I. Description of Investment
The Department of Energy builds facilities for programs in its four main mission areas -- national security, science and technology, energy resources, and environmental quality. Many of DOE's facilities are large, technically complex, state-of-the-art research or industrial facilities, which may take ten years or more to design and build. Examples include particle accelerators for physics research such as the Fermi Main Injector and the Superconducting Super Collider (SSC), nuclear reactors for civilian and defense programs, facilities to treat and dispose of radioactive waste, lasers as big as football fields, factories to produce parts for and assemble nuclear weapons, and large experimental facilities to investigate fusion energy and central station electricity generation using solar energy or fossil fuels.
Since 1994, DOE's budget for design and construction of new facilities has averaged $1 billion per year. That is down from an average of $2.5 billion per year through most of the 1980s and early 1990s, when many more new facilities were being built to support DOE's science, defense and energy programs.
II. Decision making Process
DOE typically builds new facilities to provide unique new capabilities to the nation, e.g. new capabilities for scientific research. Traditional investment analyses that judge investment in new technologies for their ability to reduce the organization's operating costs are not generally relevant. Rather, DOE's decision making process largely involves identification of those new projects that can best support its missions and garner the political support necessary to obtain funding.
A defining feature of DOE's process of budgeting and planning for construction of new facilities has been incremental funding. Until recently, each year DOE has requested and Congress has appropriated only enough funds to cover designated spending on each construction project for the upcoming year.(1)
One benefit of incremental funding is that it helps smooth out lumpiness or spikes in the Department's budget that might result if DOE had to request full funding for large projects in a single year. On a department wide basis, spending on construction projects has varied by less than $300 million (2 percent of the total DOE budget) over the past five years. A large spike in funding would be needed to change from incremental funding to full up front funding of DOE's construction projects. Congress has been unwilling to provide DOE the large amounts of Budget Authority needed to make that change.
A drawback of incremental funding is that large projects may be initiated with relatively small budget requests in the first year or two. This practice reduces the attention paid by the Administration and the Congress to projects until they are already underway.
DOE's annual strategic planning and budgeting process focuses almost exclusively on the upcoming year. The Department does a good job in adjusting annual budget requests to balance priorities among the Departments various missions and programs. There is, however, little central control or coordination of individual programs longer term spending plans.
The combination of incremental funding and limited outyear planning creates an incentive for program managers to begin projects with low initial-year funds in the hope that future budget increases will allow them to continue. Such "betting on the come" was a common practice in DOE until recently. In many cases, the expected increase in funding did not materialize and projects were either canceled after significant spending had already occurred or had their construction schedules stretched out with resulting cost overruns.
III. DOE's Performance on Major System Acquisitions
In November 1996, the General Accounting Office (GAO) reported that of 80 projects which DOE had designated as major systems acquisitions from 1980 through 1996, 31 projects were terminated prior to completion and most of those that were finished had significant cost overruns.(2)
The complete list of DOE major projects canceled between 1980 and 1996 from GAO Report RCED-97-17 is Attachment A.
Projects Canceled After Significant Spending Had Occurred
Since 1983, construction of at least four major
Department of Energy facilities has been halted after significant spending
had occurred (see table below). All four were controversial projects which
never had widespread support. They were funded in the early years, because
enthusiastic supporters were able to gain approval of the relatively small
amounts of funding without thorough review of the full cost implications
by the entire Congress. In almost every case, the opposition grew each
year as the funding requests grew. In addition, annual debates and votes
on the projects provided multiple opportunities for committed opponents
to marshal support. There are several reasons why each was ultimately canceled,
including problems with new technologies, charges of poor management, poor
project design, cost overruns, and that the original purpose for which
the projects were intended was no longer relevant. Ultimately, however,
the major reason for cancellation in each case was that the majority of
the Congress did not think that completion of the project was justified
in light of the cost. Requests for full funding would have prompted more
through debates at the outset which may have kept the projects from being
started in the first place or garnered broader commitment and support from
|Project Name||Started||Canceled||Cost Est.||Cost Est.||Spend|
|Superconducting Super Collider||1990||1994||5.9||8.3||2.1|
|New Production Reactor||1988||1993||none||none||1.3|
|Gas Centrifuge Enrichment Plant||1977||1985||4.5||8.6||3.0|
|Clinch River Breeder Reactor||1972||1983||0.4||4.0||1.7|
2. U.S. General Accounting Office.
Department of Energy: Opportunity to Improve Management of Major Systems
Acquisitions. GAO/RCED-97-17, November 1996.
\b These amounts represent the project's "Total Estimated Cost,"
includes costs such as land, engineering, design, and construction. Other
costs, such as research and development, conceptual design, startup, and
initial training, are not available.
\c The Monitored Retrievable Storage Project was terminated;
portions of the project were continued and have now been combined with
other activities into the Civilian Radioactive Waste Management Strategic
\d The termination activities for the Superconducting Super
not yet complete. The cost at termination for this project is based on data
through fiscal year 1996.