June 19, 1998
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
1. The Administration proposed full funding for a limited number of DOE's projects in 1997 and for most DOE projects in 1998 and 1999, but Congress rejected those proposals.
2. U.S. General Accounting Office.
Department of Energy: Opportunity to Improve Management of Major Systems
Acquisitions. GAO/RCED-97-17, November 1996.
Project name and
construction line Original cost Cost at Original
item number\a estimate termination completion date Termination date
--------------------- -------------- -------------- ---------------- ----------------
50 MWe Geothermal $70.0 $28.0 March 1982 January 1982
Advanced Isotope N/A $275.3 N/A May 1982
Clinch River Breeder $699.0 $1,600.0 1979 December 1983
Compact Ignition $444.5 $107.1 September 1993 1992
Electric Vehicle N/A $180.0 N/A 1983
Elmo Bumpy Torus $173.9 $28.1 June 1982 1984
Fuel Processing $270.0\b $305.8\b September 1992 April 1992
Fusion Materials $134.4 $105.9 September 1983 1985
Gas Centrifuge $5,100.0 $2,814.1 June 1993 June 1985
Hanford Waste $1,010.2 $418.3 September 1996 August 1996
High BTU Synthetic $198.8 $53.7 March 1981 July 1981
High BTU Synthetic $156.8 $77.8 March 1981 July 1981
Intersecting Storage $398.6 $201.3 June 1986 1983
Accelerator (78-10- b)
Low-Level Waste $141.8 $7.0 September 2004 September 1996
Medium BTU Industrial $93.0 $65.6 September 1981 July 1981
Monitored Retrievable N/A $35.7 N/A N/A
Storage Project (93-
Multi-Tank Waste $240.0 $56.1 June 1999 December 1995
New Production N/A $1,257.0 2000 October 1992
Plutonium Recovery $370.8\b $24.3\b September 1997 October 1990
Process Facility $140.0\b $57.9\b N/A June 1988
Reactor Safety $109.1\b $15.6\b September 1994 June 1994
Reactor Seismic $103.4 N/A September 1996 August 1993
Solvent Refined Coal N/A $70.8 September 1984 July 1981
Demon. Plant (SRC-2)
Solvent Refined Coal N/A $190.7 June 1984 August 1984
Demon. Plant (SRC-1)
Space Nuclear Reactor $22.7\b $36.3\b December 1988 1992
Power System (86-N-
Special Nuclear $210.0\b $37.0\b March 1994 February 1991
Special Isotope $530.0\b $85.0\b March 1995 N/A
Strategic Petroleum $1,460.0 $6.0 N/A December 1993
Superconducting Super $5,893.6 $2,201.9\d March 1998 October 1993
Tokamak Physics $694.0 $73.7 September 2000 1995
Uranium $85.0\b $116.3\b March 1988 February 1994
\a Projects that are not funded as construction line items do not have
project numbers. All costs, unless otherwise specified, are "Total Project
Costs." The cost data were obtained from initial budget submissions, final
cost reports, and other DOE-provided data. The term "N/A" means cost
or schedule information is not available or not yet developed.
\b These amounts represent the project's "Total Estimated Cost,"
\c The Monitored Retrievable Storage Project was terminated;
\d The termination activities for the Superconducting Super
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