Professor, Department of Civil and Environmental
Engineering, and
Coordinator, Construction Engineering and Management Program
Stanford University
Stanford, Calif.

RESEARCH COUNCIL STAFF

Richard G. Little
Director, Board on Infrastructure and the Constructed
Environment

John Walewski
Program Officer

* Member, National Academy of Engineering